By Franz Schurmann

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Prediction for Tuesday, February 23rd,1999

China Will Be a Full Member of the World Trade Organization by the WTO's Next Meeting

• Introduction:
  The World Trade Organization (WTO) can be envisaged as a giant tree. Its roots are global trade. Its trunk is the American dollar. Its two great lower branches are the Japanese yen and the euro (an avatar of the German mark). Its bigger and smaller leaves are all the other currencies of the world. The tree was planted, under the name General Agreement on Trade and Tariffs (GATT), during the 1944 Bretton Woods Conference along with the IMF and the World Bank.

  The WTO is the centerpiece of America's vision and policy for a global economy centered on America. But pressures are growing to reduce America's centrality, especially calls by Japan and France to link together the dollar, yen and euro. Many observers interpret this as moves to split the current dollar-based global financial system into three interlinked but regionally autonomous systems.

  China --- now having a lion's share of total world trade --- has resisted America's demands that it fully open its markets as a condition for entry into the WTO. Chinese Prime Minister Zhu Rongji is scheduled to visit Washington in April. US officials have made it clear it's do-or-die time for China to join the WTO. The fact that no firm date has been set --- though it was for his Russia trip during February 24-27 --- means serious entry-or-no-entry WTO talks are going on between Washington and Beijing.

• Prediction:
  After first predicting to myself that China would not join and that Zhu might even not come at all, I now predict a surprise. He will come and China will join. By the time of the WTO's next meeting on November 30 in Seattle, China will be a full member.

• Outcome:
  All the signs from American, Chinese and other media indicate that formal US support for China's entry into the WTO is just about a "done deal," only waiting for the right timing to be made public. Jim Mann writing in the L.A. Times of April 26: "A big trade agreement with China is not yet done--but behind the scenes, the Clinton administration is already working overtime to orchestrate support for the deal."

  The New York-based China Press which usually reflects Beijing's views on foreign affairs carried a dispatch datelined May 3: U.S. ambassador to China James Sasser today said in New York that he expects the US and China will sign a WTO agreement "within two or three weeks."

  So my evaluation of the prediction is: all signs indicate a hit on target.

America has shown no signs of abandoning either its global political-military centrality ("solo superpower") nor its global political-economic centrality (primacy of the dollar in the global financial system). Over the last months Treasury Secretary Robert Rubin has repeatedly rejected all talk about setting up a new tripartite global financial system.

Japan and Europe have enormous financial power. But Japan has been mired in deep recession since 1992 and Europe's unemployment has been chronic for an even longer period as its growth now too is slowing.

Rubin has been ceaselessly pressuring Japan to use its huge capital resources to spark revival in the Asian countries suffering economic crisis. But its new conservative-right ruling coalition --- influenced by the articulate Ichiro Ozawa --- won't do so until America concedes Japan political and military as well as economic equality.

European capital, especially German, is taking over corporation after corporation in the US. And the new Euro-bonds are offering worrisome competition to US Treasury bonds, as are also the new Japanese government bonds.

China, on the other hand, supports the current America-centered financial system. Despite trying to diversify its export trade, China's main market remains American. It gave Hong Kong key support in November 1997 when the latter defeated the hedge-fund speculators' efforts to ravage the US$-pegged HK dollar. And China fears a Japan now coming more and more under right-wing influence.

There is a fierce debate going on in US policy circles whether China is threat or opportunity. The president's support for the proposed Theater Missile Defense (TMD) is a China-threat sign. But this week's announcement by the Pentagon that it will expand its ties to China's People's Liberation Army (PLA) is a China-opportunity sign. A successful WTO entry for China would be another opportunity sign as a failure would be a threat sign.