U.S., China reach 'compromise' on accession to WTO

By V. S. Sambandan

GENEVA, JUNE 15. One of the most high-profile processes in the World Trade Organisation - China's accession to the multilateral organisation - may have taken yet another turn this week with a ``consensus'' reached between the U.S. and China on ``major issues'' at Shanghai, but there is still a certain element of uncertainty as the details of the pact, especially that relating to farm subsidies, remains unclear.

The WTO's Director General, Mr. Mike Moore, saw it as one of the ``most important decisions in 50 years.'' However, unless the details of the agreement reached between the two major economic players, representing contrasting ideologies, are made known, it would still be a case of so near, yet so far away. The sticking point over China's accession to the WTO has been the status it should be accorded. While China has argued for being included as a developing country, the U.S. has been calling for it to be considered a developed country. The distinction is crucial in that developing countries are permitted to spend an equivalent of up to 10 per cent of their domestic farm production as subsidies, while the developed economies would have to adhere to a 10 per cent cap.

Compromise on farm subsidies

Officials at the WTO remain tight-lipped about what the agreement has been, except to say that ``a compromise'' was reached. Such a compromise, according to some trade negotiators, would imply that the level of subsidies permitted to China has been placed between 5 per cent and 10 per cent - most likely in the range of 8 per cent. This, according to some trade representatives, would connote a departure from the rules-bound nature of the organisation, which has mandated for only two levels of farm subsidies. However, this ``departure'', it is conceded, could be `corrected' in the instrument of accession.

There has been some build-up as well to make the China accession to the WTO an issue before the Doha Ministerial Conference and that China is also broadly in favour of a fresh round of trade negotiations is a point that is not missed in briefings. The reasoning behind China's call for a fresh round is that in the event of it joining the WTO, it would like to be right at the commencement of any fresh multilateral negotiations.

Yet another procedural aspect that would have to be completed is in correlating domestic Chinese laws for the compatibility with the principles underlying the multilateral trading body. This process, officials say, would take some time to be completed.

Yet another imponderable that awaits developing countries on the effect of China joining the WTO is on which side of the arguments it would stand up for: the developed or the developing. The farm subsidy terms on which it joins the organisation is also likely to reflect that stance.

Though there has been a considerable narrowing of bilateral political differences in the multilateral trading body, as is evident from the common posture taken by India and Pakistan, the history of collapsed pacts between the US and China, as well as the recent chill that descended between the two countries over the spy-aircraft issue are testing points for the pact holding firm.

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