China-US talks vital opening, and minefield

By Greg Ansley

This afternoon Hugo Judd, secretary to Governor-General Sir Michael Hardie Boys, will open the door to history.

With United States President Bill Clinton already waiting inside Government House, Mr Judd will admit Chinese President Jiang Zemin for talks that may set the temperature of great-power relations in the region for years to come.

While the immediate focus will be China's membership of the World Trade Organisation, both countries are anxious to use the opportunity to produce a significant warming in a seriously - and potentially dangerously - damaged relationship.

Comparatively mundane, but nonetheless essential, trade offers the two powers the chance to bridge a chasm of other pressing differences which will largely determine peace and stability in the western Pacific in the 21st century The two Presidents see Apec as a potential icebreaker enabling the US and China to move back towards the glow of the height of Mr Clinton's engagement policy two years ago, when the two exchanged state visits.

Behind WTO membership lies a minefield: China's refusal to accept the bombing of its Belgrade embassy as a "series of very bad mistakes," American accusations of systematic theft of nuclear secrets, illegal Chinese funding of the last US presidential election, human rights and the rise of anti-China forces in Congress.

Taipei's decision to seek talks with Beijing on a state-to-state basis has renewed tensions across the Taiwan Straits, again heightening Chinese anger at US support for the island, at the extension of the Japan-US alliance to embrace Taiwan, and at the very existence of an alliance China believes is directed against it.

"First and foremost, re-engagement between the US and China on the full range of issues is terribly important and would - in and of itself - constitute a significant outcome to the meetings between President Clinton and President Jiang," US Trade Representative Charlene Barshefsky said in Auckland.

The signals from both sides are optimistic, if diplomatically reserved.

Stanley Roth, Mr Clinton's key man in Asia, said in Canberra ahead of the talks that China appeared to be focusing away from Belgrade and back towards a constructive partnership, with hopes of significant progress in Auckland.

In Australia on his way to New Zealand, President Jiang spoke warmly of "my old friend" Mr Clinton and suggested that with American concurrence, new life could be breathed into China's 12-year-bid to join the WTO.

There is little argument that membership would benefit everyone.

China's domestic market of 1.25 billion people, already sucking in imports of $US140 billion a year - $US317 billion including Hong Kong - is rapidly expanding.

Its $US1127 billion economy is the third-largest in the region, growing by about 7 per cent a year and attracting more than $US45 billion a year in foreign direct investment.

Although the European Union and several other major trading nations have yet to agree to a set of conditions for Chinese WTO membership, the US remains the key to bringing that market and its 21st-century potential into a rules-based world trading system.

New Zealand and Australia have, with a large number of other countries, already concluded their WTO negotiations with Beijing.

Mr Clinton had a real chance of following suit earlier this year when Premier Zhu Ronji arrived in Washington with a package of concessions, many of them extremely sensitive and probably damaging to massive state-owned businesses struggling under domestic reforms and shedding staff by the millions.

These included: sweeping cuts to, or the elimination of, tariffs on such key sectors as automobiles, information technology and most bulk commodities; foreign ownership of Chinese telecommunications providers and an initial $US10 billion national mobile system as a sweetener; entry to the finance system and business in the Chinese renminbi (currency) for foreign banks; and access to the bulk of the nation's insurance business.

To widespread dismay among US business and supporters of China's WTO entry, Mr Clinton rejected Mr Zhu's offer in a rebuff that hardened the frost spreading between Beijing and Washington.

Tentative steps have already been taken back to the negotiating table with small teams of officials meeting for ice-breaking technical discussions this week.

Obstacles remain, including US concerns on Chinese offers on banking, securities, textiles and a number of other issues, but the tone of talk on both sides bodes well for today's Government House meeting.