What Has Changed in China and the World?

By Yao Ling

On accession to the World Trade Organization (WTO), China promised further economic reform and opening-up, establishing a trade policy system in line with international rules and advancing the healthy development of its national economy and foreign trade. In the 10 years since then China has honored those promises and seen momentous change.

Growing at an annual rate of 10.5 percent, the Chinese economy has climbed from the sixth largest economy in the world to the second. The value of its imports and exports have increased 4.8 times from US$509.7 billion to US$2.97 trillion, lifting China's share of global trade from 4 percent to 9.7 percent. Since 2005 net export's contribution to China's economic growth has remained at around 20 percent, adding two percentage points to the country's year-on-year growth rate.

This enormous growth not only benefits China, as its huge market and growing imports spell opportunities for businesses worldwide. In the decade from 2001 to 2010 China's annual imports averaged US$750 billion, creating 14 million jobs for its trade partners. In response to the financial crisis that broke out in 2008, China took advantage of its strong economic position and deliberately stepped up its global spending to stimulate the struggling world economy. In 2009 and 2010 China's contribution to global growth exceeded 50 percent, providing strong support for the recovery of world economy.

A Highly Open System of Foreign Trade

In the past decade China has set up a highly open system of foreign trade according to its promises to the WTO, and so far it has smoothly passed three WTO reviews of its trade policies and won positive appraisals from the organization and its members. The first step towards this achievement was the formation of a three-tier legal system, consisting of the Foreign Trade Law, the Regulations on the Administration of Cargo Imports and Exports, and rules and regulations formulated by relevant administrations. It allows China to operate its imports and exports according to law and follow a standardized, transparent and indiscriminative process. China modified 3,000 laws and regulations in line with WTO rules and regulations.

Meanwhile, the Chinese government released its hold on foreign trade operation rights, allowing diversified players in the import and export sector. The Measures for Registration of Foreign Trade Operators came into effect on July 1, 2004, requiring licensed companies to file with relevant authorities when taking up import and export operations instead of having to apply for government approval as before. Reform of China's foreign trade operation system was one of the promises China made to the WTO, and was implemented six months before the deadline. It scrapped the monopoly of state-owned import and export companies, and brought into the game more players. After abolishing state-owned enterprises monopoly over imports and exports, private, foreign-funded and joint-venture companies account for nearly 90 percent of China's total exports.

China also further opened up its market by slashing tariff rates and non-tariff trade barriers. As for cargo imports, the average tariff rate has been decreased from 15.3 percent to 9.8 percent. Tariffs for imports of industrial products and agricultural produce, at 8.9 percent and 15.2 percent respectively, are the lowest for those products among developing countries. At the same time, restrictive non-tariff measures, including import quotas and import permits, have been abolished. In the service industry, China has opened 100 of the 160-odd sectors listed by the WTO, a level much higher than the average for developing countries, and is poised to open 11 more sub-sectors.

Learning, Adapting to and Employing WTO Rules

Of the WTO members China has encountered the largest number of trade remedy measures. China is dedicated to its stance against trade protectionism, which is fundamental to its foreign trade policy and has been articulated in all bilateral talks and negotiations under the G20 framework. In striving for a robust and healthy system of open international trade, China has been earnestly learning, adapting to, and employing WTO rules to handle trade conflicts.

Over its 10 years in the WTO China has sought to resolve conflicts with other members through the WTO dispute settlement mechanism, and has so far been involved in 19 cases, seven times as complainant and 12 as respondent. Of the cases against China one third were solved through negotiations. Of those going to the Dispute Panel and the Appellate Body, China won the disputes over steel tariffs by the United States, the U.S. ban on Chinese poultry imports and [the European Union] anti-dumping duty on Chinese fasteners.

Though China lost the case "Measures Affecting the Protection and Enforcement of Intellectual Property Rights," it cannot be overlooked that the panel set up by the Dispute Settlement to scrutinize the four complaints from the United States rejected some of the United States' key accusations, including that thresholds for criminal liability are inconsistent with China's obligations under the Agreement on Trade-Related Aspects of Intellectual Property Rights.

China has taken a positive attitude towards these cases. The cases it lost serve as lessons in better understanding WTO rules and accelerating domestic reforms, and the cases it won prompt the United States and EU to revise relevant regulations so as to ensure a fair and open multilateral trade system.

A Staunch Supporter of Free Trade and Investment

China has set up bilateral trade and economic cooperation mechanisms with 163 countries and regions worldwide, signed pacts for 10 free trade zones, and entered agreements with 129 countries on mutual investment protection and with 96 countries to avoid double taxation. These efforts facilitate international trade and investment and substantially advance the stable development of world economy.

After the Doha Round of global trade negotiations stalled, the trend of establishing free trade zones has gained momentum, and China has embraced this by incorporating free trade zones into its national strategies. China is currently establishing or negotiating for 15 free trade zones involving 28 countries and regions. This has significantly reduced disputes between China and other signatory countries, fostered a stable, transparent, free and fair environment for importers and exporters in all countries involved, and considerably galvanized bilateral trade.

Last year bilateral trade between China and its 10 major free trade partners – the Association of Southeast Asian Nations (ASEAN), Pakistan, Chile, Singapore, New Zealand, Peru, Costa Rica, Hong Kong, Macao and Taiwan – reached a total of US$782.6 billion, accounting for 26.3 percent of China's total foreign trade in 2010.

The establishment of the China-ASEAN Free Trade Zone in 2010 proved to be a strong stimulus for foreign trade on both sides. That year ASEAN overtook Japan to become China's fourth largest export market, and in 2011 replaced Japan as China's third largest trade partner. At present, free trade has been largely realized between China and ASEAN, and the flow of various factors of production, ranging from capital, resources and technology to personnel, has become markedly more efficient, propelling the economic integration of the region to an unprecedented level.

Promoting Global Economic Growth

Since joining the WTO China has worked even more strenuously to achieve import-export balance. From 2001 to 2010 it expanded its imports fivefold, with the annual worth of imported goods approaching US$750 billion, creating 14 million jobs for its trading partners. China is now the biggest export market for countries and regions including Japan, South Korea, ASEAN, Australia and South Africa. It is also the second largest export market for EU and the third largest for the United States.

After the 2008 financial crisis China launched a raft of measures to spur economic growth and stabilize the exports while expanding domestic demand. It was the only major economy in the world to see increased imports in 2009, which gave support to countries stumbling in the worsening economic meltdown.

What's more, China is giving much needed assistance to the least developed countries by ramping up imports from them. Starting in 2001 China has granted zero tariff treatment to certain imports from the world's 41 least developed countries designated by the UN, and is steadily extending the scope of duty-free commodities. It is among the first developing countries in doing so. The WTO figures show that over the past decade Chinese imports from the world's least developed nations gained by a yearly average of 27 percent, hitting US$43.3 billion in 2010. China has remained their largest export market for three successive years since 2008, taking in one fourth of their exports.

Striving for a Fair and Open International Trade System

As a member of the WTO, China is committed to helping improve the fairness and openness of the international trade system. Its involvement in the organization deepened when it signed the Information Technology Agreement (ITA) in 2003 and applied to join the WTO Agreement on Government Procurement (GPA) in 2007. Meanwhile, China has been active in the institutional affairs of the WTO, recommending candidates for members of the Appellate Body and chairpersons of relevant committees. China made multiple donations to the Doha Development Agenda Global Trust Fund (DDAGTF) as part of its support for Aid for Trade, which is designed to help developing countries, in particular least developed countries, expand their trade.

Though a developing country and a new member of the WTO, China is a steadfast advocate for continuing the Doha Round so that it can play a constructive role in establishing a healthy multilateral trade system, and is actively reaching for all parties to end the impasse. China has presented over 100 proposals for talks at the technical level, and made solid promise to cut custom duties. In 2009 it proposed the three negotiation guidelines of "respecting the mandate, locking the results and taking multilateral negotiations as the foundation," which were supported by most member countries of the WTO. At the WTO Hong Kong Ministerial Conference China played a key role in the adoption of some important resolutions, including providing duty-free and quota-free market access for products originating from least developed countries. At the 7th WTO Ministerial Conference in 2009 Chinese Commerce Minister Chen Deming called on the gathering to send a positive signal to the world struggling with a once-in-a-century economic crisis, a signal to "open up, advance and reform." At the WTO Mini-Ministerial Meeting in Davos last January the minister told participants that China is ready to collaborate with other WTO members in a practical and proactive manner so as to achieve a successful result from the Doha Round by the end of 2011.

Yao Ling is a research fellow with the Chinese Academy of International Trade and Economic Cooperation.

Source: China Today


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