Secondly, the package offers a number of new concessions for foreign firms and investors. For example, international automobile manufacturers and banks would be allowed to offer consumer loans for car purchases, which is a crucial concession given the high price of automobiles in China relative to incomes. Foreign manufacturers will also be allowed to distribute their own products imported from abroad and not be forced to rely on domestic distributors. Above all, foreign firms are to be provided an important role in the emerging and rapidly growing telecommunications sector (including internet). The agreement provides for foreign firms to hold 49 per cent of the equity in local ventures for a period of two years and 50 per cent subsequently.
 
The third area in which major concessions have been offered is the financial sector. Thus far foreign banks were allowed to offer their services to foreign companies operating in China. But under the terms of the agreement they would be allowed to offer their services to Chinese firms two years after their entry, providing loans, undertaking currency transactions and servicing their other banking requirements. Limits on the insurance business undertaken by foreign insurance companies are also to be gradually dismantled and they are to be allowed to increase the number and expand the size of their branches as well as enter new areas such as property. Market access is to be eased and enlarged for foreign legal and accounting firms as well. Finally foreign brokerage houses and mutual funds are to be allowed to form joint ventures with Chinese companies, holding 33 per cent initially and a possible 49 per cent subsequently.
 
In return for these substantial concessions, the US has agreed to support China's claim to WTO membership. But it has not offered very much else. In the contentious area of textiles, which is a major item in the Chinese export basket, quotas are to be phased out only by 2005. The US has also reserved for itself the right to respond in protectionist fashion to what it sees as import surges in the US market for a period of ten years, and to similarly respond to "dumping" for a period of 15 years. The experience under the Uruguay Round so far points to the ease with which such clauses can be converted into protectionist devices by developed countries.
 
The willingness of China, an important developing country exporter which has been struggling to join the formal multilateral trade framework, to make these compromises is to an extent understandable. What is less clear is why the US which, for political reasons, was earlier unwilling to accept even these terms, has suddenly come round to accepting an agreement which, according to some reports is not as good as the terms which were on offer and were rejected in April. Moreover, given the impending Presidential elections and the strong opposition to Chinese entry among the trade unions, the timing of the agreement is indeed surprising. The AFL-CIO has vowed to fight the deal, both because it threatens American jobs as well as goes against America's "democratic principles and most cherished values". And some local business interests, including the textile lobby have also sharply attacked the agreement.
 
If yet the Clinton administration has chosen to go through with it, it is possibly because of a strategic concern. It is indeed pointless not integrating an emerging economic power like China into current and future negotiations on the world trading system. But, more importantly, the willingness of China to make crucial concessions in areas like foreign investment and the financial sector could be an important source of pressure on recalcitrant developing countries unwilling to agree to start negotiations on investment and services, as part of a new Round. That could possibly explain the willingness to conclude an agreement on terms rejected only recently, in time for the ministerial meet at Seattle. As in the case of patents at the time of the Uruguay Round, China is implicitly being held up as a model of a developing country with a reasonable negotiating position.