In a step that could help restart stalled negotiations on China's entry into the World Trade Organization, U.S. Undersecretary of Commerce David Aaron arrived in Beijing today for the first high-level trade talks with China since the NATO bombing of China's embassy in Belgrade on May 7.
The meetings were hastily scheduled after China told U.S. officials on July 16 that it was ready to hold bilateral trade discussions in Beijing after two months of icy relations following the bombing. U.S. officials suggested the talks in April, but hadn't heard back in three months.
"They suddenly said: `We'd like you to come,' " Aaron said in an interview. "They have been telling our businesses that they want to continue business as usual, but that hadn't been reflected in our commercial dialogue until now."
While China continues to reject the U.S. explanation that the embassy bombing was an accident, Chinese officials recently have shown an interest in improving ties. On Sunday, Chinese Foreign Minister Tang Jiaxuan met with Secretary of State Madeleine K. Albright in the highest level meeting between the two sides since May. Albright said she sensed an "easing of tensions" during her "very friendly lunch" with Tang at a regional security forum in Singapore.
China still has not agreed to resume talks on entering the WTO, the Geneva-based body that regulates global commerce, but Aaron said he hopes the Chinese government's willingness to hold trade discussions in Beijing now could pave the way for future WTO negotiations.
Since May, nearly all high-level talks between China and the United States have focused on the bombing, or on security issues such as recent tensions with Taiwan. Beijing shunted aside trade talks as second-tier concerns that had to wait until other, more important issues were resolved. Now, though, trade appears to be back on Beijing's agenda, and Aaron is eager to get back to the tough economic issues between the two countries.
"We have to get back to the frank, workmanlike relationship that we had," Aaron said.
Aaron's talks in Beijing are to be held on the same day the House is set to decide whether to continue normal trade relations with China. In his meetings with Shi Guangsheng, China's minister of foreign trade, and other officials on Tuesday, Aaron plans to raise the issue of China's massive trade surplus with the United States, which has now reached more than $1 billion a week.
Another key issue is compensation for Sprint Corp. and other U.S. telecommunications firms that had large portions of their businesses in China shut down last year. The companies formed joint ventures with state-owned China Unicom, the country's second-largest phone company, to avoid China's rules prohibiting foreign firms from providing telecommunications services. But last year the government retroactively closed the loophole that allowed such arrangements.
Twenty U.S. and other foreign companies invested more than $1 billion with China Unicom. The companies have demanded to be repaid and compensated for lost revenues, but China Unicom is resisting. Aaron said the issue could threaten China Unicom's planned initial public offering in the United States, which is being underwritten by Morgan Stanley Dean Witter & Co.
"There's a big question mark hanging over it. Until it's resolved, it's pretty hard to go ahead with a stock listing," Aaron said, adding that the decision on whether to allow an offering will be made by the U.S. Securities and Exchange Commission, not the Clinton administration.
Such conflicts illustrate why the United States would like China to join the WTO, Aaron noted. China's entry to the WTO -- which would require deep reductions in its trade barriers -- would give American businesses access to closed Chinese industries, such as telecommunications. It also would spur competition and reform in China's highly protected and monopoly industries, key goals of economic reformers such as Premier Zhu Rongji.
Zhu offered a package of deep tariff reductions and other trade liberalization measures during a summit in Washington in April. The administration rejected the offer as insufficient. Chinese negotiators have since stepped back from a number of the commitments they made in April.
The remaining WTO negotiations promise to be tough, if and when they do get underway.
"Our view is, we have to go forward, not backward," Aaron said. "We didn't go too far. We didn't go far enough."