9:03 AM Jul 29, 1994


Geneva 28 July (Chakravarthi Raghavan) -- China took a tough public stand Wednesday at the GATT talks on its entry into the GATT/WTO, by setting out some ten 'demands' on it in the latest Girard elements paper and declaring them to be 'unacceptable' demands which were 'not negotiable.

The Chinese position was set out in the statement delivered by Mr. Long Yongtu, Assistant Minister of China's Ministry of Foreign Trade and Economic Relations at the meeting at the GATT of the working party on China's resumption of status as a GATT contracting party.

The statement was later made available to the press by the Chinese mission.

The working party had before it a non-paper by its Chairman, Pierre-Louis Girard of Switzerland, "Elements for a draft protocol on China", containing detailed provisions which several GATT delegations said represented the 'maximalist' positions and demands put forward by members of the Working Party after its last meeting.

In delivering a tough response which, though, some thought was less tough than the statements on the issue coming out of Beijing, China put forward its own draft protocol.

While the Girard paper contained many 'outrageous' demands on China, the Chinese response leaned totally the other way, giving no ground on the genuine concerns of other trading nations, one source said.

GATT sources said that at the informal meeting of the working party, major demandeurs on China -- United States, European Union, Canada, Australia and New Zealand -- were equally tough, saying there was no purpose in the meeting if things were 'non-negotiable'.

But behind the scenes, the sources said there were a number of bilateral discussions going on between China and the United States and China and the EU, with the latter trying to help China to become an original member of the WTO, but at the same time ensuring sufficient 'safeguards' are written into the protocol to reflect the nature of the Chinese economy in its transition to a full market-based system.

The working party is due to adjourn Friday and will meet only in September. But the informal bilateral discussions, and the market access negotiations are expected to continue in the meanwhile.

Whether all this can be concluded in time to enable all the formalities to be completed for China to become a member of the GATT by December end, and thus an original WTO member, is still not clear.

There are many who believe that it will be a very difficult time-table to fulfil, but a mid-July 1995 target could be more realistic.

But whatever is done, China will have to pay a 'high entry fee', in many ways an 'unfair price', one source said, referring to the demands on China such as placing it in the same situation as the developed nations, for example, in State support for domestic agriculture, particularly in dealing with the rural poor.

"But that is the name of the game in the GATT," the source added.

The demands on China in agriculture are reportedly being pressed by Australia and New Zealand, riding on the back of the US.

China has made clear that it should be an original WTO member. This, as well as its insistence on being accepted as a 'developing country', have become very high political issues for Beijing.

Third World sources said that while China in terms of the details of the protocol and the developing country options and special treatment (to the limited extent they are available in the WTO), might be flexible, it would be politically impossible for Beijing to compromise on WTO original membership or formally its developing country status.

Some participants later said that probably the crux of the demand on China, not to use all developing country rights, is probably the one relating to the TRIPs, where the US wants China to comply (like developed countries) within a year of WTO entry into force, and not the five year period for other developing countries.

The argument for this, referred to in the Girard paper, is that China has already enacted its IPR laws (to comply with US demands under Special 301 processes). The Chinese law, in terms of pipe-line protection, go beyond those of the WTO-TRIPs accord, and provide retrospective protection from 1986.

As for original membership of WTO, by becoming a GATT member before end of December, until March, there was a difference between those members of the GATT 1947 who would join as original members of the WTO and those applying or joining later.

The GATT 1947 Art XXXV would have blocked use of the non-application provision, where two parties had entered into tariff negotiations (irrespective of the outcome). The WTO non-application Article has no such stipulation but makes clear that its non-application provision could not be applied against GATT 1947 members, unless it was already being 'non-applied' between any two of the cps.

Since then, at the March meeting of the GATT Council, at the US initiative, an understanding on Art XXXV (non-application provision) was agreed, by which a government seeking accession and a GATT contracting party may engage in negotiations for establishing the applicant's GATT schedule, without prejudice to the right of either to invoke Art XXXV in respect of the other.

However, the original membership of the WTO has become a major political issue of importance to Beijing, but whether others could successfully use it to extract a "high" and even an "unfair" price from China is unclear.

There are some who believe that the longer the delay, the higher the "unfair price" that China would have to pay for being outside the system. But others think that while China might be wiling to pay a high price now for 'original membership' (because of the political profile it has raised on it), if it does not succeed and has to negotiate entry into the WTO as a new member, it too might take a tougher line.

As a large economy, and a growth pole in the Far East, China remaining outside the system, would generate its own negative dynamics for the WTO trade order, in an essentially unstable world order.

In giving up efforts to use trade for non-trade political purposes (democracy, human rights etc), President Clinton acknowledged China's position as a permanent member of the Security Council and a nuclear weapon-power -- elements that have not disappeared.

While the US, EU, Canada, Australia and New Zealand are the vociferous demandeurs in the working party, other participants in the working party appear to be keeping a low profile, having mainly a watching brief from their capitals. Several, however, spoke up at the last meeting, supporting the speeding up of negotiations to enable China to become an original WTO member.

But many of them privately indicate they too are for special conditions on Chinese entry (to reflect the current non-transparent nature of trade-policy decisions and use of trade instruments as well as price formation), but that these more limited concerns are being fought out by the majors.

In his statement, Long said the Girard paper of 19 July (before the working party) had no 'major improvements' on the earlier paper which had been found to reflect only views of one side and not the Chinese views and was "unbalanced and unacceptable".

China had at the last meeting reacted to that paper pointwise, and had hoped that some of its views would be reflected in the revised paper. While some adjustments had been made, there was no "major and substantive" difference in the revised paper which still kept intact the key areas on which China had clearly set out its "unacceptability".

Though the revised version was "not acceptable in principle", China still hoped that the multilateral process of formulating the protocol would be continued. In this spirit, China had put forward its own draft protocol based on the general guideline of seeking a balance of rights and obligations.

While China had no intention of seeking "any special privileges whatsoever", it was imperative to ensure that China would enjoy full rights as a GATT and WTO member "including those rights accorded to members of developing countries". China would reject any provision attempting to deprive or damage its right to invoke all articles in the GATT and Uruguay Round agreements.

China, Long said, would observe all obligations under GATT and Uruguay Round "consistent with its level of development". China had made major efforts in economic reform and opening to the world and had the capacity to implement basic obligations of GATT and WTO, but "in principle, cannot accept obligations which go beyond these agreements". But since China was still in the process of transition to the market economy, it could consider undertaking some "special obligations" which had to be "realistic, practical and conducive to economic and trade reform of China on a gradual basis".

The protocol should be GATT-based, and not cover non-GATT issues. Since China has already signed the WTO Final Act and was in the process of improving its own schedules on tariffs, agriculture and services, the protocol in principle should not deal with these obligations under WTO, Long added.

Long listed the 'not negotiable, unacceptable demands' as:

* preventing China from invoking GATT articles on BOP, particularly those for developing countries, and setting out a special provision on BOP more stringent than that for developed countries;

* establishing a special, discriminatory, safeguards clause based on concept of 'market disruption' and completely deviating from accepted criteria of 'serious injury';

* preventing China from invoking relevant provisions of the Agriculture Agreement "which may trigger social unrest among the 800 Chinese farmers";

* obliging China to accept plurilateral agreements (Civil Aircraft and Government procurement) which under WTO are only optional and depriving China of right to use relevant transitional arrangements under the Technical Barriers to Trade and Customs Valuation Agreements;

* requiring China to bind its export duties at zero across the board;

* propelling China to accept obligations beyond that required in the TRIPs Agreement, namely applying its provisions within a period of one year;

* requiring China to accept a TRIMs plus and eliminate at date of protocol all measures inconsistent with TRIMs agreement (under which developed countries have two years to eliminate TRIMs-inconsistent measures and developing countries have five years);

* Demanding China accept a 'service plus' and apply unconditional 'national treatment' on trade in services (whereas under GATS all, including developed countries, can set in country schedules limits to national treatment, in sectors and sub-sectors where initial commitments have been made);

* requiring any trade dispute between China and other contracting parties to be resolved, not within the WTO Dispute Settlement Mechanism, but under the special review mechanism of the working party;

* and compelling China to abolish across the board all price controls.