Crunch time for EU-China trade talks

The EU wantss to limit Chinese clothing exports

Talks between China and the European Union on China's entry to the World Trade Organisation will continue for a fifth day as a rare evening session failed to result in a settlement.

EU trade commissioner Pascal Lamy met with Chinese trade minister Shi Guangsheng for four hours in a late night bargaining decision designed to build momentum for a final deal.

There is a desire to take this forward and we are seeing that on both sides. It is tough. I think there is momentum

Anthony Gooch, EU trade spokesman

It is the first time they have arranged to meet during the evening in the latest round of trade talks.

That sparked speculation a deal might be near.

Anthony Gooch, the EU spokesman Lamy said the two sides wanted to reach to deal.

"There is a desire to take this forward and we are seeing that on both sides. It is tough. I think there is momentum," he said.

"There are a number of points of contention," he added.

"It's like climbing a mountain. At the beginning you have relatively easy hills to climb. The closer you get to the peak, the steeper the climb is. Those last few steps before you reach the peak are very strenuous, very difficult," Gooch said.

Disputes remain

Differences are understood to remain on mobile phone services, the car sector, life insurance, retail services and on China's state trading monopolies.

A major sticking point in the talks has been the EU's insistence that it achieve better conditions that those granted to the United States in November.

It's like climbing a mountain. The closer you get to the peak, the steeper the climb is.

Anthony Gooch, EU trade spokesman

But Chinese negotiators, who have been accused by some Beijing ministries to giving in to the US, have made it clear that the US deal is as far that they are going to go.

However, there are now signs that the EU is easing its demands.

One trade official revealed following the Wednesday talks that the EU had dropped its demand that foreign companies should be allowed to gain a majority stake in telecomm ventures. The US deal gave foreigners a 49% stake, rising to 50% after two years.

Previous breakdowns

Previous talks had broken down when the two failed to reach an agreement majority foreign ownership of telecommunications and life insurance companies.

And the stakes could not be much higher.

A deal with the EU would remove a major barrier to China's 14-year quest to join the WTO, opening key markets, especially in the service sector.

At the same time, Chinese membership of the WTO would seal its commitment to economic reform.

The 15-nation EU is the biggest of seven WTO members who have yet to reach a bilateral trade deal with China.

Under WTO rules, China must reach agreement with all existing WTO members over trade liberalisation measures before it can be admitted.

Crucial US vote

China has expressed the hope that the negotiations will be wrapped up this week, before a crucial vote in the United States on trade relations with China.

There is increasing political controversy in the US over last November's trade deal with China.

Opponents of that deal, who question China's commitment to enforcing human rights and labour standards, are trying to undermine that agreement by refusing to grant China permanent normal trading relations with the USA.

Although a vote will not prevent China from joining the WTO, it will prevent US companies from benefiting from any deal.

A successful conclusion to the EU trade talks might add to pressures on a divided Congress to heed President Clinton's plea not to disadvantage US companies trading with China.

Under WTO terms, any agreement reached by the EU would also have to be offered to US firms.