China's WTO entry recasts economic landscape
Source: China Daily/FT Date: 2006-12-11
Membership in the World Trade Organization (WTO) has dramatically altered the character of the Chinese economy; and the country is ready to play a bigger role in globalization.
That is the assessment of Minister of Commerce Bo Xilai on the eve of the fifth anniversary of the nation's accession to the WTO.
"China's performance (since its entry to the WTO in 2001) has outpaced the expectations of not only foreigners but also ourselves," Bo said yesterday.
The past five years saw China become the third-largest trader in the world; and its share in global trade nearly doubled to 7.7 per cent from 3.9 per cent.
"It is a splendid record for the country as the market share of other major traders, such as Japan, the United States and Germany, declined or levelled off during this period, " Bo said.
When China joined the WTO, many people were worried that domestic industries, such as steel-making, telecommunications and banking sectors, would lose out to their international rivals.
The growth in imports and exports, however, has become a driving force for the improved performance of domestic industries.
"We feel confident and optimistic when analyzing the structure of China's foreign trade," Bo said.
Exports of machinery and electronics products climbed to 56 per cent of the country's total exports in the past five years; high-tech products claimed 28 per cent; and completed products accounted for 94 per cent of total exports, according to statistics from the commerce ministry.
"Domestic industries did meet some challenges," Bo said. "But industries that opened up the most were the ones to have made the greatest progress."
Production of steel and vehicles increased by 25 per cent during the period while exports increased by around half.
More importantly, WTO membership perceptibly changed Chinese people's opinions on employment, intellectual property rights protection and innovation, Bo said, adding that he was proud of China completely fulfilling its commitments and strictly complying with WTO rules.
The government has revised more than 3,000 laws and regulations since the country joined the global trade body to optimize its market system.
China's average tariffs were lowered to 9.9 per cent in 2005 from 15.3 per cent in 2001, while tariffs on industrial products were reduced to 9 per cent and those on agricultural products were cut to 15.3 per cent.
The country has opened foreign-trade rights to all individuals, private-owned businesses and foreign-invested companies; and from this month, foreign-funded banks are allowed to offer renminbi retail business.
As the largest developing member of the WTO, the minister said, China expects to pro-actively participate in the formulation of international trade rules.
"We did not have a say at the Uruguay Round of talks. But now it is different. We should participate in the institution of trade rules, including pushing forward the Doha Round of talks," he said.
The nation feels the same pinch as other developing members and a number of them expect China to help make their voices heard in the global trade regime.
Bo said China hopes to be a bridge between developing and developed members in the Doha Round of negotiations, which were suspended in July because of disagreements between the United States and the European Union on subsidies for agricultural exports.
China hopes that irrationally-high tariffs on farm products, subsidies and support for agriculture, which distort free trade, are scrapped through negotiations and more trade opportunities given to developing countries.
China is now one of the few developing countries with the lowest level of tariffs on agricultural and industrial products, he said.
"In fact, China's tariffs on farm products are lower than not only in developing countries but also many developed members."
He stressed that trading partners should treat China as a full market economy.
"It is globally acknowledged that China's economy is growing fast and healthily," Bo said. "It is illogical to deprive China of the market economy status."
Touching on unfair trade practices, Bo said: "We feel, in the past five years, the more advances we made, the more trouble was attracted."
He pointed to instances of trade friction: 15 per cent of all anti-dumping cases in the world targeted China in 2001, the figure increased to 30 per cent last year and 37 per cent in the first three quarters of this year.
Bo said it is not accidental that China is facing increasing trade conflicts, but is optimistic that the country will be able to resolve the problems.
Lamy lauds achievements
World Trade Organization Director-General Pascal Lamy Sunday praised China's performance since it joined the global trading body in 2001.
"These five years proved that China's WTO accession has brought a win-win result not only to China, but to the world as a whole," Lamy told China Daily in a written interview.
The director-general acknowledged China's efforts to fulfil its commitments, such as reducing import barriers to a level that is among the lowest in developing countries. Also, the country's imports hit nearly US$2.2 trillion in the past five years, with an annual growth rate of 28 per cent.
"China's ratio of imports to GDP, which is a criterion to measure an economy's openness, has moved from 5 per cent in 1978 to 30 per cent in 2005. It is also higher than other developing countries such as Argentina, Brazil or India," he said.
More importantly, Lamy said, China has also become a destination for exports from other developing countries.
"China is the world's third-largest importer from the world's poorest countries, after the European Union and the United States," he said.
When the WTO conducted the first review of China's trade policy in June, the overall assessment was positive.
"The political commitment and determination showed by the Chinese Government is serious and responsible, and all WTO members have acknowledged it," Lamy said.
He also believes China will play a key role in the ongoing WTO negotiations under the Doha Round.
"It is a clear reflection of the importance that China attaches to a fairer and more open trading system, providing a stable framework for China's insertion in the global economy," he said.
Lamy also expects China to make further efforts in some areas, such as intellectual property rights protection.
"I have the confidence that the Chinese Government will spare no effort in improving its trade regime and legal enforcement, which would benefit the Chinese economy in the long run," he said.
Schwab: China risk to world economy
US-Chinese relations are in jeopardy because Beijing is slowing the pace of reform and putting the global economy at risk, Washington's chief trade negotiator said on the eve of a high-level delegation to China.
The Bush administration has identified "troubling indications that China's momentum towards reform has begun to slow" in the last year, according to Susan Schwab, the US trade representative.
The negotiator said the US was ready to initiate new trade disputes and retaliate against China if reforms were not stepped up following this week's strategic economic dialogue led by Hank Paulson, Treasury secretary.
The warnings reflect pressure on the administration from the US Congress to be more aggressive with China over the value of its currency and the growing trade imbalance between the two countries.
Ms Schwab, writing in the Financial Times, said the administration would use this week's talks "to clearly convey our view that a slowdown in reform hinders China's development and undermines the health of our bilateral ties."
The trade representative added that "incomplete" reforms were "creating massive distortions that could leave the Chinese and global economies at risk."
The warnings are detailed in a 100-page report due to be submitted to Congress to mark the end of China's five-year accession to the World Trade Organisation on Monday.
Senior administration officials made clear in interviews and briefings that relations with China were entering an uncertain and perilous phase with the expiry of the WTO road map, which has underpinned relations for more than a decade.
This week's economic dialogue is intended to focus on "fundamental long-term strategy" and provide a fresh context for negotiations, Ms Schwab said in an interview.
A key goal of the talks is to persuade China to throw open its doors to US financial services groups, while an official indicated the Beijing leadership might be enticed with the offer of sought-after market economy trade status.
The dialogue has been carefully choreographed by Mr Paulson, who has a close personal relationship with the Chinese leadership, formed when he was head of Goldman Sachs, the investment bank.
The talks are supposed to project profound respect for the emerging superpower.
However, Ms Schwab said that behind the scenes she would meet her Chinese counterpart and discuss the threat of trade litigation.
The US trade representative said that "voices in China resisting further market liberalisation have grown louder."
Ms Schwab is also being squeezed by a threat from Democrats in Congress that they will impose unilateral punitive tariffs on China in the wake of their victory in mid-term elections.
The trip to Beijing will be a chance for Ms Schwab and Mr Paulson to work together closely. The Treasury secretary is seen as a skilled communicator and persuader, while Ms Schwab is regarded as a tough negotiator.
"You always want to work together in a manner where you are leveraging each other's strengths," Ms Schwab said, indicating she retains overall control of the wider trade agenda while accepting the Treasury secretary's leadership on financial services negotiations.
Observers said there was a delicate dynamic between the two arising from Mr Paulson's leadership on economic policy.
There have been contrasting messages from the two on issues such as the Doha world trade talks, which collapsed in July.
Ms Schwab yesterday linked US movement on Doha to financial services reforms by China, but remains very downbeat about the multilateral talks. Mr Paulson in contrast has called for urgent action to reach a deal on Doha.
Larry Summers said that as Treasury secretary in the Clinton administration he had at times stepped in when trade issues needed to be "elevated," citing his role in WTO negotiations with China. A senior Washington lobbyist said tensions be-tween Ms Schwab and Mr Paulson on trade strategy would ultimately be resolved by Josh Bolten, White House chief of staff.
