China’s Entry to the WTO: Ten Years After
While China is preparing to welcome the year of the Dragon, it witnessed last December the celebrations of the 10th anniversary of China’s accession to the World Trade Organization (WTO). The anniversary was somewhat less celebrated here among the Western business community, where the observers do not necessarily agree on the positive impacts of China’s membership to this elite club.
China’s entry to the WTO was not a simple one: it took about 15 years of negotiations and representations from Chinese high officials, as well as the approval by members of the organization of a 900 page legal document that encompassed the results of these negotiations. At the time of its accession to the global trade body, Mike Moore, then chief of the WTO, said it was a “fine moment in history of cooperation between nations” and he added that “the world will become a more competitive place now and that can only be a good thing”. But was the addition of this new player on the international trade field beneficial to all?
Certainly, Chinese nationals have benefited from their country’s rise to the status of the World’s second biggest economy. China’s annual growth rate has been around 10% for the last few years and it is said that 200 million Chinese were relieved from poverty. When one travels throughout the country, it is even more obvious that Chinese nationals now enjoy a higher quality of life than a decade ago, than ever for that matter. With its exports having almost quintupled over the last 10 years, China has become the world’s biggest exporter and an essential business partner for manufacturers.
As for Westerners, they can surely thank China’s membership to the WTO for the numerous consumer goods they can now buy at prices much lower than before they were Made in China. Moreover, American and European companies such as Wal-Mart, Fed-Ex and Ikea were given access to an impressively populous market and were hoping for the best when they set foot in mega cities such as Guangzhou, Shenzhen or Chengdu. Why then were there so many complaints from Europe and the US filed against China to the WTO?
When it applied for becoming a member of the WTO, China was considered as a “developing” country and only a few could have predicted its fast and sharp rise to the status of superpower among the World’s international trade community. Consequently, and as any other developing country entering the elite club, it benefited from a special regime that allowed it to protect its industries in certain circumstances. But being the very developed and superpower that it is today, China still uses these provisions, and some argue that in reality, it is preventing foreign companies from truly gaining access to its market. For example, a Jeep Grand Cherokee Made in USA currently sells at less than 28,000$ in the United States, while it is offered at a starting price of 85,000$ in Beijing because of the high tariffs it can still impose on imported automobiles. One can understand that when only 2,500 Grand Cherokee were sold on Chinese soil in 2011, it is tempting to raise a bright red flag to the WTO.
Some observers say that China’s economic policies have not followed the evolution of its economy and have remained in a protective mode, what one would expect from a truly developing country. And that considering the state and the flourishing of China’s economy today, it should by now take full responsibility of its membership to the WTO and its superpower status. Considering the instability of the US market and some European economies, it is no surprise that the European Union Trade Commissioner, Mr. De Gucht, called for China to embrace the “WTO spirit of promoting open markets and non-discriminatory principles in its domestic legislation” in the future.
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