SPEAKING FREELY Time to recall China’s accession to the WTO
By Jean-Marc F Blanchard
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On December 11, 2001, China became a member of the World Trade Organization
(WTO). This was a momentous event since it brought the then world's
seventh-largest economy and largest developing country into what some many
would deem the world's preeminent international economic institution.
Statistical figures make clear the profound effect of China's WTO accession. In
2001, China's was the world's sixth-largest trading nation. At present, it is
the largest. In 1993, China received a meager $10 billion of inward foreign
direct investment (FDI).
In contrast, the year after its WTO accession, inward FDI reached
a startling $50 billion. In joining the WTO, Beijing opened sectors ranging
from automobile to aviation to distribution to securities to express delivery
to foreign manufacturers, financial firms, and service providers. Moreover, it
modified thousands of laws and regulations to fulfill WTO requirements.
Before China joined the WTO, there was much anxiety in China about the impact
accession would have on its agricultural sector and the viability of domestic
firms in sectors such as automobiles and banking. In fact, there were forecasts
the WTO would displace tens of millions of farmers and workers.
For others, there were worries about surges in Chinese imports, the
displacement of developing country exports to third parties by Chinese
products, and the redirection of investment to China. Others speculated China's
WTO membership would give it an opportunity to subvert the liberal trading
While China's accession, in some cases, did create severe challenges for
developed and developing countries, in other cases initial anxieties proved
overblown while in yet other cases adjustments were tempered by offsetting
gains such as increased investment from global production chains or new
opportunities to sell to China.
As for China, there were major adjustments in its agricultural, industry, and
service sectors, the consolidation of numerous state-owned enterprises, and
increased pressures flowing from the elimination or reduction of a vast number
of tariffs and non-tariff barriers.
Nevertheless, WTO membership yielded China capital, technology, energized
reform and competition, and created an opening for new sectors. Competition, in
sectors such as the banking, itself led to new product offerings and higher
service levels. Furthermore, China's membership in the WTO importantly helped
to depoliticize trade disputes.
In an interview, US Trade Representative Charlene Barshefsky told the China
Daily the WTO and China's participation in it helps to keep a growing number of
Sino-American trade frictions “manageable” and prevents them from "taking over
the entire relationship between the two countries".
Membership has given China a voice in the WTO, too. Lastly, China's chief WTO
negotiator Long Yongtu believes accession brought about important changes in
the Chinese mentality.
For the outside world, China's WTO accession has brought a multitude of
benefits. Increased access to the Chinese market has benefited foreign
companies by facilitating the sale of goods and services in China, reducing
production costs, enhancing their regional presence, lowering supply costs, and
helping them tap local scientific expertise.
At the international level, China's involvement in the WTO legitimates not only
the WTO, but also the multilateral trading system generally. One article aptly
quipped, “A WTO without China was not truly universal in scope.”
WTO officials, foreign governments, and business associations have commended
China for its progress in complying with a number of its WTO obligations. In
particular they have noted China's progress in cutting tariffs, changing laws
and administrative structures, and opening diverse market areas.
Even so, China's fulfillment of its WTO Trade-Related Intellectual Property
Rights (TRIPS) obligations clearly remains a work in progress. Others have
raised serious questions about China's progress in meeting its WTO
Trade-Related Investment Measures provisions, which inter alia require the
Chinese government to shun investment measures such as local content and
technology transfer requirements that discriminate against foreign goods.
Beyond this, other parties have noted grave concerns about China's government
procurement, product technical standards, and indigenous innovation policies.
A hot topic on the eve of the 10th anniversary of China's WTO accession is the
extent to which China should play leadership role in the current stagnant WTO
Doha Negotiating round, with advocates on both sides of the aisle. Some believe
China should play a more active role since it is a key member of the system and
can play an important "mediating" function given its extensive links with both
developed and developing countries.
In contrast, some are wary of greater Chinese activism in the WTO given China's
revolutionary intention to reform the multilateral trading system so that the
system better takes into account the interests of developing countries and its
view that WTO rules are "imperfect and unfair".
To be fair, Beijing takes the perspective that “the status quo should be
maintained” rather than systemically reformed and is trying to move the Doha
Round forward, at least somewhat.
Nearly 10 years ago, China became a member of the WTO. Its membership never
meant trade disputes would cease. Indeed, it seems a day does not pass without
some trade action against China.
What the WTO has done, though, is to make most such controversies routine and
to give all countries including China mechanisms they can exploit to defend
their interests. Regardless, one should not forget China might have become such
a powerful force in international trade precisely because of the transformative
effects of its accession to the WTO 10 years ago.
Jean-Marc F Blanchard, PhD is Associate Professor of International
Relations and Associate Director of the Center for US-China Policy Studies at
San Francisco State University.
(Copyright 2011 Jean-Marc F Blanchard.)
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