Trade talks open in Beijing; U.S. seeks agreement to open markets, gain WTO entry for China; Deal believed to be near


WASHINGTON -- Two top U.S. economic officials will sit down in Beijing today to try to finally bring China into the World Trade Organization, a deal that some say is potentially the biggest development in U.S.-China relations since the 1970s.

With a critical WTO meeting approaching in Seattle in three weeks, U.S. Trade Representative Charlene Barshefsky and White House economic adviser Gene Sperling will work to re-create an agreement that was all but signed seven months ago before politics and war got in the way.

WTO membership would open the insulated Chinese market to Western companies and give China, with 1.3 billion consumers, a say in the rapidly evolving rules of global commerce.

Barshefsky and Sperling flew to China on Monday after three weeks of secret negotiations between the White House and Beijing, prompting speculation that a deal is close. They are scheduled to take part in two days of meetings, beginning today.

The United States and China each have incentives to reach an agreement before the WTO meeting Nov. 30, but both are emphasizing difficulties and discouraging high expectations.

Based in Geneva, the 134-member WTO enforces rules of commerce among its members and works to lower global trade barriers. Membership in the WTO is the commercial equivalent of membership in the United Nations.

Shi Guangsheng, China's trade minister, was quoted by a state-owned newspaper yesterday as saying that the talks are reaching "a crucial period" and that "the government is keeping an optimistic attitude."

A White House official said, "We're not predicting when this might be concluded, but they are over there with a view toward making further progress on China's accession to the WTO."

The stakes are huge economically and sensitive politically, a situation that helped torpedo an apparent WTO deal for China in April. Though all WTO nations have a say about new members, the United States holds effective veto power over China's entry.

"Each time I've been optimistic, I've been wrong, said Bob Vastine, president of the Coalition of Service Industries, a big-business lobby based in Washington. "We've been on the brink. We were at the brink in April with a great deal, and the administration chickened out."

Changing painfully into a market economy after decades of government control, China wants a seat at the trade table but fears the rapid and unpredictable flows of capital markets and what it sees as potential interference in its internal affairs.

The United States wants access to China, with a fourth of the world's consumers, and a more balanced economic relationship with Beijing, but U.S. labor unions worry that unfettered commerce with China would wipe out more American jobs.

Union opposition, political analysts said, was the main reason Clinton rejected what was widely seen as a generous trade offer from Chinese Prime Minister Zhu Rongji in April. Zhu's package would have cut Chinese tariffs below those of many U.S. trading partners; reduced subsidies for Chinese exports; increased protections for music, software and other intellectual property sold in China; and allowed Western businesses to buy big shares in Chinese phone and insurance businesses.

A month after Zhu went home empty-handed, U.S-Chinese relations went into a freeze over NATO's mistaken bombing of China's embassy in Belgrade, Yugoslavia, during the Kosovo campaign. Allegations of Chinese theft of U.S. nuclear weapons secrets also have muddied the process.

Talks resumed in September, nudged by U.S. business interests seeking Chinese investments and by Chinese reformers who hope WTO rules will keep their country from backsliding into state-run, centrally planned inefficiency.

By obtaining approval for WTO membership by Nov. 30, China would get to influence the next round of global trade negotiations at the organization's ministerial conference in Seattle. President Clinton would add a major foreign policy notch to his legacy.

But whether the negotiators on both sides can obtain terms satisfying to their home constituencies is an open question.

Chinese hard-liners worry that Western companies will add to domestic unrest by buying state-owned businesses and laying off thousands of workers.

The Clinton administration must obtain credible entree for

U.S. firms and not just long phase-in periods that merely extend the status quo, analysts said. And the administration wants to preserve the U.S. right, demanded by unions, to apply unilateral, punitive tariffs on low-cost steel, clothing and other imports from China.

Analysts said the White House must justify its rejection of Zhu's offer in April by gaining concessions in a new agreement that it can point to as a better one.

Clinton "needs to point to some areas in which he can say the agreement is improved," said Nicholas R. Lardy, a China specialist at the Brookings Institution. "The package will have to look a little different from April to give both sides a little wiggle room."

While direct congressional approval is not required to gain WTO membership for China, Congress must bless the favored trading status that WTO members are supposed to extend to one another. Congress approved favored trading relations with China several months ago, but the designation expires in June.

Opposing WTO membership for China are many in Congress with union ties and those who decry Chinese rights abuses, espionage and military muscle-flexing. They want to withhold WTO membership until China shows more signs of reform.

While a fight over permanent U.S. trading ties with China might be bitter and close, analysts believe that if Clinton invites China into the WTO, Congress will come around.

Otherwise, "the market will be opened to financial services for European banks, and U.S. banks will have to wait," Lardy said. "If that happens, there's going to be tremendous pressure on Congress" by businesses.

China is one of America's biggest trading partners, but the relationship is mainly one-way. Lately, the United States has been buying seven times more toys, electronics, textiles and other merchandise from China than it sells in return, putting pressure on U.S. manufacturers and generating huge trade deficits.

"We have a huge deficit with virtually everything with China," said Charles McMillion, chief economist for MBG Information Services, a Washington economics consultancy.

The trade deficit with China is expected to hit $68 billion this year, McMillion said, the biggest ever.

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