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Monday, November 15, 1999 Published at 08:07 GMT

Business: The Economy

China drops trade barriers

Smiles all round as US and Chinese negotiators reach a deal

Chinese and American negotiators have signed a historic trade deal that paves the way for China to join the World Trade Organisation.

World trade wars
The deal, which will involve major opening of China's markets, will provide a significant boost to China's economic reforms and to the reformist politicians around Prime Minister Zhu Rongji.

It will also strengthen the legitimacy of the world trading system, which has been damaged by disputes between the United States and Europe.

The BBC's Duncan Hewitt reports on the trade deal being signed
The downside for China is that unemployment may rise sharply as its inefficient state industries face increased competition.

"The China-WTO agreement is good for the United States, it's good for China, it's good for the world economy," US President Clinton said.

"Today, China embraces principles of economic openness, innovation and competition that will bolster China's economic reforms and advance the rule of law," he added.

The BBC's John Terrett describes the business implications for China
The deal clears the way for China to join the World Trade Organisation, subject to the agreement of other members, after 13 years of negotiations.

"We are looking forward to the day when China will become a full member of the WTO within this year," Foreign Trade Minister Shi Guangsheng said.

[ image: Apples from Washington State on sale in Beijing]
Apples from Washington State on sale in Beijing
US Trade Representative Charlene Barshefsky and Mr Shi signed the agreement after six days of gruelling negotiations to open China's relatively closed markets to American products and services.

American businessmen in China hailed the deal.

"Having worked hard for years to convey to the two governments how China's WTO accession could help both countries, the American business community here is delighted it is now at hand and we pledge our full support for the implementation process in coming years," said Richard Latham, chairman of the American Chamber of Commerce.

Historic step

The deal makes it likely that China will be a member of the World Trade Organisation in time for the next round of global trade talks which are due to start in Seattle at the end of the month.

[ image:  ]
The US team has been pushing China to open its markets to American products and services, especially in the areas of telecommunications and financial services.

The deal will give foreign firms new access to the fields of insurance, telecommunications and banking, including auto finance.

That should boost foreign investment in China and speed up the process of economic reform.

It will also give China, the world's ninth-largest exporter, non-discriminatory access to markets around the world.

"This is a major step forward in China's accession to the WTO. I have said many times that we are not a World Trade Organisation until China has joined," said Mike Moore, Director-General of the WTO.

Close to breakdown

Even up to the last minute, it was unclear whether a deal was possible.

It looked as if negotiations had broken down on Friday, when the US delegation left after 80 minutes of meeting.

But on Saturday, Ms Barshefsky held an unexpected session with Chinese Prime Minister Zhu Rongji and Foreign Trade Minister Shi Guangsheng.

Washington said that, despite slow progress, both sides had decided to continue because of the importance of the issues at stake. In a sign of the importance attached to the deal, key Presidential aide Gene Sperling accompanied the US delegation.

Long delays

US President Bill Clinton gives his reaction to the agreement
China has been pressing for years to join the WTO, in order to set the seal on its aspirations for economic modernisation, but only recently, when it abandoned its claim to be treated as a developing country, did negotiations become serious.

A deal was nearly reached when Mr Zhu visited Washington in April, but President Clinton delayed signing on political grounds.

The bombing of the Chinese embassy in Belgrade by Nato planes prompted China to put the negotiations on hold for several months.

The delay reportedly damaged the political standing of Mr Zhu, and led to calls from some of his opponents in China for tough new restrictions in some areas of foreign investment.

President Clinton has had to overcome protectionist pressures in the United States Congress, and opposition from human rights activists who are opposed to a deal with China.

The Congress will now have to repeal legislation which requires a yearly review of progress on human rights before granting trade privileges to China.

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