Rift Between EU US Over AIG Stalls China/WTO Pact

July 5, 2001

Negotiators in Geneva had hoped to announce that they had reached an accord on all issues, clearing the way for China to join the World Trade Organization, but they’ll have to wait a bit longer, as a dispute over American International Group’s China operations has so far held up a final agreement.

AIG’s predecessor was founded in Shanghai in 1919, and the insurance giant was the first company readmitted to do business there in 1992. At the time it formed a wholly owned Chinese subsidiary. Under the proposed WTO admission criteria, China can require that any life insurance venture must have at least 50 percent Chinese ownership.

AIG’s CEO, Maurice “Hank” Greenberg” has vigorously defended his company’s position, and has declared that it should be allowed to open branch offices in other Chinese localities exempt from the 50 percent requirement. So far U.S. trade negotiators and the Chinese have agreed.

The European Union has taken the position that all companies should receive equal treatment, and that allowing AIG to continue under separate rules would give it an unfair advantage. They want AIG to change its position, or for E insurers to be given the same advantages. So far no compromise has been reached.

The only other problem holding up China’s admission involves the compromise over agricultural subsidies reached between U.S. and Chinese negotiators in May. A number of developing countries, including India, Malaysia and South Korea, have expressed concern that the 8.5 percent ceiling China agreed to would become a precedent, and have asked for assurances that developing country subsidies will continue to have a 10 percent ceiling

The next meeting is scheduled in to take place in two weeks, and hopefully these two problems will have been resolved, as all parties have expressed a strong desire that China be cleared for entry into the WTO by the time of its next plenary session in Qatar in November.

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