NEWS ANALYSIS : Opening Up China’s Market Apt to Be Hard

The new pact between the United States and China protecting U.S. copyrights and patents from piracy will help ease trade friction between the two nations and pave the way for progress on broader trade issues.

Still, the road to an agreement on measures eliminating Chinese barriers to imports--a matter of paramount importance to U.S. exporters--remains rocky. Negotiations on these market access issues will probably begin in February.

The trade agreement protecting U.S. intellectual property rights, signed last Friday, is the good news counterbalancing the disappointments in Sino-American trade. Trade tension between the countries developed after China recorded a 1990 trade surplus of $10.4 billion, prompting U.S. industries and the American government to complain of unfair Chinese trade practices.

China’s 1991 trade surplus with the United States is expected to be in the $13-billion range--an all-time high--when exports and imports for December are tallied. However, in the wake of the agreement on intellectual property rights, American frustration will probably be muted.

That is because U.S. industry will no longer be losing an estimated $400 million a year in China as a result of the unauthorized copying of American computer software, sound recordings, books and other intellectual property. Under the agreement signed Friday, China promised to tighten its regulations protecting patents and copyrights, and agreed to comply with international rules protecting intellectual property.

The agreement averted a confrontation over the United States’ plans to slap tariffs of up to 100% on as much as $1.5 billion in Chinese imports, including clothing, leather goods, electronic equipment and watches. China threatened to retaliate with tariffs on $1.2 billion of U.S. imports--primarily aircraft, cotton and chemicals.

China made concessions because its trade negotiators and officials in its Ministry of Foreign Economic Relations and Trade finally persuaded the country’s aging leadership to comply with international trade conventions. The agreement, which averted a trade war, signals a sea change in China’s stance on trade disputes. China watchers generally agree that it will be easier to get that country’s Communist leadership to remove barriers to U.S. products.

“The agreement on intellectual property rights will provide positive carry-over on market access issues,” said Nicholas Lardy, a University of Washington economist who has advised members of Congress on Sino-American trade.

Lardy said the Chinese will probably deal quickly with the non-tariff barriers.

U.S. companies have long complained that the Chinese government has not disseminated information on its import regulations--rules governing what it will and will not purchase--making it difficult to develop strategies for selling to China.

For example, U.S. firms do not know how to tailor certain products for that nation because Beijing has not circulated information on many quality standards and product specifications.

By pushing China to be more open, U.S. negotiators also hope to prompt China to end secret discriminatory practices. For example, U.S. negotiators last year obtained a secret Chinese government memo prohibiting its state enterprises from purchasing equipment from American telecommunications firms such as American Telephone & Telegraph.

China’s economy has improved since 1989, when it suffered global trade reversals. Beijing will probably use its foreign exchange to purchase more factory equipment, machine tools and aircraft from U.S. companies, said Kim Woodard, director of Chinese business affairs for A. T. Kearney, the Chicago-based international management consulting firm.

However, Woodard and many others in the trading community believe that it will be difficult to get Beijing to make sweeping market access reforms.

“Negotiations on market access will be extremely tough,” Woodard said. “The tariffs, quotas and non-tariff regulations existing in every Chinese industry have been used to build these trade surpluses. Without this protectionism, many of China’s state-owned industries would crumble.”