Sino-American deal on WTO: Win-win or win-lose solution?

By Harvey Stockwin

The Sino-American deal on China's future World Trade Organization (WTO) membership was speedily sold to the world as a balanced and equitable arrangement. This article, the second in a series, analyses the ways in which the pact was oversold well before the evidence for any such optimistic verdict was made available.

HONG KONG (JP): As the Sino-American agreement on China's accession to the World Trade Organization (WTO) has been oversold, the many boosters of the incipient pact have consistently insisted that it was a "win-win deal", that both sides would gain by what had been agreed.

The "win-win" verdict was portentously used by China's Minister of Foreign Trade Shi Guangsheng at the signing ceremony on Nov. 15. Whether he himself devised that verdict, or the Clinton Administration had insinuated it into the negotiations, is not yet clear.

But the main reason that the overuse of the "win-win" phrase, plus all the other hype, was basically unjustified was simple: there was no factual basis for it.

I have before me as I write the 14-page document foolishly placed on the internet by the Clinton administration last April, setting out the state of the Sino-American negotiations on WTO accession, and listing the concessions which Chinese Prime Minister Zhu Rongji had offered on his visit to Washington, and which Clinton then felt unable to accept.

Even the Clinton administration should have recognized that Zhu, with negligible factional strength of his own, would not appreciate his secret negotiating hand being exposed so that his enemies, within the Chinese bureaucracy, could read it.

Apart from that grave error, no equivalent document has been released since the negotiations finally concluded on Nov. 15. The full details of the Sino-American accord have not been made available on the internet, or anywhere else. In other words, all the immediate hype last week about the agreement by analysts and researchers, businessmen and journalists was generated in ignorance of what precisely had been agreed.

The only revelation made so far is a summary issued by the White House three days after the end of the negotiations plus what the Clinton administration has chosen to leak. It is not the complete record. The Clinton Administration has already lobbied U.S. businessmen on the basis that the November deal is better than the April one -- but it has yet to produce the evidence.

So, apart from anything else, all the hype has been a terrible indictment of the way in which the outside world does business with China. So many far-reaching conclusions have been asserted about the benefits of China's accession, without the full factual basis for such conclusions being available.

By itself, this emphasizes the extent to which wishful thinking still governs attitudes and policy towards China in a way which, as far as this reporter can see, is not true of the way the U.S., or the West generally, does business with any other country.

There are two obvious reasons for the absence of full disclosure.

First, the quick release of what has now been agreed would have enabled critics to see clearly the gap between what China offered Clinton in April and what the U.S. was able to obtain in November. A major foreign policy blunder would have been fully exposed.

Almost certainly, the Clinton administration has had to accept fewer concessions by China in November than those which were briefly on the table in April. How much less remains an open question. Given the tradition of American openness, the details will eventually emerge but, by then, maybe fewer persons will be interested in closely examining them.

Second, Bill Clinton's current obsession with his place in history almost certainly dictated both the resumed negotiations, and the hype. "Its the legacy thing, there's nothing bigger" for him, chief negotiator Charlene Barshefsky was overheard to say by the New York Times prior to the resumption of negotiations in Beijing.

For Clinton, accelerating China's integration with the world trading community would look a more dramatic achievement in the history books than, say, the steady, quiet but persistent nudging of Beijing to be less intolerant of dissent, and to improve its human rights record.

Clinton, always good at creating illusions, created the illusion of a great success in advance of full disclosure. The Chinapologists, and those naively believing in the infinite profitability of that allegedly huge Chinese market, happily followed his lead.

There are many additional grounds for skepticism only a few of which can be mentioned in this article.

In April in Washington, while his precise reasons for doing so are still obscure, it was Zhu Rongji who appeared to seek agreement with the U.S.. In November in Beijing, it was clearly Clinton who was the supplicant. The U.S. President had let it be known in advance that he didn't want the talks to fail.

So when Barshefsky threatened to walk out of the negotiations, Zhu knew that her boss would prefer her to stay. The Chinese are masters at tailoring their negotiating stance to the relative power of those with whom they are negotiating. By November, the Chinese knew Clinton's power was fading, even as his ambition to secure positive results, and to be able to label those results "historical", was increasing.

The compromises that have been so far revealed scarcely justify the hype. Take for example China's import of foreign films. Currently China imports 10 foreign films a year on a revenue-sharing basis. Beijing has now agreed to import 40 rising to 50 films a year but only 20 on a revenue sharing basis -- which is the only basis which interests profit-minded foreign film producers. For those hyping the agreement, this represented an increase of 100 percent.

The reality remains that 20 foreign films a year -- not all of which may come from Hollywood since this concession is given to all nations, not just the U.S. -- is a ridiculously low number for a nation of China's size. By contrast, the six and a half million people of Hong Kong import between 10 and 20 Hollywood movies every month.

This concession can only mean that China's negotiating stance was not governed by a desire for greater openness but rather by a desire to continue controlling what China's population sees, feels, and learns about the non-Chinese world. By agreeing to that ridiculous total of 20 film imports the Clinton administration tacitly accepts that questionable premise.

In the same way, the Americans have now accepted that in future they can own up to 49 rising to 50 percent of China's telecommunications and internet firms, whereas in April they were briefly offered 51 percent. But this limitation also signals that, for Beijing, control is more important than growth.

If China was serious about opening up, and actually becoming the advanced nation it yearns to become, it would have opened up these sectors completely in the tough-minded recognition that, since it has so much catching-up to accomplish, it must offer foreign investors the greatest encouragement and inducement.

All told, an air of unreality hung over the latest Sino- American agreement. China failed to see that it should have made many more concessions if it was to enhance its opening up to the outside world and overcome its current weakness, as Deng Xiaoping intended.

It also needed to make more concession in order to politically protect those huge trade surpluses currently earned by China in its trade with the vast market of U.S.

The outside world smacked its capitalist lips in the expectation that a dynamic Chinese unitary state would speedily move towards free trade -- and failed to see that not the least of China's problems is the fact that there is not yet completely free trade between China's many provinces.

What China needs is a thorough-going campaign educating the people on the merits of reform and openness.

What China gets is a never-ending pervasive campaign warning of the dangers of the organization Falan Dafa and the beliefs of Falun Gong -- and imprisoning those who don't take heed.