The pros and cons of Chinas accession to the WTO

Zhang Kai


     After 15 years of negotiation, and making maximum concessions to WTO members, China eventually gained accession to the WTO. The mass media in China was filled with euphoria. However, let us take a close look at some of the facts revealed by the press in order to come to some assessment of the pros and cons of Chinas accession.

     The editorial of the Hong Kong Wen Hui Bao, on the day following Chinas accession, wrote that this implies China will enjoy multi-lateral, steady and unconditional most favoured nation treatment, defend Chinas state interests, and prompt Chinas accelerated economic systemic reform and restructuring. This will also imply Chinas marketization and internationalization. The editorial ended with the phrase the formation of Chinas socialist market economy will rise above all obstacles.

     The sector that may benefit most from the accession is textiles. The USA, EU, Turkey and others will formally cancel all quota restrictions on Chinas textile exports by 2005. Next to that is the electronics industry. The World Bank gave an optimistic estimate of Chinas annual economic growth to be 2%. Niu Wenyuan, Chief Scientist of the Sustained Development Strategy Division of the China Academy of Sciences, estimated that in the next five to ten years, about 30 to 40 million jobs will be created.

     However, there are worries about possible severe impacts on agriculture, state enterprises and current product quality. With China drastically reducing tariffs on imports, foreign industrial and agricultural goods may be dumped into China, creating serious difficulties for Chinese products to compete. It is estimated that in the four years starting from the beginning of 2002, the overall level of tariffs on industrial goods will drop from 15.3% to 12%. The decrease will affect over 70% of tariff items, and low tariff items (lower than 10%) will increase to about half of all items. The average tariff rate for over 300 information technology products will be reduced to about 5%, of which over 100 items will be tariff-free. By 2005, there will be further drastic changes, and items with tariff over 25% will be reduced by half from now, and constitute less than 5% of all items. The general tariff rate will go below the average level of developing countries (9-10%). The tariff for automobiles will go down from the current 70-90% to a standard 25% by July 2006. This will create much pressure on the domestic automobile industry.

     It is also estimated that with such competition and with the economic restructuring, tens of millions of workers will be laid off. The impact on peasants will also be serious. Take soya bean as example. The price of imported soya beans is lower by 15-20% compared to domestic products. The tariff rate is only 3%.

     According to the tariff agreement, China will by stages reduce tariff on agricultural products starting from January 2001. By 2004, the average tariff rate on imports will be reduced from the present 20-30% to 14.5-15%. By 2006, the quota on certain imported agricultural products such as soya oil and vegetable oil will be cancelled, and all tariffs will be uniformly reduced to 9%. The Minister of Agriculture of the USA commented that US farmers will immediately benefit from exporting agricultural goods to China, and it is estimated the annual increase will be USD 2 billion. It is also believed that more peasants will be transferring to the urban or industrial sector.

     Telecommunications and insurance will be the two major sectors that will be open to foreign capital. Related ordinances restricting their operation by foreign capital have been removed. That means China could be attracting more foreign capital and investment, providing the ground for activity by global capitalism. Major state-owned enterprises will also be restructured and shares will be sold to foreign investors. Statistics show that by the end of 1999, 81% of state-owned enterprises have been corporatized. On the other hand, the operating mechanisms of two-thirds of small state-owned enterprises have been changed through shareholding system, joint capital ventures, sale or bankruptcy.

     There are also orientations towards privatization of land ownership through the idea of operating agriculture by science and education. This could allow limited transfer of land use rights from individual peasants to corporations.

     There have obviously been differences of views concerning Chinas accession to the WTOI, which is why the Premier Zhu Rongji, in a meeting on Dec 9, stressed that all levels of leadership should correctly understand the significance of the accession to the WTO, and unify all opinions under the central leaderships policies. It is also expected that the masses of workers and peasants will resist the adverse impacts on their working and living conditions with Chinas accession to the WTO and further concessions to the forces of global capitalism. More resistances, protests and organization will inevitably follow.

25 December 2001