Now, China faces wrenching change as a WTO partner

SHANGHAI, China -- China greeted its new prospects as a permanent American trade partner with official applause yesterday, but it is now shifting its focus, with private trepidation, to its future membership in the World Trade Organization.

Many Chinese worry that the country is ill prepared to face the global competition that membership will bring. Membership will force Chinese industries to become stronger in the long run, but many people will lose their jobs along the way.

"Frankly speaking, this is a better deal for the U.S. than it is for China," said Lloyd Meeds, a former congressman and lobbyist from Washington state.

The new trade status became clear on Tuesday when the U.S. Senate overwhelmingly passed a trade bill to end what China considered a humiliating annual debate about whether it deserved to be treated as a normal trade partner or warranted punishment for its perceived shortcomings along with countries like Libya, Iraq and North Korea. The House earlier approved the bill, and President Clinton is set to sign the law, which he considers a crowning achievement.

The new relationship gives both countries "a chance to start anew," a Foreign Ministry spokesman said.

But it's easy to find people here who worry about the severe economic changes that the global onslaught will bring. On Nanjing Road, Shanghai's busiest shopping street, two parking lot guards discussed the bleak prospects for Shanghai's auto industry, one of the town's biggest employers. "I think they'll die," one said.

And the manager of a cramped grocery store downtown shrugged with resignation when asked about the WTO's likely impact on his business.

"Already, medium-sized shops like us can barely compete with the foreign megamarkets," said the manager, who gave his name as Qiu.

The trade bill has no direct bearing on China's membership in the 138-member regulatory group, which is likely to come later this year. But it clears the way for American companies to take part in the open markets that China promises to deliver.

Granting China permanent normal trade relations eliminates one of the main risks for American companies investing here. American-owned factories in China previously operated under the threat that they could be blocked from sending products home if the United States ever withdrew China's normal trading status.

With the bill approved and China's membership in the trade regulatory group on its way, China has become a more reliable low-cost production base for American companies, which have already invested more than $24 billion here.

People like Lu Zhiqiang, deputy director of the central government's top think tank, worry that China's local governments, industrial regulators and state-owned enterprises are ill prepared for what's to come and predicts a wave of bankruptcies.

China's 900 million peasants are among the least prepared. After China joins the WTO, duties for agricultural products will fall sharply from as high as 85 percent to 18 percent in some cases and import quotas will disappear, forcing China's farmers to compete with importers selling cheaper yet higher quality American corn, soybeans, pork and chicken. American meat has already begun arriving in China under a related trade deal.

Other areas of the economy that have long been sheltered by government protection, telecommunications and banking, for example, will undergo wrenching change if China follows through on its WTO promises.

On the Net:
White House site on China Trade: www.chinatrade.gov

U.S. Embassy in Beijing: www.usembassy-china.org.cn