China and the United States announced Saturday that they have cleared the remaining hurdles blocking Beijing's entry into the World Trade Organization.
The agreement reached between Chinese Foreign Trade Minister Shi Guangsheng and U.S. Trade Representative Robert B. Zoellick during talks in Shanghai means that China now has a better chance of joining the global trading body by year's end.
"We are pleased to report that the U.S. and China have reached consensus on major issues that we discussed," said a statement released by the U.S. Embassy in Beijing. "China and the U.S. agree that we should now work together in Geneva to complete China's WTO accession."
Neither side, however, revealed any details of the discussions, which took place on the sidelines of an Asia-Pacific Economic Cooperation trade ministers meeting in Shanghai last week. The event was a kind of rehearsal for an APEC summit in October at which President Bush is expected to meet Chinese President Jiang Zemin for the first time.
There had been hopes that the two sides would take advantage of the APEC meeting to announce a breakthrough. But nothing had materialized by the time the conference ended Thursday. Talks between Zoellick and Shi reportedly continued until 3 a.m. Friday.
China's 15-Year Effort
"After the negotiation, the two sides have reached a full common understanding on the remaining issues concerning the multilateral talks on China's accession to WTO," Shi said through the official New China News Agency. "It created important conditions for the 16th meeting of the WTO China working team, which is going to be held in Geneva at the end of this month, and for accelerating the process of ending the substantive talks on China's accession to WTO."
China's marathon bid to join the global trading community has lasted nearly 15 years. It cleared a major obstacle two years ago when the U.S. agreed to endorse it. But a logjam developed after China refused to accept the status of a developed nation, with correspondingly low farm subsidies. Earlier last week, Zoellick had implied that if this final wrinkle could not be ironed out, Beijing's entry by year's end would be highly unlikely.
Even if the WTO decides to accept China's application, speedy entry will be a technical challenge, considering that between three and six months are needed to draft complicated accession protocols.
But Saturday's agreement paves the way for China to finally assume the bridge-building role it seeks between rich and poor nations. The pact could also help reinitiate stalled trade talks--something that the violence-plagued WTO meeting in Seattle in 1999 failed to do.
"This understanding is a win-win result for China and the U.S.," Zoellick said in a statement. "It would also add momentum to our effort to launch a new global round of trade negotiations in [Qatar] this November."
Mexico a Holdout
Every WTO member except Mexico, which has demanded more anti-dumping protections to counter cheap imports, has endorsed China's accession request. During a visit to Beijing last week, Mexican President Vicente Fox told Jiang that he hopes their two countries can reach a deal soon.
How the world's most populous nation and its 800 million mostly impoverished farmers will adjust to membership in the world trade body remains to be seen. The way the U.S. and China sorted out the farm subsidy issue will be critical. China had argued for an ability to subsidize its farmers by up to 10% of its annual economic output, while the U.S., pressured by powerful farm lobbyists, was insisting on a cap at 5%.
China's choice was a difficult one. Already, 20 years of breakneck economic reforms have transformed a backward command economy into an impressive engine of growth. But those changes have also created huge unemployment as well as widened rifts between rich and poor. Rural unrest is on the rise, and urban unemployment threatens to cause more social instability. Conservatives worry that the country is simply not ready for the onslaught of more market openings and foreign competition.
The reason China's growth has not ground to a halt during the global economic downturn is that its economy is protected by barriers such as tariffs, corruption, a lack of openness and the relative absence of the rule of law.
Under WTO, all of that will have to change, and reform-minded leaders in Beijing--like the international business community, which is hungry for a piece of the giant China market--believe that should be reason enough for it to embrace membership in this particular global partnership.