Tuesday, November 8

Accession has brought change to China and WTO

Accession has brought change to China and WTO By Howard Winn
...when China joined the WTO, it agreed to one of the fastest programs of import duty cuts and market opening ever accepted by a new member.

Skeptics doubted that it would stick to those commitments, but the general level of its import tariffs has fallen to 9.9 percent this year from almost 40 percent in the early 1990s, according to the WTO. Although its exports have soared, its imports have often grown faster.

Chinese imports rose 39.9 percent in 2003 compared with export growth of 34.6 percent, and 36 percent in 2004 compared with a 35.4 percent rise in exports, figures from China's national statistics office show.

WTO figures show that China was the third-largest exporter and importer in the world in 2004, overtaking Japan and lagging behind only the United States and Germany.
despite some discomfort,
"China has adopted policies resulting in a far more open and profitable business environment for many U.S. companies," the council, a Washington-based umbrella organization for U.S. companies doing business with China, said.

"In general, you'd have to say China is complying with its WTO obligations," Owen Nee, a counsel with the U.S.-based international law firm Orrick, Herrington & Sutcliffe, said in an interview. "There are places where there are problems, but by and large they have met the deadlines and passed the laws."

Andrew Freris, chief economist and head of Asian-Pacific fixed income research at BNP Paribas, noted that China was already a major trading force before it joined the WTO. Membership had been particularly important in opening up its service sector, he said.

"Prior to joining WTO, nothing was happening on that front," Freris said. "We had neither a timetable nor a specific set of time limits for certain things to happen. Now we do."

In the textiles sector, Nee said, WTO membership has played to China's advantage. When a 10-year-old international textile quota system ended at the start of this year, much of the textile industry in Asia shifted to China.

Chinese textile exports soared, triggering a backlash in the European Union and the United States that pushed the EU and U.S. authorities to impose temporary, bilateral curbs on further growth. But "if China hadn't been a member of the WTO, I believe that the quota system would have been extended," Nee said.

Yet perhaps more important, in the long term, for China, WTO membership has helped the leadership in Beijing to deal with obstructive local officials. "If Beijing tells provincial authorities to do something, they don't listen. But if they are told these are WTO rules then there is more chance of compliance," Nee said.
The leadership has used the threat of WTO-inspired foreign competition, and the inflow of foreign investment and expertise, to force banks, insurers, and telecommunications companies to become more market-oriented and efficient.
If WTO membership is helping China to transform its economy, it is also producing a transformation within the WTO. China has begun to take on a role that was not anticipated when it was negotiating entry, positioning itself between the traditional powers, like the United States and the EU, and the developing countries.

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