The new U.S. trade representative met here Tuesday with his Chinese counterpart for the first time, raising hopes that both sides were ready to accelerate China's entry into the World Trade Organization.
But no breakthrough came after initial talks between Robert B. Zoellick, the highest-ranking Bush administration official to visit China, and Foreign Trade Minister Shi Guangsheng.
"There are still issues that need to be resolved," said Zoellick, on the sidelines of an Asia-Pacific Economic Cooperation meeting of government ministers that begins today. "But there is a good-faith commitment on all sides to keep pushing forward."
Agricultural subsidies are the main sticking point preventing China from getting into the WTO before the end of the year.
China wants to protect its 800 million farmers, some making less than a $1 a day. So it wants recognition as a developing country, which would entitle China to grant its farmers a 10% subsidy on their products. But the U.S., pressured by powerful domestic farm lobbyists, previously had insisted that China qualifies as a developed nation and should be allowed to give no more than a 5% subsidy.
In March, the U.S. offered a compromise, allowing China a cap of between 7% and 8%. But before more serious negotiations could take place, a collision in April between an American spy plane and a Chinese fighter jet sent relations tumbling.
This was followed by a series of diplomatic skirmishes over U.S. arms sales to Taiwan and Washington's decision to grant visas to the Dalai Lama of Tibet and President Chen Shui-bian of Taiwan.
But President Bush has recently softened his stance toward Beijing; last week he asked Congress to renew normal trade relations with China, a vote that is required annually until China joins the WTO.
On Tuesday, Zoellick met with various members of the APEC organization, trying to win their support for greater liberalization of trade.
"There are some areas where we have differences with China, there are other areas where we have common interests and common objectives," Zoellick said. "I'm here related to our common objectives."
The U.S. concern is that China will miss a window of opportunity in its 15-year-long bid to join the WTO. Domestic tensions are mounting as Beijing wrestles with the impact of reforms related to membership and with a widening gap in incomes between rich and poor. Already, urban and rural unrest is on the rise, posing a serious threat to the ruling Communist Party. A recent government report warned that opening more markets to foreign trade could exacerbate social instability.
The government is desperate to keep a lid on the situation, recently firing editors at the popular Southern Weekend newspaper to muzzle its aggressive coverage of rural discontent.
The Chinese leaders know that they are rolling the dice when they open the country to unprecedented access and competition from the outside world. But they also realize that there is no turning back.
"Fifteen rounds of multilateral talks have been held to draft legal documents for China's WTO accession, and we have solved most of the problems," Shi told state media.