New York Times | By CRAIG S. SMITH
HANGHAI -- Chinese and European Union negotiators broke off talks today on China's entry to the World Trade Organization, further complicating the country's troubled bid to join the body. No date was set to resume the talks. "The gap has narrowed, but we are not there yet," said Hans-Friedrich Beseler, head of the European team.
A spokeswoman for the European Union described the end of the talks in Beijing more graphically, saying they had "broken down" in their fourth day.
China's chief negotiator, Long Yongtu, said the two sides had "come very close," the official New China News Agency reported tonight.
The halt in negotiations is the latest check in China's marathon application process, which has been dragging on for 14 years. Last year, the United States and China finally agreed to China's membership terms. But China has to reach similar agreements with all members of the organization before it can join. The European Union represents the most important bloc of countries yet to reach an accord. India signed a pact with China on Tuesday.
China still has a good chance of entering this year, despite the slow progress.
A more imposing threat to its membership is growing opposition in the United States. Congress would have to lift its annual review of China's trading status and grant it permanent normal trade relations to benefit from the terms of China's eventual membership. But Congressional support has eroded because of resistance from organized labor and rising tensions over Taiwan.
China can technically enter regardless of the vote in Congress. Both the United States and Cuba are members, despite trade restrictions between the two. But officials of the trade group say China has so far indicated that it will not join unless the United States ends the annual reviews, a vestige of sanctions imposed on China after its crackdown on pro-democracy protesters in 1989.
An agreement with the Europeans is still within reach. European diplomats say unresolved issues include how extensively foreign telecommunications companies can provide services in China, constraints on business licenses and areas for foreign insurers and how open China will be to European agricultural and food products.
"The issues are the 20 percent that haven't been covered in the U.S. agreement," said a European diplomat here who is familiar with the negotiations.
In some cases, the Europeans are trying to clarify areas left vague by the talks with the United States, particularly on foreign investment in Chinese telecommunications networks. Companies as diverse as Sprint Communications and France Telecom made such investments through a complex holding structure called China-China-foreign joint ventures. But China later declared those investments illegal and demanded that they be unwound, basically nationalizing millions of dollars in foreign investment.
Under the United States-China trade accord, foreign companies will eventually be allowed to own up to 49 percent of fixed-line and mobile telecommunications networks, and many industry executives hoped that will resolve the dispute. But China has since offered a different interpretation, insisting that the existing investments are still illegal.
"This is an issue that is very important for the union, because there are some European companies involved, and they want a better resolution," the European diplomat said.
In other cases, the European Union is pushing for concessions that the United States was unable or unwilling to obtain. The Europeans want China to let foreigners have controlling stakes in telecommunications networks, for example.
And they want additional business licenses for European insurers. China has granted licenses to just 14 foreign insurers, including 5 American and 5 European companies.
But some American companies hold more than one license.
The Europeans also want foreign insurers to be allowed to sell group insurance beyond the two cities where such sales are allowed. Group insurance, covering employees at labor-bloated state enterprises, for example, is the most promising segment of the Chinese insurance market.
Despite the breakdown today, European diplomats and business executives noted that China's negotiations with the European Union resumed just last month, after having been suspended last year pending an agreement with the United States.
"There have only been two rounds," the diplomat said. "It's not a tragedy."
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