Trade route to China opened wide in deal

On Monday morning US President Bill Clinton was pulled out of the shower in a hotel room in Ankara to take a call from Ms Charlene…

On Monday morning US President Bill Clinton was pulled out of the shower in a hotel room in Ankara to take a call from Ms Charlene Barshefsky in Beijing. His chief trade negotiator, as it happened, was ringing on a mobile telephone from a women's lavatory in the Chinese foreign trade ministry. The deal was done, she told him.

Washington and Beijing had agreed on conditions for China to enter the World Trade Organisation. They were about to announce a "win-win situation" for both sides. The breakthrough, which goes to the heart of China's transition to an open market, came after 13 years of frustration and six days of classic brinkmanship. On three occasions the members of the US delegation packed their bags to go home, and once their suitcases were sent ahead to the airport.

The first time was on Friday morning, after two days of getting nowhere with the foreign trade ministry, but they were persuaded to stay on. Hopes went up and down.

In their hotel the delegation members took to picking theme songs to fit the changing mood. They sang Aretha Franklin's Respect with the words: "What I need, baby, you don't got; What you need, baby, I ain't gonna give." Later Ms Barshefsky crooned for her team's amusement: "Please release me, let me go," and at a karaoke session White House aide, Mr Gene Sperling, rallied his despondent colleagues with Marvin Gaye's Ain't No Mountain High Enough.

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The Chinese played a skilful game, keeping the Americans waiting and then bringing in their decision-makers at the last moment. On Saturday just before the US team set out for the airport, Premier Zhu Rongji at last appeared and many issues were suddenly resolved.

On Sunday the talks broke down again. Ms Barshefsky packed her case. At 3 a.m. on Monday her bedside telephone rang. It was Mr Shi Guangsheng, China's Minister for Foreign Trade, asking her to come to the trade ministry at dawn. From 7 a.m. to 10 a.m. the talks got nowhere, then Mr Zhu walked in and the last issues were settled. Ms Barshefsky made her "bathroom-to-bathroom" call to the US President and then appeared at a public signing where Mr Shi pumped her hand so hard that her frail figure shook.

It was raw, exciting diplomacy. But perhaps the real brinkmanship in those six days involved the reformers and the conservatives inside the Chinese leadership. US officials have little doubt that some protectionist Chinese ministers would have been really happy to see them follow their bags to the airport before a deal was done. Among their number may have been the No 2 in the Chinese hierarchy, Mr Li Peng, who was conveniently out of town on a goodwill visit to Mauritius.

By stalling the Americans Mr Zhu was making clear to his domestic critics that he was no pushover. But if anything this week's events showed that his commitment and that of President Jiang Zemin to reform is more profound than ever. A beaming President Jiang endorsed the deal by appearing for a farewell handshake. "Where there is a will there is a way," he told the Americans, extolling the deal as one of "profound realistic and historic significance".

WTO entry will be China's most radical economic step since then paramount leader Mr Deng Xoaping launched his opening-up policy in 1978. The officially controlled media rushed to endorse and defend the breakthrough this week. But the extent of opposition became clear in some of the comments made to a Chinese WTO website. Here is a sample: "My God! What is the Chinese government doing? We will be done for."

"Our car and heavy industries will collapse because we got off to a late start."

"Open audio and video market are tools for brainwash. If we see American movies too much, we will get to believe all Americans are all brave and smart. A cultural invasion is more harmful than opium."

"American agriculture is highly mechanised and production costs low. How can Chinese peasants compete?"

"Zhu Rongji allows the import of American wheat with virus. What will Chinese peasants do when their wheat is infected?"

"Chinese tyre enterprises will not be able to compete. It is time to sing the national anthem loudly again" (This from Mr Li Jianhua, president of Liaoning Tyre Company).

The tone is clear. Quite apart from threatening jobs in failing enterprises and agriculture, the prospect of overseas companies playing a leading role in China goes against the grain for reasons of history and self-interest, and many Chinese believe the production of essential commodities must not fall under the control of foreigners.

China is obsessed with the notion that it must be self-sufficient in war, which partly explains the heavy resistance to opening its markets fully to grain, cotton, oilseeds, and sugar.

This is why the issue of fertilisers almost wrecked the talks. Every little Chinese county has a fertiliser factory, usually inefficient. The US demanded access to the Chinese market for its efficiently-produced and cheap fertilisers. There were heated arguments right up to the last moment.

According to Mr Long Yongtu, China's chief trade negotiator, Ms Barshefsky blinked. "We rejected the demand," he told Chinese television. "The US negotiator threatened not to sign an agreement if this issue was not solved. We then asked for instructions from higher-ups. They said we could not agree. In the end, the United States compromised."

He added: "We cannot compromise on issues that have a bearing on our national sovereignty." National sovereignty - and the mindset of a communist government - made telecommunications the other final sticking point. China insisted that it could not allow more than 49 per cent foreign ownership of telecom services. The Americans insisted on 51 per cent. They settled on 49 per cent foreign ownership rising to 50 per cent two years after Beijing's accession to the WTO. The leadership is greatly concerned with the possibility of instability arising from increased unemployment in the short term. "Most state-owned enterprises which cannot survive the competition might have to close, leaving many people jobless," said Mr Liu Jianchuan (45) supervisor of a state-owned heater maintenance company in Beijing. "Once that happens, there might be social unrest."

However, for China's consumers there will eventually be cheaper and better banking and insurance services and high street goods, especially cars. Foreign automobiles are currently unaffordable because of an 80100 per cent tariff. Under the WTO deal this will fall progressively to 25 per cent by 2006.

The main argument with which China hopes to convince domestic sceptics is that there is no alternative. The government claims that China's GDP in 2005 will be 1.53 per cent higher because of WTO membership and that employment in textiles will rise by a quarter.

The overriding case for making sacrifices for WTO accession is that China just has to become a member of "this economic united nations", as Mr Long called it. As a clincher he added, "Just like Chairman Mao said, the Chinese people must secure their place in the world community of nations."