When Chinese Premier Zhu Rongji landed in Washington, D.C., on April 7, 1999, expectations couldn’t have been higher for an historic change in relations between the world’s most populous country and its most powerful one.
For the past six years, Zhu had helped steer the Chinese economy, and he believed the country’s future relied on market competition and foreign investment. That would mean a bigger role for U.S. companies and U.S.-style policies. Specifically, Zhu was traveling to Washington to finish work on a trade deal with President Clinton that would pave the way for China to become a member of the World Trade Organization. The Geneva-based organization oversaw global trade but required members to follow capitalist rules.
If all went well, China’s WTO membership would banish any remaining fears that China would backslide to the inward-looking China of Mao Zedong, where private property was expropriated and businessmen persecuted. Many of China’s American allies hoped that WTO membership would wrap Beijing so tightly in a cocoon with Western economies and ideology that a democratic China would eventually emerge.
“The bottom line is this,” President Clinton said at a think tank gathering on the morning of Zhu’s arrival: “If China is willing to play by the global rules of trade, it would be an inexplicable mistake for the United States to say, ‘No.’”1 Bill Lane, Caterpillar Inc.’s chief trade lobbyist, was so excited by Zhu’s arrival that he texted the construction equipment maker’s Peoria, Illinois, headquarters: “The Eagle has landed.”
But by the end of Zhu’s three-day spring visit, Zhu was humiliated, U.S. businesses were livid, Clinton was scrambling to figure out what he had done wrong, and U.S.-China relations had sunk to their lowest point since the Tiananmen Square shootings.
Eventually, the two sides recovered. But the memory of the Clinton-Zhu negotiations over WTO membership, and the distrust they engendered, remains vivid today.
It’s worth recounting in detail what happened. When Chinese leaders worry that President Trump might undermine them with a tweet or an offhand remark, they think back to the Clinton-Zhu encounter. When U.S. officials worry that Chinese leaders are trying to play them for fools, rather than negotiate in earnest, they hark back to the haggling over the WTO.
China had begun negotiations to join the WTO’s predecessor organization, called the General Agreement on Tariffs and Trade, in 1986. It wasn’t an easy decision for Beijing. At the time, China’s economy was nearly fully controlled by the Communist Party and the government’s state-owned firms. Private real estate barely existed. Export industries and foreign investors were confined to special export zones along the coast. It wasn’t until 1992 that the Communist Party, at the 14th Communist Party Congress, adopted the goal of creating a “socialist market economy.”
Even then, China’s bureaucracy fought any easing of government control over banking, telecommunications, agriculture, and many other industries where Western companies hungered to get a foothold. High tariffs protected local firms from foreign competition; high subsidies kept many lumbering state firms from bankruptcy. Joining the WTO would mean scaling back government protection for millions of bureaucrats who ran the economy and hundreds of millions of laborers.
The WTO works by consensus. To join, China needed approval of all 142 members at the time, a process that involved laborious negotiations over tariffs, subsidies, government protection of industries, and other issues. No negotiation was more important than the one with the United States, the nation that had the most to offer—untrammeled access to the world’s largest market—and drove the hardest bargain. Under WTO rules, any concession China made to the United States (or another nation) had to be offered to every other member. All for one and one for all.
After years of halting progress, China focused on gaining WTO entry by 2000. A big reason was the ascendancy of Zhu to the premiership in 1998. Although Zhu was the leading voice on economic issues as vice premier, a position he held for the previous five years, his enhanced status gave him a more powerful perch to push through changes. A financial crisis that swept across Asia in 1997 and 1998 had battered China’s export industry, cut China’s supercharged growth rate by half, and slowed foreign investment. Chinese leaders cast about for new ways to boost growth.
The strong-willed premier was dubbed “Boss Zhu” by admirers and detractors alike. Puffy-eyed and forceful, Zhu followed a path similar to many senior officials at the time. In 1970, during the chaos of Mao’s Cultural Revolution, he was purged from the party and banished to the countryside as a manual laborer for being a “rightist,” or one deemed as favoring capitalism.
When Deng Xiaoping prevailed in the power struggle following Mao’s death, Zhu was allowed to rejoin the party. Deng tapped him for a senior post at the powerful state economic-planning agency. Then in late 1987, he became the mayor of Shanghai, the most Western-oriented of Chinese cities. “There aren’t many people in our party who know about the economy,” Deng said at the time. “Zhu is one who does.”
Zhu’s strategy of revamping the state sector, called zhua da fang xiao, or “grabbing the big ones and letting the small ones go,” pushed many firms out of business and jolted the Chinese economy. Workers could no longer count on the “iron rice bowl” provided by state companies, which housed, clothed, fed, and educated them and their families. Many Chinese started small businesses or moved hundreds of miles to the coast to get jobs in new, privately owned factories because they could no longer find work in government-owned plants. Zhu’s plans endeared him more to foreigners, who needed laborers for their factories, than to many of the workers whose lives were scrambled.
Zhu’s agenda also faced fierce resistance from state-owned firms and Zhu’s predecessor as premier, Li Peng—the same Li Peng who had badgered Secretary of State Warren Christopher over human rights. Although Li was no longer premier, he outranked Zhu in the party hierarchy. His new job as leader of China’s legislature, the National People’s Congress, had no real power, but it provided Li an important platform in political debates.
Li argued that China should move more slowly than Zhu wanted and ensure employment for those already laid off before moving ahead with changes that would push millions more out of work. Li also attacked Zhu’s initiative to privatize some state firms as selling out to foreigners.
Zhu hoped to use foreign pressure to his advantage. It would no longer just be him and his allies who demanded change in China; the United States and other WTO members required such change as the price of WTO membership. “If China wants to join the WTO, wants to be integrated in international community, then China must play by the rules of the game,” Zhu explained later. “China can’t do that without making concessions. Of course, such concessions might bring about a very huge impact on such state-owned enterprises, and also on China’s market.” 2
For his plans to succeed, Zhu relied on the backing of Communist Party General Secretary Jiang Zemin, the nation’s top leader, who focused more on foreign policy and national security. (Jiang also had the title of president, a largely symbolic position in China. His power stemmed from his party position.)
Elevated by Deng Xiaoping in 1989 after the Tiananmen Square crackdown, Jiang’s top priority was continuing the “reform and opening up” policy begun by Deng. Jiang also displayed charisma and candor rare among senior Communist leaders, and a sense of humor.
Many in China recall how Jiang criticized a Hong Kong reporter who questioned one of his appointments. “You’re too young,” Jiang called out, speaking in English. “Too simple, sometimes naive!” Chinese netizens create Jiang Zemin memes today. Some show him combing his hair in front of a foreign dignitary; others have him playing the ukulele. They remind Chinese society of a leader with a colorful style, a big contrast to today’s stepped-up state control over every aspect of the Chinese society.
With Jiang’s backing, in February 1999, China’s Politburo—the top twenty-five members of the Communist Party—approved the economic concessions Zhu felt necessary to get China into the WTO. China was ready to address nearly all the big issues that had divided Washington and Beijing for years. Dissenters held their tongues. “Opposition within China was not won over, but rather was run over,” wrote University of Maryland professor Margaret Pearson. 3
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The Clinton administration was a willing partner. Zhu had wowed Clinton Treasury Secretary Robert Rubin and his successor, Larry Summers, with his daring policies and his candid admissions that he needed foreign pressure to accomplish his goals. The Treasury also complimented China for ignoring pleas by domestic manufacturers to devalue the yuan during the Asia financial crisis, even though a stronger currency harmed Chinese exporters. Runaway devaluations would have made recoveries by other Asian nations even more difficult.
Clinton had come to see his historic role as weaving China and the former Soviet Union into the U.S. orbit through trade and economic policies. After Clinton’s first frosty meeting with Jiang in 1993, the two leaders developed a warm relationship. During a 1997 trip to the United States, President Jiang went out of his way to impress his American host.
Just before he was to meet the president, Jiang gathered staffers at the Chinese embassy in Washington, including cooks, drivers, and barbers, to practice his English. “Good evening, I am going to speak English tonight,” he told the group. 4He recalled how he had practiced English in college by reciting Lincoln’s Gettysburg Address, and then went off to the White House.
A trip by Clinton to China the following year also went well. He and Jiang did a live, televised press conference, where the president discussed human rights and urged Jiang to meet the Dalai Lama, the Tibetan religious leader despised by Chinese leaders. “The main point of the press conference was the debate itself” with Jiang, Clinton wrote in his autobiography. The president said Jiang impressed him as “intriguing, funny and fiercely proud.” 5
The Clinton team was prodded by business lobbyists who had long been pressing the administration and Congress to help China with its WTO bid. In the mid-1990s, Boeing formed what it called “the Rump Group” of ten major U.S. exporters, including AT&T, AIG, Chrysler, and General Electric, to push a “normalization initiative” for improved economic relations between the United States and China. Boeing put up $2 million in seed money for a lobbying campaign that would spend far more in the years ahead. The group flooded U.S. negotiators with information about Chinese markets and the trade barriers they wanted dismantled as part of a “commercially meaningful” agreement for China’s entry into the WTO.
A series of letters from Clinton to Jiang between November 1998 and February 1999 convinced Chinese leaders that a deal was within reach. 6 In the February letter, President Clinton expressed the hope that a WTO deal could be wrapped up during Premier Zhu’s already scheduled visit to the United States in April 1999. That visit was endangered by the start of the U.S.-led bombing campaign of Yugoslavia in March after that country’s president, Slobodan Milosevic, rejected a peace deal drafted by the North Atlantic Treaty Organization (NATO). What more proof was needed, asked Zhu’s opponents, that the United States sought global hegemony, not fair deals with less powerful countries? But Jiang batted away such concerns.
“President Jiang Zemin decided that I should come according to a schedule and he is number one in China, so I had to obey him,” Zhu joked with reporters during his April visit to Washington. 7
But unknown to the Chinese, the president’s top advisers had been holding a series of meetings in March, chaired by White House Chief of Staff John Podesta, to decide whether to try to wrap up a WTO agreement during Zhu’s visit.
Charlene Barshefsky, now promoted to trade representative, Secretary of State Madeleine Albright, and members of the National Security Council and Central Intelligence Agency made the case for completing a deal. Although the United States still sought concessions from China in a number of important areas, Barshefsky said she was confident she could get Zhu’s approval. The United States had an historic opportunity to transform China and the global economy. “If you don’t empower him, and you humiliate him, you’re making a terrible mistake,” she argued.8
Her confidence surprised some of the others, who had thought the two sides weren’t close to a deal. “Trade negotiators can smell a deal,” Podesta told colleagues after one meeting, holding his finger to the side of his nose and sniffing.
But Podesta, a savvy political operator trusted by the president, along with National Economic Council (NEC) Director Gene Sperling and the White House legislative director, argued against accepting a deal. Democrats in Congress hadn’t been notified that an agreement could be imminent, they said. They already suspected the Clinton White House was too wedded to free trade and didn’t fight hard enough for Democrats’ labor allies. A quick deal would fuel their suspicions.
The White House had just started discussions on China with Representative Sandy Levin, a Michigan lawmaker who was influential with House Democrats on trade issues. A premature announcement was bound to lose his vote and the votes of colleagues. “Rushing this so that you don’t do the full consultation with key House Democrats that was promised wouldn’t be in the long-term interest of getting this deal done,” Sperling argued.
Perhaps the most important voice was that of Treasury Secretary Rubin. The influential former Goldman Sachs co-chairman was impressed with Zhu’s sincerity and ambitions, and initially lined up with Barshefsky for finishing a trade deal. But he changed his mind during the White House discussions. “If we tried to do a deal with Zhu when he was there, it could have blown up in Congress,” he says now. “The chance to get it done was better if he left without a deal.”9 Others in the administration suspected that Rubin also wanted to impress upon Democratic lawmakers that he was with them in order to clear the way for Larry Summers, no favorite of the Democratic caucus, to succeed him as Treasury secretary. Rubin says that wasn’t the case.
Hanging over the White House debates was the memory of congressional defeats in 1997 and 1998 when President Clinton sought authority for negotiating new trade deals in Latin America and at the WTO. The losses were the most significant setbacks for trade expansion since Franklin Delano Roosevelt started reducing tariffs in the wake of the Depression. Perhaps unfairly, Barshefsky took a lot of the blame for the defeat, as did business lobbyists, who didn’t give her much support on Capitol Hill. The trade representative was nicknamed “Stonewall Barshefsky” by her White House colleagues for her negotiating ferocity, but politically she was viewed as a naïf.
In the 1998 congressional debacle, only 29 Democrats backed the administration in the House. Podesta figured he needed 60 to 70 to win approval of a China trade deal. “We had to take more time to get them,” Podesta says now. “None of the groundwork 10had been laid.” President Clinton agreed.
Worried that Zhu might feel sandbagged in Washington, Barshefsky flew to Beijing a week before the premier was scheduled to depart for the United States. Before the caravan of U.S. embassy vehicles arrived at the ornate gate at Zhongnanhai, the Chinese leadership compound, she stopped the cars, fearing they were bugged. “Step outside,” she asked her chief China negotiator, Robert Cassidy.
“Bob, I’m doing everything I can to get a deal through this administration,” she said.
“What do you mean?” he asked.
“I’m having trouble getting this through.”11
At Ziguang Hall, a two-story pavilion where Chinese leaders meet foreign dignitaries in front of elaborately carved Chinese panels, she delivered the same message to Zhu. She also used her visit to press for even deeper trade concessions.
“If we agree to this package, the president will sign?” Zhu asked.
She couldn’t speak for the president, Barshefsky replied, but she was doing her best to put a deal together despite opposition. “We have to get the best package we can to get the best outcome in Washington,” she told the Chinese premier.
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Zhu arrived in Washington on April 7 after a short stay in Los Angeles. The Chinese premier settled into Blair House, the president’s stately welcome center, and then made the short walk to the White House to meet Clinton at 9 p.m. in a second-floor parlor called the Yellow Oval Room for its shape and décor. A handful of aides accompanied the two leaders, who sat facing each other under a crystal chandelier. A waiter stood by, ready to bring the two men drinks.
The president quickly got to the point. There wasn’t going to be a deal, at least not now.
Clinton said that Barshefsky believed that if the two sides worked intensely the following day, they could put together a satisfactory WTO deal. “But that isn’t my inclination,” Clinton said.
The issues dividing the nations were still deep, and Congress would be suspicious of any outcome unless it was “bullet proof,” the president said.12 The goal wasn’t simply to get a deal, but to get one that Congress would approve.
Clinton looked to shift onto Zhu some of the responsibility for scrapping negotiations. The president told him that some of his aides thought Zhu could be hurt politically if he failed to bring home a deal. If Zhu wanted to try to wrap up an agreement, “we could work all night,” Clinton said, according to his former aides and his recollections in his autobiography. But it was up to Zhu to ask for further negotiations.
To some of Clinton’s political aides, the president was being as straightforward and candid with Zhu as he would be with a Western ally. Yes, a deal was possible. But why push for one now if Congress was so wary of the negotiations that it might reject the results? Better to continue to negotiate, make progress, and finish up sometime later.
Additional rounds of talks would help convince lawmakers that he wasn’t settling too easily—“for a photo op,” as one of Clinton’s aides put it. Unmentioned by the president was that Republican distrust of Clinton on China dated back years to a scandal involving Chinese efforts to influence the Democratic Party through campaign contributions.
But others in the administration, who worked closely with the Chinese, felt that Clinton was putting Zhu in an impossible situation. If Zhu took the president at his word and pressed him to finish negotiations during his Washington stay, he would lose any negotiating leverage and would be second-guessed back home. He would look like a beggar. “I can’t imagine those words”—asking an American president for political help—“would come out of Zhu’s mouth,” says Barshefsky today.13
Zhu kept his disappointment to himself for the time being. “If the timing was bad, we could wait,” he told Clinton. The two sides would agree to keep talking and try to reach what Chinese advisers later described as “seeking common ground, while reserving differences,” a reference to a strategy made popular by Zhou Enlai for dealing with nations that disagree with China. The idea is to acknowledge differences, but still treat each other with respect and maintain communications.
Early the next day, April 8, Barshefsky met with China’s trade negotiators. They detailed the deep changes in trade and economic policies China was willing to make. Beijing would reduce or eliminate tariffs, quotas, price controls, and other barriers on thousands of agricultural and industrial goods. Foreign companies would get greater access to banking, telecommunications, insurance, and other politically sensitive industries. Intellectual property protections would be expanded and pressure to transfer sensitive technology curtailed. Barshefsky had the Chinese negotiators sign the documents outlining the offer.
One exception: the United States didn’t push especially hard to get China to ease joint venture requirements and other restrictions on banks and securities firms, say U.S. negotiators. They lay the blame on Treasury, which was responsible for that part of the negotiations. Clinton Treasury officials don’t dispute the criticism. They say they were pursuing other priorities and believed that U.S. financial firms were doing well in China despite limited access there.
At about 4 p.m., Clinton and Zhu met the press at the White House’s presidential hall. Clinton put his best spin on his decision to spurn Zhu. “We have made significant progress toward bringing China into the World Trade Organization on fair commercial terms, although we are not quite there yet,” the president told reporters.
But Zhu was no longer willing to play along with Clinton. He told reporters he saw their discussions quite differently. “If you want to hear some honest words, then I should say that now the problem does not lie with this big difference or big gap, but lies with the political atmosphere,” the Chinese premier said.
Two hours later, Barshefsky and Sperling, the NEC director, held their own press conference. She had a surprise for the Chinese: the U.S. trade representative’s office was publishing a seventeen-page document detailing the Chinese offers. The press release broke the rules usually governing trade negotiations. Any offers are considered tentative—and kept secret—until a final deal. In trade lingo, there is no agreement on anything until there is a final agreement on everything.
Many in Barshefsky’s staff opposed her decision, saying it broke protocol and broke faith with the Chinese. The release was bound to weaken Zhu at home. Barshefsky shut down the argument with a curt, “That’s enough.” Her main concern was preventing China from backsliding on its commitments after Zhu went home.
“We have captured and memorialized—in agreement language—what has been achieved,” Barshefsky told the afternoon press conference. “All of that is now locked in place.”
Zhu’s top trade adviser, Wu Yi, a female Chinese politician who matched Barshefsky in passion and intensity, felt betrayed. “The Iron Lady of China,” as she was known, was “absolutely furious,” recalls Cassidy, the U.S. negotiator. In a meeting with Barshefsky, “she had enough English to swear, but the translator had even more words.” 14
That atmosphere was about to get a lot more poisonous. The Wall Street Journal reported the next day, April 9, that Clinton had never intended to cut a deal with Zhu during his visit. The story detailed the series of White House meetings that occurred before Zhu landed in Washington. 15
That night Zhu made his anger clear at how he was treated. At a dinner with U.S. business leaders, he complained that the U.S. side “made public many documents and said we had agreed to them, but we have not agreed. If you want too much too soon, in the end you may wind up with nothing.” 16
U.S. business leaders were also outraged. After Zhu left Washington to start a tour of U.S. cities, about one hundred lobbyists were invited to meet with Sperling and Barshefsky in the elegant Indian Treaty Room of the Old Executive Office Building, across from the White House. Barshefsky, who they knew had pushed for a deal, was met with a standing ovation. Sperling was booed.
Looking to ease the tension, Sperling told the crowd that the president wanted a deal and “we’re all in agreement” with that.
“No we’re not,” shouted Robert Kapp, the usually courteous president of the U.S.-China Business Council, which represents big businesses operating in China. He launched into a diatribe 17against the administration’s handling of the negotiations. “I interrupted Sperling. I hogged the floor. I was beside myself,” Kapp says now, embarrassed by his outburst.18
The press portrayed Clinton’s spurning of Zhu as a debacle. The New York Times called the talks “fruitless.” Washington Post columnist David Ignatius was more withering. “Clinton’s flip-flop on the WTO sullies one of the few areas—free trade—where he reasonably can claim to have acted consistently on principle,” he wrote. Newsday called Clinton’s decision to send Zhu home empty-handed “a missed opportunity that may never come again for Clinton.”
The president struggled to understand what had gone wrong, his mood lurching between anger at his advisers and bewilderment at the Chinese reaction. Hadn’t he offered Zhu Rongji the chance to negotiate further if that was what he wanted to do? When Sperling handed him a positive editorial, he batted it away. “Everyone knows I made a mistake,” he said. He asked his aides what they could do to get negotiations back on track or even convince Zhu to return to Washington.
With the skill of a veteran politician, Zhu barnstormed Denver, Chicago, and New York, portraying himself as the jilted partner and reminding business audiences of the opportunities they might miss in China. Clinton “didn’t have enough courage” to sign an accord because he feared congressional opponents, he told a meeting of lawmakers before leaving town. 19 In Denver, he told a luncheon hosted by the city’s mayor that the Chinese “are not sure [Clinton’s] judgment is the right one.” In Chicago, he toured the Chicago Mercantile Exchange, met with Chicago-born Commerce Secretary William Daley, and warned the business community that “America is not the only country in the world. There are other countries and continents” happy to do business with China.
When Zhu reached New York on April 13, the White House had had enough. President Clinton called him at his suite at the Waldorf Astoria and the two men talked for about twenty minutes, during which Zhu regaled him with stories of all the Americans he met who favored China’s WTO membership. The president said he would issue a new statement committing the United States to getting China into the WTO by the end of the year and to restarting negotiations as soon as U.S. negotiators could travel to Beijing. A satisfied Zhu told a dinner of business leaders afterward that “I think we are very, very close to achieving a final agreement on the WTO. Some observers say we are 95 percent of the way there. I myself think it is more like 99 percent.”20
About a month later, on May 7, 1999, that agreement was blown apart by B-2 stealth bombers flying from Whiteman Air Force Base in Missouri to the skies over Belgrade, Yugoslavia. There, the aircraft dropped five precision-guided bombs on the Chinese embassy, destroying the building, killing three Chinese staffers, and injuring twenty-seven others. Demonstrations erupted across China. Angry Chinese threw stones, bottles, and even some homemade bombs at the U.S. embassy in Beijing. For one of the authors of this book, Lingling, the bombing made her question whether to reject a full-scholarship offer to New York University’s graduate journalism program. (After an editor at state-owned China Daily talked sense into her, she went ahead with her American Dream.)
“Don’t worry, our three martyrs! The motherland and the people will remember you forever,” said an announcer on the main evening newscast on China’s state-owned broadcast. “Getting stronger is the only way we can avoid being humiliated.” Plans were shelved for negotiations with Washington over the WTO. The talks could be portrayed in China as the United States taking advantage of China’s weakness.
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President Clinton was beside himself. How could the United States have screwed up so badly? How could he possibly convince President Jiang that the bombing had been a mistake, that someone had used an outdated map to load coordinates into the jet’s computers? Chief of Staff Podesta tried a joke: “Some of your own staff weren’t that sure it was a mistake, either,” he said, unleashing a presidential tirade. Later, in his autobiography, Clinton said, “I had a hard time believing it, too.”21
At an emergency Politburo meeting in Beijing, not a single leader accepted the U.S. explanation. “This incident, more than anything else, reminds us that the United States is an enemy,” Li Peng declared. 22 “It is by no means a friend, as some say,” he added, in a pointed reference to his adversary, Premier Zhu. But after three days of closed-door deliberations, the Chinese leadership concluded that China’s relationship with the United States was too important to make it another casualty of the bombing. In a May 13, 1999, speech welcoming the return of Chinese embassy staff from Yugoslavia, Jiang said, “China will not deviate from the policy of developing the economy and carrying out reform and opening because of this incident.”
The following day, Jiang told Clinton by telephone that he didn’t believe he personally ordered the bombing, but figured that others in the Pentagon could have “rigged the maps intentionally to cause a rift” with China. He urged the U.S. leader to conduct a thorough investigation. Clinton offered his apology for the tragedy.23
Still, the combination of Clinton’s rejection of Zhu’s WTO offer followed by the embassy bombing badly weakened the premier. As soon as Zhu returned home from his U.S. trip, committees under Li Peng’s National People’s Congress questioned whether Zhu had gone too far in offering concessions. Wu Jichuan, the head of the Ministry of Information Industry, threatened to resign over Zhu’s offer to open the telecommunications industry to foreign competition. 24At a meeting of senior Communist Party officials, Zhu offered Mao-style self-criticism, or jiantao, for his U.S. trip. He said he was too anxious to get a deal done, said a senior government official at the time.
Many of China’s Internet users, increasing at a rapid pace at the time—and far less controlled by censorship than they are now—labeled Zhu a maiguozei, or traitor, in their online postings. Some compared his WTO offer to the infamous “Twenty-one Demands” made by Japan in 1915 that would have greatly extended Japanese control of China during World War I.
The bombing deepened his problems further. Jiang sought to quell criticism by offering Zhu’s critics some concessions. In the summer, the job of reforming the state sector, which had been Zhu’s signature program, was handed to Vice Premier Wu Bangguo, Zhu’s subordinate. Still, Zhu held on to the premiership, giving him the chance again to conclude a WTO deal.
Getting relations back on track took months of difficult discussions. U.S. officials were never really certain that their Chinese counterparts believed their explanations for the bombing. In an icebreaking session in September, the two sides resumed formal talks, although the subject matter in Washington was limited to whether Zhu had agreed in April to allow foreigners to buy a majority stake in Chinese telecommunications firms.
On October 16, Clinton called Jiang, offering to clear up what the United States wanted from China to assure WTO admission. A week later, Larry Summers, then Treasury secretary, flew to Beijing to meet with Premier Zhu, signaling a further easing of tensions. Around that time, the United States formally dropped one of its toughest demands of China, which would have allowed Washington to impose high tariff walls to block all Chinese imports if Beijing flooded any U.S. market. U.S. negotiators called that the “nuclear option” and figured there was very little chance China would accept the provision anyway.25
Final negotiations were to start on November 10 in Beijing, with the U.S. side uncertain whether Beijing really wanted a deal then or was looking to embarrass the United States by rejecting the negotiators, as Clinton had done to Zhu in April. For the Chinese, their suspicions of Clinton and his team continued unabated. Nevertheless, a day before the Americans arrived, the Politburo’s seven-member Standing Committee, its most senior leadership group, including President Jiang and Premier Zhu, voted to support a deal. Only Li Peng dissented, as he had in the past. 26
Barshefsky, the U.S. negotiator, recruited NEC Director Sperling to accompany her on the trip, even though he had helped convince Clinton to reject Zhu. Having him in Beijing, she calculated, would signal to China that the U.S. side was united and represented the president. “They are going to be looking to you for help,” Barshefsky advised Sperling. “They will want to talk to you during the breaks and try to peel you away. Be that friendly person they want you to be.” If they trusted him, they would take his demands more seriously later on, she calculated.
Negotiations, expected to last a few days, started slowly. Sperling was mum as Barshefsky talked with her counterparts. On the second day, when the issue of auto tariffs came up, she advised Sperling to pounce, as a way to show the Chinese that slashing 80 percent tariffs on automobiles was a Clinton priority. When the Chinese balked, Sperling, usually friendly and ingratiating, pounded the table and said, “Let me be clear. President Clinton will never, never, never, never, never, never take that deal on autos,” leaving the Chinese nonplussed.
Looking to move the negotiations along, Zhu came to the negotiating room on the fourth day of talks, November 12, and took over for his trade advisers. The premier apologized that he hadn’t been able to get involved in the negotiations earlier, but said he had been reading the transcripts of the talks. As Zhu continued in Chinese, before his translators could explain his words in English, the Chinese officials cracked up at any mention of the word “Sperling.” Why? the U.S. side wondered.
“I even know Mr. Sperling said, ‘no,’ six times,” Zhu said. “We find that unusual because in China we tell our children not to repeat the same word even twice.”27 Zhu encouraged negotiators on both sides to continue talking until a deal was struck.
But discussions remained stalled, again making the U.S. side wonder whether they were being set up to take the blame for a failure. During some of the many pauses in negotiations, Sperling went to see Star Wars, which was playing in local theaters, and called his father from the cavernous Great Hall of the People to get updates on the Michigan–Penn State football game. When the Chinese side said that they couldn’t make a decision and needed to confer with more senior leaders, Barshefsky had had enough.
She and Sperling left to get dinner without telling their Chinese hosts where they were heading. “Trust me, they know how to find us if they want to,” she told Sperling. Later, she telephoned President Clinton in a secure embassy room nicknamed “the refrigerator” and told him the team was flying home. The Chinese were jerking them around. “We had been there one week already,” Barshefsky says now. “I only brought two outfits. I thought if we stayed longer, we’d look weak.”28 Clinton agreed, saying he didn’t want to be played.
But Sperling, who had backed Barshefsky’s plan, had second thoughts. What if the Chinese really did need some additional time? Was Barshefsky acting too hastily? Without informing her, he placed a call to National Security Advisor Sandy Berger, who then telephoned Secretary of State Albright. She phoned Zhu in the middle of the night, Beijing time, to press him on the negotiations. With the U.S. delegation threatening to fly home the next day—and sending their luggage ahead to the airport to show they were serious—Zhu phoned his senior negotiator, Long Yongtu, to make another stab at discussions.
Around 4 a.m. on November 15, Long and U.S. negotiator Robert Cassidy met at China’s Ministry of Commerce. “Do you really want to conclude an agreement?” Long asked Cassidy, who had donned what he calls his lucky shirt—a worn collarless garment with broad stripes. Of course, replied Cassidy, who said they should proofread the hundreds of pages of text they had negotiated over the years, which Long took as a sign of good faith. The Chinese negotiator telephoned Zhu with the news that “based on my many years of experience in dealing with the Americans, they want to sign,” pointing to Cassidy’s willingness to proofread the documents as evidence.29
“Very well. I trust your judgment,” Zhu said. “You must manage to talk to the Americans and don’t let them leave.” That wasn’t only his order, he said, but the order of President Jiang and other top leaders.
By the time Barshefsky and Sperling drove up to the ministry, ostensibly to say good-bye before heading to the airport, the negotiators had a surprise for them. Premier Zhu would be coming to the ministry to handle negotiations. That was a crystal clear sign that he planned to finish a deal, because the premier rarely deigned to leave the leadership compound for the far less prestigious Commerce Ministry. Zhu, Long, Barshefsky, Sperling, and a small number of aides went to a back room of the ministry to cut the deal.
In some ways, the final talks were almost anticlimactic. The two sides didn’t so much negotiate as listen while Zhu made clear what he needed politically and what he knew Clinton had to have. He agreed to U.S. demands that for twelve years China would accept provisions that made it simpler for U.S. firms to block Chinese imports. He also agreed that China would be classified at the WTO for fifteen years as a “nonmarket economy”—a designation that also made it easier for Americans to win lawsuits to stop Chinese imports. China would also reduce automobile tariffs from 80 percent to 25 percent.
Long, the Chinese negotiator, passed Zhu notes saying that he thought the premier might be exceeding his authority with these concessions, especially by accepting nonmarket economy status. An angry Zhu pounded the table and told his aide to stop bothering him.
But there were areas where Zhu wouldn’t budge. He wouldn’t agree to let foreign firms buy majority stakes in Chinese telecom firms, telling U.S. negotiators not to even bother arguing the point. Zhu said he understood the need for more competition, but this demand was politically impossible. “You’re telling me what your president has to have,” Zhu said. “I have political needs, too.”
“He wasn’t acting like the negotiator30,” says Sperling now. “He was saying each side had to respect and ultimately give on the other’s top priorities.” Boss Zhu.
After Barshefsky and Sperling telephoned President Clinton at a NATO meeting in Ankara for his approval—retreating to a bathroom in the ministry for privacy—the two sides signed the trade deal for China to join the WTO and broke out champagne. That marked the formal embrace of China into the world trading system, a designation that would clear away any doubts about China’s economic direction and supercharge foreign investment and Chinese exports. The United States was to make little use of the concessions Zhu made on import restraints and, until the Trump administration, did very little to try to slow China’s ascent.