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Sympathy for US may help China WTO bid

FAR FROM slowing progress on China's bid to join the World Trade Organisation, this week's attacks on the United States financial and military establishment could even speed the mainland's accession to the global trade body.

Sympathy for Americans in the wake of the attacks could help break an impasse between Europe and the US over access to China's life insurance market, one economist suggested. The issue is a key stumbling block for China's bid. Ken Davies, chief China economist for the London-based Economist Intelligence Unit, said European objections to privileges secured by the US insurer American International Group (AIG) could soften into 'a feeling of solidarity with the US'.

'They might soften some of their objections, considering some very major insurance companies have suffered severe casualties,' Mr Davies said.

A settlement could become a symbol of the international business world's determination to show life must go on.

'They [both sides] may be more conciliatory and may want to choose something outside of this situation to show the world is continuing on its way. After a few weeks everyone is going to want to get back to business.'

The attack on the US caused the formal working party on China to postpone what was likely to have been its final meeting in Geneva yesterday. It was to complete documents to be proposed to the ministerial meeting in Doha, Qatar in November, when China is expected to become a member.

European and US negotiators are at loggerheads over preferential treatment being sought by AIG, which claims it should be exempted from rules which require companies to form joint ventures with Chinese insurance companies. AIG has operated 100 per cent-owned subsidiaries on the mainland for decades and has signed a 'grandfather' provision with China that allows it to retain these privileges.

National Australia Bank economist Kevin Lai said the attack could delay China's inevitable WTO entry. But he was more concerned about the economic implications of likely threats to regional security. If the US decided to target central Asian countries such as Pakistan and other factions in the Middle East there would be a period of 'prolonged instability' in the Asian regional and international arenas. President George W. Bush appeared to be pushing for an alliance to target terrorism around the globe, which could agitate Islamic fundamentalist sentiment in countries as diverse as Malaysia, Indonesia and the Philippines.

'There will be economic implications not only in the region but around the world for the next six months,' Mr Lai said.

Nomura International senior economist Pu Yunghau said the big issue in resolving the insurance dispute was 'the US side may not be in a position to discuss this' after the tragedy. Mr Pu said he believed the US side would be willing to compromise more after the attack, in recognition that they had been demanding too much.

'I don't think the European side should compromise. It doesn't matter if you get there first or second, a rule is a rule.'

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