Trade winds blow US towards China

With one stroke, Clinton, who has been received in the Middle Kingdom like an emperor at the start of his nine-day visit, has in effect said a happy China is a happy Asia, a happy China is a happy world. Not surprising in view of the language coming out of Washington recently giving China good marks on all issues ranging from human rights to nuclear proliferation to environmental policies. Cynical? Realpolitik? Myopia? Trade?

Thousands of miles away, another Washington-Beijing story is playing out, a story that is likely tounderpin how both giants talk to each other and the rest of the world in the next century. China has been knocking at the doors of the World Trade Organisation (WTO) arguing that it has made major trade concessions to join and should be rewarded for its sacrifices during the Asian financial crisis including not devaluing the yuan, its currency. Trade negotiators say Beijing and its 1.2 billion people entering the multilateral system will be the trading equivalent of a nuclear blast. “China is still a long way off from WTO membership several issues have to be resolved though in the good sector they have done well. Their tariffs are even lower than those stipulated by the WTO,” one trade official said.

China’s application for WTO membership is under review as per procedure. Among other things this involves a working party that will examine China’s trade regime to ensure that it is up to speed with WTO requirements and bilateral negotiations with interested countries on goods, services, agriculture. Chinais continuing intense negotiations at the WTO with, among others, the US, European Union, the Cairns group of major agricultural exporting countries, Norway and Canada. While every member of the WTO can have a word on China’s entry, the US will have the final word as it does in most WTO matters.

Beyond the issue of tariffs trade officials say is the larger political one of the status of China. Is it a developing or developed country? If it is a developing country how does that fit with its status as a permanent member of the United Nations Security Council? If it is not, what does it mean to have the world’s largest potential market with a sustained double-digit growth rate entering the multilateral trading system offering and seeing concessions that could change trade calculations and political considerations based on them?

In the run-up to Clinton’s visit, China has been pointing to its progress in reducing tariffs now averaging 17 percent, to back its WTO claims. Beijing said it planned to cut importtariffs on sedan cars by 20 percentage points.

China had a $50 billion trade surplus in bilateral trade with the US and the latter says further opening of China’s markets is key to redressing what Washington sees as a lopsided trading relationship. The US wants China to open its markets further for US services such as banking, securities and insurance.

Beijing is also pressing Washington to scrap its annual review of China’s Most Favoured Nation (MFN) status, that most sacred of WTO rules according to which countries ensure non-discrimination of trading terms for all members. China is also looking for Clinton to lift sanctions imposed after the 1989 massacre. Clinton says he wants to abolish the annual review, but the MFN renewal has been hotly debated in the American Congress.

In recent weeks, China has got what China has wanted. It’s hard to tell who is fooling whom.