China Must Play by Trade Rules
The effort to get China admitted into the World Trade Organization has been slow and frustrating. Beijing appears eager to join but reluctant to pay the price of entry. Repeated delays have made it all but impossible for China to join before the Nov. 30 launching of the next WTO round of trade talks, in Seattle. Missing that deadline will relegate China to the margins of the talks, with potentially serious economic consequences both for Beijing and its trading partners. But easing the terms of China’s admission just to cut a deal before the Seattle meeting would be a mistake. It would discredit the WTO principle that all members are treated equally. Beijing must decide whether to accept the terms offered by Western nations.
Premier Zhu Rongji came close to meeting WTO accession requirements last April, but, rather than closing the diminishing gap, his government has been backpedaling ever since. There are disturbing signs that Beijing hard-liners, suspicious of the WTO, fear that better and cheaper imports pose a threat to China’s inefficient manufacturers. In recent weeks, Beijing has banned foreign ownership of Internet companies in China and--in clear violation of WTO rules--has imposed a curb on imports of cellular telephones.
Zhu and other reformists in his government recognize that WTO membership is essential for further economic growth. Membership would bind Beijing to a firm plan to open China’s markets for goods and telecommunications and financial services. It would also prohibit the government from closing markets without prior consultations and compensation. But without such measures, the dwindling foreign investment that drives China’s remarkable growth will not return.
No doubt WTO membership will cause the dislocations that conservatives in Beijing fear. But it is better for China to shut down its inefficient, largely state-owned enterprises than keep them afloat with borrowed money. The current practice of subsidizing the bloated state sector and protecting it from foreign competition is the quickest route to recession in China.
President Clinton, who has been roundly criticized for turning down Zhu’s April offer, has taken personal interest in the WTO negotiations. That is commendable. The outcome is all but certain, but the chances of success always improve when deliberations take place at the top level of government. Even so, the Clinton administration must stand firm. China must meet the WTO demands to clinch a deal.
