Lamy bids to clinch WTO deal with China

Date: 11/05/2000

By Shada Islam

TRADE Commissioner Pascal Lamy and China's Foreign Trade Minister Shi Guangsheng will make another bid to clinch a market-opening deal in Beijing next week, just days before a high-stakes vote in the US Congress on granting China normal trading status.

Union officials insist that Lamy's decision to head back to Beijing after inconclusive negotiations in March on the country's 13-year-old quest to join the World Trade Organisation is not connected to the crucial US vote, expected in the week beginning 22 May. "We would like the Congress to vote for the deal with China and are following the situation closely," Lamy said recently. "But we have our own decisions to take."

Despite the recent rise in political support for improved US trading links with Beijing, there is little doubt that a successful EU-China accord could help sway many still-sceptical members of the US Congress to vote in favour of granting Beijing permanent market access - instead of the current practice of taking a decision on the issue each year.

US Deputy Treasury Secretary Stuart Eizenstat and Lamy discussed China's WTO entry in Brussels last week, with Eizenstat making it clear that any further tariff reductions or other market-access provisions secured by the Union would be welcome. Under WTO rules, concessions made to one member are automatically extended to all WTO signatories, allowing American companies to benefit from the terms of whatever deal is finally struck between the EU and China.

For Beijing too, the stakes are high. An accord with the Union - by far the largest of the seven trading partners with which it is still negotiating - is critical if China is to enter the WTO by the end of this year.

Prospects of a breakthrough are looking brighter now that Lamy has secured additional negotiating leeway from EU governments on the crucial issue of foreign participation in telecoms and life insurance companies, two of China's fastest growing economic sectors.

Union negotiators will continue to press Beijing to allow European firms a majority stake in joint ventures in both sectors. But there is growing recognition in the EU that some flexibility will be required. Diplomats admit that pushing too hard on the issue of foreign ownership in the face of China's insistence that such a measure would be against Beijing's "vital national interest" could prove to be counterproductive, raising domestic opposition both to WTO membership and reformist Prime Minister Zhu Rongji's wider-ranging ambitions to open up the economy.

EU negotiators are therefore expected to use this issue to try to win other equally valuable concessions, including a lowering of Chinese tariffs for cars, cosmetics, whisky and some farm goods - sectors where European firms are well-placed to capture a slice of the Chinese market.