China Retreats On Trade Threats Against America

DESPITE its furious rhetoric at failing to win membership in the world-trade club by the end-of-the-year deadline it set for itself, China has backed off from threatened retaliation for United States opposition to the Chinese bid.

But commercial ties between the two economic powers remain clouded by a pending American decision on imposing sanctions over copyright piracy in China. Washington suspended talks last week on intellectual-property-rights violations as a Dec. 30 deadline for China to improve its copyright enforcement nears. The US could impose trade sanctions or give Beijing three more months in which to comply.

On Tuesday in Geneva, the latest round of negotiations on China's application to reenter the General Agreement on Tariffs and Trade (GATT) and become a founding member of the new World Trade Organization (WTO) next year ended without agreement.

It was an embarrassing end to Beijing's aggressive campaign to rejoin GATT by the self-imposed deadline of Dec. 31, a quest opposed by the US and other Western economies until China allows better access for foreign agricultural products, telecommunications, and banking and insurance services. China pulled out of GATT after the Communist takeover in 1949 and has been trying to rejoin for the past eight years.

IN the meantime, China says it will continue to participate in reconvened talks next year and will not withdraw compromise offers for a more-open market, as previously threatened. But it blasted the US for dashing its hopes for prestige in being a WTO founding member, accusing Washington of ``a lack of sincerity and ill-intentioned obstructionism.''

``Not having a nation of 1.2 billion people such as China as a founding member of the World Trade Organization is an injustice and inevitably will damage its representative nature and smooth operation,'' said a commentary in People's Daily, the Communist Party mouthpiece.

The latest trade skirmish between Washington and Beijing has erupted as China seems paralyzed by inflation, deficits in state-run industries, and political uncertainty triggered by the frail health of paramount leader Deng Xiaoping.

Recently, labor demonstrations reportedly broke out among unpaid workers at failing state factories in Shanghai and Xi'an, raising the specter of widespread worker unrest, which terrifies the leadership of the corruption-ridden Communist Party, a Western economist says.

Last week, a court handed down harsh sentences of up to 20 years to nine pro-democracy activists in jail for more than two years. ``That was meant as a warning to all dissidents that political activity will not be tolerated,'' a Western diplomat says.

China has also admonished the US for an October incident, recently reported in Washington, involving the American aircraft carrier Kitty Hawk, which strayed too close to Chinese waters in tracking a Chinese nuclear submarine. If such an incident happens again, American officials in Beijing were told, ``That would be getting into a high-risk situation,'' a Western diplomat says.

But in backing off on threats to keep its market limited to American and other foreign companies, China is reticent to risk its lucrative US market. In a lengthy dispatch issued by the New China News Agency, senior trade negotiator Gu Yongjiang stated that China still opposes major concessions on market opening. Western economists say that stance allows Beijing to save face while it restructures its proposals.

``China has no intention to close the door of negotiation,'' Mr. Gu said. ``China will be a member of the WTO.''