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China and the WTO
Feature: 3/12/2001

After 15 years of diplomatic struggle, China has finally - and officially - become a fully-fledged member of the international trading system (director-e News, Wednesday 12 December 2001).

China's formal membership came exactly one month after the 142 members of the World Trade Organisation ratified its application at the world trade talks in Doha in the Gulf state of Qatar, and the Chinese government formally approved the deal.

But it came after a long set of negotiations in which China has had to satisfy its trading partners, notably the United States and the European Union, that it is doing enough to open its economy to international competition.

The key turning point came in November 1999, when the United States and China signed a trade deal that was narrowly endorsed by the US Congress.

China hopes its membership of the WTO, the body that sets the rules for world trade, will ensure that its reformed and market-oriented economic system continues to flourish. "This is an historic moment in China's reform and opening-up and the process of modernisation", said the government newspaper, The People's Daily, in a front-page editorial.

Major changes

Membership of the WTO will lead to major changes in China. The restrictions on its capital markets will eventually have to be lifted and market access for foreign goods and firms will be improved.

China's vast state-owned industries will have to reform, and that could lead to a huge rise in unemployment.

In a report last week, the Chinese government admitted that parts of its economy were "in chaos", with rampant corruption, counterfeiting, fraud and embezzlement. Bringing order to the economy had become an urgent task, Li Rongrong, Minister for the State Economic and Trade Commission said.

To deal with this new world, China has opted to lift restrictions on the movement of people dating from the days of Communist central planning. Western companies will be free to set up joint ventures, even in sensitive areas like mobile phones, insurance and banking.

But the accession should ensure that foreign investment continues to flood into China, acting as a spur for economic growth. And it could make China even more competitive as an exporter to industrialised countries. It is already overtaking Japan as the largest exporter to the United States.

Meanwhile, consumers in China are hoping for greater access to Western goods for their as-yet non-convertible currency.

Triumph at Doha

China's formal membership of the WTO was the top headline in all the country's main newspapers. Many papers carried surveys stressing that consumers are hoping it will bring them new choices in everything from cheaper imported cars to more Hollywood movies in their cinemas.

In November, trade ministers at the WTO summit unanimously approved the accession of the world's largest country into membership. Loud applause and hugs between the Chinese delegation and the head of the WTO, Mike Moore, greeted the decision in the glittering conference hall in Doha, Qatar, where trade ministers were meeting to launch a new trade round.

But China put the WTO on notice that a trade round could only succeed if it addressed the gap between rich and poor nations, and ensured that all countries would gain from globalisation, as it staked its claim to lead the group of developing countries.

Chinese Trade Minister Shi Guangsheng said his country supported a new round of trade negotiations "on the basis of full consideration of the interests and reasonable requests of developing countries".

China could become a significant new player in world trade negotiations - and other traditional leaders of developing countries, like India, are wary. Some other Asian countries fear China may take away export markets as it expands its trade.

The problem is particularly intense in the light of the global slowdown, which is affecting electronics production throughout south-east Asia.

In the world's interests

"Of course China is going to be very competitive, but having China competitive under rules, under a binding dispute mechanism, is, I would have thought, in the whole world's interests", Mike Moore, the head of the WTO, said at that time.

Industrial countries, who have negotiated a wide range of deals opening Chinese markets in agriculture, telecoms and financial services, are hoping that China will live up to its commitments.

"Just like every member of the WTO, China will have to deliver on its commitments, and we will be watching this very carefully", Pascal Lamy, the EU trade commissioner, said. Earlier this month he visited Beijing again as part of a trade delegation.

But China insists it will meet its obligations. "As long as our market is open to the outside, the more economic growth we have and the better for the world", China's trade negotiator Long Yongtu told reporters.
Author: John Gibbon
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