Getting China to Adhere to Deal Is Next Hurdle

Difficult as it was to negotiate the terms of China’s entry into the world’s trading system, the real challenge may be yet to come: getting China to carry out its part of the bargain.

What if China balks at letting foreigners compete with its long-protected industrial base, as the mammoth deal reached with the United States requires? Can the World Trade Organization force compliance by such a huge country, one whose central government cannot always make sure that even its own edicts are carried out in its distant provinces?

“What’s written down in trade agreements has only little impact on what’s happening on the ground in China,” argued Greg Mastel of the New America Foundation, a critic of the agreement. “It’s not clear that the WTO is going to be able to police the Chinese very well.”

The question of whether the mammoth agreement is enforceable will probably dominate the debate next year when Congress decides whether to endorse the deal.

Opponents say that China hasn’t complied with its past trade agreements and won’t suddenly change its ways. Defenders, though acknowledging the problem, say there are several mechanisms that will ensure the agreement can be enforced.

The American Embassy in Beijing is said to have warned Washington that it worries about whether the U.S. government can manage the huge job of ensuring China’s compliance. And in an interview last summer, U.S. Trade Representative Charlene Barshefsky said that enforcing any WTO agreement with China would be “a big job, a very, very big job.”

“This is an export powerhouse that has a trade regime completely at odds with WTO norms,” Barshefsky said. But if suspicions barred the door to China’s WTO entry, she added, China “will never be in. There’s no way to square that circle.”

In many sectors of its economy, China has required foreign companies to sell and buy products in China through state trading companies that severely restrict competition. Other firms are required to seek approval from the government for many of their business operations. Such requirements--the vestiges of China’s huge old state-planning apparatus--would not pass muster under the WTO rules.

The United States and its leading trading partners already plan to set up a mechanism in Geneva, where the WTO is based, to review whether China is adhering to its promises on trade. And Barshefsky said the U.S. could pursue any of three strategies on its own if China broke those promises:

* It could invoke its own laws allowing retaliation against unfair trading practices, including existing anti-dumping laws.

* It could take disputes to the WTO, which has an established mechanism for settling complaints.

* It could impose special safeguards to block surges of imports from China.

Critics worry that these efforts won’t be sufficient. They point to the numerous problems that cropped up in earlier trade deals with China, such as the one protecting intellectual property such as movies and videodiscs.

In 1995, the Clinton administration proudly hailed the conclusion of an intellectual-property deal with China. But afterward, nothing changed: Chinese factories continued to turn out pirated compact discs. A year later, administration officials found themselves returning to Beijing for new negotiations on whether China would carry out what it had promised a year earlier.

Even some proponents of free trade and a WTO deal concede there are strong reasons to worry whether a deal against China would be enforceable.

“China has only a rudimentary legal apparatus,” said Claude E. Barfield of the American Enterprise Institute. “Even with the best of wills, the Chinese are going to have a very hard time.”

Barfield and co-author Mark A. Broombridge recently finished a study, “Tiger by the Tail,” arguing that China should be admitted to the world trading system--but only if it first meets a series of administrative reforms. For example, China needs to practice transparency by letting everyone know its trading system’s rules, the authors say. And it must provide the guarantees common to legal systems elsewhere, such as advance notice of legal proceedings, the right to appear in court and the right to appeal.

If not, Broombridge and Barfield predict, the result will be that “the WTO will face enervating disruptions and turmoil for many years to come after China’s [entry].”

China, of course, is important on its own; it has become one of the world’s largest exporting nations. But how the deal is enforced will also have ramifications that extend well beyond China to Russia and several other countries that are lining up to join the world trading system.

“We have to remember that there are 16 other non-market economies, from Russia and Ukraine to . . . Vietnam,” asserted Thomas J. Duesterberg of the Hudson Institute. “The Chinese economy could set a precedent for how these other economies are dealt with in the WTO.

“I think it’s a problem to sign on to an agreement [with China] when we have lingering doubts about their ability to enforce it,” he added.

The Clinton administration dismisses these concerns. Officials insist that China’s performance in carrying out the deals it signs is better than the critics claim.

‘On the whole, their record of compliance with trade agreements is not bad,” Barshefsky said. “They have fallen away in some places, but generally I would say, on the average they’ve been pretty good.”

However, America’s top trade official admits that for China to carry out what it has promised the WTO will require enormous changes.

“Look, we’re trying to fit a square peg into a round hole,” Barshefsky said in the interview. “What are the hallmarks of the world trading system? The rule of law and transparency. China doesn’t have either one.”

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The White House promises to conduct environmental reviews of future trade agreements. C17