When Chinese Premier Zhu Rongji returned to Beijing empty-handed from a state visit to Washington in April, it looked as if China's dream of entry into the World Trade Organization was dead for this year. Since then, prospects only grew worse. Beijing's leaders were furious with a congressional report accusing China of stealing U.S. nuclear secrets--and broke off WTO talks after U.S. planes accidentally bombed its embassy in Belgrade.
Yet pressure to reach a deal is mounting again on both sides. President Clinton and Chinese President Jiang Zemin are expected to announce resumption of the talks when the two leaders meet on Sept. 11 in New Zealand. And there are good reasons for both sides to compromise: China wants to join the 134-member group before the Nov. 30 summit meeting so it can be in on the next round of global trade talks. And the Clinton Administration wants to wring more market-opening concessions for U.S. exporters before the 2000 elections make China's WTO bid a campaign issue.
The problem: In the four months since negotiations broke off, there has been no progress on any of the issues that kept the Clinton Administration from sealing a deal in April. on some issues, the U.S. and China may be further apart. Beijing insists it never agreed to a long list of mini-deals that was released in April on the White House Web site. Meanwhile, internal disputes among leaders in Beijing may make compromise more difficult.
Even as they reopen talks, U.S. officials insist they won't rush into an incomplete deal. China still must move toward the free-trade rules that other WTO members already observe. So the details of this agreement and the pace of China's promised market reforms will be crucial. Both sides agree that these important issues must still be settled:
-- Dumping. China and the U.S. remain at odds over how WTO members would calculate dumping penalties on Chinese goods exported at prices below the cost of production. That's because no one agrees on how to determine such costs in a state-owned or directed economy. U.S. trade negotiators insist on tangible measurements.
-- Import surges. The U.S. wants Chinese assurances that it won't object if Washington levies temporary tariffs and quotas to protect some U.S. industries, notably textiles and clothing. The U.S. has agreed to end its global clothing quotas by 2005 but wants to retain the option to impose new limits on Chinese apparel. China appears willing but reasonably wants to phase out the protections.
-- Market access. China is resisting lowering barriers to foreign majority ownership in retail banking, securities trading, and telecommunications. Beijing is also fighting unfettered access to the Chinese market for U.S. films and the Internet. But if Beijing doesn't make such key concessions, it can't be a full-fledged member of the WTO.
Zhu and Jiang face tough opposition at home to such concessions. Since Beijing's huge bureaucracy is intimately connected with industry, "most government departments don't want China to join the WTO," says a Chinese economist in Beijing. Information Minister Wu Jichuan threatened to resign over Zhu's April offer to allow 50% foreign ownership in telecom companies. National People's Congress head Li Peng is among the conservatives resisting reforms.
It may be tempting for the Administration to rubber-stamp China's WTO nomination as a gift to China's reformers and hope that resulting disputes will be ironed out by the WTO later. But that clearly won't work: The fledgling WTO has so far proved too weak to adjudicate relatively minor disputes between the U.S. and Europe--two market-based economies with similar cultures.
A deal to get China into the WTO and a successful new round of global trade talks in November are top goals for Clinton. And access to 1.2 billion Chinese consumers could be important for U.S. economic growth in the next century. But the price of a bad deal is too high to pay.