EU pushes for China’s early WTO entry

Date: 08/05/1997

By Mark Turner

EUROPEAN trade officials will meet their Chinese counterparts next week to discuss conditions for the Communist giant's entry to the World Trade Organisation, possibly as early as next year.

Although the shifting winds of American policy have tended to dominate the debate over Chinese accession to the WTO, the European Union - the world's biggest trading alliance - wields considerable influence in the talks and its enthusiasm is essential to their completion.

“There is far more to this than Sino-American relations,” said one EU diplomat. “Europe could just as well pull the plug as the US.”

Despite such warnings, however, it seems unlikely that this would happen.

Next week's bilateral meeting, which precedes multilateral negotiations in Geneva at the end of the month, is one of a series at which the Union is trying to negotiate Beijing's WTO entry on the best possible terms for EU industry.

Winning concessions specifically advantageous to the Union is seen by the EU as crucial to its long-term future in China, widely expected to be the 21st century's predominant commercial power.

Even though there is no long-term guarantee that the country's present economic growth rate will continue, the potential offered in the next 20 years by over 1 billion consumers with more money than the US is proving too much for European governments to resist.

But their enthusiasm comes at a price. This month's encounter follows widespread condemnation of the EU's recent failure to criticise China's human rights record at the United Nations, just months before the hand-over of Hong Kong.

Although France and Germany have promised to fight Chinese trade threats to EU partners which spoke out individually, their lack of action has been denounced by civil liberties groups and the media.

Ironically, the meeting also comes amid a storm in the US over Washington's long-term strategy towards China. Allegations that President Bill Clinton's electoral campaign was partly funded by Beijing have galvanised Capitol Hill a month before its annual vote on China's most favoured nation trading status.

Although WTO entry is nominally a technical procedure, and is not explicitly linked to democratic standards, the political chess game between money and principles is integral to China's decade-old membership bid.

The EU and the US are largely in agreement on nearly all the conditions China needs to fulfil to become a member, but differ sharply on how quickly it should be allowed to pin on the WTO badge.

The Union advocates early Chinese accession with long transition periods, although “only under the right conditions”, according to Commission officials.

While consistent with the EU's usual stance that reform needs to be eased in rather than thrust upon a nation, this approach also conveniently helps European bids for some lucrative Chinese contracts in the aeronautics and arms industries.

Washington would prefer Beijing to take on more commitments before signing up, and to apply WTO rules more speedily once it does so. Its attitude tallies with the American tendency to settle only for the best in world trade talks, but is also opportune from Clinton's point of view in enabling him to claim the moral high-ground over the US' new bogeyman.

Together, the two trading giants need to settle about 20 major points of contention with Beijing before a deal is done. Indications are that this could happen sooner rather than later.

WTO chief Renato Ruggiero said last month that while some of the most difficult discussions were yet to come, signs were good.

“We are now approaching the final stage of the negotiations and just because of that it will be a tough time,” he told a news conference.

Still posing difficulties are negotiations on tariff reductions - discussed bilaterally between China and WTO members - and a number of the organisation's generic rules, negotiated and agreed multilaterally.

“Very difficult issues lie ahead, like agriculture, like services, like transparency, like a transition period,” warned Ruggiero.

The Brussels-Beijing bilateral will focus on tariff reductions, and continuing differences over trade in services such as telecoms, financial services, distribution and maritime transport.

The persistence of distribution monopolies in China has proved one of the most enduring bones of contention throughout the talks, and is a major irritant to European businesses.

A recent survey of EU companies revealed that distribution systems were “at best highly inefficient, and at worst hampered by corrupt practices”.

It also discovered that despite some quota reductions and relaxation of licensing rules, European companies still find permits extremely difficult to obtain, suffer from intellectual property violations and can only operate if they find good local partners.

Over half of European businesses interviewed felt that tariffs were still too high and the lack of transparent rules was a serious obstacle to trade and investment. They also cited problems of corruption, dual standards and prices for European and Chinese firms, and the authorities' tendency to change laws without warning.

EU negotiators say that they are close to agreement with China on transparency of information and intellectual property, but that issues such as services, government procurement rights, export subsidies and Chinese state trading still need a lot of work.

The ball is now in the Chinese court, with Beijing expected to table a new offer at the end-of-May talks in Geneva.