China wins long WTO battle

By staff and wires

GENEVA, Switzerland -- After 15 years of negotiations, China is set to finally have its membership of the World Trade Organization (WTO) confirmed on a memorable day for global business.

On Monday the world will be watching as Wall Street opens to trade for the first time after Tuesday's terrorism attack. The rubber-stamping of China's newly-won status gives the day double importance.

For China, the United States and the broader business community, the stakes are high in both sets of circumstances.

Informal agreement was sealed at a Friday meeting of the WTO's special working party, which has been negotiating with China for a decade and a half.

A deadline of Thursday had been initially set for the draft accord, but negotiations were adjourned for two days on Wednesday following the New York and Washington attacks.

'Big Breakthrough'

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"It has been done. The big breakthrough has been achieved," said spokesman Keith Rockwell.

Negotiations had been snagged over the conditions of entry for international insurance companies into China, but a compromise was reached at the last moment.

China's entry will bring the world's fifth largest trading power -- after the United States, the European Union, Japan and Canada -- into the WTO, and, analysts say, change the balance of forces in the body forever.

The entry of the world's most populous nation into the WTO will open China's economy to imports but will also lead to an upsurge in Chinese exports to the rest of the world. China will also be required to adhere to global trading rules.

Membership "will commit China to adhering to the rules-based global trading system," said Jeffrey Bader, chief U.S. negotiator.

"It will open markets and contribute greatly" to encouraging reform in China.

Fresh opportunities

E.U. chief negotiator Karl Falkenberg said the move would create new trading opportunities.

"It creates stability and predictability so that investors can, with more security, plan their activity in the Chinese market," he said.

Amid the celebrations, China's chief negotiator Long Yongtu injected a note of caution, The Associated Press reported.

"It is only the end of the beginning," he said. "It is a long process for China to implement and to enforce and to be a good member of the WTO."

China applied to join the WTO and its predecessor the General Agreement on Tariffs and Trade in 1986.

The application process was caught up in political problems over Beijing's crackdown on the pro-democracy movement and economic fears that China would use its vast labor market to undercut competing products.

In recent days, China had been worried the attack on the United States would further delay their bid.

Formal meeting

The accord will be rubber-stamped by a formal meeting of the working party on Monday.

It will then go through the formality of confirmation by the WTO's ruling General Council, essentially the same negotiators who form the working party, or by ministers of all 142 member countries set to meet in Qatar in November.

As a developing country, Beijing would be expected to add huge weight to the position of the poorer nations -- who already make up well over two thirds of the membership but complain that the current big four dictate the agenda to their own advantage.

Market of one billion

"It was long and painful but in the end we have an agreement that will ensure the integration of China into the world trading system," said the E.U.'s Falkenberg.

For the big four, known in trade parlance as "The Quad," the lure of a market of one billion people -- one sixth of the world's population -- for goods and services outweighed concerns over the stance China might take in the trade body.

Western leaders also argue that bringing China into the WTO and opening up its economy to the outside world will also bring domestic political liberalization and make the long feared "Communist Dragon" a more predictable partner.

"All countries -- China and its partners -- would benefit. This should become a win-win game," said Falkenberg.

But many developing economies fear that Chinese goods will capture markets for items like clothing, textiles and footwear as well as for agricultural produce that they had hoped to win themselves in the richer countries of the North.

Side agreement

On Thursday, Mexico completed a side agreement with China allowing it to maintain restrictions on many Chinese consumer goods for six years in order to give its industries time to adjust.

Right up to the last, Reuters reported, the deal had also been threatened by a dispute between the E.U. and the United States over terms for foreign insurance companies opening new offices in China once it has come under the umbrella of WTO rules.

The two powers, with China in the middle, had been at odds over insistence by the United States that the huge American International Group Inc (AIG) conglomerate would be able to hold 100 per cent ownership of any new Chinese operations.

The E.U. argued that this would mean the AIG getting better terms than insurers from its 15 member states -- which would be bound by Chinese rules giving newcomers onto its market the right to only 50 percent ownership.

Such an outcome, Brussels said, would violate the WTO's basic principle of most-favored-nation, or no discrimination between trading partners who are members of the trade body.