China's Entrance Into WTO, Once a Slim Possibility, Seems More Likely Impossible

After initially seeming eager to close a deal before the Seattle Ministerial, the Chinese have lately seemed unenthusiastic about joining the WTO.
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Until a couple of weeks ago, a plausible, last-ditch effort scenario for Chinese ascension to the

World Trade Organization

went like this: When Chinese President

Jiang Zemin

visited Europe in late October, he would conclude a deal with the European Union, which would then put pressure on the U.S. to do the same. Why, a deal could even happen when Treasury Secretary

Larry Summers

visited China in the last week in October. There might even be enough time to get the U.S.

Congress

to sign off on the deal, so that China could officially gain admittance at the November

Seattle WTO Ministerial

.

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At best, it was a slim possibility. Now, it's more than likely impossible.

While the focus on China's WTO bid has typically been on negotiations with the U.S., the world's most populous country also needs to strike separate deals with the Europeans and the Canadians. These agreements would set the terms by which China would open its market to foreign goods and services and would set the stage for agreement in the WTO on China's admittance.

Until recently, the expectation was that China would strike a deal with the U.S. first, and then Europe and Canada would follow suit. But negotiations between the U.S. and China have stalled since September, when they reopened. Hence the speculation the Chinese might try to strike a deal with Europe first. Of course, Europe and the U.S. have coordinated their respective negotiations, so theoretically, they would not blindside each other. But the Chinese are sophisticated negotiators and perhaps thought they could get a better deal from Europe than the stubborn Yanks.

However, reports from Europe indicate that all Jiang will do while in Europe (other than sleep at

Buckingham Palace

and see the sights) is indicate China's desire for WTO membership. No negotiations are expected to occur.

Meanwhile, there are no scheduled negotiations between the U.S. and China, either. Summers is traveling to China next week, but for a regularly scheduled meeting of the

Joint Economic Committee

, an annual get-together of Chinese and U.S. officials from the respective finance ministries. The WTO issue will come up, but there won't be any of the serious, detailed negotiations needed to close the deal.

After initially seeming eager to close a deal before the Seattle Ministerial, the Chinese have seemed unenthusiastic about joining the WTO. It looks like Jiang wanted to test the waters with the U.S. to see if he could get a better deal than the one that China agreed to and the U.S. rejected in April, a deal which infuriated protectionist factions in the Chinese government. He quickly realized that the U.S. wanted more, not less, than the April deal and that wouldn't fly back home.

A couple of other factors also probably influenced Jiang's decision not to initiate serious negotiations in Europe. One, I believe, was the vote in Congress over the

Comprehensive Test Ban Treaty

. It does not take a very sophisticated observer of U.S. politics to realize that with the current acrimonious relations between Congress and the

White House

, a battle over China's WTO admission would be extremely difficult. Another factor, however, might be the report this week in the

Observer

alleging the U.S. bombing of the Chinese embassy in Belgrade was not accidental at all, but the deliberate targeting of a communications station used by the Yugoslav army ... a report strongly denied by the U.S.

All told, not exactly an atmosphere for optimism that a last-minute deal will occur.

And so, China's WTO admittance is in hibernation -- a hibernation that will have consequences for foreign investors who will continue to lack full access to the Chinese market, as well as for China. The longer China waits to get into the WTO, the harder it will be to get in. After the WTO begins the new round of global trade negotiations in Seattle, the bar will be raised as to the level of market openings China will be expected to agree to.

That, in turn, will mean more domestic pressure in China against an agreement. At the same time, investors will be wary of China's commitment to market-opening measures, adding to the frustration many feel in doing business there and contributing to the decline in foreign direct investment that has occurred this year. Meanwhile, pressures will increase to devalue the yuan, although a key Chinese economic official denied this week that any devaluation would occur.

It's funny -- everyone from Jiang Zemin to

Bill Clinton

to

Trent Lott

to

Tony Blair

says they want China in the WTO, but no one wants to get it done.

David Kurapka wrote speeches for Treasury Secretary Robert Rubin from 1996 until 1999. Before that, he was U.S. Trade Representative Mickey Kantor's speechwriter from 1993 to 1996. Kurapka writes from Oakland, Calif.