TNAG-1493-FCO40-2051-Future-of-Hong-Kong-General-Agreement-on-Tariffs-and-Trade-(-1986 — Page 81

CD: Trade Committee Working Party, 26 May

CHINA

I

-China and the GATT

We had a fairly general discussion based on Secretariat document TCWF(85)15; few delegations were willing to go into any detail.

2. Italy, the US, Spain and UK warned against too optimistic approach: the principle of Chinese membership was one thing,but at the technical, trade policy level we were concerned with there were some particularly thorny issues that needed to be worked out before negotiations, that would inevitably be difficult could begin. The focus should not be on the principle, but on the terms.

Canada generally supported this view. Japan however took the opposite line, that TCWP(85)15 made everything look more difficult than it really was. The EC Commission had nothing, it appeared to contribute except to say that the paper would help further reflection in capitals.

3. Among the more interesting points;

a) Australia announced that they were warmly in favour of Chinese membership and had for some time been giving the Chinese advice on the issue and on how they might participate in the New Round, through their technical assistance programme;

b)

there was universal agreement, even from notorious soft-liners such as the Swedes, that Chinese membership would have to be handled so as to provide no precedent for the USSR.

c) most who spoke agreed with the RG and UK that it was wrong to try and characterise China as either a state-trader or an ldc. There were strong elements of both and it was impractical to try and make any meaningful distinction. Japan stressed that it was important to realise that China differed markedly from other state-traders in that 85% of her foreign trade was already conducted with GATT members. To a great extent China was already well integrated into the multilateral trading system. The US however was not too impressed by this: prices in Ching were accurately described as "irrational", a description accepted by the Chinese themselves, in that they bore no relation to production costs. For this and other reasons China should be regarded as "planned commodity economy" and not treated as though it were similar to market economy ldcs.

Canada announced that the Chinese had indicated to them in Geneva recently that they were now planning to seek membership by accession, not through simply taking up their old place. (The reasons given by the Chinese seemed very similar to the disadvantages of the resumption options set out in the paper enclosed in Shepherd's letter of 7 November to Rosenny Spencer).

15.