Cutting tariffs

China's soaring trade surplus with the United States will provide a sensitive backdrop to President Jiang Zemin's forthcoming summit with Bill Clinton. Beijing has tried to minimize the impact of Monday's revelation that this year's surplus will break all records by unveiling a further package of tariff reductions.

But not even the most optimistic mainland officials believe this will be enough to ensure the terms for China's entry into the World Trade Organization can be finalized during the October summit. Too many other issues remain unresolved for an early agreement.

China has made impressive progress in reducing tariffs on manufactured goods over the past year. But, even after these latest cuts, they are still more than twice the level the European Union is insisting on as a precondition to WTO entry. As a Beijing trade official yesterday acknowledged, differences also remain over services and agricultural goods.

The U.S. and Europe see these negotiations as their chance to force open the mainland's huge services market. China, like many Asian nations, fears its domestic companies are not yet strong enough to survive such unrestricted competition from their Western counterparts. Such concerns have led to repeated delays in the unveiling of Beijing's package on improving access to its services sector, which was originally scheduled for July. But even when it does finally arrive, it is unlikely to be viewed as satisfactory by Western nations, so prompting further protracted negotiations.

China is making progress towards WTO membership, with its hopes of early entry boosted by reports that Japan is now insisting on less stringent tariff reductions than the U.S. and the EU seek. However, it is Washington's attitude which will be decisive.

In an ideal world, the fact China has enjoyed a good harvest, and so is importing less grain from America, would be irrelevant to WTO negotiations. But, in the real world, the resulting increase in the bilateral trade imbalance will inevitably make these talks more difficult, hence Beijing's warnings yesterday against expecting early progress.

While some symbolic headway toward WTO membership may still come out of the October summit, it would be unrealistic to expect all the obstacles still obstructing China's entry to be resolved until next year at the earliest.

-- South China Morning Post