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China hopes to quickly complete ratification

by Chakravarthi Raghavan

Geneva, 17 Sep 2001 - With the adoption Monday by the WTO working party of its report and protocol of accession of China to the WTO, the government of the People’s Republic of China will start its internal processes of getting the formal approval of the National People’s Congress to complete the legislative processes in China, but there will be no internal problems, the Chinese vice-minister and chief negotiator, Mr. Long Yongtu said Monday at a press conference at the WTO.

While the National People’s Congress (the Parliament) plenary session is not due immediately, Chinese delegation sources explained later that this matter would be handled and dealt with in the Standing Committee of the Congress.

The Chinese vice-minister said that the accession process had been a governmental process, and the domestic ratification and approval processes did not involve the party Congress.

Long underscored that throughout the long and difficult period of negotiations, the Chinese negotiators had been consulting widely within the country with various sections and interests, and therefore did not expect any problems in the ratification and domestic processes. The news of the working party actions and Chinese accession would be the second best news for the people, after the news about the Olympics being awarded to China.

The Chinese authorities have explained fully to their peoples, in the coastal areas (benefiting from the foreign trade) and in the rural and interiors, about the benefits and advantages and the overwhelming majority understood that their fundamental interests had been taken into account, and without it the Chinese government would not get their support. The Chinese government was proceeding to set up an adequate safety net for those that would be affected, and development policies were also being pursued to help the backward and interior regions of the country.

A relaxed Long fielded a range of questions from newsmen, some in effect attempting to trip him up on the likely negative effects of the WTO accession to the ordinary masses, farmers and the like, or in trying to pit the Chinese against the anti-globalization protests.

In his statement to the 18th session of the working party earlier Monday afternoon, Long had cited President Jiang Zemin, that the decision to accede to the WTO was a strategic one made by the Chinese government under economic globalization, and in line with China’s reform and opening-up policy and the goal of establishing a socialist market system.

When a western correspondent sought to pit Long and the Chinese government against the growing anti-globalization movements ‘that claimed to represent the voice of the peoples against their governments’, Long declined to pass judgements on the rightness or otherwise of these protest demonstrators. From the Chinese perspective, they saw globalization as a historical tide that no one can avoid or resist, and the best policy is to try and get the best out of it.

However, said Long, globalization, like the market economy, could bring development, but also bring insecurity, injustice and “we have to address these properly”. This was why at the UN and other forums, the Chinese government has always called for a new economic order that would address the injustices of globalization. Globalization produces a lot of economic growth and productivity, but “there is also much injustice and we need to balance the two.”

Another question which also Long sidestepped was over a ‘new round’ of negotiations at the WTO (which the US, the EU and the WTO head want to see launched at Doha), and for which China had expressed support (during the visits of Moore, as well as leaders from APEC to Beijing).

Long said that China wanted the multilateral trading system (MTS) strengthened.  The credibility of the system had been very much damaged at Seattle. China preferred the MTS as opposed to bilateral or regional agreements, and hoped the MTS would be strengthened by launching a new round.

“However,” he said, “there are many things which need to be addressed including the concerns of the developing countries on the WTO. We are going to carefully study all these issues. We have not studied them carefully so far. Starting from today, we will start to study these and make our position clear after admission into the WTO.”

Earlier, at the working party’s formal session, the United States used the occasion to speak about last week’s ‘terrorist attack’ and destruction of the twin towers at the World Trade Centre in New York, and mentioned the lives lost from various nationalities, some only by name, and others where a few hundred each were killed, the country and the numbers, and then portrayed it as an attack against world trade and commerce, and the need not to yield to such terrorist attacks.

A copy of the speech to the working party was not made available to the media, but only a three-para statement: the first two paras welcomed successful completion of the working party, that China’s accession would benefit the US, China and the global economy. In the statement distributed outside, the US said:

“At a time of the most profound national sorrow, combined with determination and resolve to defeat the deadly menace of terrorism, the US government will not neglect its other interests. This week’s decision on China’s WTO entry demonstrates that.”

In response to questions at the press conference (echoing the US views about attacks and destruction on the world trade centre twin towers as symbolic of the attack on world commerce) and the forthcoming Doha ministerial of the WTO (viewed as the institution of world commerce), Mr. Moore drew attention to the remarks last week of the US Trade Representative Mr. Zoellick and of the EC Commissioner, Pascal Lamy, that the Doha meeting and the launching of a new round should go ahead as planned, and not appear to yield to terrorism.

Many of the delegations were non-plussed by the US remarks (and that of others using it in the WTO context), with some viewing the US reaction with some sympathy (as the result of the trauma of the attacks on the US soil, for the first time, and with such horrendous loss of lives); others though were worried and concerned over the tactics of mixing up the attacks and destruction and the US efforts to mobilise a global coalition for a fight against such terrorism (and expected to result in quick reprisals against the Taliban and other elements) with global economic issues.

Some were apprehensive of this kind of a dangerous mixture - combining Islamic and other religious fanatic, fundamentalist movements, with secular (and relatively rational) protests and opposition to economic globalization and the expansion of the WTO’s remit and reach.

Meanwhile, formally, no one is planning to make a formal move for postponing the Doha meeting. However, many trade ambassadors privately say that with massive US military action in the region (and possible reactions), the WTO should have for the present not be involved, hold a lower-profile high-level official meeting in Geneva (to admit China and take other organizational or other decisions), and putting off the ministerial meeting itself to next year.

Some Cairns group members privately say that such a meeting next June (after the French elections) would provide a better climate for some forward-looking agenda on agriculture and other subjects.

The accession of China, Moore said Monday, would be a defining moment in the history of the WTO, and with China’s membership, the WTO would take a major step towards becoming a truly world organization. “The near-universal acceptance of its rules-based system will serve a pivotal role in underpinning global economic cooperation.”

Would China’s entry and assertion of its economic and trade power lead to more disputes? The only international organization where there would be no disputes or differences would be one with only one member, Mr. Moore quipped.

The final version of the text in the working party report and the protocol of accession and China’s schedules, show that at least in one instance, the last minute compromise over the insurance sector, the issue would probably be resolved in the future through a dispute panel process.

The working party report (in para 312) relating to the insurance sector (where earlier there was a bracketed version, and a point of contention, relating to the right and ability of the American Insurance Group, AIG, of US now selling life insurance in China as a wholly-owned operation), to continue such operation and extend it by opening other branches.

The compromise language in the working party report says: “He (the representative of China) also confirmed that a branch and a sub-branch were an extension of the present enterprise and was not a separate legal entity and that China would permit internal branching accordingly on that basis, and in compliance with China’s Schedule of Commitments, including provisions on MFN treatment.”

The services schedule in column two (about bound and unbound modes of supply and the limitations), in the relevant portion spelling out the limitations (in terms of providing life insurance in mode 3, commercial presence), says:

“A. Form of establishment:

Upon accession, foreign life insurers will be permitted 50% foreign ownership in a joint venture with the partner of their choice. The joint venture partners can freely agree the terms of their engagement, provided they remain within the limits of the commitments contained in this schedule..”

In column one of the schedule, the Chinese commitment under financial services in terms of “all insurance and insurance related services” lists life, health and pension/annuities insurance, non-life insurance, reinsurance, and services auxiliary to insurance. This is qualified by a footnote that says: “any further authorization provided to foreign insurers after accession under more favorable conditions than those contained in this schedule (including the extension of grandfathered investments through branching, sub-branching on any legal form), will be made available to other foreign service suppliers which so requested.”

This footnote, read with the portion in the working party is being interpreted differently by the US and EU, and others who are for the moment keeping their counsel. But it is bound to become a subject of disputes on handling of the applications of foreign service suppliers, particularly the meaning of “which so requested”. There are many other compromises across various range of issues in goods and services that would become potential points of future dispute.

The reactions from members to the effect of China joining the WTO, whether or how it would impact on international trade and the balance within the WTO, whether it would take an assertive leadership role on behalf of the developing world or play its own game (and try in effect to join the Quad), the stands it would take on a new round and new issues etc, remain somewhat muted - with some believing it would bolster the situation of developing countries.

Others were not so sure, though several said it would even be unfair to ask China to play a role other than pursuing its own interests, as all members did.  Having been forced to pay a heavy price for entry, including not only more onerous conditions and a virtual TRIPS-plus regime, Beijing should not be expected to support positions of its competitors, one ambassador remarked.

At the final working party, and later at the press conference, Long said China’s accession would be a “win-win” situation for all. “The great potential of China’s market will be gradually translated into purchasing power, so as to provide a huge open market to all countries and regions in the world.”

According to the IPS: Having China in the WTO and subject to the same rules governing the rest of the world’s countries will have a positive effect on the global economy, said Federico Cuello, the ambassador of the Dominican Republic.  China’s admission, he said, must be analysed in the light of the difficult situation facing the world economy today, marked by a dramatic slowdown in the US and Europe and recession in Japan, he pointed out.

Uruguayan ambassador, Carlos Perez del Castillo said China could become an important force in achieving more equitable results in the future. China’s presence will help to correct the “asymmetries” seen in WTO accords, and to pursue objectives that have long been postponed in areas that are vital to poor countries, like agriculture and textiles, said Perez del Castillo.

However, it is still unclear what role China will play in an organization characterised by often profound disagreements between the blocs of industrialised and developing countries.

The Chinese delegation said China’s adherence to the institution that regulates the liberalisation of trade and the world’s economies was “in line with China’s reform and opening-up policy and the goal of establishing a socialist market economic system.”

Perez del Castillo ruled out the possibility of China becoming a leader of the world’s developing countries, saying it had failed to do so within the United Nations, and adding that “I don’t see why” it would do so in the WTO. – SUNS4969

The above article first appeared in the South-North Development Monitor (SUNS) of which Chakravarthi Raghavan is the Chief Editor.

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