The National Bureau of Asian Research
November 1999


China and the WTO: The Politics Behind the Agreement

Joseph Fewsmith


Chinese leaders in favor of China's greater integration into the world economy were thrown on the defensive in April by the U.S. rejection of China's unprecedentedly forthcoming offer for joining the World Trade Organization (WTO) and by the bombing of the Chinese embassy in Belgrade in May. The events of April and May raised the WTO issue from the already difficult arena of bureaucratic politics to the often brutal realm of elite politics. Although Premier Zhu Rongji bore the brunt of public criticism, President Jiang Zemin similarly came under attack by nationalistic opposition leaders for "selling out the country" and being soft on the United States. Jiang has spent much of the time since then defending himself and rebuilding support for joining the WTO. The Clinton Administration, realizing its miscalculation in April, similarly spent the next six months working to repair U.S.-China relations in order to bring China back to the negotiating table.

On November 15, 1999, the United States and China finally signed a landmark agreement on China's accession to the WTO. Without the efforts from both China and the United States to repair the damage done in the spring, an agreement would have been delayed indefinitely. The agreement on China's entry into the WTO will rank with President Nixon's 1972 visit to Beijing and President Carter's extension of diplomatic recognition to China as a major step in bringing China into the world. It will help stabilize China's relations with the major powers — most particularly the United States — and burnish Jiang Zemin's (and perhaps Zhu Rongji's) leadership credentials. Most importantly, it will reinforce domestic reform and lead China to play an increasingly constructive role in world affairs.


On April 6, 1999, Chinese Premier Zhu Rongji arrived in the United States to try to clinch a deal on China's membership in the World Trade Organization (WTO). The People's Republic of China (PRC) had originally applied for membership in the WTO's predecessor organization, the General Agreement on Tariffs and Trade (GATT) in 1986. Progress on an agreement was interrupted by the Tiananmen Square incident in 1989, and subsequent disagreements over market access, intellectual property rights, and other matters repeatedly thwarted prospects for a deal in the years since. By the time Zhu Rongji came to the United States in 1999, however, there was reason to believe that an agreement could be reached. Chinese leaders were suggesting greater flexibility, and the Clinton Administration had finally concluded that getting China into the WTO would anchor its China policy and leave a lasting legacy for the President. Before leaving for the United States, Zhu, reflecting an air of optimism, suggested that the time to reach an agreement had finally come. Negotiations, he said, had gone on for 13 years, long enough for his hair to turn white; it was time to make a deal.

But even as Premier Zhu was en route to the United States, President Bill Clinton was making decisions that would prevent a deal from being consummated. Over the weekend of April 4-5, President Clinton met with his advisors. His foreign policy advisors, National Security Advisor Samuel Berger and Secretary of State Madeline Albright, along with United States Trade Representative (USTR) Charlene Barshefsky favored clinching a deal that was better for American business than any had dared hope only a few months earlier. However, Clinton's domestic advisors, Treasury Secretary Robert Rubin, National Economic Council head Gene Sperling, and domestic political advisor John Podesta, argued that unless there were guaranteed protections for labor unions and industries that compete directly with their Chinese counterparts, Congress would vote to kill the deal — and that would be worse for U.S.-China relations than no deal. President Clinton sided with his domestic advisors and requested that USTR go back to the negotiating table to ask for extended protection for textiles and added assurances against large-scale increases in imports. On the morning of April 7 President Clinton declared that it would be wrong to walk away from a good agreement with China, but then, in a two-and-a-half-hour meeting with Premier Zhu at the White House that evening, he did exactly that.1 Although an agricultural agreement was quickly signed the next morning, Zhu was sent back to China virtually empty handed.

Even though, in response to an outcry from business, President Clinton quickly realized his error and called Premier Zhu in New York on April 13 to make a commitment to get China into the WTO by the end of the year, the damage had been done. Although Clinton did not know it, the grumbling in Beijing had already begun and it would grow as soon as the inability to reach an agreement was announced.

Seven months later, on November 15, China and the United States finally signed an agreement on China's accession to the WTO. This is an historic agreement, one that will rank with President Richard Nixon's decision to open state-to-state relations with China and President Jimmy Carter's extension of diplomatic relations. Economically, the WTO agreement will give new momentum to reform in China, while politically it will help anchor U.S.-China relations, dampening the severe oscillations the relationship has suffered in recent years. In retrospect, this agreement is likely to be seen as the Rubicon in China's opening to the outside world. Although China has been opening to the world for two decades now, much of that progress has stopped short of total commitment to all — especially security-oriented rather than economic — international regimes.2 The WTO agreement will take China from "shallow integration" to "deep integration."3

On the Chinese side, even more than the U.S. side, the negotiations behind the WTO deal have been extremely complex as issues of national interest became embroiled in elite politics. To understand this complexity, it is useful to "walk back" the politics of WTO in China.


China's WTO Position: Why It Changed

Following Tiananmen, Chinese interest in the GATT/WTO process revived prior to the inauguration of the WTO in 1995. In that period, Jiang Zemin sent clear signals that China was interested in participating in the organization, but at that time U.S. negotiators, more cognizant of the potential size of China's economy and under more scrutiny from Congress, demanded that any agreement be "commercially viable" — a term that included opening China&'s market to U.S. goods. Such demands naturally encountered bureaucratic resistance in China. Resisting bureaucrats found a ready champion in Li Peng, who had taken over the premiership in 1988 but had only become a genuinely powerful actor following the ouster of Zhao Ziyang, the general secretary of the Chinese Communist Party, after Tiananmen in 1989. Li, an adopted son of former Premier Zhou Enlai and hence deeply embedded in the network of Party elders, was also a product of China's bureaucratic culture, having risen through the ranks of the energy sector. There was nothing in Li's personal background or work experience to suggest an understanding of, or openness to, market forces, and indeed he effectively stymied China's bids to join the WTO by ensuring that they fell well short of Washington's expectations.

Taiwan President Lee Teng-hui's visit to Cornell University and the PRC's subsequent military exercises against Taiwan in 1995 and early 1996 further delayed any consideration of China's entry into the WTO. It was only as relations warmed in the wake of the exchange of summits between Presidents Clinton and Jiang that China's accession to the WTO came back into the picture. Prior to President Clinton's June 1998 visit to China, Jiang Zemin made clear his commitment to join the world economy. He said in March, "We have to gain a complete and correct understanding of the issue of economic 'globalization' and properly deal with it. Economic globalization is an objective trend of world economic development, from which none can escape and in which everyone has to participate."4 At the same time, the reform-minded Zhu Rongji replaced Li Peng as premier.5 When Zhu Rongji first took over as premier, he seemed distinctly less interested in the WTO than Jiang Zemin or Vice Premier Li Lanqing, who had been directing China's WTO effort. Zhu wanted to concentrate his attention on reforming domestic industry, particularly the state-owned enterprises (SOEs), and felt that external pressure would be too much to bear. Whether for these reasons or simply because Zhu had not had time to focus on WTO issues, Chinese negotiators did not present what American officials considered a viable offer prior to President Clinton's visit. Thus there was little progress on the negotiations despite the improved U.S.-China relationship.

President Clinton's June 1998 trip to China went very smoothly. The Americans were pleased that Clinton's "debate" with Jiang Zemin at his reception was broadcast live to the Chinese people, and the Chinese were pleased that Clinton enunciated the so-called "Three Nos" regarding Taiwan (that the United States does not support Taiwanese independence, the creation of one China and one Taiwan, or the entry of Taiwan into international organizations for which statehood is a requirement). The tensions of 1995-1996 — when the possibility of military conflict between China and the United States seemed real — had disappeared, and the prospect of something approaching warm relations seemed possible. Both sides talked in terms of building a "strategic cooperative partnership."

Clinton's trip to China provided the boost to U.S.-China relations that made serious negotiations on WTO possible, perhaps for the first time since 1994. The improved relations provided the necessary background for China's later shift on the WTO. It strengthened Jiang Zemin's hand by suggesting that an amicable relationship with the United States was possible and beneficial. During the same period, Zhu Rongji appears to have become more favorably disposed to the WTO. Facing resistance in his efforts to restructure the Chinese economy, Zhu, like Li Lanqing before him, came to see international influence as useful in pressuring SOEs to make the reforms necessary to break up monopolies, to become more competitive, or to go out of business — any of which would make the Chinese economy more efficient and reduce the heavy burden of subsidies on the Chinese government. As Premier Zhu put it, "Competition arising from such a situation will promote the more rapid and healthy development of China's national economy."6

Moreover, China's economy grew substantially through the early 1990s. As market forces expanded and the Chinese economy matured, an increasing number of industries developed an interest in lower tariffs (to lower the costs of imports) or expanding export markets. After all, some 40 percent of China's economy is linked to the international market.7 More specifically, however, the decision to make a major effort to join the WTO reflected the pressures facing China following the Asian financial crisis. As the economy slowed, China looked for new ways to boost exports, shore up foreign investment, and, most importantly, make Chinese industry more competitive. There was also the realization that the upcoming Seattle round of the WTO Ministerial Conference would take up a number of issues of interest to China, including agriculture and labor standards. It would be better to be involved in the formulation of the trade rules than to sit out and watch as the price for admission went up. There were also concerns that pressures would mount for letting Taiwan into the WTO ahead of the PRC. Finally, there was also the pressure of Zhu's forthcoming trip to the United States. Those working on the trip wanted to have something to show for it, especially in light of the deterioration of U.S.-China relations as new reports appeared on campaign finance violations, nuclear espionage, and China's crackdown on democracy activists. China's entry into the WTO would impart new momentum to the relationship and give it an underpinning that it had been noticeably lacking in recent years.

All these factors appear to have been part of the general background that brought about a substantially altered approach to WTO issues. Nevertheless, a push was still needed to catalyze the Chinese leadership. That push was apparently provided by President Clinton's personal intervention. According to Chinese sources,8 President Clinton wrote Jiang Zemin a letter on November 6, 1998, expressing hope that the WTO issue could be resolved in the first quarter of 1999. On February 8, 1999, Clinton is said to have written a second letter to Jiang Zemin stating that he hoped that WTO negotiations could be concluded during Premier Zhu Rongji's visit to the United States. A third letter, on February 12, expressed hope that a package deal could be reached.

By January 1999, the Chinese position on the WTO had changed enough that Premier Zhu was able to tell Alan Greenspan, chairman of the U.S. Federal Reserve, that China was prepared to offer substantial concessions. Nevertheless, a clear-cut leadership decision on concessions appears to have been made only in February, after receipt of President Clinton's letters. Sometime in the latter part of the month there appears to have been an enlarged Politburo meeting that approved broad-gauged concessions in an effort to achieve WTO membership. All major bureaucracies would have been represented at such a meeting and would have had an opportunity to present their views — although the expression of those views would no doubt have been constrained by the obvious support of the top leadership, and particularly Jiang Zemin, for joining the WTO.9

Assuming that there was such a meeting, the task of drawing up a detailed negotiating proposal would have fallen to the Ministry of Foreign Trade and Economic Cooperation (MOFTEC) office headed by Long Yongtu, China's chief negotiator on the WTO. It seems almost certain that any "Terms of Reference" would have had to receive approval by at least the Standing Committee of the Politburo and perhaps a larger body such as an enlarged meeting of the Politburo.

Despite this apparent consensus to move forward, there were obviously still differences among bureaucracies and within the leadership. Some bureaucracies apparently muted their opposition in light of Jiang Zemin's support for accession to the WTO. That opposition would not remain quiet for long.

The first indication of internal dissent came on March 24, 1999, as the North Atlantic Treaty Organization (NATO) launched an air assault on Serbia in an effort to force President Slobodan Milosevic to accept the Ramboullait Accord. The U.S. role in launching such attacks certainly raised the worst fears of Chinese conservatives, making plausible to many the argument that the United States was unwilling to be constrained by any institution (such as the United Nations). Some argued that Zhu Rongji's scheduled trip to the United States should be postponed or cancelled in protest. Nevertheless, it was decided that Zhu would visit Washington as scheduled, a decision that could only have been made with Jiang Zemin's support. Given increased rumblings within the Chinese government, the WTO accord began to take on yet greater meaning.


China's Reaction to the Failure of the April Bid

Shortly after President Clinton turned his back on the WTO deal, details of China's concessions appeared in a 17-page document posted on the USTR web site. The posting may have been intended to whip up support for the deal in the business community, but it also seems to have been intended to exert pressure on China, to ensure that the Chinese did not backtrack on their offer. Whatever the reason, publication of the document proved to be almost as great a miscalculation as President Clinton's decision not to accept the deal.

By the time Zhu returned to China, the opposition, which had been muted before his trip, began to burst forth. Ministries that felt that the concessions would hurt them lost their inhibitions in voicing their complaints. Wu Jichuan, minister of Information Industries (including telecommunications) reportedly tendered his resignation (which was not accepted). Moreover, the USTR posting allowed the broader public to weigh in, and Zhu was abused mercilessly by public opinion. Articles on the internet as well as student demonstrators in May labeled him a "traitor" (maiguozei). At the same time, some old cadres have been known to mutter that the government's readiness to accept globalization was like Wang Jingwei's willingness to serve as head of Japan's puppet government in occupied China during World War II. Others have called Zhu Rongji's compromises in Washington the "new 21 demands selling out the country" — a reference to Japan's infamous demands of 1915 that sought to reduce China to a colony.

It is important to note that opposition to the WTO agreement was not limited to stodgy bureaucrats and hardline ideologues (although their voices were definitely heard). Some articles blasted "globalization" as a mask for Americanization.11 Prominent intellectuals and intellectual journals came out against the agreement, at least for the present time.12

In the wake of this rising tide of hostility, Jiang Zemin told an internal meeting that China had waited 13 years to join WTO (GATT) and it can wait another 13 years. Accordingly, Li Zhaoxing, China's ambassador to the United States, declared that "China upholds principles and will not strive to enter the World Trade Organization at any cost."13 Even State Councilor Wu Yi, who helped hammer out the WTO deal, appeared to back off. She told reporters that the government would solicit opinions from various big enterprises, such as China Telecom, and that "[i]f people thought that... the United States demanded too much from us, we could give up the idea."14

Reflecting the vulnerability of officials connected to the WTO deal, MOFTEC Minister Shi Guangsheng declared that the concessions listed by the USTR were "inaccurate."15 The list, he said, consisted of items under discussion but not agreements reached. Following the bombing of the Chinese embassy on May 8, 1999, Shi quickly called a staff meeting to angrily denounce the USTR's list.16 Zhu Rongji similarly adopted strong language in his meeting with visiting German Chancellor Shroeder.17


Reaction to the Embassy Bombing

Beijing's initial reaction to the embassy bombing was one of shock and confusion — as well as a desire to manipulate events to China's advantage. The top leadership spent three days in an intensive round of meetings. The sardonic citizens of Beijing, noticing the absence of the leadership, began to call the emergency line at the Beijing police department to report three missing persons: Jiang Zemin, Zhu Rongji, and Li Peng! Humor also skewered the abilities of the leadership to respond to the event. People said that the hotline recently installed between Beijing and Washington was for "chewing out your old lady" (maniang), but when the bombing occurred not only did Jiang not pick up the phone and dress down Clinton, he wasn't even around to pick up the phone when Clinton called! Old cadres, especially those retired from the military, were less humorous. They unfavorably compared Jiang, and the leadership in general, with Mao Zedong, saying that Mao would never have put up with such an outrage.

By the time the leadership emerged from a series of internal meetings, some things were clear. First and foremost, the leadership had decided that it wanted to continue the relationship with the United States. The relationship was considered too valuable to sacrifice to the emotion of the moment. Jiang Zemin's May 13 speech welcoming the return of embassy staff from Yugoslavia reiterated that China "must continue to unswervingly take economic construction as the central task."18 A series of editorials in the People's Daily emphasized continuity of policy and concluded with the declaration that China wants to "develop amity and cooperation with developed countries in the West, including the United States."19 And on June 12, Deputy Prime Minister Qian Qichen declared, "China does not want confrontation with the United States."20

China's reaction appears based not only on pragmatic calculations but also on the belief of the top leadership that the bombing of the embassy was indeed accidental, or, at a minimum, that it did not reflect a policy of President Clinton or his top advisors. That does not mean that everyone in political circles agreed. Many high-level Chinese officials were convinced that the bombing represented an effort to test China's resolve, while others argued that the bombing was the work of an anti-China conspiracy in the bowels of the U.S. bureaucracy. Elaborate theories have been spun to explain the alleged motives of the United States. These suspicions are widespread throughout government and society and are not likely to disappear quickly or easily. Many raise analogies to the assassination of President John F. Kennedy and suggest that the truth may never be known.

The contrast between what the top leadership seems to have believed about the incident and what it said to the Chinese people through the mass media apparently reflects both the anger among old cadres, particularly from parts of the military, and deep concern that public anger would turn against the government itself, especially if its attitude toward the United States seemed less than resolute. A widespread current of public opinion that has existed for some years maintains that the Chinese government has been too weak in the face of various slights to China. This sentiment was clearly visible in the 1996 best-selling book The China that Can Say No, which was as much a criticism of the Chinese government as it was an expression of anti-Americanism.21 At the same time, there was reason to fear that such feelings — and others as well — would be directed against the Chinese government. After all, the bombing occurred only a couple of weeks after more than 10,000 adherents of the Buddhist Law Society (falungong) had shocked the top leadership by staging a silent protest outside Zhongnanhai, the seat of government.


Did Zhu Exceed His Instructions?

There are several questions that emerge from this brief overview of the Chinese reaction to the failure of their bid for membership in the WTO and the subsequent bombing of the Chinese embassy. It is apparent from subsequent developments that Zhu Rongji's position in the leadership was severely weakened. The first question is: Did Zhu go beyond his instructions? If not, then on what basis could he be legitimately criticized? Second, if Jiang Zemin was as supportive of China's WTO bid as he appears to have been, then why was criticism directed chiefly at Zhu Rongji? Third, the People's Daily issued a series of unusual, and unusually harsh, "observer" (guanchajia) articles; two articles published on May 16 and May 27 were notably harsher in tone than the more authoritative editorials published by the People's Daily at the same time and suggested intense anti-U.S. sentiment within the Chinese government.22 Another observer article carried by the People's Daily on June 22 pushed rhetoric well beyond the bounds of normal diplomatic discourse by comparing — at great length — the United States to Nazi Germany.23 What voice did such a harsh invective represent?

Upon close observation, it appears that Zhu did not exceed his Terms of Reference, or not by much. One version of events argues that before Zhu left for the United States, Jiang Zemin gave a personal authorization to make the concessions necessary to achieve WTO membership. According to this interpretation, the ensuing brouhaha was because the decision was not a collective one. But, as indicated above, there was an expanded Politburo meeting in late February. Thus, if there is any truth in this version, it may consist of Jiang's personal encouragement to be as forthcoming as possible. Another version, not necessarily incompatible with the first, suggests that Zhu's "fault" was in accepting provisions that were at or near China's "bottom line" across the range of issues rather than, as expected, yielding in some areas while holding fast in others.

The closer one looks at the course of events, however, the more one is convinced that Zhu's problem did not lie in anything he did in the course of the negotiations (and if President Clinton had accepted the deal, Zhu would have returned to applause, even if some of it were feigned). On the contrary, the source of Zhu's problems lies first in the number of enemies he has made among China's bureaucrats as he has moved to restructure industry and government; and second, Zhu became the scapegoat for discontent with Jiang Zemin's policy decisions.

Chinese critics, particularly on the internet, have focused on Zhu, but critics within the Chinese government suggested that the real maiguozei was Jiang Zemin. It was after all Jiang who encouraged a closer relationship with the United States, who pushed for China's entry into the WTO, and who was slow to react to the U.S.-NATO action in Kosovo. These voices stemmed largely from the military. This is not to say that the entire People's Liberation Army (PLA) was critical, but simply that there is a very nationalistic wing within it. And with the U.S. bombing of the Chinese embassy in Belgrade, these voices became both strident and difficult to ignore. Jiang was, in the immediate aftermath of the embassy bombing, in a very difficult situation.

It was, according to observers in China, Li Peng who used the emotion of the moment to direct criticism at Zhu Rongji. At a Politburo meeting not long after the embassy bombing, Li Peng reportedly expressed his complete support for Jiang Zemin and then turned to Zhu Rongji and leveled three criticisms. First, Li reportedly accused Zhu of not respecting Jiang Zemin as the core. According to Li, Zhu had set himself up as a separate center, focusing on the economy and not reporting back or asking for instructions from the center (which would include both Jiang and Li, who is ranked second on the Politburo). In Li's criticism, Zhu did not listen to his subordinates either. Second, Li reportedly alleged that Zhu had misspoken in the United States. Zhu's claim that he did not want to come to the United States but was asked to come by Jiang was similar to what Zhao Ziyang had done in 1989 when he said Deng Xiaoping was the man in charge — namely deflect blame onto Jiang. Third, Li was critical of Zhu for pursuing too many reforms too quickly. Many of these reforms were good, Li assented, but they cannot all be done at once or pushed too quickly. Cutting the bureaucracy had hurt lots of good cadres, just as housing and medical reforms had hurt the common people (laobaixing), causing them to bear heavy financial burdens.

If this report is accurate, it is quite interesting, for none of Li's criticisms suggested that Zhu exceeded his instructions or that China's entry into the WTO was not desirable. Instead, criticism of Jiang was deflected onto Zhu, weakening one of Li Peng's chief antagonists. When Jiang reportedly expressed agreement with Li, Zhu was put into an extremely difficult position. He has reportedly offered up his resignation repeatedly in the months since.

This interpretation of events, namely that Jiang was as implicated as Zhu in being "soft" on the United States, is compatible with the probable explanation of the virulent observer articles mentioned above. Rather than express a point of view different from that of Jiang Zemin, these articles were apparently intended to show the military and other critics that Jiang could be just as harsh on the United States as they were. These articles, apparently run with Jiang's approval, suggest the degree of threat that Jiang felt in the immediate aftermath of the embassy bombing. This interpretation jibes with reports of Jiang adopting harsh rhetoric in internal meetings, saying for instance that U.S. imperialism will not die (wangwozhixin busi — an evocative expression used by Mao Zedong) and calling for "bidding time while nurturing grievances" (woxin changtan).

Jiang's deft maneuvering, with the "help" of Li Peng, allowed Jiang to recover his balance quite quickly, even as it undermined Zhu's position. It has been widely reported that Vice Premier Wu Bangguo has taken over Zhu Rongji's SOE portfolio; what was not reported was that this change happened as early as June. Although Zhu has been kept in his position as premier, he has appeared to exercise very little authority in his own right — his recent interventions in the WTO process perhaps marking an exception and possibly even an improvement in his status.

One other factor weakening Zhu and increasing opposition to a WTO deal was Taiwan President Lee Teng-hui's statement on July 9, 1999, about cross-strait relations being "special state-to-state" relations. That statement produced a new wave of nationalist anger just as the initial outburst following the embassy bombing had begun to quiet down. When the leadership of the Chinese Communist Party (CCP) met at the seaside resort of Beidaihe in late July, Li Peng reportedly launched an open attack on Zhu's management of the economy. Beijing was rife with rumors that Zhu would step down, and he still might. Obviously, China and Jiang Zemin would face a considerable loss of foreign confidence if Zhu were dismissed, and that is certainly one factor keeping him in place.

This interpretation of events makes the decision of the Fourth Plenum in September to add three members to the Central Military Commission more comprehensible. In addition to selecting Hu Jintao, vice president of the PRC and member of the Politburo Standing Committee, to serve as vice chairman of the Commission, the Plenum added two generals, Guo Boxiong and Xu Caihou, as members. Jiang needed to increase his control over the PLA.


Resumption of WTO Negotiations

According to press reports, President Clinton soon regretted his decision to turn down the WTO agreement in April and worked hard to restore U.S.-China relations in the wake of the embassy bombing. On June 16, 1999, Undersecretary of State Thomas Pickering attempted to explain to Chinese Foreign Minister Tang Jiaxuan how an accident of the magnitude of the embassy bombing could have occurred. The meetings themselves went reasonably well, and there appears to have been an effort on both sides to try to repair the damage done. There were clearly those in the Chinese leadership who wanted to find a way out of the impasse. Nevertheless, the Chinese rejected Pickering's explanation as "illogical" and "unacceptable."24 This stance not only reflected the government's inability to reverse course so quickly after having fanned the flames of anger for the preceding month, but more importantly reflected the very unsettled state of politics at the top reaches of the Chinese government, as described above. An important indication of the difficult political situation in Beijing was that Jiang Zemin left town during the Pickering visit so he would not have to meet with him.

Additional efforts to repair relations were made in July when Secretary of State Albright met with Minister Tang at the Association of Southeast Asian Nations Regional Forum, and relations took another step forward in September when President Clinton met with President Jiang at the Asia-Pacific Economic Cooperation meeting in Auckland, New Zealand. Despite the improved atmosphere, it proved difficult to restart serious WTO negotiations. When MOFTEC head Shi Guangsheng met with USTR head Charlene Barshefsky in Washington in September, the talks were extremely brief. China's top trade negotiator Long Yongtu, reportedly also under a cloud because of the failure of the April accord, did not accompany Shi. Although originally scheduled to last two days, the talks in fact lasted only a couple of hours. Apparently Shi's brief was to lay out the differences between what the Chinese said they had offered in April and the list of concessions posted on the USTR web site. According to Chinese observers, there were 15 areas of disagreement. One of the most important was in the area of telecommunications. According to the USTR posting, China agreed to allow foreign companies to own up to 51 percent of telecommunication companies in the service area, but Shi's message was that the Chinese had only offered 49 percent. Other disagreements centered on phase-in times and U.S. insistence on textile protection and safeguards against a surge of Chinese exports.

On October 16, a month after the Shi-Barshefsky meeting, President Clinton called Jiang Zemin to urge a resumption of serious WTO negotiations. Apparently as a result, U.S. Treasury Secretary Lawrence Summers, who was to attend the twelfth China-U.S. Joint Economic Meeting in Beijing, added a side trip to Lanzhou to meet with Premier Zhu Rongji, who was in the northwestern provincial capital to discuss regional economic development. U.S. officials came away from that meeting believing that there was room for compromise. President Clinton again called Jiang Zemin on November 6, and then made the decision to send Barshefsky and Gene Sperling, national economic advisor, to Beijing on November 8 to try to reach an agreement.

Some have argued that the long delay in resuming serious WTO negotiations was prompted by the hard negotiating style of the Chinese, but the problems clearly ran deeper than that. Unfortunately, the missed opportunity in April, followed by the embassy bombing in early May, raised the WTO issue from the already difficult arena of bureaucratic politics into the often brutal realm of elite politics. It appears that it took Jiang Zemin until the convention of the Fourth Plenum in September to regain full control, and even then, he needed to be able to demonstrate to his domestic constituency that he had not been "soft" on the United States.

The November 15 agreement, coming after six days of grueling negotiations, marks a major watershed in U.S.-China relations. From press reports, it appears that the agreement is roughly as strong as the April agreement, and it will be widely supported by the business community. Although there has been much speculation that this agreement will benefit Premier Zhu Rongji — and it may — the big winner appears to be Jiang Zemin. Jiang has spent the last two years trying to solidify China's relations with the major powers of the world, and this agreement will allow him to say — correctly — that China has now been recognized as one of the great powers. This will clearly enhance Jiang's leadership credentials and deflate some of his nationalistic antagonists (both within government and the broader society). If negotiators had failed to reach an agreement, Jiang would likely have been forced to play the nationalist card to defend himself. He would prefer to play the role of world statesman — something that is very much in the interest of the United States as well.


Joseph Fewsmith is associate professor of international relations at Boston University and a specialist on the political economy of China. His publications include Dilemmas of Reform in China: Political Conflict and Economic Debate (1994) and Party, State, and Local Elites in Republican China (1985).

The views expressed in this article are those of the author, and do not necessarily reflect the views of other NBR research associates or institutions that support NBR.



1 Wall Street Journal, April 9, 1999, pp. A1 and A6. For a vivid description of President Clinton's meeting with Premier Zhu Rongji, see Steven Mufson and Robert G. Kaiser, "Missed U.S.-China Deal Looms Large," The Washington Post, November 10, 1999, p. A1.

2 See Elizabeth Economy and Michael Oksenberg, eds., China Joins the World: Progress and Prospects, New York: Council on Foreign Relations, 1999.

3 These models, also labeled as "full integration" and "partial integration" are more fully discussed by Margaret M. Pearson, "China's Integration into the International Trade and Investment Regime," in Elizabeth Economy and Michael Oksenberg, eds., China Joins the World: Progress and Prospects, New York: Council on Foreign Relations, 1999.

4 Renmin Ribao, March 9, 1998, p. 1.

5 One of the interesting aspects of this transfer of power was that Li Peng, who was made head of the National People's Congress, retained his number two ranking in the Politburo at the Fifteenth Party Congress in September 1997. Normally the premier would occupy the second rank position in the Politburo, so this seemed an intriguing bit of face-saving, a seemingly harmless "side payment" to get the conservative Li Peng to vacate the center of power. But as we will see below, this arrangement would come back to haunt Jiang Zemin — and especially Zhu Rongji.

6 Wang Yanjuan, "WTO: How Close is the Deal?" Beijing Review, no. 19 (May 10, 1999), pp. 14-16.

7 This estimate is true if one uses exchange rates to calculate the size of the Chinese economy; purchasing power parity (PPP) estimates yield a lower figure for the importance of international trade.

8 In order to evaluate the candid opinions of Chinese observers, the author conducted a series of interviews during the summer and fall of 1999. To encourage candid responses, the interviews were conducted on the condition of anonymity.

9 When interviewing on the WTO issue in June, a number of people argued that some ministries had been cut out of formulating China's proposal. Subsequent interviews in October contradicted that assessment. Obviously more work needs to be done to better understand the policymaking process.

10 Yong Wang, "China's Accession to WTO: An Institutional Perspective," unpublished paper.

11 Di Yingqing and Zheng Gang, "Meiguo wei shenma jiyu yu Zhongguo chongkai ruguan tanpan" (Why is the U.S. so anxious to restart WTO negotiations?), Gaige neican (Reform reference), no. 8 (April 20, 1999), pp. 39-42.

12 Cui Zhiyuan, "Jiaru shijie maoyi zuzhi bushi Zhongguo de dangwu zhiji" (Joining the WTO is not an urgent matter for China), Zhongguo yu shijie (China and the World),; and Shao Ren, "Guanyu Zhongguo jiaru shimao zuzhi wenti de zhanlue sikao" ("Strategy and reference material for the question of China's entrance into the WTO"), Suidao (Tunnel), internet journal.

13 Zhongguo Xinwenshe, June 17, 1999.

14 Dagongbao, May 27, 1999.

15 Xinhua, May 6, 1999.

16 Xinhua, May 9, 1999.

17 Xinhua, May 12, 1999.

18 Xinhua, May 13, 1999.

19 "Firmly Implement the Independent Foreign Policy of Peace," People's Daily, June 3, 1999.

20 Xinhua, June 12, 1999.

21 Song Qiang et al., Zhongguo keyi shuobu. The China that Can Say No was published at a time when there was a growing perception among government officials and the broader public that the United States was trying to "contain" China. This perception was related, among other things, to the United States' 1993 opposition to China's bid to host the Olympics in 2000, the Yin He incident of the same year (in which the U.S. demanded to inspect a Chinese ship suspected of carrying precursor chemicals for chemical weapons to Iran), and, most directly, the 1995 decision to allow Taiwan president Lee Teng-hui to visit the United States. Although written by a group of young intellectuals on their own, the book secured the backing of conservative officials in the government.

22 "Humanitarianism or Hegemonism?," People's Daily, May 16, 1999; and "On the New Development of U.S. Hegemonism," People's Daily, May 27, 1999. "Observer" (guanchajia) articles in the People's Daily are extremely rare. The last one prior to recent events was during the Taiwan Straits Crisis in 1996. An article as important as these observer articles almost certainly has to have the approval of the General Office of the Chinese Communist Party (CCP). In contrast, editorials must be approved by all members of the Politburo. The publication of a series of "observer" articles suggests that a special writing group was set up to draft these diatribes.

23 "Today's Hegemonism Should Look into This Historical Mirror," People's Daily, June 22, 1999.

24 Xinhua, June 17, 1999.


© 1999 by The National Bureau of Asian Research