China’s accession ‘revives’ WTO conference

by Gustavo Capdevila

DOHA: The incorporation of China into the ranks of the more than 140 nations that make up the WTO brought a sense of relief to the 4^th Ministerial Conference, the success of which was considered crucial for the international entity’s future.

The conference approved the documents of China’s accession to the WTO on 10 November. The admission of the new member was the first good news in several years for the WTO, whose  3^rd  Ministerial Conference, held two years ago in the US city of Seattle, was considered a fiasco because no new accords were reached, and which has been the target of heavy criticism from most developing countries and from the anti-globalization movement.

In its first address to the delegates as a Member of the WTO, China defended the positions of the nations of the developing South, though without pitting them against the industrialized North.

The chief of the Chinese delegation to the Qatar meet, Trade Minister Shi Guangsheng, said that only “by adapting itself to the developments and changes of the world economy and fully reflecting the interests and requirements of all parties, including developing countries, can the multilateral trading system maintain its vigour and vitality.”

Shi urged the WTO to commit to resolving the defects of the global trade system in order to deal more effectively with the interests and demands of the developing South.

But he also announced China’s support for launching a new round of multilateral negotiations aimed at further liberalization of the world economy, an objective mainly promoted by the European Union and the US, and widely objected by developing countries.

The Chinese diplomat stated that the admission of his country into the WTO would have “widespread and far-reaching impacts” on China’s economy and on the world economy.

This latest step that China has taken in the international sphere will likely cause social problems at home, at least in the short term, agree most experts.

The WTO itself predicts that the next few years will put pressure on China’s labour market and that problems will arise in income distribution for the population of 1.3 billion, as has occurred in many developing economies that have applied strict structural adjustment measures.

Chinese workers will face a massive wave of layoffs, according to Bill Jordan, secretary-general of the International Confederation of Free Trade Unions (ICFTU). The automotive industry in China alone stands to lose 10 million jobs as a result of the tariff reductions required for joining the global trade system. Lower tariffs will favour car imports. “And tens of millions more in other sectors will find their once lifetime jobs under threat,” according to ICFTU calculations.

Furthermore, “as a country with more than a billion people, with a regimented workforce on some of the lowest pay in the world,” China will enter into competition with countries like India, Malaysia and the Philippines, said Jordan.

The union leader said that the incorporation of China into the world market does not represent a threat to industrialized countries, but rather to “the overwhelming majority of developing countries that deal in the same goods and services as China.”

Studies conducted by various multilateral institutions indicate that China’s entry into the WTO will have positive effects on  the  economies of the industrialized North, particularly the US, EU and Japan, but  that  South  Korea  would also benefit. These countries are among China’s top trade partners, as the principal source of the Asian giant’s imports and the main destination of its exports.

According to the WTO, foreign business groups plan to benefit from the reforms in China’s investment rules, which include the lifting of certain restrictions and a more attractive tax system.

For China itself, the likely economic consequences of its entry into the WTO remain uncertain because it will depend on how the expected changes are carried out, particularly in measures related to greater transparency and the dominance of law, say WTO experts. The rise in economic activity that China will see as a result of tariff reductions will be modest in comparison to the growth rates it has achieved in recent years.

The International Monetary Fund, meanwhile, has predicted that China’s accession to the WTO will initially have a negative and limited effect on the economy. In the second year after the accession treaty enters into force, the Chinese economy will grow 0.1%, expanding in the third and fourth years by 0.6%, and by 0.8% in the fifth year, according to IMF forecasts.

From 1990 to 1999, China’s economic growth averaged 10.7% annually, as a result of the reforms introduced beginning in 1979 under the economic model of a socialist market. The prospects for China as a consequence of its new WTO membership are not all promising, says the IMF.

China could see a weakening over the next few years in its foreign current account, which today registers a large surplus. There will be a growing imbalance as imports outstrip the country’s exports.

The IMF predicts that China’s financial problems could be resolved if industrialized countries eliminated their restrictions on textile and clothing imports. If that were the case, the deterioration of the trade balance would be counteracted by increased foreign investment in China’s textile sector. (IPS)