In the year 1948, the Republic of China was among the 23 signatory countries of the General Agreement on Trade and Tariffs (GATT). This happened following an announcement by Taiwan’s government that the Republic of China could quit the GATT. It was after China’s revolution of 1949. However, Beijing never recognized such an announcement that its government was quitting the system. After 40 years, in 1986 the Republic of China showed an intention through a notification to GATT, that it was ready to resume its position as GATT’s system Contracting Party. As a result, an examining party was created to monitor China’s status as a Contracting Party for GATT in March 1987. According to Lardy, the first meeting was convened in October the same year. Mr. Shen Juren the then Assistant Minister for International Economic Relations and Trade announced that China’s reform agenda that had commenced in late 1970s had a significant effect regarding the economy of the county. In his statement, he was quoted reiterating that at the previous decade which was from 1978 to 1988 the government’s trade value grew from approximately $20 billion to more than $80 billion (Lardy Nicholas, 1-7)
After almost 15 years, of arduous discussions, the government of China is headed to joining the WTO. World Trade Organization is an international governing institution of international trading system. Anchored on free trade business principles, World Trade Organization requires for its new members to abide by the norms and rules that supports free flow of services and goods across the borders. In most occasions, the member nations that anticipate joining must sweep their economic reforms so as to move themselves in positions that are market oriented and just like any other country, China is not an exception. It is therefore of interest to both United States of America and the world trading community to ensure that the People’s Republic of China become a member of World Trade Center. As a result of its entrance, the economic interest of all parties will be served and at the same time, the organizations that are facing closure in the United States as well as the executives of government-owned monopolies in China will benefit. At the same time, it is in United States security interest to support the peaceful integration of China towards the international community. As far as the Chinese leadership is concerned, the pro-reform element hand will be boosted and strengthened. However, there are legal legitimate concerns regarding the ability of the Country in question of living up to all the expectations as well as abiding to stipulated conditions with which it has entered into through its commitments.
United States of America: A Potential Beneficiary
According to Mark Groombridge, China’s joining of the World Trade Organization will see the United States of America benefiting from the deal since the same country is 13th largest market for goods from United States of America. These kinds of exports do promote classy jobs especially in most important parts of the economy. Some of the sectors that are expected to be boosted are: organic chemical industry, Computer industry, medical sector, telecommunication accessories and fertilizer industry. Both the United States economy and also citizens have benefited following an expansion of the trade between the United States government and the People’s Republic of China for the last 2 decades. Back in 1978 the people’s republic of China unveiled an “Open Door” policy and left its autarchic tradition, between America and China.
The Peoples republic of China is America’s 4th largest business partner whereby the goods and services involved in trading between the two countries are estimated to be worth $100 billion. It is quite evident that the People’s Republic of China a member of World Trade Organization, America could stand to gain a better deal. An amazing number of US organizations including industries stands to benefit a great deal due to China’s accession to the World Trade Organization. Business firms in the United States of America will gain unprecedented entry into the People’s Republic of China’s flamboyant market economy. Opportunities in various sectors for instance, agriculture will tremendously expand and as a result, product tariffs will come down from the present forty five to twelve percent. Also, there are ranges of other organizations that will benefit as well. A good example of industries that will stand to benefit is information technology as well as telecommunication industry and they are the most vibrant sector that reflect the strength of America’s economy (Groombridge M. 1-8)
Currently, the trade in China has already quadrupled in its value. The newly taken figures that were recorded in the year 1999 indicated that China was among the World’s biggest exporters, as well as importer. In exporting goods and services, China was rated 9th in the world, while in importing goods and services it was rated 10th. In 1999 only, the approximate figure of China’s export value was $196.3 billion and that of imports totaled to approximately $166.3 billion in exports while importing services totaled to $31.6 billion putting China in position 15 in the world in terms of exports of services and position 10 in importing of services world over.
China’s Accession to WTO
There are 29 governments that are presently requesting accession to WTO and China happens to be among them. Many of these governments are in processes of economic transformation and reforms implementation so as to be corroborative with the requirements of WTO. The membership of Working Party regarding to China’s accession to WTO, is open to all WTO member states who might be interested. At first, the Working Party on the Republic of China’s status was launched in 1987 under the General Agreement on Trade and Tariffs and it touched the country’s trade regime for goods and services, and later, it was transformed to a WTO Working Party. China’s accession process has been marred with bilateral discussions with some WTO members. These are performed between the government of China and some of the Working Party Members who are based in capitals in Geneva, Switzerland. These multilaterally convened meetings of Working Party are both official and non-official sessions. It is the Working Party’s obligation to multilaterally organize for protocol of accessions as well as the drafted reports. This will be done after China’s compliance of examination as well as the economic status with World Trade Organization has been verified. On the other hand, market access commitment schedules in goods and certain activities in services come as a result of plurilateral and bilateral discussions.
According to analysis that were carried recently indicates that China’s accession to WTO comes as a result of export sales to the United States agricultural growth. These large gains will abruptly increase as the access of the market expands and also, as the economics growth of China boosts demand due to imports of agricultural products. The realization of export gains however, will depend on different factors. These factors are:
- United States export competition from different exporting countries that are in the Chinese market.
- Republic of China’s food regulations and domestic agriculture that affects the imported products
- Implementation of China’s commitments towards World Trade Organization.
China’s World Trade Organization accession agreement contains different effects on the sales of United States agricultural products. The consumers in China are perceptive to price when they purchase food, also, imports that are from various comparative quality sources compete for sales price of the goods and services. The market accession commitment of China under World Trade Organization could potentially create enormous opportunities for United States exports that are of agricultural products to the Republic of China. This has been done and illustrated by an empirical work that was conducted recently by the United States Department of Agriculture (USDA). The people’s republic of China became the one hundred and forty third member of the WTO, after her several succession attempts that had began in 1980s. The table below shows accession period since its commencement.
China’s Accession attempt to World Trade Organization
China submits an application seeking for membership to GATT
The Working Party is formed to monitor China’s accession request
GATT is replaced by World Trade Organization and the Round Agreement that is made in Uruguay
China engages in trade reforms that includes minimizing of tariffs in different categories and at the same time restructuring the enterprising department
An agreement is reached regarding United States and China’s bilateral access in markets
An agreement is reached regarding the European Union and China’s bilateral access in markets
World Trade Organization officially approves the accession by China at its ministerial conference held in Qatar
China is fully recognized as a complete World Trade Organization member
China’s entry to the World Trade Organization had profound effects on the global trade in goods and services.
According to wto.org, prior to China’s accession to World Trade Organization, the government tightly controlled access to The PRC’s access to agricultural markets. Import quotas existed for tobacco, cotton and sugar whereas TRQs applied in a variety of the remaining agricultural products. In cases of commodities that are not subject to total import quotas, State Trading Enterprises (STEs) has an implemented leeway of setting its own import quotas that are internal.
According to Mr. Mike Moore, the Chief Executive of the World Trade Organization, China’s accession to World Trade Organization is an historic moment to both China as a nation and the World Trade Organization. Moore was speaking after the confirmation of China’s approval of the accession. The People’s Republic of China is among the world’s fastest growing. As a result, China has made a very remarkable progress for the past ten years in the reduction of poverty levels. This is as a result of her system of economy that is widely open to foreigners as well as trade investment. Since the entrenchment into the WTO, its economy will operate based on the procedures and regulations of World Trade Organization. This is an advantage to world economic cooperation.
China’s Minister of Foreign Trade and Economic Cooperation, reiterated that the People’s Republic of China required to call the members so as to see the integration of the century’s international trade regulations via equitable consultation and representation, to enhance most of third world countries to share their interests and opportunities that come as a result of the economic globalization and at the same time, avoiding the enlargement of the gap that is between the rich and the poor. The move also saw the protection and development of marginalized countries. The Working Party’s chairman, Ambassador Pierre-Louis Girard of Switzerland concluded that China had agreed to abide to all the stipulated regulations that had been under discussion for fifteen years. There was a total of 900 page legal text that was prepared for China’s official accession acceptance by World Trade Organizations’ one hundred and forty two member governments. As a result, The People’s Republic of China accepted that she would be undertaking a chain of imperative commitments so as to prove its readiness to integrate the global economy and at the same time, provide a reliable environment for both foreign and trade investments according to the laid regulations by World Trade organization.
Some of the commitments that The People’s Republic of China undertook to abide with were:
That it could not discriminate any member of the World Trade Organization
That it could do away with the practices of dualism and also the treatment that was according to the home made goods for sale in comparison to those goods that were produced for export
That it could not capitalize on for reasons of gaining the protection to home industries or even service providers in that matter
China also undertook to implement its agreement with World Trade Organization both uniformly and effectively after thoroughly revising her laws that are in existence and then enact a new legislation that will show the conformity and compliance with World Trade Organization
China also agreed not to either introduce or maintain subsidies that were for her export especially on the products which were produced agriculturally (wto.org, 1-9)
China also suggested that it would comply with obligations of TRIPS after a period of one year instead of five years in most developing countries. Chinese government should protect foreign intellectual property so as the regional officials can act independently to the central government. The main problem is that intellectual property protection in agriculture is day by day becoming important because of high proportion of biotechnological products. Given the fact that these accession aspects are for a long time been under negotiations, substantive issues have been given less attention. The ability of enterprises in domestic state has distorted input prices to those firms that engaged directly in international trade. For the input prices to be set correctly, firms engaging in export production or those producing import producing goods should be given tactical advantage against foreign competitors. Vehicles, steel, electric power and other important inputs are being affected. Some attempts have been taken into account of removing state monopolies in industries but has proved to be futile to the Chine’s industry in concessionary pricing. The other issue is lack of transparency in making decision which has affected the economy of China. If there is no transparency, foreign firms will be affected by non-discriminatory basis. The above problems will result to large number of disputes at World Trade Organization once China accedes.
China has been given many requirements by the World Trade Organization. The government of China sees membership of World Trade Organizations as a method to escape variable use of foreign governments’ trade policy. China currently as a non World Trade Organization member, conducts trade through bi-lateral agreements with other foreign countries. The agreements that China engage into can be withdrawn or lapse easily than obligations of WTO. Many different countries have used withdrawal of concessions of bi-lateral trade as for non-trade reasons like human rights as an excuse. China’s accession to the World Trade Organizations would protect it from threats or withdrawal of trade actions. Given the fact that China’s trade activities with foreign countries and also its approach to trade, the country’s WTO activities should be expected to concentrate on acquiring protections from use of foreign governments’ use of trade policy. China has made offers and commitments evaluation to the WTO which is of practical interest to the trading partner countries and policy makers in China.
World Trade membership will give the Republic of China a steady access to foreign markets. This will curb disruptions due to unpredictable shifts policy in foreign trade. China will attract foreign investors who will use the country as their export podium. China will also attract investors due to its adequate securities so that they can develop and improve China’s domestic market. China as a member of WTO, it will be provided with additional capital, market information, management technology and global distribution and production networks that will connect China to other economies of the world (Cheng Leonard, 3-4)
China has faced many difficulties getting its admission to World Trade Organization. These difficulties are:
Political issues- This has its roots in many vested and established interests from the citizens of China that has made it difficult to be given WTO membership.
Legal difficulties- China’s legal system does not operate to the requirements of World Trade Organization. PRC’s legal system of China has caused delays in China’s accession to WTO. China’s establishing Rule of Law has been faced with many Problems considering its enormous size where there are corrupt or incompetent local officials who have made it impossible.
Economic issues- The economic caused by oppositions from abroad or within the country. Interest groups in China especially those of protected areas like chemicals, automobiles and machinery has pressured the government of China to oppose accession to WTO (Beiske Ben, 4-5)
China’s accession to World Trade Organization came as a blessing in disguise to many countries. With a population of over one billion people, most of the member governments have benefited from the deal especially developing countries. This has been made possible by the rules that are set by World Trade Organization whereby all types of discriminations are eliminated. One the country that has benefited from the deal is the United States of America. This has been possible following China’s large market in global trade. The People’s Republic of China has also benefited from its accession because it still reserves its right to exclusive trading of goods. Some of these goods include mineral, fuel cereals among others.
Beiske Ben. “The Difficulties Surrounding China's Accession to the World Trade” Norderstedt: Grin Verlag press (2003). 26th April, 2011: 4-5. Print.
Cheng Leonard. “China's Economic Benefits from Its WTO Membership”: Department of Economics (1999). 26th April, 2011: 3-4. Print.
Groombridge Mark. “China's Accession to the WTO. A Winning Outcome for both China and the United States” Center for Trade Policy Studies (2001). 26th April, 2011: 1-8. Print.
Lardy Nicholas. “Issues in China's WTO Accession” Washington D.C (2011). 26th April, 2011: 1-7. Print.
Wto.org. “WTO successfully concludes negotiations on China's entry: World Trade Organization (2001). 26th April, 2011: 1-9. Print.