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NOVEMBER 29, 1999 VOL. 154 NO. 21

Barshefsky: "It is political legitimacy"
TIME correspondent Barry Hillenbrand spoke in Washington last week with Charlene Barshefsky, U.S. Trade Representative, following her trip to Beijing, during which the U.S. and China signed their historical trade pact. This is the online-only, extended interview:

TIME: What does the U.S. get from this agreement?
The agreement will open extraordinary trade opportunities for U.S. workers and farmers. It establishes certain principles that are not only critical to a predictable international trade regime in China, but would also have important spillover effects in other areas beyond commerce. For example: principles of transparency, of regularity in the economic system, notions of contract and rule of law, the peaceful settlement of disputes. The U.S. needs to ensure to the maximum extent it can that China is a constructive force in Asia, not a destructive force. To the extent that China is brought into multilateral institutions with defined rights and responsibilities, that means that China has an absolute interest in peace and stability beyond its borders. WTO accession is an important step in that direction.

Cover: The Son of Heaven?
A plum trade deal wins Jiang Zemin accolades, but it's probably not enough to elevate him to the ranks of China's immortals, Mao and Deng

Advice for Jiang from the Image Doctors: Look the Part
Those who recognize Jiang--those owlish glasses are, for better or worse, a defining characteristic--see him as bland and uninteresting

Anatomy of a WTO Deal
Bluffs and brinksmanship kept both sides guessing until the U.S. and China finally signed the trade pact

China's WTO Deal May Leave Hong Kong Out in the Cold
The People's Republic's likely accession into the World Trade Organization may make Hong Kong's lucrative role obsolete

ONLINE EXCLUSIVE: Barshefsky: 'It is political legitimacy'
TIME speaks with Charlene Barshefsky, U.S. Trade Representative, in this online-only, extended interview

Line of Fire: Hot Air at Harvard
Even in academia, no one is telling China what it needs to hear

Jiang Zemin's Big Bash
The Mao-suited President stages a huge, highly choreographed show to celebrate the People's Republic's 50th anniversary

China's Amazing Half Century
Navigate through the People's Republic of China and discover the 50 places where history was made

50 years of the People's Republic
presented by CNN, TIME, Asiaweek and Fortune

China's 50th Anniversary
Jiang Zemin's coming-out parade [an interactive photo essay]

TIME: Do you think people in Asia see these benefits as well?
What I found interesting was Asian coverage of this WTO deal. You'd think that we had landed on the beaches of Normandy. Asian nations see it as a movement by China toward international norms that will promote stability in the region.

TIME: What does China get out of the package?
From the economic side, you have Zhu Rongji essentially as the architect of China's willingness to join WTO. When he took office as Premier Zhu announced a massive and, some say, overly ambitious reform plan. That plan really paved the way for us to demonstrate how WTO accession commitments would further and cement the reform process in China. Zhu saw that he could use the WTO accession as a means to, first, force internal reform and, second, ensure that the reform process would be cemented even after he left--in a concrete set of agreements fully enforceable which go out into the future well beyond his term.

TIME: But aren't there dangers? Not everyone in China wants those reforms.
This is a win-win situation because we were able to respond to his and Jiang Zemin's genuine political concerns by "rebalancing" within the sectors in which concerns were expressed. We did not say: "O.K., give us something in telecoms and we'll give up autos." But if they needed some political assistance in some sector (and they needed very little, actually) we needed to be sure there were compensating benefits on the commercial side within that sector so the deal would be at least as good as it was, and hopefully better. Since his political imperative was met, it was a win for him whatever else he gave U.S. Since commercially we ended up with a stronger deal in telecoms and in autos than we had, it ended up for us to be a win as well.

TIME: Does China get anything besides the economic benefits?
On the political and diplomatic side China has always wanted the recognition of the large multilateral institutions, the GATTs/WTOs being prominent on the list of those to which it is not a member. Jiang, wanting to position himself as something of a reformer, wants to be in. It is political legitimacy.

TIME: If it is such a win-win situation, why did it take 13 years for China to bull its way in?
You did not have a genuine economic reformist spirit among the leadership 13 years ago. You had Deng Xiaoping who said: let's make money. But the idea of making money was not to open their markets. The idea of making money was to create massive state-owned enterprises, inject them with capital, hire a lot of folks and make a lot of stuff. When they looked at GATT, they made no serious offers on cutting tariffs, which was the bedrock of the multilateral system. No offers at all on services or agricultural market opening. What they wanted was a political deal.

TIME: But didn't China push to get in after the Uruguay round?
Yes, in 1993-1994 China wanted to be a founding member of the new WTO that came out of the round. China revved up its political machinery, but not its substantive machinery. They became very anxious to get in and threatened countries by saying: "You let us in or you won't sell another widget in our country." As a result, by the end of 1994 no country supported China's accession.

TIME: How did China finally break through?
In 1995 I decided that what we ought to do is provide China with a road map on how to join the WTO. It was not clear to me that even the ministerial ranks understood fully the nature and scope of the obligations. That road map was helpful and began an interagency process in China which you did not have before. There were then offers on the table in goods, services and agriculture. That's where, in 1996 and 1997, the real process began.

TIME: Why was 1999 critical?
There was an exchange of summits [between Clinton and Jiang], you have the turn of the century -- the Chinese are big on dates -- and you have the Seattle ministerial, which will launch a new round. If China does not move, they will be out of the game. Because of all those reasons and most particularly because Zhu's internal reforms stalled, they felt that now was the time. We tried in April and it did not come fully together, although it was 95% together. We sent a team two weeks later to resume the negotiations and then the bombing [of the Chinese embassy in Belgrade] happened. Everything stopped until the two presidents met in Auckland and agreed they ought to resume negotiations. Jiang was on board.

TIME: Did you really feel that Jiang was fully aboard at that time and that it was just a mater of getting the rest of the leadership aboard as well?
Let me put it this way: Jiang played it cautiously, which is not surprising. But he said immediately that we should resume negotiations and start at Auckland. Those meetings were pro forma. We had not engaged with them for five months. Very little was accomplished. There were some confidential communications between the presidents, and ultimately it was decided that if China would be ready to deal with outstanding issues and was ready to close, the President would send me out. If not, I wasn't going anywhere. Jiang encouraged me to come out. I then thought it would be good to bring in [National Economic Council chief] Gene Sperling. This was quite hotly debated. I was very insistent because I felt they would never have full trust in the U.S.'s absolute commitment to close the deal unless you had someone like Gene who heads the whole economic team and can speak on behalf of all agencies. That was exactly the right decision. It gave the Chinese at the negotiating level additional confidence that all agencies were aboard and there would not be further dissension.

TIME: When did you know you had a final deal? You packed you bags twice and made reservations out. Where you just playing American poker?
Yeah. I also felt once Jiang encouraged me to come out that we would get the deal.

TIME: But it didn't look good after two days.
No, it never looks good in the beginning. Why should it? If you are going to be there a week, why should it look good in the first two days? This is brinkmanship at the best. The turning point was the first meeting with Zhu. We had struck an impasse. The leadership had not fully decided what it wanted to do. So the negotiators on the other side were rather treading water I passed a note to Gene saying this is like a "Seinfeld" episode: it may be of some interest, but it's contentless and not nearly as funny. On Friday I said that this was at an impasse, and I'm going to see Zhu tomorrow morning or we are gone. And sure enough, we saw Zhu in the morning. As soon as I saw Zhu, who emphasized his full authority, I just knew that he would never have re-inserted himself unless he knew that he could bring it together and unless he had the imprimatur of Jiang.

TIME: Was Jiang in the background all the time?
Yes, he had to be. Zhu could not have done anything without Jiang's imprimatur and approval. Then we go back to the negotiating : lots of backsliding. Lots of pull-offs off the table, indicating to me that they are treading water. They were not yet sure what final concessions they could make. We played it out. Packed our bags and basically said this was nonsense. We packed our bags for a second time. We came in [to the ministry] early the following morning [Monday]; they knew all our bags were packed and sent to the airport, which we arranged. We had a quite heated exchange that morning. They started talking about problems they had in existing texts, and I gave an exceptionally strong response. I got up and walked into the hallway. Wu Yi, my old friend, comes out and says that "Premier Zhu had come to the building. It was unprecedented. Never in the history of the ministry has someone of that rank come here. We always go there. He is here and wants to see you." So that is when you know the leadership has made the decision. We had a good meeting, and the deal was done. That was Monday morning. I gave them my parameters as to how we could move on the 51% on telecoms and what we had to have. And that worked out absolutely fine. Then the Chinese begin listing a whole series of new issues. And of course, this is silly stuff. I say: "Oh, please. Too complicated. Can't possibly deal with it. What time is the signing?" And that was the end of the negotiation. We did the initialing of all the texts and signing and it was done.

TIME: That's when you talked with Jiang?
Monday morning Zhu said that Jiang would like to see us when the arrangement is complete. I said: "Great! How about today?" Jiang was extremely gracious He was obviously elated and relieved. We had a very cordial conversation. He put on his overcoat and took us to a different pavilion to show us the South Lake in front of which the Empress Dowager in the Qing dynasty used to sit and look at the geese and the swans. He chatted about it for a while in a little bit of English and a little bit of Chinese. And that was his way of saying thank you and sending his best regards to the United States without ever saying either. And that was a nice capstone of the day.

TIME: Did Jiang say he thought things were getting back on course?
He felt that the [U.S.] President and his relationship made the difference. This is absolutely. But for the President's intervention, but for Jiang's response and but for the further discussion in this sort of confidential manner, there is no way this could have been done. Not a chance on the face of the planet.

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