Politics, Not Economics, Sinks a WTO Deal With China

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Chinese premier Zhu Rongji leaves the United States on Wednesday without the economic prize his country has sought for more than a decade: a deal with the U.S. to join the World Trade Organization. What makes the failure particularly frustrating is that “both sides were 95 percent in agreement over the outstanding issues,” says TIME Beijing bureau chief Jaime FlorCruz. What was missing was the handshake -- that is, the trust. “The economic differences were mostly bridged," says FlorCruz, “but not the political problems.” China agreed to lower most of the trade barriers the U.S. has long sought to pierce and agreed to live up to those obligations pursuant to WTO rules. But the United States insisted on a further guarantee: a right to impose unilateral sanctions if China reneges.

The additional requirement proved to be a deal-breaker for this round of negotiations. “The Chinese believe they are already taking a big enough risk -- competition -- by seeking to join the WTO,” says FlorCruz. They are not willing to also shoulder the risk of a U.S. veto over their economic decisions. Meanwhile, the administration -- already on the defensive over allegations of Chinese nuclear spying and Chinese campaign contributions -- is concerned about getting burned in Congress over anything Chinese and wants to look tough. U.S. Trade Representative Charlene Barshefsky showed up on Capitol Hill on Tuesday to sell the American hard line. But she and the administration could now risk getting burned from another direction: Many U.S. businessmen feel the White House may have let a good deal slip by.