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Friday, 19 May, 2000, 14:22 GMT 15:22 UK
EU-China agree trade deal
EU trade commissioner Pascal Lamy and Chinese foreign trade minister Shi Guangsheng
Deal: EU's Pascal Lamy and China's Shi Guangsheng
The European Union and China have reached a ground-breaking trade deal, paving the way for Beijing's membership of the World Trade Organisation.

The WTO deal
Allows up to 49% foreign ownership in mobile phone companies
Seven insurance licences to European companies
End of joint venture restrictions on large department stores
Easing of state monopoly on crude oil imports
European carmakers can choose which vehicles they build in China
Chinese import tariffs cut on 150 products
After five days of negotiations, European Union trade commissioner Pascal Lamy and Chinese foreign trade minister Shi Guangsheng signed the agreement.

It came after the intervention of Prime Minister Zhu Rongji, whose involvement was also crucial in clinching a similar trade deal between the US and China last November.

He has long been a supporter of opening up China's vast market of nearly 1.3bn people as a means of jump-starting the country's stagnant state-run industries.

He is also in favour of opening up export markets and encouraging foreign investment.

The two negotiators toasted the deal with champagne. Shi Guangsheng said: "This agreement is in the fundamental interests of both parties."

Mobile phone market to open up

Mr Lamy said: "[WTO entry] has benefits for China. It has benefits for EU companies and it will enhance EU-China relations."

However, the EU has not got everything it wanted and made some concessions to the Chinese.

But Mr Lamy said Friday's deal was better than the trade agreement reached between China and the US in November.

"What I said back in November with the American deal was that we had gone 80% of the way and we had 20% to go. So how much did we get here at this negotiation? I would say we got between 16% and 17%", Lamy said.

Under the deal, China has agreed to speed up the liberalisation of its mobile telecommunications market when it joins the WTO.

But it has stopped short of allowing European companies majority ownership in telecommunications ventures.

China will allow 25% foreign ownership, and the limit will rise to 35% after WTO entry and to 49% in three years after the start of membership.

China will also award seven licences to European insurers in the life and non-life sectors.

It will allow European insurers to operate in China free of any joint-venture restrictions five years after it joins the WTO.

China agreed to lift joint venture restrictions for foreign companies on large department stores and on nearly all chain stores.

It will also gradually ease its state monopoly on imports of crude oil and oil products.

Tariff cuts

Regarding trade duties, China will cut tariffs to between 8% and 10% on 150 leading European exports, such as machinery, glass, textile, cosmetics, footware, leather goods, wine and spirits.

China has being trying to join the WTO for the past 14 years.

The EU was the largest of six remaining WTO members to reach bilateral trade agreements with the Chinese.

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

Crucial US vote

The deal may help swing a crucial vote in Washington 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 US.

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

The successful EU trade talks could 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.

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See also:

19 May 00 | Business
Analysis: China's WTO hopes
19 May 00 | Business
US shift on China vote
10 May 00 | Business
US trade battleground
18 May 00 | Business
Greenspan backs Clinton on China
18 May 99 | The Economy
WTO: Policing world trade
18 May 00 | Business
Business lobbies hard on China
04 Aug 99 | Battle for Free Trade
WTO: A history of free trade
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