Guard is up over WTO concessions

PUBLISHED : Monday, 06 March, 2006, 12:00am
UPDATED : Monday, 06 March, 2006, 12:00am

As recently as the early 1990s, residents in major cities, including Beijing and Shanghai, had to queue for an hour just to make a simple phone call. Just five years ago a trip to the post office or bank meant waiting more than an hour to deal with incredibly rude and unhelpful functionaries who clearly resented every minute they spent there.

Today, the transformation brought about by persistent privatisation and increasing competition in the services industries is evident in virtually every aspect of daily life.

Gone are the armies of bored supermarket attendants with no idea of the products on shelves behind them. Gone too are the angry scowls on the faces of bank tellers, replaced by helpful smiles.

The country's entry into the WTO, and the subsequent deregulation and opening to foreign companies, is the key driver of the change. From banking and insurance to retail and logistics, mainland service providers have been forced to upgrade quality, efficiency and service standards to meet the challenge from the world's best. Beijing's WTO accession commitments in the services sectors are viewed as possibly the most comprehensive in the history of the organisation. Probably the most significant concessions Beijing made were in the distribution sector, retail and financial services, according to David Weller, of the Wilmer Hale law firm and former US trade envoy to China.

But, he said, there are still lots of gaps. The media and publishing sectors remain tightly controlled and restricted which, in turn, leaves room for a thriving market in pirated goods.

And the WTO accession agreement barely mentions the securities and asset management sectors, where foreign companies remain restricted to minority stakes.

'That is an area that really makes very little sense for China not to be opening, given the state of its capital markets,' Mr Weller said.

Evaluating any country's progress on its WTO commitments is much harder with services than with goods because of a host of licensing requirements, procedural barriers and capitalisation requirements, according to Sergio Balibrea, head of trade at the European Commission delegation in Beijing. He said major barriers remained, despite Beijing's commitments in sectors such as telecommunications, insurance, construction, franchise retailing and outbound tourism.

'Some companies would have expected to be able to sell much more of their services after China joined WTO than they are now,' he said.

US politicians tend to put it more bluntly, saying that while Beijing has mostly followed the letter of its accession agreement, it often fails to live up to the spirit of its commitments.

The central government view, as expressed by Vice-Minister of Finance Yi Xiaozhun, is that commitments in the area of services are far greater than most developing countries, such as India, and in some fields go further than developed WTO members.

The current round of WTO negotiations, known as the Doha Development Agenda, is unlikely to have a large effect on China's services industries.

The Hong Kong ministerial meeting in December was squarely focused on bitter disagreements between the US and European Union over agriculture, mostly leaving services, and China, off the agenda.

The deadline for a final agreement for the round has now been delayed until October, according to Fu Xingguo, head of the office of topics for discussion under the WTO Department of the Ministry of Commerce.

'By then all countries are supposed to agree on a set of plans regulating what areas of the service industry should be opened,' he said. 'The areas where China should allow foreign companies greater access are still under discussion.'

Beijing's negotiating partners see the chances of greater concessions on services as slim in the current round of talks, especially considering the fact that some commitments, in banking for example, are still being phased in.

'The attitude is 'we just went through a harrowing WTO domestic fight and we've had enough for now',' Mr Weller said. 'Looking at the priorities of the leadership, further liberalising of services industries is very far off. This is not Jiang Zemin and Zhu Rongji in 1998.'

Mr Balibrea thinks any further concessions in services will be made only for bargaining purposes, to elicit commitments from trade partners in other areas of trade relations. This is because despite how far they have come in such a short time, with the exception of certain industries such as maritime transport, China's services industries remain uncompetitive and underdeveloped in then context of global competition.