Cracked Door

China took another step in its long march toward a market economy last week. Signaling its desire to become a full-fledged member of the world economic community, Peking officially announced that it would seek to join the General Agreement on Tariffs and Trade, the 91-nation group that works to lower trade barriers and sets the rules of international commerce. Western companies eager to crack the vast Chinese market are delighted. Says Bruce Vernor, executive vice president of the National Council for U.S.-China Trade, a group of 400 American firms: "We certainly believe this is another indication of China's commitment to an open-door policy."

When GATT was formed in 1947, China was a member of the Geneva-based organization, but the country dropped out in 1950, after its Communist revolution. The move to return to the fold is part of Deng Xiaoping's bold campaign to decentralize the Chinese economy. Under his leadership, China has boosted its imports and exports from $29 billion worth in 1979 to $59 billion last year. In 1960, 70% of China's trade was with Soviet bloc countries, but now 80% of it is with the non-Communist world, especially the U.S. and such Asian neighbors as Japan and Hong Kong. China has become a significant exporter of oil, textiles, clothing and spices, while importing such goods as steel, factory equipment and heavy-duty construction machinery.

Even in the Deng era, though, Chinese trade remains encumbered by protectionist regulations. All imports of machine tools, for example, must be approved by a special committee, which determines if the equipment could be manufactured in China. If it could, the import is not permitted. Tariffs can be equally tough: the levy on foreign autos is 230%. At the moment, China is strictly limiting imports because of concern about its trade deficit, which ballooned from $1.4 billion in 1984 to $13.7 billion last year. Moreover, Peking two weeks ago devalued its currency by 15.8% against the U.S. dollar. That could discourage imports by making them more expensive.

No one thinks that Peking's bid to join GATT will end Chinese protectionism. Says a Western diplomat in Peking: "We all know the Chinese are not interested in facilitating trade. They are interested in facilitating exports." Trade experts think that several years of delicate negotiations lie ahead before GATT members admit China to the club. The Chinese, for instance, may request special treatment as a developing nation. Nevertheless, the fact that China has asked to sit down at the bargaining table with its trading partners is a promising omen.