EU and China Reach WTO Accession Agreement

23 May 2000

The EU and China on 19 May reached a bilateral agreement toward China's membership in the WTO. The agreement brings China ever closer to completing its 14-year-old accession bid, although China must still conclude bilateral accession agreements with Costa Rica, Ecuador, Guatemala, Mexico, Switzerland and Venezuela.

WTO Director-General Mike Moore hailed the agreement. "This is another major step towards extending the benefits and responsibilities of the WTO system to a quarter of the world's population", Mr. Moore said.

China's Foreign Trade Minister Shi Guangsheng said the agreement assures that the accession process is now largely procedural, and reiterated China's commitment to membership in the global trade body. "Our entry into the WTO now enters the procedural stage," Mr. Shi said. "I make a solemn statement that we will fulfill our commitments to the WTO and follow its rules and principles."

The final deal reflects China's refusal give in to EU demands for majority (51 percent) foreign ownership of Chinese telecoms and insurance firms. EU demands in these areas exceed concessions given by China to the US in their November 1999 negotiated trade accord. Under terms of the EU-China agreement concluded last week, China agreed to a foreign ownership regime based at 25 per cent on accession, 35 per cent after 1 year and to 49 per cent after 3 years.

"Chinese leadership have made absolutely clear that certain things were simply too difficult politically for them to contemplate," Mr. Lamy said in reference to the majority ownership issue. "So the mandate I had this week was, having tested the depth of their resistance, to say to the Chinese: we need you to go as far as you can to the red line you have identified. But if you can't cross it, then we must have compensation, both inside and outside the particular sector concerned," Mr. Lamy said.

Those concessions include China's promise to end state monopolistic control of oil imports, and tariff cuts to between eight and 10 percent on 150 leading European exports, including machinery, ceramics and glass, textiles, clothing, footwear and leather goods, cosmetics and spirits.

"It is my belief that by spreading the improvements across a large number of sectors, we have in fact secured a better deal for a broader range of EU industries than if we had focused solely on China's most politically sensitive interests," Mr. Lamy said.

The EU-China deal is expected to have a positive impact on Clinton Administration efforts to pass legislation granting Permanent Normal Trade Relations (PNTR) with China this week (week of 22 May 2000). The US House of Representatives are scheduled to vote on PNTR Wednesday, 24 May. The US and China concluded talks late last year on a bilateral WTO accession package outlining the terms for market access and other areas as part of China's bid to join the WTO. PNTR is a necessary next step by the US in the accession process as it would put China on par with the US' other WTO trading partners.

While PNTR is expected to pass the US Senate in early June, the vote in the US House on 24 May is not as certain. In an effort to boost support amongst House members, provisions are to be added to PNTR legislation that would protect against import surges and create a permanent commission to monitor Chinese human rights. The provisions are expected to help secure a number of votes in favour of PNTR, however, PNTR opponents said the provisions lacked real enforcement mechanisms and would do little to pressure China on its human rights record.

"Highlights of EU-China agreement on WTO accession," EU PRESS RELEASE, 19 May 2000; "Statement by Mike Moore on EU - China agreement," WTO PRESS RELEASE, 19 May 2000; "Last major obstacle to China accession is lifted by bilateral accord with EU," WTO REPORTER, 22 May 2000; "Beijing signs WTO deal with Brussels," 20 May 2000; "China trade bill supporters confident of passage," REUTERS, 18 May 2000.

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