China and the World Trade Organization

Last updated

China became a member of the World Trade Organization (WTO) on 11 December 2001, [1] after the agreement of the Ministerial Conference. [2] The admission was preceded by a lengthy process of negotiations and required significant changes to the Chinese economy. Its membership has been contentious, with substantial economic and political effects on other countries (some times referred to as the China shock) and controversies over the mismatch between the WTO framework and China's economic model. [3] [4] Assessing and enforcing compliance has become issues in China-US trade relations, [5] including how China's noncompliance creates benefits for its own economy. [6]

Contents

Background

Until the 1970s, China’s economy was managed by the communist government and was kept closed from other economies. Together with political reforms, China in the early 1980s began to open its economy and signed a number of regional trade agreements. China gained observer status with GATT and from 1986, began to work toward joining that organisation. China aimed to be included as a WTO founding member (which would validate it as a world economic power) but this attempt was thwarted because the United States, European countries, and Japan requested that China first reform various tariff policies, including tariff reductions, open markets and industrial policies.

Preparations

After the 1997 Asian financial crisis, China sold off or merged many unprofitable state-owned enterprises. In 1998, China reformed the State Council to greatly reduce the mandate of the State Planning Commission and increase the mandate of the State Economic and Trade Commission. This shift also corresponded to the change in premiership from Li Peng to Zhu Rongji, the latter of whom strongly believed that China needed deeper economic restructuring. This, which had been happening since the 1980s, included crackdowns on corruption and the establishment of chambers of commerce. [7]

The World Trade Organization Ministerial Conference of 1999 and related 1999 Seattle WTO protests were the penultimate step before Chinese accession. [8]

United States' role

Formal diplomatic relations between the United States and the People's Republic of China were not established until 1979, and even afterward, trade relations were hampered by the high tariff rates of the Smoot–Hawley Tariff Act of 1930. After the two governments settled asset claims dating from the Korean War in 1950, Congress temporarily granted China most favored nation status in 1980. Chinese-American trade was still hindered by the Jackson–Vanik amendment of 1974, which made trade with the United States contingent on certain human rights metrics. [9]

By 1984, the United States had become China's third-largest trading partner, and China became America's 14th largest. The annual renewal of China's MFN status was constantly challenged by anti-Chinese pressure groups during US congressional hearings. For example, U.S. imports from China almost doubled within five years from $51.5 billion in 1996 to $102 billion in 2001. [10] The American textile industry lobbied Congress for, and received, tariffs on Chinese textiles according to the WTO Agreement on Textiles and Clothing. In reaction to the 1989 Tiananmen Square protests' suppression, the Bush I administration and Congress imposed administrative and legal constraints on investment, exports, and other trade relations with China. [9]

The Clinton presidency from 1992 started with an executive order (128590) that linked renewal of China's MFN status with seven human rights conditions, including "preservation of Tibetan indigenous religion and culture" and "access to prisons for international human rights organisations"—Clinton reversed this position a year later. Other challenges to Sino-American relations in this decade included the investigations into Chinese nuclear espionage which produced the Cox Report, the persecution of Taiwanese-American scientist Wen Ho Lee for unproven allegations of espionage for the PRC, and the 1999 United States bombing of the Chinese embassy in Belgrade. But relations warmed after the September 2001 initiation by George W. Bush of the War on Terror. [11]

Conditions

These changes were difficult steps for China and conflicted with its prior economic strategy. Accession meant that China would engage in global competition according to rules that it did not make. China's admission was "an enormous multilateral achievement" that marked a clear commitment toward multilateralism. [12]

When China joined the WTO, it agreed to considerably harsher conditions than other developing countries. [13] [14] After China joined the World Trade Organization (WTO), its service sector was considerably liberalized and foreign investment was allowed; its restrictions on retail, wholesale and distribution ended. [15] Banking, financial services, insurance and telecommunications in China were also opened up to foreign investment. [16] Furthermore, China had to deal with certain concerns linked to transparency and intellectual property that the accession to WTO underlined. [17] [18]

Non-market economy

Under Article 15 of the protocol by which China joined the WTO, China was recognized as a Non-market economy (NME). This status allows special treatment within the WTO. The status was set for 15 years and has been disputed after 2016, the year when the 15 years had passed. [19]

See also

Related Research Articles

The General Agreement on Tariffs and Trade (GATT) is a legal agreement between many countries, whose overall purpose was to promote international trade by reducing or eliminating trade barriers such as tariffs or quotas. According to its preamble, its purpose was the "substantial reduction of tariffs and other trade barriers and the elimination of preferences, on a reciprocal and mutually advantageous basis."

<span class="mw-page-title-main">World Trade Organization</span> Intergovernmental trade organization

The World Trade Organization (WTO) is an intergovernmental organization that regulates and facilitates international trade. With effective cooperation in the United Nations System, governments use the organization to establish, revise, and enforce the rules that govern international trade. It officially commenced operations on 1 January 1995, pursuant to the 1994 Marrakesh Agreement, thus replacing the General Agreement on Tariffs and Trade (GATT) that had been established in 1948. The WTO is the world's largest international economic organization, with 164 member states representing over 98% of global trade and global GDP.

<span class="mw-page-title-main">Trade agreement</span> Wide ranging taxes, tariff and trade treaty

A trade agreement is a wide-ranging taxes, tariff and trade treaty that often includes investment guarantees. It exists when two or more countries agree on terms that help them trade with each other. The most common trade agreements are of the preferential and free trade types, which are concluded in order to reduce tariffs, quotas and other trade restrictions on items traded between the signatories.

The status of permanent normal trade relations (PNTR) is a legal designation in the United States for free trade with a foreign nation. The designation was changed from most favored nation (MFN) to normal trade relations by Section 5003 of the Internal Revenue Service Restructuring and Reform Act of 1998. Permanent was added to normal trade relations some time later.

In international economic relations and international politics, most favoured nation (MFN) is a status or level of treatment accorded by one state to another in international trade. The term means the country which is the recipient of this treatment must nominally receive equal trade advantages as the "most favoured nation" by the country granting such treatment. In effect, a country that has been accorded MFN status may not be treated less advantageously than any other country with MFN status by the promising country.

The Uruguay Round was the 8th round of multilateral trade negotiations (MTN) conducted within the framework of the General Agreement on Tariffs and Trade (GATT), spanning from 1986 to 1993 and embracing 123 countries as "contracting parties". The Round led to the creation of the World Trade Organization, with GATT remaining as an integral part of the WTO agreements. The broad mandate of the Round had been to extend GATT trade rules to areas previously exempted as too difficult to liberalize and increasingly important new areas previously not included. The Round came into effect in 1995 with deadlines ending in 2000 under the administrative direction of the newly created World Trade Organization (WTO).

In American politics, the China lobby consisted of advocacy groups calling for American support for the Republic of China during the period from the 1930s until US recognition of the People's Republic of China in 1979, and then calling for closer ties with the PRC thereafter.

<span class="mw-page-title-main">International trade law</span> Rules for trade between countries

International trade law includes the appropriate rules and customs for handling trade between countries. However, it is also used in legal writings as trade between private sectors. This branch of law is now an independent field of study as most governments have become part of the world trade, as members of the World Trade Organization (WTO). Since the transaction between private sectors of different countries is an important part of the WTO activities, this latter branch of law is now part of the academic works and is under study in many universities across the world.

A free-trade agreement (FTA) or treaty is an agreement according to international law to form a free-trade area between the cooperating states. There are two types of trade agreements: bilateral and multilateral. Bilateral trade agreements occur when two countries agree to loosen trade restrictions between the two of them, generally to expand business opportunities. Multilateral trade agreements are agreements among three or more countries, and are the most difficult to negotiate and agree.

The original member states of theWorld Trade Organization are the parties to the General Agreement on Tariffs and Trade (GATT) after ratifying the Uruguay Round Agreements, and the European Communities. They obtained this status at the entry into force on 1 January 1995 or upon their date of ratification. All other members have joined the organization as a result of negotiation, and membership consists of a balance of rights and obligations. The process of becoming a World Trade Organization (WTO) member is unique to each applicant country, and the terms of accession are dependent upon the country's stage of economic development and the current trade regime.

<span class="mw-page-title-main">Criticism of the World Trade Organization</span> Criticism directed at the World Trade Organization

Since its creation in 1995, the World Trade Organization (WTO) has worked to maintain and develop international trade. As one of the largest international economic organizations, it has strong influence and control over trading rules and agreements, and thus has the ability to affect a country's economy immensely. The WTO policies aim to balance tariffs and other forms of economic protection with a trade liberalization policy, and to "ensure that trade flows as smoothly, predictably and freely as possible". Indeed, the WTO claims that its actions "cut living costs and raise standards, stimulate economic growth and development, help countries develop, [and] give the weak a stronger voice." Statistically speaking, global trade has consistently grown between one and six percent per annum over the past decade, and US$38.8 billion were allocated to Aid for Trade in 2016.

<span class="mw-page-title-main">Zoran Jolevski</span> Former Macedonian Ambassador to the US

Zoran Jolevski is a Macedonian diplomat and the former Minister of Defense of the Republic of Macedonia. Prior to his appointment as Minister of Defense, he served as Macedonia's Ambassador to the United States of America. In November 2008, he was appointed chief negotiator to the Macedonia naming dispute, and in 2011 he was appointed Ambassador to the United Mexican States and as Permanent Representative to the Organization of American States. He served as Secretary General of the late Macedonian president Boris Trajkovski from 2000–2004. He holds a Ph.D. in International Economy from Ss. Cyril and Methodius University of Skopje. He is married to Suzana Jolevska, and together they have two sons, Pero (1988) and Filip (1992).

The Ministerial Conference is the top decision making body of the World Trade Organization (WTO). There have been twelve ministerial conferences from 1996 to 2022, usually every two years.

<span class="mw-page-title-main">Commercial policy</span>

A commercial policy is a government's policy governing international trade. Commercial policy is an all encompassing term that is used to cover topics which involve international trade. Trade policy is often described in terms of a scale between the extremes of free trade on one side and protectionism on the other. A common commercial policy can sometimes be agreed by treaty within a customs union, as with the European Union's common commercial policy and in Mercosur. A nation's commercial policy will include and take into account the policies adopted by that nation's government while negotiating international trade. There are several factors that can affect a nation's commercial policy, all of which can affect international trade policies.

The spaghetti bowl effect is the multiplication of free trade agreements (FTAs), supplanting multilateral World Trade Organization negotiations as an alternative path toward globalization. The term was first used by Jagdish Bhagwati in 1995 in the paper: “US Trade policy: The infatuation with free trade agreements”, where he openly criticized FTAs as being paradoxically counter-productive in promoting freer and more opened global trades. According to Bhagwati, too many crisscrossing FTAs would allow countries to adopt discriminatory trade policies and reduce the economic benefits of trade.

<span class="mw-page-title-main">United States–China Relations Act of 2000</span>

The U.S.–China Relations Act of 2000 is an Act of the United States Congress that granted China permanent normal trade relations (NTR) status when China becomes a full member of the World Trade Organization (WTO), ending annual review and approval of NTR. It was signed into law on October 10, 2000, by United States President Bill Clinton. The Act also establishes a Congressional-Executive Commission to ensure that China complies with internationally recognized human rights laws, meets labor standards and allows religious freedom, and establishes a task force to prohibit the importation of Chinese products that were made in forced labor camps or prisons. The Act also includes so-called "anti-dumping" measures designed to prevent an influx of inexpensive Chinese goods into the United States that might hurt American industries making the same goods. It allows new duties and restrictions on Chinese imports that "threaten to cause market disruption to the U.S. producers of a like or directly competitive product."

U.S. - Vietnam Trade Relations refer to the bilateral trade relationship between the United States of America (U.S.) and the Socialist Republic of Vietnam (Vietnam) from 1990s to 2012. After more than two decades of no economic relationship since the end of the Vietnam War, the two governments reestablished economic relationship during the 1990s. The bilateral trade between the U.S. and Vietnam grew slowly afterwards, and it has developed rapidly after the signing of the U.S.-Vietnam Bilateral Trade Agreement in December 2001. Total bilateral trade turnover has increased 1200% from $1.5 billion in 2001 to over $20 billion in 2011. The bilateral trade relations further developed after the U.S. granted Vietnam permanent normal trade relations (PNTR) status as part of Vietnam’s accession to the World Trade Organization (WTO) in 2007. The U.S. and Vietnam also came to a Trade and Investment Framework Agreement (TIFA) in 2007. Vietnam was recently the United States' 26th largest goods imports partner with $17.5 billion in 2011, and was the 45th largest goods export market with $3.7 billion in 2010. Vietnam with six other partners are now in the ongoing Trans-Pacific Partnership (TPP) negotiations with the U.S. The growth in bilateral trade has also been accompanied by issues and problems, e.g. anti-dumping cases, worker’s rights, non-market economy, Intellectual Property Rights (IPR) protection and Vietnam’s exchange rate policy.

Afghanistan received membership to the World Trade Organization (WTO) at the 10th WTO Ministerial Conference in Nairobi, Kenya, December 17, 2015. Afghanistan is 164th in the world and 36th among the less-developed countries that have received WTO membership.

<span class="mw-page-title-main">History of the World Trade Organization</span> Aspect of history

The World Trade Organization (WTO) is an intergovernmental organization which regulates international trade. The WTO officially commenced on 1 January 1995 under the Marrakesh Agreement, signed by 123 nations on 15 April 1994, replacing the General Agreement on Tariffs and Trade (GATT), which commenced in 1948. The WTO deals with regulation of trade between participating countries by providing a framework for negotiating trade agreements and a dispute resolution process aimed at enforcing participants' adherence to WTO agreements, which is signed by representatives of member governments and ratified by their parliaments. Most of the issues that the WTO focuses on derive from previous trade negotiations, especially from the Uruguay Round (1986–1994).

The Agreement on Textiles and Clothing (ATC) succeeded the Multi Fibre Arrangement (MFA), and facilitated the gradual dismantling of quotas for world textile trade that the MFA had put into place. Thus, the Agreement on Textiles and Clothing (ATC) stipulated a systematic and progressive elimination of the Multi Fiber Arrangement (MFA) over a span of ten years. This process culminated on 1 January 2005. The ATC aims to abolish quota restrictions on textiles and clothing in global trade by 2005.

References

  1. ↑ "WTO | Accessions: China". www.wto.org. Retrieved 2018-08-06.
  2. ↑ "Accession of the People's Republic of China - Decision of 10 November 2001". World Trade Organization. 23 November 2001.
  3. ↑ Mavroidis, Petros C.; Sapir, Andre (2021). China and the WTO: Why Multilateralism Still Matters. Princeton University Press. ISBN   978-0-691-20660-8.
  4. ↑ Tan, Yeling (2021). Disaggregating China, Inc.: State Strategies in the Liberal Economic Order. Cornell University Press. ISBN   978-1-5017-5963-5. JSTOR   10.7591/j.ctv1bxh5p1.
  5. ↑ "Hearing: China and the WTO: Assessing and Enforcing Compliance". www.uscc.gov. Retrieved 2023-07-06.
  6. ↑ "False Hope & Broken Promises: Chinese Compliance With the WTO" . Retrieved 2023-07-06.
  7. ↑ Fewsmith, Joseph (2001). "The Political and Social Implications of China's Accession to the WTO" (PDF). The China Quarterly. 167. doi:10.1017/S0009443901000328. S2CID   154509255.
  8. ↑ Smith, Noah (6 January 2014). "The Dark Side of Globalization: Why Seattle's 1999 Protesters Were Right". The Atlantic Monthly Group.
  9. 1 2 Kent, Ann (2001). "States Monitoring States: The United States, Australia, and China's Human Rights, 1990-2001" (PDF). Human Rights Quarterly. The Johns Hopkins University Press. 23 (3): 583–624. doi:10.1353/hrq.2001.0037. S2CID   144657047.
  10. ↑ "Foreign Trade - U.S. Trade with China". Census.gov. Retrieved 2012-07-06.
  11. ↑ Wang, Dong (2011). "China's Trade Relations with the United States in Perspective". Journal of Current Chinese Affairs. German Institute of Global and Area Studies. 39 (3): 165–210. doi: 10.1177/186810261003900307 .
  12. ↑ "Money talks: An enormous multilateral achievement". The Economist . 5 December 2011. Retrieved 2012-07-06.
  13. ↑ Branstetter, Lee (2008), "China's embrace of globalization", in Brandt, Loren; Rawski, G. Thomas (eds.), China's Great Transformation, Cambridge, UK: Cambridge University Press, p. 655
  14. ↑ Scott, James; Wilkinson, Rorden (2013). "China Threat? Evidence from the WTO" (PDF). Journal of World Trade. 47 (4): 761–782. doi:10.54648/TRAD2013025. S2CID   154847791.
  15. ↑ Branstetter 2008 , p. 657
  16. ↑ Branstetter 2008 , pp. 658–659
  17. ↑ Farah, Paolo Davide; Cima, Elena (2009). China's Participation in the World Trade Organisation: Trade in Goods, Services, Intellectual Property Rights, and Transparency Issues. SSRN   1527992.
  18. ↑ Farah, Paolo Davide; Cima, Elena (Spring 2010). "The Implementation of the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPs) in China". Tsinghua China Law Review. 2: 317–351. SSRN   1679999.
  19. ↑ "Is China a Non-Market Economy, and Why Does It Matter?". Econofact | Key facts and incisive analysis to the national debate on economic and social policies. 2017-04-13. Retrieved 2021-04-15.
This page is based on this Wikipedia article
Text is available under the CC BY-SA 4.0 license; additional terms may apply.
Images, videos and audio are available under their respective licenses.