DATE=4/15/99 TYPE=BACKGROUND REPORT NUMBER=5-43122 TITLE=U-S / CHINA / WTO BYLINE=STEPHANIE MANN DATELINE=WASHINGTON CONTENT= VOICED AT: INTRO: CHINESE PREMIER ZHU RONGJI WILL RETURN HOME (THE MIDDLE OF NEXT WEEK) AFTER HIS NORTH AMERICAN TRIP WITHOUT SOLID U-S ENDORSEMENT FOR CHINA'S ENTRY INTO THE WORLD TRADE ORGANIZATION. A TRADE DEAL DESIGNED TO SECURE THE NECESSARY U-S APPROVAL SEEMED ALL WRAPPED UP BUT THEN BEGAN TO UNRAVEL DURING HIS VISIT TO WASHINGTON. V-O-A'S STEPHANIE MANN REPORTS ON WHAT HAPPENED TO THE DEAL THAT WAS NEGOTIATED AND WHY IT NEEDS MORE WORK. TEXT: THE UNITED STATES AND CHINA HAVE BEEN NEGOTIATING THE TERMS FOR CHINA'S ACCESSION TO THE WORLD TRADE ORGANIZATION FOR 13 YEARS. CHINA HAS WANTED TO GAIN ENTRY AS A DEVELOPING COUNTRY, RATHER THAN AS A DEVELOPED COUNTRY, SO IT CAN BENEFIT FROM MORE LENIENT W-T-O REQUIREMENTS, IN PARTICULAR REGARDING IMPORT RESTRICTIONS. HOWEVER, BECAUSE OF THE SIZE OF CHINA'S ECONOMY AND ITS VOLUME OF INTERNATIONAL TRADE, THE UNITED STATES AND MANY OTHER W-T-O MEMBERS BELIEVE CHINA SHOULD UNDERTAKE ECONOMIC REFORMS SO IT CAN COMPLY WITH BROADER W-T-O REQUIREMENTS THAT THE DEVELOPED COUNTRIES MUST MEET. CHINA HAS SAID IT IS MAKING THE REFORMS, WHICH WOULD INCLUDE OPENING ITS MARKETS, BUT THEY WILL TAKE SEVERAL YEARS. IN THE WEEKS LEADING UP TO PREMIER ZHU'S VISIT TO WASHINGTON, THE TRADE NEGOTIATIONS INTENSIFIED, WITH THE TOP U-S NEGOTIATOR, TRADE REPRESENTATIVE CHARLENE BARSHEFSKY, MAKING SEVERAL TRIPS TO BEIJING. MANY ANALYSTS SAY THE DEAL COULD HAVE BEEN FINALIZED DURING PREMIER ZHU'S VISIT. BUT THEY SAY THE U-S SIDE TOOK STEPS TO DELAY IT. THE DIRECTOR OF THE CHINA POLICY PROGRAM AT GEORGE WASHINGTON UNIVERSITY, DAVID SHAMBAUGH, SAYS WHEN PREMIER ZHU ARRIVED IN THE UNITED STATES APRIL 6TH, THE PRESIDENT'S ADVISORS TOLD MR. CLINTON A DEAL WAS READY. // SHAMBAUGH ACT ONE // HIS ADVISORS, WHICH INCLUDE REPRESENTATIVE BARSHEFSKY, SECRETARY OF STATE (MADELEINE) ALBRIGHT, NATIONAL SECURITY ADVISOR (SANDY) BERGER AND OTHER NATIONAL SECURITY COUNCIL STAFF MEMBERS AND OTHERS ALL URGED THE PRESIDENT THAT THIS WAS INDEED THE BEST DEAL THAT WE COULD HOPE TO GET FROM CHINA. INDEED IT WAS A MUCH BETTER DEAL THAN MANY, VIRTUALLY ALL, ANALYSTS EXPECTED. THE CHINESE WENT VERY FAR IN MANY, MANY CATEGORIES TO MEET AMERICAN CONCERNS AND INDEED W-T-O ACCESSION STANDARDS. // END ACT // AMONG THE CONCESSIONS OFFERED BY CHINA WERE SIGNIFICANT CUTS IN TARIFFS FOR IMPORTS OF AGRICULTURAL AND INDUSTRIAL PRODUCTS, A DECISION TO ALLOW U-S TELECOMMUNICATION COMPANIES TO HOLD A LARGE SHARE OF THE CHINESE TELECOMMUNICATIONS MARKET, A RELAXATION OF THE LIMITS ON THE OPERATION OF U-S INSURANCE COMPANIES IN CHINA, AND A PARTIAL OPENING OF THE CHINESE FINANCIAL SERVICES SECTOR TO U-S BANKS. BUT PROFESSOR SHAMBAUGH (WHO IS ALSO A SENIOR FELLOW AT THE BROOKINGS INSTITUTION, A WASHINGTON RESEARCH ORGANIZATION) SAYS THE PRESIDENT, AT THE LAST MINUTE, CHOSE NOT TO ACCEPT THE RECOMMENDATION OF HIS TOP FOREIGN POLICY ADVISORS. // SHAMBAUGH ACT 2 // I WOULD NOT SAY IT WAS THE CLINTON ADMINISTRATION THAT DID NOT CLOSE THE DEAL. IT WAS THE PRESIDENT WHO DID NOT CLOSE THE DEAL. AND HE DIDN'T DO SO FOR FEAR OF THE AMERICAN TEXTILE LOBBY AND INDEED BECAUSE OF THE GENERALLY SOUR ATMOSPHERE ON CAPITOL HILL CONCERNING CHINA THESE DAYS. // END ACT // WHAT THE PRESIDENT DID, PROFESSOR SHAMBAUGH SAYS, WAS INTRODUCE NEW CONDITIONS AFTER PREMIER ZHU'S ARRIVAL. POLITICAL ECONOMIST TOM GALLAGHER SAYS THE WHITE HOUSE, FOR DOMESTIC POLITICAL REASONS, ADDED ISSUES TO THE NEGOTIATIONS THAT HAD BEEN A SOURCE OF DISAGREEMENT BUT HAD NOT BEEN DISCUSSED PREVIOUSLY AS A PRECONDITION FOR U-S APPROVAL OF CHINA'S W-T-O MEMBERSHIP. // GALLAGHER ACT ONE // THE ONE AREA THAT THE WHITE HOUSE POINTED TO AS AN AREA WHERE THEY WANTED FURTHER CONCESSIONS FROM CHINA HAS NOTHING REALLY TO DO WITH W-T-O MEMBERSHIP. IT HAS TO DO WITH PROTECTING THE U-S TEXTILE AND APPAREL MARKETS FROM A SURGE IN CHINESE IMPORTS. ... A LOT OF PEOPLE THINK THAT WAS PUT IN AT THE LAST MINUTE IN ORDER TO PREVENT A DEAL FROM BEING FINALIZED. THAT'S BECAUSE THE WHITE HOUSE, FOR ONE OR TWO POLITICAL REASONS, JUST DIDN'T WANT TO RAISE THE ISSUE OF IMPROVED ECONOMIC RELATIONS WITH CHINA AT THIS MOMENT. // END ACT // MR. GALLAGHER IS SENIOR MANAGING DIRECTOR AT INTERNATIONAL STRATEGY AND INVESTMENT GROUP -- A NEW YORK-BASED BROKERAGE FIRM THAT SPECIALIZES IN ECONOMIC RESEARCH. HE SAYS THE POLITICAL REASONS BEHIND PRESIDENT CLINTON'S DECISION INCLUDE A FEAR OF FURTHER ANTAGONIZING MEMBERS OF CONGRESS -- MANY OF THEM ALREADY UPSET OVER ALLEGATIONS OF CHINESE SPYING AT U-S NUCLEAR LABORATORIES AND ALLEGATIONS THAT CHINA FUNNELED MONEY TO U-S ELECTION CAMPAIGNS. IN ADDITION, MR. GALLAGHER SAYS, AMERICAN LABOR UNIONS ARE OPPOSED TO FAVORABLE TRADE TREATMENT FOR CHINA AND THEY PUT POLITICAL PRESSURE ON THE PRESIDENT. THEA LEE IS ASSISTANT DIRECTOR OF PUBLIC POLICY AT THE AFL-CIO -- A LARGE AMERICAN TRADE UNION FEDERATION. SHE SAYS THE AFL-CIO DOES NOT OPPOSE THE EVENTUAL ADMISSION OF CHINA INTO THE W-T-O, BUT SHE SAYS IT FIRST MUST IMPROVE ITS HUMAN RIGHTS AND LABOR RIGHTS, SUCH AS ALLOWING WORKERS FREEDOM TO ORGANIZE AND CONDUCT COLLECTIVE BARGAINING. MOREOVER, MS. LEE SAYS CHINA HAS NOT YET PROVEN THAT IT WOULD CARRY OUT ALL THE TRADE CONCESSIONS IS HAS PROMISED IN ORDER TO JOIN W-T-O. // BEGIN OPT // // LEE ACT ONE // OUR EXPERIENCE TO DATE IS THAT CHINA HAS NOT ABIDED BY EITHER THE SPIRIT OR THE LETTER OF THE BILATERAL TRADE AGREEMENTS THAT WE HAVE SIGNED WITH THE CHINESE GOVERNMENT. AND SO, I GUESS THAT RAISES A LOT OF SKEPTICISM FOR US ABOUT WHETHER CHINA IS WILLING OR ABLE TO DRAMATICALLY CHANGE ITS ECONOMIC POLICIES TO CUT ITS TARIFFS, TO AFFORD U-S COMPANIES ACCESS TO CHINESE MARKETS AS HAS BEEN DISCUSSED UNDER THE NEGOTIATIONS FOR THE W-T-O ACCESSION. // END ACT // // OPT // MS. LEE SAYS AMERICAN LABOR IS ALSO WORRIED ABOUT THE POSSIBLE LOSS OF AMERICAN JOBS. SHE SAYS U-S COMPANIES -- ONCE THEY GAIN GREATER ACCESS TO CHINA'S MARKETS -- MAY DECIDE TO MOVE THEIR PRODUCTION LINES TO CHINA INSTEAD OF CONTINUING TO PRODUCE GOODS IN THE UNITED STATES FOR EXPORT TO CHINA. // OPT // HOWEVER, TOM GALLAGHER SAYS W-T-O MEMBERSHIP FOR CHINA WOULD BENEFIT THE UNITED STATES. // OPT // GALLAGHER ACT 2 // CERTAINLY U-S EXPORTERS ARE HELPED BY REDUCTION OF TRADE BARRIERS. U-S MULTINATIONALS BENEFIT FROM MORE FREEDOM OF ACTION WITHIN THE CHINESE MARKET. AND THIS IS A CONTROVERSIAL POINT, BUT I THINK AT A POLITICAL LEVEL, IT HELPS FOR THE U-S TO BE ABLE TO GO TO THE W-T-O WHEN IT HAS COMPLAINTS ABOUT CHINESE TRADE PRACTICES INSTEAD OF GOING HEAD TO HEAD AND TRYING TO FORCE THE CHINESE TO BACK DOWN ON A BILATERAL BASIS. // END ACT // END OPT // DURING THE CHINESE PREMIER'S VISIT TO WASHINGTON WHAT THE TWO SIDES SIGNED -- INSTEAD OF A WIDE-RANGING TRADE DEAL -- WAS AN AGREEMENT THAT REDUCES TARIFFS AND OTHER CHINESE BARRIERS TO IMPORTS OF U-S WHEAT, CITRUS AND BEEF PRODUCTS. BOTH GOVERNMENTS SAY THEY ARE COMMITTED TO GAINING CHINA'S ACCESSION TO W-T-O THIS YEAR, AND BOTH SAY THE NEGOTIATIONS ARE ALMOST COMPLETE. PRESIDENT CLINTON TELEPHONED PREMIER ZHU WHEN HE WAS VISITING NEW YORK AND ASKED THE CHINESE LEADER IF HE AGREED TO REVIVING THE TRADE TALKS SOON. THEY AGREED TO DO SO, AND U-S TRADE REPRESENTATIVE BARSHEFSKY IS EXPECTED TO GO TO BEIJING LATER THIS MONTH FOR TALKS ON THE OUTSTANDING ISSUES. HOWEVER, IT REMAINS TO BE SEEN IF CHINA WILL STILL OFFER THE FULL LIST OF CONCESSIONS IT DID EARLIER THIS MONTH AND WHETHER THE U-S SIDE WILL CONTINUE TO PRESS FOR NEW CONCESSIONS TO PROTECT THE AMERICAN TEXTILE INDUSTRY AND DEAL WITH IMPORT SURGES. (SIGNED) NEB/SMN/KL 15-Apr-99 12:54 PM EDT (1654 UTC) NNNN Source: Voice of America .