China and the Long March to Global Trade

The Accession of China to the World Trade Organization

Alan S Alexandroff, Sylvia Ostry, Rafael Gomez

• Publisher: Routledge
• Year: 2002
• ISBN:
  9781134569137
• Edition: 1
• Topic: Business
• Subtopic: International Business
• Index: Business

On December 11th 2001, China joined the World Trade Organization (WTO). China and the Long March to Global Trade examines the prolonged negotiations leading up to this historic event. This edited collection assumes little prior knowledge of the Chinese accession process yet provides an in-depth examination of the related issues. It is therefore sui

1 General introduction

Alan S. Alexandroff and Rafael Gomez

After almost six years of “silence” following Tianamen Square in 1989, China and the member countries of the World Trade Organization resumed seriously negotiating its entry into the WTO (formerly the General Agreement on Tariffs and Trade or GATT).¹ The negotiations, particularly the critical bilateral market access negotiations, occurred primarily with the major Western economies, namely the United States (US) and the European Union (EU). Following the resumption of serious negotiations in 1995, it was apparent that China was significantly different from the applicant of earlier negotiating years. China had grown enormously, its economic influence had spread globally and, despite a slight decline in growth following the soon to strike Asia crisis, China was more economically powerful and more globally involved than it had ever been since the establishment of the People's Republic of China (PRC). During this same period, a new set of emerging economies had grown quickly as well, notably Malaysia, Thailand and even Vietnam, but it was China that represented the spectre of an economic and political superpower unequaled in the developing world. Indeed, it is the size of China's population, its economy today and its potential tomorrow that attract such critical attention in both popular discourse and academic fields of study. This economic size and potential for growth underlines the uniqueness and dramatic importance of China's admission to the WTO.

The ways in which China has been studied and the ways in which its economic success has been accounted for are to a large extent embodied in this book. A principal aim of this study, China and the Long March to Global Trade: The Accession of China to the World Trade Organization (Long March) is to provide the reader with a critical analysis of the implications for the global economy and its institutions, of China's entry to the WTO. It uses the main disciplinary approaches (economic, legal and political) and their theoretical frameworks, which have been employed in the study of China's economy and society to examine China's accession.

There are several ways, in fact, in which this book provides a guide to the study of China's accession. First, while it does look briefly at the process by which China sought to accede to first the GATT and then the WTO, a distinction is drawn between China's integration into the global economic system and its actual legal accession to the WTO. In this regard, the Long March is more accurately viewed as an examination and overview of China's integration into the multilateral trading system. Though the accession process is central to the book (and provides this book with much of its distinctive focus) there is also a clear concern to address the variety of ways in which Chinese accession is intertwined with a whole set of domestic (to China) and external economic, legal, social and cultural factors. Thus, the Long March certainly focuses on accession, but examines equally the implications of China's accession on the role which the Chinese government and state have played in relation to Chinese economic development, the behavior of Chinese legal authorities, as well as the larger socio-cultural context within which the Chinese economy operates. Accordingly, the Long March not only pays close attention to the events and processes specific to China's accession to the WTO and their analysis by China scholars, but also scrutinizes the critical issues involved in explaining how China came to be a member of the multilateral trade regime. How China and the WTO may respond once accession is officially in place, and the extent of Chinese integration or lack thereof into the global trading system may be seen to connect to larger patterns of social and economic processes inside and outside of China, and are questions that are addressed in this study as well.

With these aims in mind, the Long March explores not only the various aspects of Chinese accession but also the contemporaneous legal, social and economic events that occurred while China was negotiating accession. So while it gives considerable attention to popular topics such as the effect of the Asia crisis on the Chinese economy, it also examines some very pertinent, but less visible aspects of Chinese society, such as China's administrative legal system, which operates quite differently than that of Western judicial systems. The Long March also reviews the diversity of opinion held about China within the United States (China's largest trading partner). In consequence, it familiarizes readers with the debates concerning whether, or under what terms, China should be permitted to accede to the WTO, as well as the theories and critical approaches that were held about China before the accession deal was finalized in September 2001. As the different contributors to the Long March indicate, the study of Chinese accession has rendered problematic many of the assumptions that have traditionally governed our (Western) understanding of the WTO and has therefore entailed the need for more appropriate alternative perspectives and scenarios of what may occur once China accedes (given its size and its distinct legal and cultural traditions).

The result is a book which, it is hoped, successfully conveys the variety of ways in which Chinese accession to the WTO has been studied and the genuine debate among trade negotiators, politicians and analysts that has characterized this historically long accession. The Long March does not adopt one “line” or advocate one critical approach above all others (even though individual authors may often agree with the particular framework or critical preferences of the editors) but seeks instead to suggest the issues that have been a feature of the accession process. It makes no attempt to iron out any differences between various approaches: readers are left to make up their own intellectual and political minds concerning the critical approaches employed and are free to sample those chapters of most relevance to their own enthusiasms.

This book is unique in that for the first time, but now likely not to be the last, the Long March has brought together trade law and policy experts with a variety of China specialists. In order to comprehend both the impact of China on the multilateral trade regime, particularly on the WTO, as well as to understand the extent of China's integration into the global economy and the influence of the accession on China, its economic, political, legal and administrative structures, it is vital to call on the expertise of both communities of analysts and scholars. We have done this. Indeed one of the satisfying aspects of the Project that resulted in the commissioning of many of these chapters was the often clashing perspectives that these different experts brought to Project meetings whether in Washington, Geneva or Tokyo.²

The structure of the book attempts to give voice to differing perspectives brought together to examine China's accession. Part I introduces the three episodes or phenomena that are the central focus of the book. Individual chapters outline the process of transformation of the world trading system beyond border barrier issues such as tariffs and quotas as embodied in the pre-Uruguay rounds of global trade negotiations. In addition, chapters examine the expansion of the global trade regime to include member states such as China, and then how the accession process itself is changing the multilateral trade regime. Thus, the chapters examine not only the timeline of China's entry into the WTO but also the various contextual differences between this accession process and all others. This part of the Long March, therefore, begins with an examination of how different the multilateral trade regime actually is, when compared to the relatively simple world of the GATT and its tariff and subsidy issues. The chapters also set out how the China accession process took place under this changing trading system.

Part II focuses on China's global economic integration and its own internal reforms. Since the end of the Uruguay Round in 1993, the thrust of multilateral negotiations has been toward the designing of institutions, which can promote deep integration. Deep integration, in its most benign form, simply refers to the harmonization of domestic laws so as to make the global economic system a fair one for the world's transnational firms. Part II focuses on the Chinese economy and its potential for reform. It is therefore hardly surprising that a key stumbling block for China's successful accession was that much of its domestic economy was (and still is) centrally planned and behaves largely in non-market ways. Part II looks at the effect of this legacy in relation to China's state-owned enterprises (SOE) and the necessary changes that have to be made in order for China to implement financial and telecommunication agreements.

Part III of this book is devoted to the non-economic aspects of China's WTO accession, in the sense that the WTO is as much a political and legal institution as it is an economic one. While this may sound only of passing interest, it is in fact essential to understand that underlying the WTO is a set of practices, assumptions even values that are taken for granted in developed capitalist economies. Many of these practices are derived from the civil and common law traditions, in particular American common law jurisprudence. This Western, largely American legal framework has little or no precedence in China. On the contrary, the presence of administrative law and more generally the rule of law as conceived of in the Western sense is a very recent development in China. Part III explores the evolution of law in contemporary China and the administrative legal changes required to implement some of the basic accession requirements.

Part IV of this book discusses – both from a contemporaneous standpoint and by looking back with the benefit of hindsight – the debate that occurred in the US Congress and the ever present clamor from the political right and left for close scrutiny of a variety of Chinese polices such as its labor and environmental policies as well as human rights practices and even its military spending. These Congressional divisions not only made the process of Chinese accession all the more complicated but also, in retrospect, gave Western negotiators the needed leverage with which to advance market access negotiations between China and the United States.

Although the Long March aspires to be comprehensive, it is not exhaustive in its coverage. There is naturally a degree of selection and readers will find more on certain areas, less on others, than they might have expected. This is particularly the case with Part IV, where the debate surrounding Chinese accession in the US is singled out, rather than giving full coverage of debates that occurred in Europe, in Japan, or among other member countries such as India or Mexico. Thus while certain countries are omitted, it is expected that the critical concepts and issues raised in this part will be seen to have meaning beyond the context of the member countries examined.

The authors of individual chapters have been asked not only to survey their particular area but also to identify some of the questions that will remain following China's official accession to the WTO. In this way, it is planned that readers should gain some sense that this process is not over, that China's integration into the multilateral trading regime is still incomplete even after the signing of the accession protocol. It is ultimately in this spirit that the Long March is presented: to provoke thought and encourage debate, and to stimulate ongoing research into the implications of Chinese accession not only for China, but for the global economy as well. The excitement surrounding China's integration into the global economy is that, despite a growing institutionalization of China's internal reform process, it still remains a phenomenon in which a variety of disciplinary approaches coalesce and compete and in which basic questions remain unsettled. If the Long March communicates some of that excitement to its readers then it can be judged a successful endeavor.

Notes

1 Most believe that the accession negotiations were suspended following Tianamen. In fact, as noted in Chapter 3 by Jeffrey L. Gertler, the GATT Working Party on China undertook almost no bilateral or multilateral activity for some two and a half years before the massacre. However, the Working Party did commence discussions in October 1992 and continued periodically thereafter. In December 1995 this Working Party was converted into a WTO Working Party on China Accession.

2 The Project was begun in November 1996 by Dr Sylvia Ostry, a former Deputy Minister of International Trade for the Canadian government who became the Chairman of the China/WTO Accession Project. Dr Alan S. Alexandroff became the Project Director. The Project was designed as a multi-year, multinational and non-governmental effort to track, analyze and disseminate information about China's WTO accession negotiations. In addition the Project analyzed and commented on the impact of China on the WTO and chief trading parties such as the US, the EU, etc. To accomplish these objectives, Drs Ostry and Alexandroff organized an international team. The members of the Project included former trade negotiators, trade policy experts and China experts. These experts were drawn from Canada, the United States, Europe, Japan, South Korea and China. The Project continued for three years meeting periodically in various cities to track progress and problems in the accession. In an effort to assist with problems as they arose in the negotiations, the Project commissioned a variety of research papers, many of which in altered form are now chapters in this book.

Part I
Background to China and the World Trade Organization

2 The WTO
Post Seattle and Chinese accession

Sylvia Ostry

Introduction

The saying that timing is everything is particularly apt – even if somewhat dismal – in trying to assess the impact of China's accession to the WTO. If China had joined the GATT in the 1980s, the negotiations would have centered on traditional trade issues or border barriers. The negotiations would probably have been difficult but since China was well embarked on a reform policy, including trade liberalization which would have been facilitated by GATT accession, the impact on China and the trading system would have been, on balance, welfare enhancing.

But the transformation of the system wrought by the Uruguay Round and its after-effects rather dramatically changes the conditions for access, and also changes the likely impact of Chinese accession on the WTO as well as the impact of the WTO on China. This is a vast subject, of course, and this chapter will be selective. Three main issues will be discussed: the North–South divide in the WTO; the rise of the environmental movement; and the increasing legalization of the WTO. In this concluding section I shall try to highlight the implications of these changes for Chinese accession.

The North–South divide in the WTO

The Uruguay Round could be characterized as a North–South Grand Bargain. Prior to the Uruguay Round developing countries negotiated mainly to secure unreciprocated access to OECD (Organization for Economic Cooperation and Development) countries' markets. Most lacked the expertise and analytical resources for trade policy-making but that really did not matter much because the focus of negotiations was on border barriers for industrial products, and also because agriculture was largely excluded. The tried and true GATT model of reciprocity worked well as the negotiations were led by the United States and managed by the transatlantic alliance with the European Community. The so-called Third World was largely ignored as a player in the multilateral trading system.

The Uruguay Round was a watershed in the evolution of the multilateral trading system. For the first time agriculture was at the centre of the negotiations and the European effort to block the launch of the negotiations, in order to avoid coming to grips with the Common Agricultural Policy, went on for half a decade. This foot-dragging also spawned a new single-interest coalition – the Australian-led Cairns Group – which included Southern countries from Latin America and Asia determined to ensure that liberalization of agricultural trade would not be relegated to the periphery by the Americans and the Europeans as it always had in the past.

But the role of a group of developing countries, tagged the “G10 hardliners” and led by Brazil and India, was in many ways even more important in the Uruguay Round's transformation of the system. The G10 were bitterly opposed to the inclusion of the so-called “new issues” – General Agreement on Trade in Services (GATS), intellectual property and investment central to the American negotiating agenda. Without the new issues it is doubtful that the American business community or American politicians would have supported a multilateral negotiation and, indeed, the long delay in launching the Round was the most significant factor in the origins of the US multi-track policy in the 1980s which included bilateralism, unilateralism and – if possible – multilateralism.¹ A major objective for the US in the bilateral negotiation with Canada, which resulted in the Canada–US Free Trade Agreement (CUSTA) of 1989, was to include the new issues;² also, to amplify the message to the G10, the little-used Section 301 of the 1974 Trade Act, an instrument of aggressive unilateralism, was activated in 1985. Indeed a new Special Section 301 of the 1988 Trade and Competitiveness Act was targeted at developing countries with inadequate intellectual property standards and enforcement procedures. As the Uruguay Round negotiations proceeded, the message from Brasilia and New Delhi became clearer: given a choice between American sanctions or a negotiated multilateral arrangement, an agreement on trade-related aspects of intellectual property rights (TRIPS) began to look better.

Mo...

Table of contents

• Cover Page
• Title Page
• Copyright Page
• Illustrations
• About the Editors
• Contributors
• Preface
• Acknowledgements
• 1: General Introduction
• Part I: Background to China and the World Trade Organization
• Part II: China's global economic integration Economic reform
• Part III: Transparency and the rule of law Legal reform in China
• Part IV: Provisional membership and transition mechanisms