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VIEWPOINT: KAUTILYA
Long
March To Geneva
After 14 years of negotiations, China's WTO entry is
facing the last mile problem.
By Jairam Ramesh
In July 1986,
China started negotiating its re-entry into the General Agreement on Tariffs
and Trade (GATT). China and India were among the 23 founder-members of
GATT when it was formed in 1948. From January 1995, the country has been
negotiating its membership of the WTO which replaced GATT. It was expected
that China will finally become a member by November 2001 when trade ministers
of WTO member countries meet next in Qatar, although it now looks that
this deadline may well slip. Hong Kong and Macau will continue as members
even after China's accession and Taiwan will join immediately after China's
entry. Thus, after China's final accession, among the major trading nations
only Russia and Saudi Arabia will not be in the WTO.
China is following a two-track approach. On
the bilateral track, following the Sino-US pact signed in November 1999,
it has signed market-access agreements with 35 other trading partners
including India. Nine more bilateral agreements remain to be finalised,
including one with Mexico which is proving to be especially sticky on
the issue of anti-dumping. Simultaneously, it is negotiating multilaterally
in the WTO. The bilaterally agreed commitments become part of the treaty
terms of China's membership in the WTO.
 Five
issues are proving contentious in the multilateral negotiations. First,
China wants to be treated as a developing country for determining the
extent to which agricultural subsidies are permitted; the Americans contend
that China is an advanced country. Second, China wants to be treated as
a developing country in industry also so that it can invoke the developing
country provisions of the WTO Agreement on Subsidies and Countervailing
Measures. This is being opposed by the US and Europe. Third, there are
differences over commitments that China is prepared to make to liberalise
some of its services industries like retailing, franchising, insurance
and brokerage. Fourth, China's conformity to the WTO Agreement on Technical
Barriers to Trade is in dispute. The argument given by the Americans and
the Japanese is that China uses inspection standards and quality and safety
licences to discriminate against imports. The procedures it uses to implement
technical regulations and standards is also very discretionary. Fifth,
China's trading partners want that foreign companies be granted greater
access to the local distribution system through free imports and exports-the
so-called trading rights issue.
Twice before the negotiations have been derailed
over Sino-American spats. The first was in June 1989 when the Tiananmen
Square firings took place. The second was in May 1999 when the Chinese
Embassy in Belgrade was bombed. Now with the recent spy plane incident,
some influential Americans are calling for further delaying of China's
entry into the WTO. In September 2000, the US Congress approved what is
called permanent normal trading relations (PNTR) agreement with China
which freed China from the obligation of seeking MFN status year after
year through protracted wranglings. But this PNTR depends upon certification
by the US President before June 3, 2001 that the final accession package
agreed to between China and the WTO is as favourable to the US as the
Sino-US bilateral deal. This deadline may not be met and China will then
have to revert to the conditional MFN regime which it finds very embarrassing
The WTO Agreement is as much about law as it
is about trade, something we too are yet to fully come to grips with.
On trade, China has done outstandingly well. In the 1990s, exports and
imports averaged about a third of its GDP. China is now the world's 10th
largest trading nation based on dollar values. Chinese exports and imports
are now almost six times that of India's whereas it was just about twice
just two decades ago. But it is on law that serious questions remain.
Qingjiang Kong, a Chinese trade scholar, argues that in a society that
is based on the Confucian rule by virtue-something that goes beyond mere
rule through law or legal instrumentalism-the notion of rule of law is
still somewhat alien. The Chinese will also face serious problems on transparency
obligations arising from various WTO agreements.
There are fears within China that the foundations
of its spectacular prosperity will be endangered if it joins the WTO.
There are powerful forces in the Chinese power structure that would not
be unhappy if China's entry is delayed. But Prime Minister Zhu Rongji
clearly thinks otherwise and sees the entry vital not just for consolidating
the gains from growth but also for making a major political statement.
It is in India's interests that China's entry materialises at the very
earliest. A leadership role in this regard will not be out of place, especially
given that China's absence from the WTO hurts us more than it does the
developed countries.
(The author
is with the Congress party. These are his personal views.)
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