China's admittance to the WTO and industrial structural adjustment in the world economy

Abstract

The end of the long process of China’s accession to the World Trade Organisation is in sight. How will entry into the WTO affect China’s economy? The work reviewed in this paper shows that China will gain substantially from WTO accession. It will gain from the reforms that it has committed to as part of the accession process. It would gain far more from accession, which will give access to the commitments made by WTO members in the Uruguay Round. The value to China of reforming its services sector and restrictions on investment will also be significant. WTO accession also helps the Chinese government achieve domestic support for its reform agenda by tying domestic reforms to gains from liberalisation in the rest of the world. WTO accession and liberalisation will have significant long-term effects on China’s structure of production and on patterns of trade, and should speed industrial upgrading. China’s liberalisation and structural adjustment can affect the economies it competes with in world markets, for example some of the ASEAN members. However, when liberalisation takes place in the context of a wider program of reform (in the WTO or in APEC), a greater number of sectors are involved and the gains are distributed more broadly. Significant uncertainties remain – the most significant being whether other members will implement their Uruguay Round commitments on textiles and clothing. The accession agreements do not address the risk to China that other countries will resort to anti-dumping actions to protect their industries. The WTO processes also seem unable to deal with another increasingly important source of anxiety – the growth in preferential arrangements. Dealing with these issues requires further work in the WTO, and complementary action outside it. China’s role as APEC chair in 2001 provides opportunities to complement its WTO accession with support for open regional cooperation.