September 23, 2013 1:23 pm

China in push to join US-led $4tn services trade talks

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China is seeking to join US-led talks aimed at updating the ageing rules on the $4tn annual trade in global services in a move that is raising concerns in Washington over Beijing’s motives.

Frustrated with a lack of progress in the World Trade Organisation, the US, the EU, and almost two dozen other largely rich-world countries last year launched the talks towards a new Trade in Services Agreement, or TiSA. The talks cover about 70 per cent of global services and are one of the main pillars of President Barack Obama’s trade strategy.

Were China to join, it would mark a significant change of strategy by Beijing. Since its accession in 2001 China has insisted on the primacy of the Geneva-based WTO as a trade negotiating forum. By choosing to join the TiSA negotiations it would be aligning itself with the US and others fed up with a stalemate in negotiations in the 159-member WTO.

A number of meetings between US and Chinese officials have taken place in recent weeks and it is unclear whether the US would, or could, block China from taking part. China has also held talks with the EU and other participants, according to people close to the negotiations.

Chinese officials could not immediately be reached for comment.

US officials are concerned that if China joins the discussions, it may seek to water down the services agreement and they point to China’s actions earlier this summer in the negotiations over an Information Technology Agreement to lower trade barriers to high-tech goods. Those talks were suspended in July after Beijing presented a long list of products it wanted excluded from the deal, prompting the US and others to walk away in frustration.

“We do not want a similar fate to strike the [services talks],” a US official said.

“The United States supports any member joining the TiSA who shares the objective to have a high standard and ambitious services trade agreement,” the official said. “The price of admission for any economy to these trade negotiations must be a demonstrated commitment to that objective.”

One senior Geneva-based trade official said: “TiSA has always been envisioned as a group of the like minded . . . But the question is: ‘Is China like-minded?’”

Part of the suspicion of China’s motives is driven by its past antipathy towards negotiations taking place outside the WTO framework, in which the Chinese have growing influence. The new WTO director-general, Brazil’s Roberto Azevêdo, has appointed a Chinese deputy.

“A year ago they were giving speeches in the [WTO] General Council where they were saying TiSA was going to be the death knell of the multilateral system . . . Now they are very actively figuring out how they can join,” the Geneva-based trade official said.

With the 12-year-old negotiations towards a global trade deal in the WTO stalled thanks to a stalemate between developed economies and emerging powers such as China and India, the US has in recent years prioritised big regional trade negotiations and “plurilateral” agreements such as TiSA.

Not only has China until now been reticent about trade deals outside the WTO, it has until now been largely excluded from US-led talks, such as the 12-country Trans-Pacific Partnership (TPP). For that reason, many believe the US strategy is aimed at containing its emerging rival economically, or at the very least keeping it from the negotiating table as the potential building blocks of a future global trade deal are assembled.

China’s bid to join the TiSA talks, which began in August when Beijing’s commerce minister, Gao Hucheng, first raised the idea with US trade representative Michael Froman, would potentially upend that strategy.

US officials are unsure how to read the Chinese approach. A decision by China to step outside the WTO and join the services negotiations could amount to a sign that the new leadership in Beijing is adopting a fresh strategy towards trade and economic reforms, and sees life in the US approach. Or, it could amount to an attempt to derail the US strategy.

The TiSA negotiations remain at an early stage. At a meeting on Friday countries agreed to submit their initial negotiating positions to the group by the end of November. Whether China would be allowed to join – a process done by consensus in the past – could depend on the bar set by those offers.

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