Top European Union and Chinese officials adjourned talks in Beijing last night without reaching a bilateral deal on China's entry into the World Trade Organisation (WTO).
Hopes had been raised of a breakthrough yesterday morning when EU Trade Commissioner Mr Pascal Lamy met Prime MinisterMr Zhu Rongji for an 80-minute discussion before the second day of talks.
Mr Zhu's intervention in WTO negotiations between China and the US in November led to a dramatic last-minute deal following marathon negotiations.
Mr Lamy and China's Foreign Trade Minister, Mr Shi Guangsheng, then continued the negotiations yesterday afternoon and agreed to continue efforts today to try to resolve outstanding differences.
"We're at a stage where both sides are reflecting, and the Chinese side suggested we meet again at 8.30 a.m. tomorrow," Mr Lamy's spokesman, Mr Anthony Gooch, said, adding: "We've entered into the nitty-gritty phase."
The EU delegation would "not stay here indefinitely", Mr Gooch said, but had not set a deadline for a deal.
He cautioned: "We'd need to reach cruising altitude pretty quickly tomorrow if we are to be able to reach an agreement during our time here."
China has already completed bilateral WTO agreements with most major WTO members, including the US, Canada, Japan and Australia, and the absence of a deal with the EU is the only serious obstacle to joining the world trade body later this year. The agreement with Washington was 80 per cent in common with Brussels' aims; the differences are in the remaining 20 per cent.
The EU has specific requirements on up to 400 commodities of which it exports more than the US, including agriculture equipment, ceramics, glassware, cosmetics, spirits and leather goods. It wants to secure the same number of operating licences as the US in life insurance, seen as a major growth area, and the right to set up wholly-owned insurance operations in China.
It also has differences on telecommunications.
The EU's concerns also include export performance requirements, whereby some foreign companies based in China are required to export as much as 70 per cent of turnover.
The implications of failure for Beijing are enormous. A government think-tank in Beijing has forecast that WTO membership would boost China's growth by 1 per cent a year, and that the real value of China's GDP in 2010 would be 34 per cent higher.
But membership would initially bring increased unemployment as industries like steel manufacture lost the benefit of high tariffs on imported metals.
China's official Xinhua news agency yesterday quoted trade ministry officials as saying Mr Zhu's talks with Mr Lamy were "friendly and frank", but gave no details.
