Sep 23, 1989

(THE FOLLOWING IS THE SECOND IN A TWO PART FEATURE. THE FIRST, "CHINA: GATT AND THE URUGUAY ROUND" APPEARED IN SUNS No. 2224)

CHINA: HAS SIMILAR CONCERNS AS THIRD WORLD ON URUGUAY ROUND.

GENEVA, SEPTEMBER 22 (BY CHAKRAVARTHI RAGHAVAN) Planned much before the june Tinananman incidents and the problems faced by China in the GATT over its efforts to "resume" its status as a contracting party, the Beijing symposium on new themes in the Uruguay round (august 15-17) showed that China has concerns similar to those of third world countries.

The symposium was organised as a part of the UNCTAD/UNDP Uruguay round technical assistance project for developing countries and was attended by about 50 Chinese participants - officials in China's Ministry of Foreign Economic Relations and Trade (MOFERT) and other substantive ministries and departments involved in various aspects of China's foreign economic relations, Chinese academics and some outside experts and consultants from UNCTAD, UNCTC and WIPO.

The discussions centered on the implications of the Uruguay round as a whole, its qualitative difference from earlier GATT trade liberalisation rounds, and the proposals and prospects on the new themes - trade-related intellectual property rights (TRIPS), trade-related investment measures (TRIMS), and trade in services.

The comments, interventions and questions of several of the Chinese participants, belonging to particular departments, ministries or enterprises, showed that in subjects dealt with by them they were quite familiar with the issues, though not of the latest developments in the negotiating groups.

But, as is also the case in many third world capitals, some of the participants and experts in specific negotiating areas were not fully aware of the overall implications or thrust of the round or the efforts of the major industrial countries to use the round to establish a new world economic system and relations.

Again, as in other third world capitals, there perhaps is also a communication gap - between negotiators in Geneva, the ministry dealing with GATT and Uruguay round in the capital and the substantive ministers and people.

For example, on the new themes, while the people involved with each of them seemed aware of the proposals and effects, few of them were aware that the proposals of the major industrial countries like the U.S. in each of these areas were easily substitutable, and that a gain on a proposal in the area (intellectual property, investment or services) would achieve the same ends as sought in a proposal in another.

In the area of trips and intellectual property rights, China is a member of the Paris union conventions on intellectual (industrial) property rights (administered by WIPO), but not of the Berne convention on copyrights.

As in many other third world countries, and until quite recently in several of the advanced industrial nations, China recognises only patents on process in the area of pharmaceuticals, food and such vital sectors of public health and welfare, and not product patents. It also provides for "compulsory licensing".

As several other leading third world economies, China has been included in the U.S. "special 301" actions, and is on the "priority watch" list, and the U.S. has explicitly made several demands on China including about product patents and copy-right law and its scope.

But unlike in the case Brazil, India and a few others, there is no U.S. demand for China's "constructive" participation in the Uruguay round negotiations on TRIPS.

Chinese officials who spoke at the symposium, and outside, were aware of and concerned about the effects, on China's efforts at modernisation and development or acquiring modern technology, of acceptance in the trips group of the proposals of the U.S. and other leading ICS, or of putting the issue within the scope of GATT and its dispute settlement mechanisms that would enable retaliation on exports.

On investments, the Chinese (like several third world nations) are anxious to attract foreign direct investment (FDI) in speed up the modernisation of the Chinese economy and its diversification.

China, like other third world (and even some ICS), offers the foreign investor "incentives" for investment in activities considered to be priority areas, and also prescribes some performance requirements about imports and exports and transfer of technology, etc.

The Chinese experts were aware that if the proposals of U.S., Japan and the EEC in trims were accepted, China or the third world governments would be handicapped in their negotiations with TNCS and the latter would have an upper hand, and that the ultimate outcome would be less and not more FDI.

China recently has granted a U.S. investor, at Tianjin (a port city near Beijing), land on a 70-year lease on what were described as "attractive" terms", with a basic requirement that imports should be balanced by exports so that there is no balance of payments problem and outflow of foreign exchange.

This seemed to have some parallels to the grant of special rights to Europeans in China (Shanghai) in the 19th century, leading to the alliance of Chinese comprador class with Europeans and Japanese and to a colonial-type situation in China. But Chinese officials, while some inherent dangers, said that Chinese laws would apply and there was no extra-territoriality.

In the area of services, the Chinese side appeared to feel that in several sectors, particularly producer services sectors, China was probably even behind other comparable third world countries.

This, in their view, meant that while they would have to rely upon and import some services, they should also be able to develop their own service sectors. The importance of the "development" dimension in the services area and need to provide for this in the proposed framework was underscored in several Chinese interventions.

While a few spokes in terms of "special and preferential treatment" in the GATT and the new rules for China and other developing countries, some of the international experts and some Chinese officials underscored the need for the development dimension being an integral part of any new rule or framework, rather than providing "exceptions" to the third world in the form of longer time to conform.

The substantive Chinese concerns in many of the areas and the "low profile" of China in the talks figured in the discussions, with some of the international experts commenting on it.

A few Chinese participants thought that since China is not a member of GATT, it could not really contribute effectively.

Others, including officials of MOFERT and some of the international experts, however pointed out that China was a full participant in the round, and had as much rights as any of the GATT members except in the final decision-making processes of the GATT contracting parties relating to GATT articles and rules.

In this view, the Chinese participants got the clear message that China would have to take a more active part, tabling its position papers before December or, where it is not ready to do so, supporting the positions of those third world countries whose positions converged with those of China.

There have been reports that China had adopted this posture in the belief that this would facilitate China's "resumption" of status and avoiding any U.S. actions under s. 30-1 of the omnibus trade and competitiveness act.

The last undoubtedly, and wrongly it turned out, had figured in calculations of quite a few third world countries at the time of TNC meetings in April 1989.

China, like these third world countries, was nevertheless hit by the U.S. But whether this lesson has been learnt was not clear.

A number of Chinese participants appeared to feel that it was now for China to take a more active role, lest the GATT that might result from the Uruguay round might not be worth joining.

But it was clear that the ultimate decision would depend on the political authorities and their thinking on overall Chinese relations and interests.