China's Trade Boss

Vice-Premier Wu Yi has an iron will. She'll need it when she comes to Washington to lead talks

Among Beijing's chattering classes, Wu Yi is known as the Iron Lady -- a nickname she didn't earn by shying away from a challenge. In her youth, she was one of just a handful of women who attended the Beijing Petroleum Institute, earning a degree in engineering. Then early on she worked as a technician at the remote Lanzhou Oil Refinery, climbing through a clubby, male-dominated industry to become the ranking Communist Party official -- and de facto boss -- of the Yanshan Petrochemical Corp. by 1983.

Wu has since moved into the rough-and-tumble world of Chinese politics. She started out as a deputy mayor of Beijing, and today serves as a Vice-Premier and top trade negotiator -- the only woman in China's 24-member ruling Politburo. Key to her rise, according to those who know her: bull-headed stubbornness leavened with a quick wit and a directness that's rare at the pinnacle of Beijing power. "To her friends, she is very nice and enthusiastic," says Lin Shipei, a student adviser from Wu's university days who has kept in touch with her. "To her opponents, she is hard like iron."

That iron skin will serve Wu well as she prepares for her latest challenge. In mid-April, Wu is scheduled to lead trade talks with White House officials puffed up with election-year ire over lost jobs. The annual meeting of the U.S.-China Joint Commission on Commerce & Trade, once handled by lower-level officials, has been upgraded to the ministerial level, so she'll hold talks with Commerce Secretary Donald L. Evans and U.S. Trade Representative Robert B. Zoellick.

One reason for the increased urgency: A U.S. complaint before the World Trade Organization claiming that Beijing offers its semiconductor industry unfair protection. Other thorny issues on the agenda include concerns over rampant counterfeiting and piracy of everything from brake pads and windshields to Sex and the City DVDs and Viagra tablets; a tug-of-war over China's proprietary standards for electronic communication chips, which the U.S. fears would effectively shut foreigners out of the market; and concerns that the Chinese currency is way undervalued, giving the country's manufacturers an unfair advantage over foreign rivals. "There are some very significant issues between our two countries," says Robert Kapp, president of the U.S.-China Business Council in Washington. "And as far as trade issues, most of that is landing on Wu Yi's shoulders."

SPOILING FOR A FIGHT. The stakes in this tussle are high. Since last summer, a slew of high-level U.S. delegations have traveled to Beijing, and Vice President Dick Cheney is scheduled to do so on Apr. 13. But these officials haven't gotten much satisfaction. Washington has been looking for a much tougher stance on the growing scourge of piracy and counterfeiting than Beijing has offered, and has long raised concerns over regulations requiring foreign companies to share their technology with local partners in order to gain access to the Chinese market. Administration officials say they have already cut China enough slack as the country has moved to fulfill the commitments it made in joining the WTO. So when the 65-year-old Wu lands on the banks of the Potomac, she'll find that Washington is spoiling for a fight. "There is some point at which tolerance is exhausted," says Grant D. Aldonas, a Commerce Dept. under secretary who has often negotiated across the table from Wu.

China, of course, makes an easy target. Its trade surplus with the U.S. last year swelled to $124 billion, U.S. figures show, up from $103 billion a year earlier. And the strength of its manufacturing sector in everything from clothing to TVs means it's being blamed for the woes of U.S. workers. On Mar. 16, the AFL-CIO accused Beijing of tolerating abusive employment conditions -- including a ban on independent trade unions -- that give China an unfair trade advantage. The union's solution: punitive tariffs of up to 77% on Chinese imports -- an idea that is gaining support. "There isn't any question that there are abusive labor practices in China," says Senator Byron L. Dorgan, a North Dakota Democrat. "Do they affect American workers? Of course."

With such anger in the air, Wu will clearly have her hands full with the U.S. But she also has a tough constituency back home. Where American business leaders see unfair advantage, China Inc. sees a system designed to give it a fighting chance against oversize foreign rivals. Take China's policy of refunding most of the value-added tax imposed on locally produced semiconductors, which has sparked the WTO action. Although the same tax break is available to foreign companies making chips in China, they don't like it because they feel it's part of a campaign to force them to set up joint-venture production and transfer their technology. Chip imports don't get the same break. Chinese officials say the rule is fair because the money is earmarked for research and development. "The rebate is to protect our infant industry," says Li Ke, director of the information department at the China Semiconductor Industry Assn. "You cannot say this is a discriminatory tax policy."

Wu will be raising China's own trade concerns with Washington. One longtime beef: U.S. restrictions on the export to China of so-called dual-use technology -- goods that might serve military as well as civilian uses -- including high-speed computers and some encryption software. Nix the limits, Beijing says, and the trade deficit will shrink. More recently, the U.S. has slapped quotas, tariffs, and antidumping duties on a handful of Chinese exports, including color TVs and cotton bras, and is considering tariffs of more than 400% on wooden bedroom furniture. The restrictions, Wu will likely say, have to go. "These actions don't comply with WTO rules and are unfair to Chinese companies," says Li Yushi, vice-president of the Chinese Academy of International Trade & Economic Cooperation under the Commerce Ministry.

DEFUSING TENSIONS. Although widely popular, Wu has disappointed some of her constituents before. Some critics say that as a leader of China's delegation negotiating membership in the WTO, Wu sold out hard-pressed industries such as agriculture by agreeing to lower tariffs on grain, fruit, and vegetable imports. "Some of the compromises were unnecessary," says one graduate student of international relations at Beijing University. "Personally, I don't think too highly of her."

Like her or not, there is little debate over Wu's abilities. One thing that distinguishes her is her relatively modest upbringing. She doesn't hail from a politically powerful family and so has risen through the ranks on her own merits. She's no peasant, but her parents -- intellectuals in the central city of Wuhan -- lived far from the power circles of China's capital. With her degree in petroleum engineering, Wu paid her dues for 26 years in China's oil and gas sector, including three years in the remote western province of Gansu. Her no-nonsense approach caught the eye of former leader Deng Xiaoping, who promoted her to deputy mayor of Beijing in 1988, and deputy minister of trade in 1991. "Deng was looking for capable technocrats -- and she is certainly that," says Cheng Li, a professor of government at Hamilton College in Clinton, N.Y. Although she makes time for concerts at the Beijing Symphony and a weekly game of tennis, the unmarried Wu is "outspoken and works long hours," says Li.

It was as deputy trade minister that Wu really got noticed. Upon her appointment, she started leading delegations to Washington to hammer out agreements on policing knockoff goods and opening China's market to U.S. companies. In the early years, she earned a reputation for toughness to the point of intransigence. At the time, she was a "knowledgeable negotiator," says U.S. trade official Aldonas. "That means finding 19 different ways of reciting the same thing over and over again as you fend off demands from the U.S. until the decision can be made at a higher level."

But she also won acclaim for her ability to defuse tensions with her sometimes acid sense of humor. At one point, when U.S. negotiators were pressing the Chinese to crack down on pirates stealing from multinationals by selling counterfeit software and music, Wu countered that U.S. museums are full of cultural relics plundered from China. A bit of a red herring, perhaps, but the comment earned her plenty of admiration at home -- and the respect of U.S. officials. Although she uses an interpreter, she speaks enough English to understand much of what's being said and to throw in a phrase or two at key moments. And despite her reputation, Wu has a softer side, too. "The issues don't become personal with her," says Charlene Barshefsky, U.S. Trade Representative in the Clinton Administration, who negotiated with Wu over the terms of China's admission to the WTO. Barshefsky particularly recalls a hand-dyed scarf that Wu chose especially for her as a gift. "She can be tough as nails across the table, and then she does something quite thoughtful," Barshefsky says.

Wu's reputation for hard work and competence has pushed her ever-higher in the Chinese political firmament -- and won her jobs that extend far beyond trade. During last year's SARS crisis, President Hu Jintao and Premier Wen Jiabao tapped her to manage the response to the emergency, including mobilizing teams of health inspectors and coordinating a nationwide medical reporting system. For her trouble, she won the additional title of Health Minister, a position she still holds. Since then she has won praise for her effort to deal with problems ranging from HIV/AIDS to deteriorating health care in rural China. And she hasn't been afraid to take bold steps. For example, Wu Yi was the first top official to visit Gao Yaojie, an elderly doctor who first exposed how serious AIDS had become in rural China, and who had been put under temporary house arrest by nervous local leaders. "She is the sort of person who really gets things done," says one official with the Chinese Center for Disease Control & Prevention in Beijing.

But trade has always been Wu's real specialty -- and her work in that sphere is what may ultimately have the biggest effect on the future of China. Sure, both China and the U.S. will likely try to paint the Washington talks as a success, though passions are running high enough in this election year that it may be difficult for them to reach agreement. "Both sides will be very tough on all the issues," says Wang Yong, director of the Beijing University Center for International Political Economy.

But the U.S. is China's second-largest trading partner, so Beijing can ill afford to wage a trade war across the Pacific. Either way, the Iron Lady is surely steeled for the fight.

By Dexter Roberts in Beijing, with Paul Magnusson in Washington

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