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Tuesday, March 30, 1999 Published at 06:32 GMT 07:32 UK

Business: The Economy

'Final negotiations' on China's WTO bid

US Commerce Secretary Daley meets Chinese PM Zhu Rongji in Beijing

US Trade Representative Charlene Barshefsky has begun one-day talks with Chinese Premier Zhu Rongji amid signs the two sides were nearing agreement on Beijing's bid to enter the World Trade Organisation.

[ image: US trade representative Charlene Barshefsky  has arrived in China]
US trade representative Charlene Barshefsky has arrived in China
Ms Barshefsky, who arrived late Monday and will return on Tuesday, is expected to put the finishing touches on a deal that can be announced when President Clinton meets the Chinese Prime Minister in Washington on 8 April.

US Commerce Secretary William Daley, who is also in China for preparations for the summit, said after talks with Mr Zhu that "we are getting down to the final negotiations."

But he added that "as in any good negotiations, sometimes the most difficult issues are left to the very end."

If a deal is not sealed this year, China risks being shut out of the next round of trade talks which begin in November.

It could also leave the China, with its huge trade surplus, vulnerable to growing protectionist pressures around the world.

Trade concessions

China, which has been pressing to join the WTO for 13 years, has reportedly offered more concessions in the last three weeks than it has in the last three years.

After years of resisting calls that it must open up its markets first, Beijing has offered concessions on telecommunications, financial services, and agriculture.

China has said it will liberalise the telecommunications sector, allowing foreign firms to compete with China Telecom. Now it has also widened the scope for competition in mobile phones, by allowing US-type mobile phones, using CDMA technology, access to the Chinese market. At present only GSM, European standard mobile phone systems are permitted.

China may be prepared to accept wheat exports from the United States which have been blocked for years because of concerns that they are infected with TCK smut disease, according to a US grain firm executive.

The government has also pledged greater access by foreign firms to the financial services sector, including banking and insurance.

But some officials have been stressing that Chinese companies would first have to get ready to meet the competition.

Duncan Hewitt reports from Beijing
Ma Yonwei, chairman of the China Insurance Regulatory Commission, said "foreign insurance institutions" would be "admitted at an appropriate time", but did not give a timetable for the market's liberalisation.

The China Daily's Business Weekly edition quoted Mr Ma as saying that an early opening up would put China's "still immature" insurance industry under great pressure: "We cannot allow foreign companies, as they want, to flood our unsophisticated market without limit."

Chinese worries

The comments are characteristic of the ambiguity in China about fully opening its markets to Western competition, which could lead to mass layoffs in many inefficient state industries.

The Chinese government still insists that its country's economy is developing and should be allowed certain exemptions from international free trade rules, while the United States argues it is far too big to be treated in that fashion.

On Monday Mr Daley met Wu Yi, China's former trade minister, who criticised US controls on high-tech exports.

The meeting coincided with an announcement of a series of US-China trade deals, including the sale of more Boeing commercial jet airliners, a gas pipeline, and a coal-fired power plant.

US trade deals

Mr Daley said he was optimistic that progress would be made on China's entry to the trade organisation.

"I don't know if there will be an agreement by the time (Chinese) Premier Zhu goes to Washington next week, but we are moving forward with discussions," he said.

He said it was important that China would join the WTO "sooner rather than later".

China is the second-largest trading partner of the United States, and last year chalked up a trade surplus of about $60bn, up from $49.7bn in 1997.

The US government blames closed markets in China for the trading imbalance, which Mr Daley called "politically unsustainable".

He said the overriding objective of his mission was to expand US exports to China: "With a one billion dollar a week trade deficit, it's critical to get more of our products in the mainstream of China's economy."

Political struggle

With the Chinese economy expected to slow this year, China's Prime Minister Zhu Rongji needs a trade deal to seal his prestige at the Washington summit, and counter the opponents of economic reform at home.

But political opposition to any deal in the United States is growing despite Chinese concessions.

The concern that China may have stolen US nuclear weapons technology, and the increased military tensions over Taiwan, have stiffened the resolve of those who want to be able to use trade as an economic weapon - something that would be far more difficult if China was in the WTO.

The WTO has 134 members, and another 30 countries are waiting to join. The organisation is the guardian of free trade, arbitrating international trade disputes and administering a complex web of agreements covering everything from farm goods and textiles to banking and intellectual property.

Its decisions on trade matters are supposed to have the force of international law.

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