Old China News Agency – III
A case study in how to resolve trade disputes.
From today’s Wall Street Journal Asia
President-elect Barack Obama told a Pittsburgh crowd this year that “trade with China will only be good for you if China itself plays by the rules.” Well, thanks to its membership in the World Trade Organization, China is learning to do precisely that.
The latest example came Thursday, when American, European and Chinese negotiators resolved a trade tiff over financial information suppliers. The dispute started in 2006 when Xinhua, China’s state-run news agency, insisted that foreigners hand over private client data and use Xinhua as their sole distribution agent. The agency aimed to set up its own competing news service, Xinhua 08 — presumably after stealing foreign client lists and business plans.
The move upset an earlier deal between China and such foreign firms as then-Reuters (now Thomson Reuters), Bloomberg and Dow Jones, which is owned by News Corp. and owns this newspaper. Xinhua had tried to muscle foreigners out of the market in the 1990s, and the U.S. and European Union agreed at the time that their firms would be subject to content oversight by Xinhua in exchange for permission to operate in China and sell directly to clients.
After the latest Xinhua power play, the Bush Administration filed a complaint at the WTO. The European Union and Canada joined the U.S. case. After eight months of negotiation, the governments announced Thursday that China had more or less caved. Foreigners will be allowed to distribute news directly to their clients, without interference from Xinhua, and will not be forced to cough up confidential client information to obtain a business license. China also promised to set up an independent regulator to oversee the industry, removing Xinhua’s oversight, by June 1 next year.
In other words, China agreed to play by WTO rules. This isn’t a one-off event. As the U.S. Trade Representative’s Office points out, China has settled disputes with U.S. negotiators on three other occasions: In July 2004, over value-added tax rebates to semiconductor manufacturers; in January 2006, over antidumping duties on kraft linerboard; and in November 2007, over export subsidies. China filed its first suit against U.S. antidumping duties on Chinese paper imports last year.
The lesson is that China’s accession to the WTO is giving leverage to China’s economic reformers. Beijing’s Ministry of Commerce played a important role in educating other government ministries about the benefits of abiding by WTO rules. That’s a big change from the days of former Vice Premier Wu Yi, who lectured the U.S. Commerce Secretary and Trade Representative last year after the U.S. filed WTO suits.
Thursday’s resolution also comes at an opportune time. With the financial markets in turmoil, businesses in China need as much information as they can get about what’s going on in global financial markets. The competition will also force Xinhua, which has a new president, to improve.
Reporting from China continues to pose challenges for foreign news organizations. Beijing’s acceptance of the WTO dispute-resolution process doesn’t change its essential desire to control the flow of information whenever it can get away with it. It continues to reserve the right to censor content and it does not allow foreign media to hire local reporters, which is standard practice just about everywhere else in the world.
Mr. Obama told his Pittsburgh audience that “if countries are committed to reciprocity, if they’re abiding by basic rules of the road, then we should welcome trade.” Let’s hope the Obama Administration holds up its end of the bargain.