China's great leap into the WTO

Beijing worked hard for admission, due tomorrow. But joy mixes with worry for many Chinese.

Just down the street from Tiananmen Square, Beijing's largest bookshop has two large shelves, marked "WTO" (World Trade Organization), next to the entrance.

Among the 48 titles on display are "WTO and the Travel Service Trade," "WTO: It's Foundation, Direction, and China's Strategy," and "WTO: No Free Lunch." Sales are brisk.

Wong Fan, a planner at a Beijing steel factory, already has read several volumes. The steel industry has been in a slump, but Mr. Wong says WTO membership will allow China to enter new markets in Asia and Africa. "I tell my children that everything is changing now," he says, smiling. "They need to know how to compete."

Next to him stands the less enthusiastic Liu Bo Tan, a mid-level manager at a private food-processing plant. At the moment, it corners a huge local market in meat and dairy products. But Mr. Liu worries that once cheaper, higher-quality foreign products become available under WTO rules, his customers will switch.

"People don't buy foreign products," he says. "They are more expensive. But now, maybe they will."

The book browsers exemplify the mixture of ebullience and worry surrounding China's approval for WTO membership, expected tomorrow at the group's meeting in Doha, Qatar. The event, to be covered live on nationwide TV here, marks the fulfillment of a 16-year dream.

Twenty years ago, China was a struggling country that issued food coupons for rice and bread. Last year, it was the world's seventh-largest exporter of merchandise - a country with more mobile phones than the US, where million- and billion-dollar deals are signed every day for the production of everything from microchips, autos, and TVs, to shoes and chewing gum.

Yet as many Chinese themselves recognize, WTO entry is no arrival in a promised land. Rather, it is more akin to getting a map to reach one. Along the way, factories will close, towns will dry up, and the already vast ranks of migrant workers who sleep on dusty construction sites around urban areas will swell further.

"The Chinese seem worried, and it is a very good sign that they seem worried," says Nicholas Lardy, a Brookings Institution specialist on China and author of the forthcoming book, "Integrating China into the Global Economy."

What China signed up for, he says, "is tougher than anyone else has tried to accept. The pain is front-end loaded. In order to get in, the Chinese agreed to open up wide, especially in agriculture."

In the first move of its kind, China has agreed to suspend immediately all agricultural tariffs - a risky move in a country of some 800 million peasants, and where 50 million farmers are already out of work. And in five years, China will allow foreign banks to operate under the same rules that govern domestic banks, a change that will allow foreign companies to save millions of dollars on standard trading rights and distribution.

Once China is a formal WTO member - 30 days after it ratifies the articles of admission - this country of 1.3 billion is poised to do two things: First, to significantly improve its already burgeoning export-market position in the global economy, especially in Asia.

"This is a sign of China's commitment to the world economy, and to a different and better future," says Justin Yifu Lin, director of the China Center for Economic Research in Beijing.

Second, by accepting WTO rules, Communist Party elites plan to use its fair-trade standards to force changes and reforms they could not accomplish on their own - taking on a system of patronage and corruption that some skeptics predict will stymie, if not derail, the nation's adjustment to WTO rules.

"Local protectionism is one of the worst features of the Chinese economic landscape," says Patrick Powers, director of the US-China Business Council in Beijing. "The government is hoping that WTO will take down some of the concentrated local powers."

As one source put it, "This isn't corruption by individuals. The corruption runs through the entire political-business connection."

Under WTO rules known as "uniform administration," there can be no special laws, licenses, payoffs, or deals that hamper trade and business.

"This is more about putting in a professional, managerial culture at the higher levels in China," says Mr. Powers. "There may be some trouble in the first six to 12 months, but the clout for reform is there. It comes from the top. The message from Beijing is, 'If you don't want to reform, you will be thrown out.'"

In the larger picture, the WTO itself - whose last acrimonious meeting, in Seattle, broke up during violent antiglobalization demonstrations, and whose current meeting comes amid a global economic slump and the US-led war on terrorism - must agree to a solid new set of trade rounds, experts say. Without a clear set of agreements for the future - including fairer methods for deals between developed and developing countries - the psychological glue that holds the group together could melt.

In advance of the global gathering, at a Southeast Asian economic summit in Brunei this week, Chinese Premier Zhu Rongji, considered the architect of China's reforms, painted a picture of the world's largest free-trade zone - in Asia. China and 10 Association of Southeast Asian state members agreed Monday to link their economies within a decade, forming a market of 2 billion people.

China is dealing from a position of strength, even in a region dependent on a robust US economy. Chip giant Intel signed a $300 million deal for a factory here on Sept. 21. Motorola this week agreed to spend $6.6 billion over the next five years in China. Even Morris Chang, owner of Taiwan's largest semiconductor firm and long an opponent of investing in the mainland, this fall agreed to spend $1.2 billion on a Shanghai plant. (Taiwan, which Beijing considers a renegade province, is due to join the WTO the day after China does.)

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