GENEVA — Major Western trading powers, led by the U.S. and the European Union, are expected to intensify pressure on China this year to further open its lucrative market as part of the troubled Doha global trade talks, senior trade diplomats and experts said.
With its foreign reserves piling up and now in excess of $1 trillion, China is also likely to come under sustained pressure to expedite efforts toward a more flexible policy for its currency, the yuan, and to take effective steps to combat widespread abuse of intellectual property rights and turn off the flow of subsidies to state-owned enterprises.
Five years after China joined the World Trade Organization, the perception in trade circles is that the honeymoon is over and that the country, as the world’s third-largest trading power, needs to play a more active role in shoring up the system.
China’s low posture “is affecting the talks,” said a WTO ambassador from a G8 power who spoke on the condition of anonymity. A similar sentiment was expressed by a number of top Asian WTO envoys, who also requested anonymity.
The global trade talks, launched in Doha, Qatar, in November 2001, were suspended in late July after major rich and emerging trading powers — the U.S., EU, Japan, Australia, Brazil and India — could not narrow their differences on how to proceed to lower subsidies and tariffs in agricultural trade.
“China, a big elephant in the room, has been very quiet [in Doha], but it has [the] most to gain,” said Christopher Wenk, director of international trade policy at the U.S.-based National Association of Manufacturers. “They have to play a more active role in these negotiations. They are the big beneficiaries.”
Senior Chinese officials consider as unfair the “free-rider” charges and counter that they are firm supporters of the multilateral system and are making “tremendous efforts.” A few WTO envoys have even gone so far as to put some of the blame for the collapse of the talks in July on the lack of leadership by China.
Anthony Hill, a Geneva-based trade consultant, said China’s WTO membership has changed the dynamics of the agency, which oversees most global trade in goods and services.
Hill, formerly Jamaica’s WTO ambassador, said China wants a successful outcome in the Doha talks, but noted that its low-key role in them so far may stem from a desire by Beijing “not to push its power or a political desire not to be
According to some senior WTO diplomats, fear of China’s growing manufacturing might, as well as the agricultural gridlock, is what has been holding back other major emerging economies such as Brazil and India from being more forthcoming in the Non-Agricultural Market Access segment of the Doha talks, which aims to lower industrial tariffs.
“I think that is not correct,” said a senior Chinese official, who asked not to be identified, and noted that 60 percent of the country’s trade consists of imported materials that are processed and exported as finished goods.
However, rich countries are also under pressure from industry groups to secure further deep reductions from China in the NAMA talks on top of the big concessions Beijing made to secure WTO membership in 2001. In the talks, China, given its status as a recent member, has said it expects to make smaller cuts in tariffs than other members in light of the big concessions it made in the entry talks.
Pascal Lamy, WTO director general, said that, in the case of China, it’s “true their entry ticket was huge, there was no doubt about that.” However, the WTO chief added that “nobody said, and neither did the Chinese, that they would have this round for free.”
On China’s newly acceded status, Lamy noted it is a tradition in WTO negotiations “that a newly acceded member has a rebate…so the question is not whether they will be entitled to a rebate. The question is the size of the rebate and that remains under discussion.”
Senior Western diplomatic sources close to the Bush administration said China will have to cut its industrial tariffs. But with average industrial tariffs of around 9 percent, Chinese officials counter they do not have much room to maneuver.