Can Zhu Deliver on WTO Promises?

China still has to conclude negotiations with other countries regarding its accession to the World Trade Organization, notably the European Union. But a U.S.-China agreement that would end an arduous, 13-year-long process and pave the way is widely expected in Washington; U.S. Trade Representative Charlene Barshefsky is believed to be satisfied with most of the most recent offer put forward by China.

Curiously, though, more progress on China's WTO accession has been made in the past two months than the past six years. The apparent reason for the sudden breakthrough is that China's premier, Zhu Rongji, took a leading role on this issue and committed China to a wide-ranging package of economic reforms in telecommunications, financial services and agriculture.

While the U.S. business community is broadly in favor of China's entry into the WTO on commercially viable terms, it has good reason to view this sudden breakthrough in negotiations with skepticism.

It can hardly be lost upon U.S. businesses that the Clinton administration is trying desperately to steer attention away from topics such as nuclear espionage and human rights.

Moreover, that Premier Zhu made these reform promises just weeks before his arrival in the United States this week can hardly be a coincidence. The sudden and timely breakthrough in the negotiations raise serious questions about whether the United States has evaluated sufficiently the degree to which Mr. Zhu's commitments on opening up China's economy are credible.

Unfortunately, the first year of Mr. Zhu's tenure as premier, a position he was promoted to in March 1998, does not give much cause for optimism. To his credit, he has followed a prudent macroeconomic policy, resisting pressures from domestic exporters to devalue the yuan.

Mr. Zhu's track record on restructuring the economy, however, is less impressive. For example, a year ago, when promoted to premier, he announced he would restructure China's ailing state-owned enterprises in three years - a goal he now admits he will not achieve.

The initial government plan was to auction off small SOEs under a policy of ""Seize the Big and Release the Small.'' Fixated on achieving target growth rates, however, China is backtracking from this policy and is increasing its investment in even smaller and medium-sized enterprises.

This is not to fault Mr. Zhu personally for failing to restructure the economy despite his recent public proclamation that he was to blame. The problem is that Mr. Zhu must persuade reluctant local officials to implement his directives.

Since 1978, the Chinese government has delegated a great deal of authority to local officials not only to enforce but to design reform institutions and policies. Not surprisingly, many local officials are adopting policies that benefit themselves and their localities with little consideration of the national interest in mind.

Mr. Zhu himself has admitted that ""the resistance to the principles, policies and measures of the central authorities is not weak, which makes it very difficult to implement them. Some party and government chiefs do not feel obliged to listen to the central authorities.''

The premier will have a hard time, for example, in following through on his promise to lift informal ""buy local'' orders on telecommunications equipment in China. China has already outlawed the establishment of protectionist barriers between its provinces, but it is widely known that they are still in place.

Mr. Zhu will also have to contend with powerful central ministries that are reluctant to allow foreign access. It is widely known, for example, that the minister of post and telecommunications, Wu Jiachuan, is against increased foreign participation in China's fledgling telecommunications market.

Apparently Mr. Wu is not alone. One recent anonymous article published in a dissident magazine quoted a senior official saying: ""Only the trade ministry wants to join the WTO. The rest of us are against it.''

The United States is right to welcome China's recent reform package put on the table by Premier Zhu and his colleagues, which to some extent justifies the back-patting we will see during the premier's U.S. visit.

In the months that follow, however, it will be crucial for the world trading community to get in writing not only the commitments on market access that China will make, but the processes China will adopt to implement the accession agreement.

Particularly since most of the economic reforms China has pledged to adopt do not have to be phased in until 2005, such a written commitment on processes is crucial.

Indeed, it is the only way to dispel the other rumor floating around Washington now--that the present China WTO deal smacks of political opportunism by leaders on both sides of the Pacific who are more interested in the short-term goal of good photo-ops than in the more important long-term need to move China genuinely down the path of reform.

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