China concludes trade deal with Europe, putting Congress on the spot

BEIJING - China and the European Union clinched a deal Friday to open Chinese markets to European goods, clearing Beijing's biggest hurdle to joining the World Trade Organization and increasing pressure on the U.S. Congress to give China permanent trading rights.

Tariffs on 150 items that Europe produces - from gin to shoes - will fall an average of 40 percent and mobile telephone companies will get quicker access to China's markets as part of the deal, once China joins the WTO.

EU Trade Commissioner Pascal Lamy cheered his handiwork as crafted to European interests.

The deal's first impact will likely be felt in Washington. Congress opens a closely contested debate next week on granting China coveted permanent low-tariff access to the American market. Lamy said the EU-China agreement made congressional approval more urgent, so that U.S. firms could enjoy the concessions Europe won.

China does not need Congress' approval to join the 136-member WTO. The Clinton administration gave that in a market-opening agreement with Beijing in November.

But Congress' current annual reviews of Chinese trading rights may be discriminatory under WTO rules. And Beijing has threatened that once in the traders' club it may deny U.S. companies access to Chinese markets on the terms given other WTO members.

Lamy and Chinese foreign trade minister Shi Guangsheng sealed the deal after five days of often plodding talks that capped 14 years of fitful negotiations by Beijing to join world trade's rule-making body. A Thursday night meeting between the negotiators and a pivotal lunch with Premier Zhu Rongji fixed the pact.

''This agreement is in the fundamental interests of both parties,'' a smiling Shi said to Lamy following the signing, cheers and a champagne toast inside China's foreign trade ministry. ''Once China becomes a WTO member, it will seriously abide by WTO rules and fulfill the commitments it has made.''

Lamy and Shi then went to deliver the good news to Chinese President Jiang Zemin at the communist leadership compound. Chinese and EU negotiators ''reached a win-win agreement today,'' the government news agency Xinhua quoted Jiang as saying.

Lamy called the agreement ''a great step forward'' for China's entry into WTO.

''Entering the WTO is like unlocking the door, or 150 doors. We came here this week to cut the right key,'' he told reporters. ''The door marked WTO entry will soon swing open.''

With the EU deal in hand, China still needs to conclude the separate market-access agreements necessary for membership with five more of the WTO's members: Switzerland, Mexico, Costa Rica, Guatemala and Ecuador.

For China's reform-minded communist leadership, especially Premier Zhu, WTO membership is seen as a way to secure needed export markets and foreign investment and force long-protected state industries to make capitalist reforms.

Zhu's WTO concessions to Washington, however, have drawn fire from powerful bureaucrats in charge of critical industries. Chinese leaders have brought provincial politicians to Beijing in recent weeks to describe WTO's benefits, while admitting that foreign competition will push more Chinese out of work.

While hailing the U.S.-China agreement, Lamy said it only met 80 percent of Europe's needs. He said he eked out another 16-17 percent. But Lamy acknowledged that China's political realities blocked key goals, including majority foreign ownership in telecommunications, and fewer restraints on insurers and automakers.

''Right from the start, the Chinese leadership made clear that certain things were just too difficult for them to contemplate,'' Lamy said. He said the EU tested those barriers, but in the end ''the Chinese were unmoved.''

That forced EU negotiators to wrest gains on other issues, many of which built upon the U.S. agreement, Lamy said.

For example, aside from reducing tariffs on 150 European exports to 10.9 percent from 18.6 percent, China agreed to open its markets to foreign telecommunications and insurance firms two years earlier than under the agreement with Washington.

China also promised to remove its 215,000-square-foot size limit on foreign department and chain stores, and auto makers will be able to make engines without Chinese partners and have a greater say in what types of vehicles to produce.

China sweetened the deal by immediately providing seven new licenses to European insurers, Lamy said.

The result, Lamy said, was a deal that contained something for all EU members and their leading businesses.

''Each of the 15 members of the European Union has to come back from the negotiations with its part of the beef,'' Lamy said. That was crucial for his next step: selling the deal to the EU's Council of Ministers, comprised of member-nations foreign ministers, in Brussels, Belgium, on Monday.