China likely to join G.A.T.T., diplomats say

Press, 10 April 1987, Page 10

China likely to join G.A.T.T., diplomats say

NZPA-Reuter Peking China’s bid to join the world trade organisation G.A.T.T. is likely to succeed, in spite of economic policies that contradict principles of free trade, thanks to support from Western countries, Western diplomats say. China formally applied in July, 1986, to join the General Agreement on Tariffs and Trade, which was formed in 1948 to integrate the world’s free market economies and now regulates 80 per cent of world trade. The G.A.T.T. secretariat is to submit a list of detailed questions to China next month at the start of long and complex negotiations, the diplomats said. One diplomat said China’s prospects for being admitted were good, with the application supported for political and economic reasons by the United States, Japan and the European Community. “The fear is that if China was refused entry, it would draw back the bamboo curtain and go back to the way it was,” he said. A West European diplomat said the Soviet Union

was in the wings, awaiting G.A.T.T.’s decision on China. “If G.A.T.T. accepted China, it would be hard not to accept the Soviet Union. China’s agreement will be seen as a model for the Soviet Union. G.A.T.T. is not a political body,” he said. Serious problems have to be tackled during the negotiations on China's application, including the price system and subsidies for foreign trade. The G.A.T.T. system is based on the principle of free trade and aims to lower tariff barriers and promote trade, with prices alone dictating who buys what products. One of the diplomats said it was very hard in China to establish the real cost of goods because many prices were set by the State and often contained subsidies. “Even when you go in person to a factory or a company to try to find out the real cost of something, officials do not give you a clear answer. The political meaning is evident. They do not want to answer,” he said. China’s position, as set out in a memorandum to G.A.T.T. in February, is

that it is gradually reforming the price system to make prices correspond more to real production costs and replacing administrative constraints with market ones.

Another diplomat pointed out that other controlled economies, like Hungary and Yugoslavia, had joined G.A.T.T. but China would apply for membership as a lessdeveloped country entitled to preferential terms. “But the economies of Hungary and Yugoslavia are small. China’s economy is huge. It is the world’s number two producer of coal, for instance. It could have a very large impact on world trade,” he said. Another sticking point is the subsidies China pays companies to export. It does this to earn foreign exchange to pay for imports of vitally needed technology, equipment and raw materials for industry. A Japanese trader said China lost money on every tonne of grain exported because it had to make up the difference between a low world price and a high domestic price.