By Prof. Xiao Lian


China and WTO entry is going on process but not in practice. There are big debates among inside of China and outside of China in terms of economic and non-economic issuers.

I. The WTO is a Multinational Economic Organization Dominated by the US and Benefited to the US.

As one of Members of Task Force in the "Symposium on the Consequences of Economic Globalization", November 1999, Bangkok, Thailand, I once pointed that the World Trade Organization (WTO) is essentially dominated by the US and other western industrial countries. The rules and standards applied by the organization are biased against developing countries and the poor, which despite their majority in number have little say. Imposing US American concepts e.g. intellectual property rights, legal systems, and accounting regulations will lead to the death of diversity, which in fact is the source of life for the future survival of the global community.

In response to the message of the Symposium addressed to WTO, Mr. Kike Moore, Director General has sent us a two-page answer. He suggested that the allegation that industrialized countries dominate the WTO is increasingly not the case. Two-thirds of the current membership of the WTO is made up of developing countries and, as decisions are made on the basis of consensus in the WTO, they wield a considerable amount of influence. Developing countries, for example, were the driving force behind bringing textiles within the scope of the WTO. The dispute settlement mechanism within the WTO also means that all countries are able to enforce their rights on the basis of the rule of law and not on economic or political power as was the case in the past.

The response of Mr. Kike Moore is kindly but non-persuasion. I once wrote in the last year that the US is a leader of the WTO, which is one of the global economic means employed at unilateral, bilateral, regional and multilateral levels. By wielding its "Super 301 Clause" and "Special 301 Clause", the US has repeatedly imposed or threatened to impose unilateral economic sanctions against other countries to force market access for US products. Through taking advantage of its superiority in high-tech, the United States has compelled other countries by means of " negotiation " to open their markets to US goods and service before a deadline set by the United States. In bilateral economic relations, the United States has pressed its trade partners through bilateral negotiations to open their markets for competitive US goods and services to reduce its trade deficit and plunder the resources of other countries. While aiming to bring all major trade regions into a US-led global economic order, the United States has tried to dominate all regional economic groups in the word. During the course of decision of police making, the United States has scrambled for the right to make and amend rules for multilateral economic co-operation to ensure its global order in such fields as economy, trade, science and technology, investment and finance. Furthermore, while obliging other countries to comply with multilateral rules, the United States will never let itself be bound by former whenever it thinks an international rule contradicts is own laws. In short, by all these unilateral, bilateral, regional and multilateral economic means the United States is seeking to dominate the WTO under the banner of "fair", free trade, free market, and less regulation.

Even the majority members of the WTO is made up of developing countries, as Mr. Mr. Kike Moore mentioned above, they are able to enforce their rights on the basis of the rule of law. But their influence in terms of key issues I pointed above is much litter than that of the developed countries (especially the US). For example, without agreeing from the US, Mr. Kike could not obtain the position of the Director of General of WTO in half term.

II. Why China Wants to Obtain Entry into the WTO?

As long as the WTO is so unfair for developing countries including China and so benefited to develop countries especially to the US, why China wants to obtain entry into it? This issue is similar to the issue that China wants to join the competition in the Olympic Game? China could not refuse to take part in the highest competition in the whole world within the Olympic, for all that it is dominated by west developed countries especially by the US, for all that it is unfair and corruption in the decision making in the Standing Committee of the Olympic. Otherwise China could loss a lots of opportunity to exchange the experiences with others and to learn others. In fact, the Olympic and the WTO, which whatever you like or dislike them, have been dominated by western developed countries. I once said that it is like the English as an international language. If you accept and use it, you could find a lot of chances to develop your business in terms of different fields. Otherwise, if you do not accept and use it, you could loss many opportunities to expand your scales of business.

The reasons why China wants to obtain entry into the WTO are:

1. The Political Need

As a member of the United Nation (UN), China has to take a position of the WTO as economic UN comparably. Upon joining the WTO, China -- world's largest developing country -- will therefore have a powerful vote, and an effective veto, in any future the WTO efforts to reform the ground rules of global markets benefited to developing countries.

2. The Economic Need

During the process of "open door policy", around half of General Domestic Products (GDP) in China are achieved through out the global markets. In 1998, the value of international trade of all of members of the WTO are US$ 6. 5 trillion with taking 20% of GDP of the global markets. Without a member of the WTO, China's more than 40% GDP is deponed on the global markets with 0. 5% share of the whole members of WTO. This means that it is greatly increasing the transaction costs of international trade if China is standing outside of the WTO.

3. The legislation Need

As a developing country, China needs to introduce the advance legal system regarding international trade, international accounting, IP protection, to learn how to protect herself with using international legislation, in order to diminish the economic gap between the western countries and China.

III. Why the US Changes its Attitude and Agrees with China's Entry into the WTO?

Firstly, the US takes the biggest commercial interests. The China's WTO entry will allow the US firms in terms of high-tech, service, agriculture, manufacture, retailers and distributors to enjoy access to high-quality, value-priced goods produced in China. American products will have better access to the largely untapped Chinese marketplace. China's WTO entry is a challenge, not a reward. To joint the WTO, China must:

  • Make painful, fundamental reforms and agree to a vast laundry list of US demands that strike to the heart of China's economic system and even touch on the PRC's political future.

  • Cut overall average tariffs from 24% to 9% by 2005.

  • Cut tariffs on US priority goods even faster to 7% by 2003.

  • Eliminate tariffs on high-technology goods by 2005.

  • Cut average agricultural tariffs by half.

  • Expand market access for US corn, cotton, rice, barley, soybeans, meats, and other products.

  • Give full trading right to foreign firms, and eliminate state-owned middlemen.

  • Open markets for telecommunications, insurance, banking, securities and professional services.

  • Open the Internet sector to foreign investment.

  • Accelerate the reduction of auto tariffs.

China's "reward" from the US is zero. China gets no increased access to US markets, not cuts in US tariffs, any special removal of US import protections. That's because US market is already open to Chinese imports. China's WTO entry opens China's market. ("Business Coalition for US-China Trade", "Fact Watch", March 2, 2000). The US will be better able to sell and distribute its goods in China without relocating its factories, or selling through the Chinese government, or transferring technology. In return, the US has agreed only to maintain the access China already enjoys to its market.

Secondly, The US needs the strategic cooperation with China regarding regional security, non-proliferation, reduce of arm sales, protection of environment, etc. Without free trade relationship with China in bilateral and multilateral terms, the US could not obtain this cooperation with China, which will not meet the needs of the US global strategic interests.

Thirdly, the issue of China's WTO entry has partly been influence on the issue that who (Democrats or Republicans) will win the presidency selection in this year. The democrats shall keep the policy stable to allow China to access to the WTO, if they want to continue to take over the president position.

IV. The Impact of China's WTO Entry to Chinese Economy and Society

China's WTO entry is both an opportunity and a challenge:


1. Have to force China to open her door more widely than before.

In accordance with recent study, published by Goldman Saches, it is estimated that China's total trade (import plus exports) would double to $600 billion by 2005from $324 in 1998 if China were to accede to the WTO. By 2005 China's accession to the WTO would boost China's total annual imports by $105 to 115 billion, with $65 billion coming from the lowering of tariffs, $20 to$30 billion from the removal of non-tariff barriers, and a final $20 billion from the expansion of foreign direct investment (FDI) in China. The share of international trade in the total GDP in PRC will be promoting from 33% (import takes 14%, export takes 19%) at present to 36% (import has 26.9%, export has 25.8%) by 2005. The increasing of GDP driven by expanding of import will be promoting to 14.3% from 11.9%, and the increasing of GDP driven by expanding of export will be reaching to 12.2% from 10.1% at the some period of time.

2. Accelerate the economic growth rate in PRC.

According to the statistic figures wrote by Development Research Center under the State Council of PRC (please see table 1), by 2005, the growth rate of real GDP in PRC will be reached 1.53%; the consumption will be expanded 0.58%; the investment will be increased 1.57%.

Table1: Comparison between Member and Non-Member of China's Entry WTO by 2005 (%)

Income from Government
Income from Suburb Citizen
Income from Rural Resident
Condition of International Trade
Agriculture Land
Self-sufficiency of Grain

- 0.25
- 1.57
- 18.38

The Goldman Sachs study estimates that China's WTO accession would add about 0.5 percentage points to its economic growth rates by 2005. This is a significant addition but still means the PRC economy would have to grow at the unlikely rate of well over seven percent per year to reach $1.66 trillion by 2005. The average growth rate of GDP in per year will be promoted 1% if China is entry to WTO in comparison with that China is not a member of WTO between 1998 and 2010. That China's WTO member will enhance its share of GDP in the whole world from 3% at present to 6% after five year later. Otherwise this share shall be only 4.5%. (Mark W. Frzier: "Coming to Terms with the 'WTO' Effect on US-China Trade and China's Economic Growth", NBR Publication, September 1999).

3. Improve the adjustment related industrial and economic structures.

With the expanding of FDI and international trade, a lots of international capital and high-tech will be involved into China, which will be benefited for overcoming the shortage of capital and advanced technology, and for shifting Chinese economy from quantity development to intensive development. The industrial and economic structures in China will be focused on the roles of intellectual knowledge and educated specialists.

4. Stimulate enterprises to enhance their ability to take part in global competition.

It is painfully for Chinese enterprises (especially for state own enterprises) to join the international competition under the agreement with standards of WTO led by western developed countries, that strike to the heart of China's economic system and even touch on the PRC's political future. It seems like invite wolf to home. In that case, you have to defeat wolf, otherwise you could be eaten by wolf.

5. Reform China's legal regulation system in accordance with the WTO standard

Their more than ten thousands of regulation, rules of law will be reformed and changed according the rule of law of the WTO. Otherwise, China could be punished by the dispute system of the WTO, if there are some conflicts between China and other members of the WTO. It will be to fast the steps of reform of China's legal regulation system.


Debate about China's member of the WTO.

The WTO emphasizes on privatization, liberalization, and deregulation, which are very deferent from the current system emphasized on centralization and communism. China's membership of WTO has not only been a source of concern within the political bureaucracy, but also animated conflicts over national economic policy, the ongoing debate over which economic development strategy will be most successful for China and the role of the member of WTO plays in these strategies. These debates were based on about the ten unresolved questions: (1) Are the concepts of -national economy" (minzu jingji) and -national industry" (minzu gongye) still meaningful today? A national economy is understood as one owned and run by Chinese enterprises rather than foreign investment enterprises (FIEs) or foreign governments. (2) Who takes advantage of whom? The use of Foreign Direct Investment (FDI) could be to obtain intellectual property (IP), know-how and management skills, but allowing foreign investors to dominate China's economy. (3) Does the strategy of "trading market access for technology" work? It is adult the whether foreign firms sell the most-advanced IP to China; instead, technology transfer wipes out China's capacity to develop indigenous and possibly competitive technologies. (4) Are multinational corporations (MNCs) benign investors? It is impossible, to build a strong and independent economy by relying only on FDI especially investment from MNCs, which final goal is to dominate the Chinese market. (5) Is China a capital and tech-scarce country? China's domestic deposits have exceeded the volume of loans ($43.5 billion, by 1998). Chinese scientific and tech level has taken leading position in the world developing countries. FDI is, in some areas, for contributing to inefficient utilisation of domestic capital. (6) Is there too much FDI for the Chinese economy to absorb? (7) Does FDI encourage state ownership enterprises (SOE) reform? The excessive FDI and the methods used to attract it are detrimental to SOE reform and have helped FIEs gain dominant market share. (8) Should China open markets to domestic investors first, before opening them up to foreign ones? (9) Should China allow foreigners to hold majority shares of FIEs? (10) And does China need a concept of "industrial security"? The government should retain the current standards of industrial security that prevent FDI from dominating strategic industries. (Yong Wang, 2000)

Chinese national economy will meet very strong pressures from outside word due to tariff cut. The agriculture production will be seriously reduced year by year, in which the biggest reduction will have been taken by wool (-37.0%) and the least reduction will belong to rice (-1.04%). The agriculture land will be decreased 18.38% by 2005. The income from rural resident will be cut dawn 2.05% by 2005 (please see table 1). With the being of insolvency of enterprises, more than 11 million workers will be unemployment, in which 9. 6 million workers will be shifted from agriculture sector to another sectors. As tariffs fall, competition will speed the dismantling of China's state enterprises, meaning that tens of millions of Chinese citizens will no longer depend on the government for everything from their paycheck to their housing to their health care. There will also be tensions-more short- term unemployment, labor and political activism-and China's leaders will face hard political choices. There will be great pressure to accommodate popular demands, by expanding local elections, letting workers take grievances to court, and broadening outlets for dissent.

Open markets will also accelerate the information revolution in China. In the past year, the number of Internet addresses in China has more than quadrupled to nine million. This year, the number is expected to grow to more than 20 million. China's restrict access to some Web sites only proves how these changes threaten the status quo. (William Jefferson Clinton: " China's Opportunities, and Ours", " New York Time", 09/24/2000)

Stronger pressure comes from the industrial structure adjustment. China has to meet the problems of the contradiction between the capital and technique-intensive market and labor-intensive market. One hand, some capital and technique-intensive sectors, like bank and insurance, automobile, telecommunication and pharmacy, will lose their share and advantage in the domestic market. For instance, the manufactures of automobile, petroleum and metal will be cutting dawn their number of enterprises at 27%, 3%, and 16% partly, which will lead to a lot of unemployment in these sectors. In other hand, in the labor-intensive sectors there have already had much huge unemployment, they can not be involved the workers lay off from the capital and technique-intensive sectors. At same time, they can not export their unemployment into the previous sectors either. Thus, the issues of unemployment will become the serious problem related social stability.

Stronger pressure comes from the management. With increasing of the share taken by multinational companies (MNCs), in which their share will take 50%, or over 50%, foreign companies will have toughly influenced on the decision process in the Chinese enterprises management. How to deal with the issue regarding the cooperation between Chinese managers and foreign managers? How to deal with the issue in respect to relationship between foreign managers and the government in different levels? How to estimate the role of Chinese Communist Party in the management in the joint ventures?

Stronger pressure comes from ideology and social justice. It is very similarity to the message addressed by us to WTO in Bangkok Conference, Thailand last year that the trade liberalization policies pursued by the WTO contributed significantly to the following results: (1) Growing impoverishment and discontent among the majorities of people. (2) Increasing inequality in income distribution within countries, which is masked by the economic statistics that indicate economic recovery, but do not show how the urban poor and rural communities were pushed even further into misery and despair, carrying the burden instead of the affluent sectors of society and business. (3) Accelerated destruction of environment and ecological systems particularly affecting livelihood and health of the rural and suburb poor especially in the western part of China. (4) Trade liberalization exacerbates the culture of consumerism and threatens the very survival of the extremely precious, diverse and traditional Chinese ancient cultures and religions.

V. The Impact of China's WTO Entry to Asia

As the biggest developing country in the world, China's WTO entry will play a important role in the global multinational trade system, in which China could represent the interests of the majority developing countries in Asia to set up the new regulation benefited for this region. Apart from the WTO, there are some regional free trade blocks, like North American Free Trade Agreement (NAFTA) and European Union (EU). The countries located in the North America and in Europe (the majority of countries) are very benefited from the indicated trade organization above. However, it is very difficult for the other counties in the other part of the world to move into the trade block or to be benefited from these regional economic and trade organization. We note that there is a no free trade union, like NAFTA and EU, united whole Asia. If China becomes a member of WTO, possibly it could be an opportunity to set up an Asian regional trade organization, (it could be to take long time to go -- my personal view), which could be block the Asia's interests shared by Asian countries and Asian people.

China's WTO entry will be benefited for Asian peace and security. China will try to be keeping the commercial environment stable. For example, China has so far largely escaped the Asian regional turmoil surrounding it, due to her the renminbi is stable. China's economic managers have had a front row seat from which to witness the Asian Region's crisis. As china moves to modernize its own economic system, it can thus benefit from the region's experience. China will continue to play a important role in the peace dialogue between North Korea and South Korea. She will continue to keep good cooperation related to the issue of non-proliferation with other Asian nuclear countries. Although there is a big conflict on "the one China policy" between mainland of China and Taiwan, Taiwan president Chen Shuibian has supported China's WTO entry, because it is useful for keeping peace and commercial development for the both sides of Taiwan Strait.

At same time, with the China's WTO entry, Asia will have faced the stronger economic and commercial competition than before any time in the Asia history. In accordance with the statistic figure reported by the Institute of International Economics of the USA, the tariff barriers in China is higher than that in Japan and in South Korea (21.7%: 5.0%: 7.9%), but the non-tariff barriers in China is lower than that in Japan and South Korea (22.7%: 173.0%: 30.7%). China's WTO entry with the condition of cutting dawn the tariff barriers and non-tariff barriers will be make bigger pressure on some Asian countries like Japan, South Korea, India, etc., to open their doors more widely to the whole world.

China's industrial structure associated to labor intensive sectors is very similar to the industrial structure in South Easter Asia countries, like Malaysia, Thailand, etc. When China access into the WTO, her production of textile will have raised 22.5% with increasing of export 63.8%; her output of garments will have enhanced 63.8% with adding of export 200.0%. So, the South Eastern Asia countries will meet stronger competition with Chinese producers in terms of labor intensive sectors such as textile and garments.

Both China and Asia have to meet the biggest pressures from western developed countries in terms of the high-tech intensive industry such as telecommunication, bioengineering, new types of material, and space engineering, etc. They have not any competitive advantage over the western developed countries in those industries. In order to take its advantage over the developing countries, the US brought the rule of law related to high tech trade, like electronic commerce, almost suddenly at the preparation stage for the Geneva Ministerial Meeting. Countries, particularly the developing countries, had hardly had any time to examine the proposal by the US. If the proposal wrote by the US is approved, it would bring benefit to some other developed countries. The developing counties including the Asian developing countries have practically no benefit. ( Bhagirath Lal Das, "The Implication of the New Issues in the WTO", " World Economy & China, Number 11-12, 1999) That how to protect the interests of the developing countries including Asia developing countries in the system of the WTO is a important issue, when China becomes a member of the WTO.