In the annals of cross-cultural misunderstanding, the meeting between President Clinton and Chinese Premier Zhu Rongji at the White House on April 7 may have been a classic.
Zhu, ready to take on the most powerful and entrenched interest groups in China by letting foreign companies compete in his country, expected Clinton to welcome Beijing into the World Trade Organization. But the president--distracted by war in Kosovo and worried about a surge in anti-Chinese sentiment in Congress--had decided to put off a final decision, despite a flurry of concessions offered by the Chinese.
On the day Zhu landed here, the Chinese sensed that their hopes might be dashed. They sought one last opportunity for the premier to speak directly to Clinton. Clinton put his arm around the considerably smaller Zhu, according to a Chinese diplomat's account, and told him: "If you really need this now, we can do it. It's hard for me to do it now, it's a bad time politically, but if you really need it, we can do it. Do you really need it now?"
Zhu, dismayed but unwilling to be a supplicant, said he didn't. The Chinese official who provided this account added, "How I wish I could have had a cultural translator in that room at that moment" to explain to both men what they were hearing each other say.
Now, Clinton is the supplicant and U.S. negotiators are trying to get back to the agreement they had nearly completed seven months ago. After speaking by phone with Chinese leader Jiang Zemin on Saturday, Clinton dispatched Charlene Barshefsky, the U.S. trade negotiator, and Gene Sperling, the head of the National Economic Council, to Beijing this week to try to resuscitate a deal before the end of the month, when the World Trade Organization convenes in Seattle to set a trade agenda for the next three years.
China would like to be a full participant in that meeting but can take part only if its differences with the United States over WTO membership have been settled. The signs from Beijing haven't been encouraging, but China frequently waits until the last possible moment before making difficult agreements.
Within the small band of officials, business executives and lobbyists who follow the issue most closely, the events of April are beginning to look like a huge moment--especially if the new effort to strike a deal is unsuccessful.
At best, trade specialists and government officials said last week, any agreement reached now will fall slightly short of the package left on the table in April. Some lobbyists report receiving phone calls from the Department of Commerce, asking how far the administration could move from the April accord before losing their support.
Robert Kapp, president of the U.S.-China Business Council, said a new agreement won't be a "verbatim" copy of the earlier deal. But he added: "No serious observer realistically expects that the final agreement will be a radical departure from what we saw on April 8."
By joining WTO, China would open its markets to foreign agricultural and industrial products, foreign providers of financial services and foreign investors, all to an unprecedented degree. It would also lock in low-tariff access to markets in other WTO member countries. For the United States to benefit, Congress would have to grant China permanent "normal trade relations" status, ending Congress's annual review.
Not all details were worked out in April. Still at stake is whether foreign companies will be allowed to own majority interests in Chinese telecommunications firms and how long it might take to phase in foreign control of joint ventures in financial services, industry sources said. Beijing wants to make it harder for U.S. companies to lodge dumping cases against Chinese exporters.
The importance of the trade talks is a symptom of the enormous change that has taken place in U.S.-Chinese relations since President Richard M. Nixon and Communist Party Chairman Mao Zedong reestablished ties during the 1970s. Back then--when Clinton was a student and Zhu a defrocked party member and intellectual who had been banished to a pig farm--the two countries were drawn together by common opposition to the Soviet Union. There was no trade.
The business executives and free trade proponents pressing for a deal see multiple benefits from Chinese membership in WTO. In their view it would commit the Chinese to joining a global system of trade under clear rules (many of them written in the United States), encourage the further privatization of the Chinese economy and finally create meaningful opportunities for American companies and farmers to make substantial sales to China. So far, Chinese exports to the United States have vastly outnumbered U.S. exports to China, creating a U.S. trade deficit with China that approaches $60 billion a year.
American proponents of a deal also argue that Chinese adherence to WTO rules would force the modernization and reform of China's communist system. Deborah Lehr, a former U.S. trade negotiator, recently told an audience at George Washington University that a deal "is not going to change China overnight. It will change China over time."
Critics of Chinese membership in the WTO include trade unions that worry about competition for American workers from low-wage Chinese; conservatives and human rights advocates who argue that China should not be rewarded unless it changes its domestic policies; and skeptics who contend that China won't adhere to the rules of the WTO even if it signs up for them.
As the Seattle meeting approaches, proponents of a deal with China want to avoid any repetition of April's experience, when business leaders felt the administration was distracted by war and politics, and some administration officials felt that the business community could have worked harder to build congressional support for a deal. This time around, the business community is ready to conduct "the strongest effort ever made" for a piece of trade legislation, as one lobbyist described it yesterday.
There was optimism in April, too. In the month before Zhu reached the United States, Steve Ricchetti, the deputy White House chief of staff, and his aides exchanged information with lobbyists for major American companies and business organizations in several meetings. "We all thought the deal was done," said a participant.
According to one well-placed source, John F. Welch, the CEO of General Electric Co., was one of several captains of industry contacted by the White House and asked to prepare a statement welcoming the deal when it was announced. A lobbyist for another of the country's biggest corporations reported receiving a phone call from the U.S. trade representative's office saying the deal was at hand.
But this lobbyist also heard from other corners of the administration that political considerations had prevailed: concern over the Cox Committee report on Chinese espionage and the anti-Chinese mood in Congress plus the advice of several key Democratic legislators had persuaded Clinton not to clinch the deal in April, these officials were saying.
"So we had three press releases drafted," each covering a different outcome, this lobbyist said.
The lobbyist's confusion reflected a sharply divided administration. Barshefsky, national security adviser Samuel R. "Sandy" Berger and Secretary of State Madeleine K. Albright all favored seizing the deal on the table. But, according to numerous sources, then Treasury Secretary Robert Rubin had the decisive vote. He, White House chief of staff John Podesta and Sperling, the economic adviser, decided the moment was inopportune.
On the day Clinton put his arm around Zhu, Senate Majority Leader Trent Lott (R-Miss.) called WTO membership for China "the wrong decision at the wrong time" and a group of influential House Democrats sent a similar message. Rep. Robert T. Matsui (D-Calif.), a leader on trade issues, had told Podesta he feared "a cataclysmic embarrassment" if the administration approved a deal and Congress refused to go along. Rep. Sander M. Levin (D-Mich.) worried that too many issues were still unresolved to close the deal during Zhu's visit.
"The business community had not revved up until the last minute," said one of the officials who argued against making the deal at that moment. "Our view was that if the president signed while Zhu was in Washington, it would look very political and would run the risk of being inflammatory. So our view was . . . that it might be better to sign two weeks later and create less of a political reaction."
That option turned out not to exist. After backing away from the deal, the administration published a list of Chinese concessions made during the negotiations. Administration officials said they thought this was the best way to "test market" the deal and build support for it.
But the Chinese were furious. "Some of us got calls from the Chinese Embassy," the Washington representative of one big company reported. "They were livid, but more to the point, they were embarrassed, and they thought the premier was embarrassed" by Clinton's decision.
Zhu then set out on a four-day tour of America. Meeting with business executives in Denver and Chicago, he made blunt appeals for support of the trade agreement. Many businesses contacted Washington that week to complain about the fate of the deal.
By April 13, Clinton decided he had made a mistake. He called Zhu in New York, where the Chinese leader was spending his last night in the United States, and said he wanted to get the talks moving again. He offered to send negotiators to Ottawa, Zhu's next stop, or to Beijing. Zhu told an American he was hopeful a deal would soon be struck.
The White House also put out the word to reporters and members of Congress that the deal would quickly be revived.
It wasn't. "We all knew something happened in China between Zhu's departure from the U.S. and his return to Beijing," said one American involved in the negotiations. U.S. publication of Zhu's last bargaining position mobilized the entrenched, state-owned industrial interests most threatened by the prospect of foreign competitors. Many Chinese political analysts say Zhu's stature was significantly diminished in the infighting that followed his trip.
The bombing of China's embassy in Belgrade just three weeks after Zhu left America was another, perhaps even more devastating blow to the optimists who thought the trade deal could be easily rescued.
"There's always a cadence to trade negotiations," observed an American veteran of these prolonged talks with China. "There is always a moment when you can get a deal, or run the risk of a deal falling apart."
CAPTION: President Clinton and Chinese Premier Zhu Rongji in April at the White House. At the time, the two nearly had a deal on allowing China into the WTO.