Great wall of trade hampers US-Sino deal

By Rod Oram

Between the lines

President Bill Clinton could today make an historic decision in Auckland. If he commits the US to push for China's entry into the World Trade Organisation, he will lay the groundwork for one of his presidency's greatest achievements.

Binding China into the world trade system will bring greater opportunity and security to all China's trading partners through freer trade and legally enforceable dispute-resolution procedures.

As he left Washington, Mr Clinton was optimistic that he and Chinese President Jiang Zemin could agree to resume their WTO talks when they meet in Auckland this afternoon. But it's far from that easy. For both sides, the stakes are high, the issues thorny.

Powerful lobbies in both countries want China to join the WTO for the increased market access they would gain. China also needs to revive its dwindling inflow of foreign investment.

For China, the deal also makes sense politically. Since Taiwan turned feisty, seeking a "state-to-state" relationship with China, Beijing has needed to normalise its US relations.

They were badly disrupted in May by the US bombing of China's Belgrade embassy and revelations about Chinese spies in the US, events which caused China to break off trade talks with the US.

But large are the forces arrayed against a deal.

There is Chinese political opposition, particularly from Li Peng, chairman of China's Congress. Also, easier imports will disrupt some local sectors.

China also has a problem with the trade concessions it offered the US in April. To win US support for its WTO candidacy, Chinese Prime Minister Zhu Rongji delivered a pretty generous package on a trip to Washington. It included opening wider the Chinese financial sector to US investment.

Many analysts judged it a good deal, saying China had moved further in six months than in the previous eight years' negotiations. Yet Mr Clinton insulted Mr Zhu by turning it down as not good enough. Certainly it lacked some elements US business wanted, such as the right for US banks to offer services in yuan in China. But the real reason was US Treasury Secretary Robert Rubin didn't believe the White House could get the China deal through Congress because of rising protectionism and anger over China's $US57 billion ($107 billion) trade surplus with the US.

Five months on, US protectionism has increased. China won't come back to the table without assurances Mr Clinton will fight for it in Congress. Worse, China may not be able to offer as good a deal this time around.

So why should Mr Clinton initiate a bloody Congressional battle over China which could weaken Vice-President Al Gore's presidential election chances? For Mr Clinton, maybe the only reason is his place in history.

But for the rest of the world, there is a much bigger reason. If he wins this fight for China after 13 years' negotiations, he will roll back US forces ranged against free trade.