Prospect of U.S.-China trade pact dims

EU-Beijing talks stall, probably slowing need for Congress to vote

April 04, 2000|By Jay Hancock | Jay Hancock,SUN NATIONAL STAFF

WASHINGTON -- The European Union's surprising failure to reach a trade deal with China adds a new obstacle to President Clinton's efforts to win approval for a U.S.-China trade pact and raises the chances that Congress will postpone the politically sensitive matter until next year, lobbyists and analysts for both sides say.

The breakdown in Chinese-European talks last week removes at least temporarily the danger that French and German companies will get a head start on Americans in China if Congress balks at making favorable trade relations with Beijing permanent.

Even before the EU-China talks stalled, momentum was building in Washington to delay a vote. Instead, many lawmakers are leaning toward continuing to renew relations one year at a time.

"This does increase the risk that the vote isn't going to happen this year," said Brink Lindsey, an analyst at the pro-trade Cato Institute. Pushing the vote through Congress, he said, "has been much more complicated than anybody expected."

Democratic lawmakers, especially, worry that supporting the China deal would leave them politically vulnerable in November. Many unions oppose a trade pact with China, arguing that it would wipe out U.S. jobs and reward a repressive government.

The breakdown of the EU-China talks "is the kind of thing that would make members of Congress scratch their heads and say, `Why do we need to do this now?'" said a Democratic House staffer.

"It's harder for members of Congress to justify being for a deal that the Europeans have rejected," said Charles McMillion, chief economist for MBG Information Services in Washington and a consultant to opponents of a China trade deal.

Obtaining permanent, favorable trading relations with the United States is one of several obstacles standing between China and its longtime hope of joining the World Trade Organization.

The Clinton administration negotiated a U.S.-China trade pact last year and is expected to vote for China's entry into the WTO, a body that sets global trade rules and works to lower commercial barriers. But unless Congress approves permanent relations, U.S. businesses won't gain expanded access to Chinese markets even if Beijing is in the WTO.

Battle due in House

The debate pits big-business and pro-trade groups against unions, some human-rights organizations and anti-China conservatives. Passage is all but assured in the Senate. The battle will be in the House.

The White House and business lobbying groups have warned that successful EU-China trade talks would guarantee Beijing's WTO membership and give European companies an early advantage in China.

But negotiators from China and the EU broke off talks Friday after four days of meetings, squelching expectations of an imminent agreement. EU trade commissioner Pascal Lamy announced that a deal "was not possible at this stage."

Last month, Chinese trade minister Shi Guangsheng said that talks with the EU were in "concluding stages" and that the United States "will be giving away the opportunity for participating in this market to its competitors."

The hang-up "undercuts the argument of those who say if we don't do this we're going to be left all alone," said Rep. Benjamin A. Cardin, a Baltimore Democrat.

Europe and China could still strike a pact by summer. A spokesman for Lamy promised yesterday to resume talks "in a matter of weeks, rather than months," probably in Beijing.

"While this clearly strengthens the hand" of people who want to delay a China trade vote, "my view is that the Europeans will come to a deal," said Bob Vastine, president of the Coalition of Service Industries, a business lobby.

Analysts said the suspension of EU-China negotiations implies deep differences. Among other things, the EU wants European corporations to be able to buy majority ownership stakes in Chinese car manufacturers and insurance and phone companies.

Opponents of a permanent trade deal argue that there's no reason WTO membership for China requires Congress to grant long-term favored trading status. Proponents say WTO rules require permanent favorable trading relations among all members, thus the need for congressional approval.

Protest planned

The faltering of the Europe-China talks comes as labor and human rights groups are preparing extensive lobbying and demonstrations against the U.S.-China deal. On April 12, labor leaders say, about 10,000 union members will descend on Capitol Hill to protest the agreement.

Yesterday, Clinton continued his push for a permanent China trade deal, telling technology executives in California that the economic benefits of letting China into the WTO outweigh the disadvantages "a hundred to nothing" and arguing that increased commerce with the United States will transform Chinese society.

"The answer is to allow them in and let liberty spread from within," the president said.

House Republican leader Dick Armey said yesterday that he plans to bring the matter to a vote by the end of May at the latest. The current temporary U.S.-China trade agreement expires in June.

Sun staff writer Karen Hosler contributed to this article.

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