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Wednesday, July 30, 2008

China Casts Its Lot With Developing Nations

This is from WSJ. Looks like China is willing to play a more active roll in global trade talks.

China Casts Its Lot With Developing Nations

By Andrew Batson

China's willingness to let the latest round of global trade talks collapse is a sign of how the emerging giant's ties with other developing nations are growing in importance.
But China's late-hour emergence as a swing factor was a surprise -- and not only because it departed from its usual low-key negotiating style. Its support for India's position effectively negated a chance to expand markets for Chinese exporters in favor of building political ties with other lower-income countries.

"The Chinese leadership has tried to adopt a strategy to sacrifice economic interests to win the goodwill of developing countries," says Henry Gao, a former WTO official who now teaches trade law at Singapore Management University.

As the world's second-largest exporter after Germany, China has little in common with the smaller developing countries that struggle to break into rich-country markets. With an average nonfarm tariff of 9%, China's market is also relatively open: India's average rate, by contrast, is more than 16%.

In that respect, China's interests are closer to the wealthy countries who were trying to bring down tariff barriers in developing nations. Publicly, however, China has cast its lot with the developing countries. The state-run Xinhua news agency blamed "selfish and short-sighted actions" by rich countries for the collapse.

China's trade negotiator said the country is ready to bolster trade ties with willing partners outside the WTO process. "On the basis of equality and reciprocity, China is ready to further intensify the bilateral trade and economic cooperation," Commerce Minister Chen Deming said in Geneva, expressing particular interest in ties with the so-called least-developed countries.

China's trade with other emerging markets -- from Asian neighbors like Indonesia and Malaysia to the Persian Gulf and Africa -- has been booming, even as its exports to the U.S. have slowed sharply this year. China has been particularly active in developing economic ties with Africa, with its companies building infrastructure projects there and striking large mining deals.

Some of those relationships have come under fire by Western critics, most notably in the case of China's ties with Sudan and Myanmar. But they highlight how China seems to be looking for future growth outside the U.S. and Europe. And that gives China less incentive to participate in WTO negotiations that are still dominated by those big powers.

"There's not so much for them to gain" because the U.S. and European Union markets are largely open already, says Matthew McConkey, director of Asian trade for the law firm Mayer Brown JSM in Beijing. "I don't know what the carrot is for them in this situation."

The biggest trade issue for China these days is the rising number of "safeguards" and antidumping measures used by rich countries to block imports of some products from China. But the global trade talks never seriously discussed eliminating those measures, which are politically important to many governments. So it could be difficult for negotiators to come home with an agreement that would make a material difference to a country that exported $1.22 trillion of goods last year.

Still, some Chinese scholars say a big trading country like China would be one of the largest beneficiaries from a WTO deal that led to a further freeing-up of global trade.

"For the long term, we still hope that there can be a unified global trade framework," says Mei Xinyu, a scholar at the Chinese Academy of International Trade and Economic Cooperation, a government think tank in Beijing. "China is large country that exports to almost every country in the world and imports from everywhere as well. Any bilateral or regional agreement cannot substitute for a true global trade arrangement."

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