After 13 years of off-and-on negotiation, China and the United States reached an agreement yesterday to bring China formally into the community of world trading nations. U.S. officials hope the impact will go far beyond trade, ultimately building respect for law, democracy and human rights in the world's most populous country.
The agreement, reached after six days of bargaining in Beijing, effectively secures China's entry into the World Trade Organization, the Geneva-based body that polices international commerce. To get the seat, China has agreed to a collection of market-opening and reform measures that, if implemented, would further tear down government control of its economy.
"In opening the economy of China, the agreement will create unprecedented opportunities for American farmers, workers and companies to compete successfully in China's market, while bringing increased prosperity to the people of China," President Clinton said yesterday in Turkey, where he is making a state visit.
The deal is an unusual meeting of the minds in a time of high tensions between the United States and China. In recent months, China has come under deep suspicion among many Americans for violations of human rights and alleged thefts of U.S. nuclear secrets and satellite technology and alleged covert funding of the Democratic Party; China has countered with outrage over the bombing of its Belgrade embassy by the U.S. Air Force during the Kosovo war.
The trade agreement could spur wide-ranging modernization in the Chinese economy, which is today a hybrid of free enterprise and state ownership, shielded from overseas competition. Benefits for the American economy would not be as broad but would still be significant.
Under the agreement, toasted with champagne in Beijing yesterday by bleary-eyed negotiators on both sides, China promised to let U.S. companies finance car purchases, own up to 50 percent stakes in telecommunications firms and sell insurance policies.
U.S. farmers were promised lower agricultural tariffs, which could raise their sales. China said it would undertake to end state subsidies for exports, take part in trade court proceedings and guard against piracy of "intellectual property" such as computer software and movies.
The agreement drew immediate condemnation from the AFL-CIO, the textile industry and some members of Congress, who called it a reward for a country that flouts civilized behavior and could not be relied upon to live up to the terms. Even as U.S. trade negotiators were talking in Beijing, a Chinese court sentenced four members of the Falun Gong spiritual movement to lengthy prison terms.
Senate Majority Leader Trent Lott (R-Miss.), who will be instrumental in a related congressional vote likely next year, reserved judgment pending study of the details.
"While China's admission to the WTO could provide opportunities for U.S. businesses," he said, "there remain significant questions about whether an agreement with China can be enforced fully and fairly and about the effect it could have on religious freedoms, human rights and our national security."
The two sides had come close to a pact in April, but President Clinton backed away from a Chinese offer. In Beijing, both sides retreated somewhat from positions they'd held then. The U.S. side, for instance, dropped insistence that its companies be allowed to own 51 percent--that is, controlling--stakes in Chinese telecommunications and life insurance companies. The Chinese agreed to a longer term--15 years rather than five--for special protections for the United States against "dumping" of Chinese products in the U.S. market.
"WTO is a set of commitments by the Chinese to complete the process of conversion to a market economy and to an economy that is regulated by law, rather than by anarchy or a central plan," said Chas Freeman, co-chairman of the U.S.-China Policy Foundation, which seeks better ties with China.
U.S. Trade Representative Charlene Barshefsky, who headed the U.S. delegation, said in a telephone interview from Hong Kong that the deal contained "enforceable rules on basic elements of a more open society, like . . . judicial review, the publication of laws and regulations." Over time, she said, they could be felt outside of the trade sphere.
U.S. negotiators flew into Beijing last week with plans to talk just on Wednesday and Thursday. They extended their stay repeatedly but three times threatened to fly home as progress stalled. The deal came together Monday morning Beijing time, after a surprise appearance at the talks by China's reform-minded prime minister, Zhu Rongji.
By U.S. accounts, the discussions at China's high-rise Ministry of Foreign Trade and Economic Cooperation building often meandered because the people across the table appeared not to have clear orders from the secretive Chinese leadership.
Criticism of the deal began almost immediately with its announcement. AFL-CIO President John Sweeney called it "a grave mistake," saying that China is "a rogue nation that decorates itself with human rights abuses as if they were medals of honor." Labor unions have often faulted foreign trade for costing jobs in the United States.
As the talks neared their end, Rep. Frank R. Wolf (R-Va.) asked: "Until you see some progress on human rights, why let them in?"
After the Cultural Revolution dislocations of the 1960s and '70s, China began opening to the outside world. With a hybrid economy of vibrant privately owned and sluggish state-owned factories, it has turned itself into an export machine, to the point that its trade surpluses with the United States today rival those of Japan.
China first sought entry to the WTO's predecessor agency, the General Agreement on Tariffs and Trade, 13 years ago. The country sees membership as giving it full status in the world community. Having a seat also provides some protection against unilateral sanctions by aggrieved trading partners.
U.S. businesses, which have long wanted better access to China's 1.3 billion people, immediately hailed the agreement. "This is probably the most important economic development for China in the last 50 years," said Sy Sternberg, chairman of New York Life Insurance Co. He said his company is working for a license to enter China.
Farm trade could enjoy some of the biggest gains, many analysts said. "What we're hearing is that this will be the largest market-access agreement in U.S. agricultural history," said Scott Shearer, director of national relations for Farmland Industries, a farmer-owned cooperative.
America Online Inc., the Dulles-based company that already has an online service in Hong Kong and investment in an Internet company serving Hong Kong, China and Taiwan, welcomed the agreement. But George Vradenburg, senior vice president for global and strategic policy, said that "the challenges of the Chinese market probably match the opportunity" and that his company would examine closely whether it wanted to go further into the market.
On Capitol Hill, the pact's supporters expressed cautious optimism that the agreement would be followed by passage early next year of legislation permanently normalizing trade relations with China, which is needed before the United States can benefit from Beijing's trade concessions.
But they said important details remain to be worked out and the legislation could get whipsawed by election-year politics in this country or by provocative behavior by China on human rights or other issues. The Senate presents less of a problem than the House, many Congress watchers believe.
"It will be a tough vote, a close vote, but ultimately I think we'll prevail," said Rep. Robert T. Matsui (D-Calif.), who said he believes the agreement satisfies most key U.S. negotiating goals. There will have to be a "big effort" by the administration as well as the business community, said Rep. James P. Moran Jr. (D-Va.), another supporter.
While Congress does not have to approve the trade agreement itself, it must give China the same trade privileges it grants its other trading partners on a permanent basis, rather than on a year-by-year basis, as it does now.
Staff writers Steven Mufson and Helen Dewar contributed to this report.
Highlights of the Deal
The U.S.-China trade deal reached yesterday promises greater access to China's markets. Here are some of the potential benefits American and other foreign companies can expect:
* Telecommunications: Phone companies, now restricted to equipment sales, will be able to own up to 49 percent of all telecommunications service ventures upon China's entering WTO and up to 50 percent two years later.
* Internet: Foreign firms will be allowed to invest in Internet content providers such as Sohu, the Chinese equivalent of Yahoo. Companies will be allowed to buy 49 percent of Chinese Internet firms starting when China enters the WTO then 50 percent in two years.
* Movies: China will import 40 foreign films a year, double the current number and 50 by the third year of the agreement. It will allow foreign film and music companies to share in distribution revenues on 20 of the films.
* Finance: U.S. banks can offer services in local currency, the renminbi, to Chinese enterprises, two years after China joins WTO, and to individual Chinese, five years after. Insurance companies can offer property and casualty nationwide.
* Agriculture: Companies can sell China large amounts of wheat, corn, rice, cotton and other commodities. A substantial share of these goods can be imported by private companies rather than the inefficient state-run operations.
* Cars: Auto companies will have full distribution and trading rights. By 2006, China will reduce tariffs on automobiles to 25 percent from the current 80 to 100 percent. China also will allow foreign financing of car purchases.
* Manufacturing: Companies will have the right to sell, distribute and market industrial goods, including steel and chemicals, without going through a Chinese middleman as is now necessary.
* Textiles: U.S. quotas on Chinese goods will disappear in 2005. But China agreed to four years of protections after the quotas are lifted to protect Americn textile manufacturers from massive influxes of low-cost Chinese apparel and other products.
SOURCE: Staff reports and Associated Press
CAPTION: U.S. Trade Representative Charlene Barshefsky exchanges agreements on China's accession to the World Trade Organization with Shi Guangsheng, China's minister of foreign trade, in Beijing yesterday.