Wednesday 17 March 1993

GATT RE-ENTRY TALKS STILL BOGGED DOWN BY US, EC STANCE

Geneva 15 March (TWN) -- The working party on China's application for resumption of its status as a GATT contracting party resumed Monday, but with the US and EC clearly intent on slowing down the discussions and negotiations on drawing up the necessary protocol.

While China came to the meeting with a large team, led by vice- Minister Tong Zhihuang, ready to negotiate and push ahead, the United States and the EC had a low-level representation.

While GATT sources said that the major storm on the US east coast had held up the delegation from Washington, according to participants the US had sent to the meeting the lowest ranking member of its GATT mission here, second secretary William Tagliani. In the US diplomatic listing and hierarchy, attaches and counsellors rank higher.

In a statement at the working party, Tong appreciated the focus of discussions around six specific issues as a positive step for accelerating the negotiating process.

The issues were agricultural development policy, price policy, foreign exchange allocation, uniform application of the trade regime, autonomy of the enterprises and right to engage in foreign trade, and commodity inspection (for imports and exports).

On agriculture policy, Tong said on resumption of its GATT CP status, China would make commitments on tariffication and tariff reductions on agriculture and apply its development policy measures in accordance with the Uruguay Round agreements.

China was establishing an automatic pricing mechanism responsive to supply and demand and proportion of state-pricing in total domestic retail sales was reduced to ten percent. As a member of the IMF, China had also made drastic changes in its foreign exchange allocation system which now accounted for only 15% of total imports and was not trade-restrictive.

On the issue of commodity inspection, the Chinese delegate indicated China's intention to adhere to the GATT Tokyo Round agreement on Technical Barriers to Trade and its adherence already to the Asia Pacific convention on plant preservation.

The structural reforms to the economy had already boosted Chinese GDP last year by 12.8 percent. Its imports had totalled $60.3 billion, a sharp increase of 26.4 percent over 1991 and representing a 8.1 percent increase over the export growth. The trends of the last two years suggested that the import goal of $300 billion envisaged during 1991-1995 would be exceeded by a big margin, Tong added.

During the discussions, Japan announced it was opening tariff negotiations with China, but reserved its position on the agriculture policy issues. Canada sought some clarifications on the agricultural pricing policy. Switzerland too is expected to start soon tariff negotiations with China.

The United States said that it would prepare a paper on how it sees the Chinese trade and economic regime and its moves towards market and provide it to the Chinese in order to further the dialogue.

In other comments, Uruguay while seeking some clarifications also suggested that the contracting parties should not make "unreasonable demands" on China. Singapore, speaking for the ASEAN group of countries, said that with an economic growth as that being witnessed, it was better to have a China inside GATT than outside.

The working party is to hold informal discussions to seek clarifications from China as also to discuss the terms of the protocol of resumption.

However, participants said that not much new ground had been covered in the meeting, and none was expected either given the stance of the two majors whose attitude to China appeared to be: "Yes, China should be in the GATT in 'good time' provided China behaves itself and cooperates."

A major source of contention between China and the major trading parties is the extent and reality of the marketisation process and whether the production and exports reflect real market prices. In the view that the Chinese prices do not reflect market forces, the US, EC and others are insisting on some 'special safeguard' measures written into the protocol to enable them to take action against 'surge of imports' from China.

Even some of the Third World nations, supporting the Chinese resumption for political and other reasons, seem to share some of the concerns on Chinese pricing, and say that according to statistical data from US industry sources, the prices of Chinese exports of textiles, toys and footwear to that market over the last ten years have remained 'stable' and not changed since 1983.

While several US industries and enterprises are seeking 'protection' against any surge in Chinese imports, and favour 'managed trade' (all MFA through quotas and voluntary restraints), there are also other US industries that appear to be wanting to invest in China and take advantage of its low-cost and disciplined labour who lean the other way.

The GATT Council, in authorising the establishment of a working party for Taiwan's application to join the GATT (as a separate customs territory of China), has decided that the Council and the vote of contracting parties on the Taiwan application would be after the Chinese one.

Recent reports from Taipeh suggest that the Taiwanese authorities are now worried that their own efforts to join the GATT may be bogged down by the way Beijing's application is being treated.

While the majors could be expected to try and break such a logjam to help Taiwan, Beijing will still command enough political support among the Third World nations to block such a move.