Beijing Quietly Battles U.S. Over Global Trade Accord : Commerce: China threatens to stay out unless it gets developing-nation status. Washington rejects ultimatum.
In a stark ultimatum to the Clinton Administration, China recently threatened to abandon its eight-year effort to join the world trading system if the United States does not agree to Beijing’s terms for entry by Jan. 1, U.S. officials say.
The tough warning--delivered to the Administration in a private message by Li Daoyu, the Chinese ambassador to Washington--has touched off a quiet new showdown between Washington and Beijing, this time purely over the trade issue rather than human rights.
The deadline China set is less than four weeks away. After that, China said, it will stop negotiating.
If the threat is carried out, China, the world’s most populous country and its fastest-growing economic power, would stay out of the world trade agreement, which was ratified by Congress last week, and would not be subject to any of its trading rules.
China argues that it deserves more lenient treatment under global trading rules than advanced economic powers and more time to adjust, because it is still a poor and developing country. The General Agreement on Tariffs and Trade and its successor regime, the World Trade Organization, have more relaxed rules for developing countries. But the United States and other countries claim that China does not qualify.
A Chinese Embassy spokesman confirmed the account Tuesday.
“Yes, that is our principled position,” he said. “We have made it very clear . . . that the substantive negotiations for China’s (membership) must be completed by the end of 1994.”
And the spokesman added another warning: If China cannot get agreement by Jan. 1, it also will refuse to abide by past trade agreements with the United States, including those on textiles, wheat and patents and copyrights.
Beijing’s ultimatum might seem to be counterproductive, because if China is outside the world trade system, Chinese exporters would not benefit from the lower tariffs and other privileges enjoyed by its members. But some American analysts believe that there may be some internal opposition within China to joining the world trade regime because foreign competition might threaten China’s long-protected, overstaffed state enterprises.
Last spring, in the face of Chinese intransigence, the Clinton Administration abandoned its previous threats to cut off China’s most-favored-nation trade benefits if China did not change its human rights policies. But this time, Administration officials insist that they have no intention of backing down.
“I think they (Chinese officials) are in the same fix we were in on MFN. They’ve made a threat that they can’t back up,” one senior U.S. official said. “They want to get into this organization, and they’re going to have to make a deal.”
The Clinton Administration has been insisting that, for China to be admitted to the world trading system, it has to change existing protectionist policies, open its markets, lower tariff barriers and abide by the same rules that apply to other major countries.
“China is the second or third largest economy in the world,” U.S. Trade Representative Mickey Kantor told reporters last month. “It has a $28-billion trade surplus with the United States.”
“It would be terrible if we accept them on the terms they want, because we will be (hurting) ourselves for a long time to come,” one Administration official said, raising the specter that China could follow Japan’s example and run up decades of huge trade surpluses with the United States.
President Clinton reportedly warned Chinese President Jiang Zemin in Jakarta, Indonesia, last month that the United States will support China’s entry into the world trading system only on the same “commercial” terms that other nations follow.
“We would like them in the GATT,” one senior Administration official said. “They’re a big and important economy. But the other side of the coin is it really is an economic decision, not a political one. . . . This (policy toward China is) not the United States alone, this is the Europeans and the Japanese.”
U.S. officials said China delivered the same ultimatum to Japan and European nations. But China is blaming the United States for its inability to gain admission. “If the United States wasn’t placing restraints, China would be able to join GATT now,” Premier Li Peng told the Wall Street Journal in a recent interview.
Clinton Administration officials said the current dispute is fundamentally different from the one over most-favored-nation trade benefits.
“The (American) business community is supporting us on this one,” one U.S. official observed.
Another Administration source said that, in private, U.S. corporate executives have been “real hard-nosed” in insisting that China be subjected to the same world trade rules as American, West European or Japanese companies.
Jan. 1 is the date for the start-up of the World Trade Organization. But U.S. officials have said it is not clear whether the organization will actually be founded on that day because many countries have still not ratified the agreement.
China has repeatedly insisted that it should be one of the founding members of WTO. But its admission has been held up by the disputes over what rules will apply.
European countries have proposed a compromise under which China would continue to negotiate in early 1995. After a deal is reached, China would be awarded, retroactively, the status of a founding member.
U.S. officials have said informally that they would be willing to go along with this compromise. But China’s ultimatum appears to rule it out by insisting that the negotiations be wrapped up this month.
The ultimatum leaves open the possibility that China would be willing to talk about “technical issues” after the Jan. 1 deadline.
