REVIEW: Article

Challenges and Opportunites of China's Entry into the WTO

China's accession to the World Trade Organization (WTO) on December 11, 2001, was an event of tremendous importance—for China, for WTO members, for the WTO as an institution, and for citizens and business people around the world.

Conclusion of the China Working Party’s mandate came at a critical moment in the life of the WTO, just weeks before the Fourth Ministerial Conference in Doha, Qatar, in November 2001. This allowed Ministers at Doha to take the formal decision approving the terms of China’s accession package, as well as launching a new Trade Round, making it a truly momentous event. The successful gavelling of China’s membership [along with that of the Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu (“Chinese Taipei”)] set the stage for a new and more inclusive multilateral trading institution.

Entry to the WTO will give 1.3 billion Chinese citizens secure, predictable and non-discriminatory access to the markets of 143 trading partners. It will also give them secure and non-discriminatory access to the goods and services of those members. China will be able to use the WTO’s Dispute Settlement Understanding (DSU) to enforce its rights vis-à-vis other members. Membership will commit China to imple­ment legal and domestic policy reform, ensuring much greater transparency and security on a uniform basis.

China’s willingness to abide by international treaty rules in the conduct of trade and in domestic policy is, to my mind, the most important aspect of its WTO entry. I believe this commitment will cement China’s incredible unilateral drive to reform over the past 20 years that has lifted more than 100 million people out of extreme poverty.

The negotiated accession package agreed to by China and its members includes a number of salient elements. On the bilateral front, after negotiating bilateral market access deals with 44 WTO members, China has committed, on a Most Favored Nation (MFN) basis to substantial reductions of import tariff levels for both agricultural and industrial products, and they are binding across the board. In services, China has made significant access commitments in such sectors as telecommunications, banking, insurance, construction, maritime transport, product testing, education, accounting and legal services.

On the multilateral side, in addition to committing itself to abide by the whole WTO treaty text, China has undertaken specific measures to ensure implementation of those commitments. Because WTO membership requires the enactment and enforce­ment of open and impartial laws, China has undertaken to abide by the WTO’s transparency obligations across the board, including publication of new laws and regulations in advance of their implementation, uniform application of the trade regime and independent judicial review.

Accession has thus set in place the means for traders and investors to have access to China’s own judicial system to review commercial and administrative decisions and to enforce intellectual property rights. This will be a historic process both for foreign participants in the market and for China’s own people. I am convinced that this will be extremely beneficial both for China and for the rest of the world in its dealings with China.

Other elements agreed to by China on the multilateral side are undertakings on non-discriminatory treatment in the right to trade and in relation to technical regulations and sanitary and phytosanitary measures, the elimination of dual pricing practices, special provisions dealing with agricultural and industrial subsidies and anti-dumping, and immediate implementation of the Trade-Related Intellectual Property (TRIPS) Agreement. China also has committed not to resort to agricultural export subsidies.

While China has reserved the right to exclusive state trading for certain products, such as cereals, tobacco, fuels and minerals, and to maintain some restrictions on the transportation and distribution of goods inside China, many of the restrictions that foreign companies have been subject to in China will be phased out over a three-year transition period. In the area of textiles, a special safeguard mechanism has been agreed that will last through 2008, permitting members to take action to curb imports in case of market disruption caused by Chinese textile products. An additional transitional product safeguard will remain in place for 12 years.

China will undoubtedly face daunting challenges as it pursues full implementation of its WTO commitments, in a uniform and non-discriminatory manner. This will of course entail difficult adjustment for much of China’s economy and its citizens. It may well take a number of years for large segments of China’s economy to establish a new equilibrium, during which time many citizens and industries will face hardships. But we should bear in mind that this adjustment process began some two decades ago. The Chinese people are hardly strangers to difficult economic reforms; the government took this decision because they know the benefits it will bring to their people.

In parallel to the challenges facing China, accession will of course also present the rest of the WTO’s membership with the task of incorporating this huge new economy and trading power into its system of rules and disciplines. China’s participation in the WTO will clearly affect our operations over the longer term. China is joining as the seventh-largest exporter and the eighth-largest importer of merchandise trade, and as the twelfth-leading exporter and tenth-leading importer of commercial services. It has the largest single population and market of any WTO member.

Judging from its performance in other international fora, and from its interest in successfully integrating into the multilateral trading system, I am convinced that China’s participation in the WTO will be positive for all.

Undoubtedly, China’s membership will have implications for the regular work of the various committees, which administer the many agreements of this institution. China will surely be active in the Doha and future rounds of multilateral trade negotiations, in agriculture, in services and in other areas of interest. I trust that it will also take part in the ongoing efforts to improve our various institutions and procedures. China’s membership—alongside the other seven countries that have joined the WTO over recent years—is also likely to result in expanded recourse to the DSU procedures, both by China and by other members in relation to China’s implementation of its WTO commitment.

In my view, China’s accession to the WTO can and will contribute to everyone’s goal of a fairer, more equitable, more peaceful world. We can be satisfied that China’s entry brings the WTO that much closer to living up to its name as the World Trade Organization.

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Director-General, World Trade Organization