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When China Joined the WTO

Jan 28, 2022
  • Zhou Xiaoming

    Former Deputy Permanent Representative of China’s Mission to the UN Office in Geneva

Although 21 years have elapsed, I still remember the day Chinese President Jiang Zemin met the Chinese negotiators at his office compound following the completion of the country’s negotiations with the United States on China’s accession to the World Trade Organization — Nov. 15, 1999. Beaming with joy, he offered his congratulations on the successful end of the talks.

“You have accomplished a great deed,” he told us. That great deed paved the way for China’s accession to the world’s top trade body in December 2001, a move that has profoundly impacted the WTO and the global economy over the last two decades. 

Indeed, China’s WTO accession has been a powerful engine for global trade and economic growth. It has propelled the country to its position as the second-largest trading nation in the world, up from sixth place in 2001. Currently, it accounts for approximately 16 percent of the world total.

As the world’s No. 1 exporter and the largest source of imports for more than 60 countries, China supplies a wide variety of quality products at affordable prices. In so doing, it has played a critical role in satisfying the needs of the world, stabilizing global supply chains and keeping inflation down — a fact brought home once again in the past two years, when China supplied other countries with half of the world’s personal protective equipment and the largest share of vaccines.

As part of its commitment in its WTO accession, China opened its market wide to other countries. Its average import tariff rates have been slashed from 19.5 percent in 2001 to 7.4 percent in 2020, a rate approaching the level of the EU and lower than the 9.8 percent it promised at accession.

Consequently, China’s place in the world in terms of imports has been elevated to second place from sixth in 2001. The country now accounts for more than 12 percent of global imports and boasts of being the prime destination for goods from some 35 countries. It took in 9 percent of goods exported from the United States to the world in 2020, up from less than 2 percent in 2001, while its imports from the European Union increased nine times during the same period.

China’s WTO accession has also greatly benefited poor countries. Developing countries constitute the majority of the biggest exporters to China. And China takes in more than one-fourth of the exports of the world’s least-developed countries. By providing an economic lifeline for numerous producers and exporters in poor countries, China’s economic rise, in the words of Ngozi Okonjo-Iweala, director-general of the WTO, “lifted millions out of poverty, not only within China but also in China’s trading partners across the developing world.”

Moreover, the impact of China’s WTO accession on the world economy transcends trade. China joining the world trade group made optimal global allocation of resources possible. By filling a large missing chunk, it completed the picture of the world economic system. Thus, for the first time in human history, the world economy had become truly integrated. This has in turn enabled trade throughout the world to be conducted with the same set of WTO rules. Consequently, comparative advantages among nations could be capitalized and a global division of labor made a reality.

Therefore, multinationals from developed economies have been able to concentrate on manufacturing high-value-added products, and on the two ends of the value chain — conception and marketing — leaving labor-intensive industries to China and other developing countries.

China’s accession has also been instrumental in raising global efficiency through economies of scale. By bringing more than one-fifth of the world’s population into the multilateral trade system, it vastly increased global demand for goods and services, which has contributed to a substantial reduction of costs and an appreciable increase in the welfare of society.

Apart from its positive impact on the world economy, China’s accession has significantly strengthened the multilateral trading system. Successive Chinese leaders are convinced that multilateralism is the way to go and that China does well when the WTO succeeds. For this reason, China has always done what it can to sustain the organization.

The country has been extremely serious about its accession commitment and has honored it willingly. The Chinese government regards living up to its promise not as a burden imposed by others but as desirable for its own domestic reform and economic development.

Around the early 21st century, China conducted a major campaign to popularize WTO rules inside the country. Numerous books were published, and government officials at all levels were required to attend training courses. I attended one of these courses.

As a result of all this activity, for a considerable period of time, “WTO accession” and “integration into the world economy” were household phrases, not just on the lips of ordinary Chinese people but etched in their minds.  

To make its legal system and rules compatible with WTO rules, China revamped its laws and regulations. Between the end of 1999 when the accession negotiations with the US  were completed and the end of 2002, the national government abolished or amended more than 2.300 measures, 14 of which involved action by the country’s national legislature. Meanwhile, local governments revised or annulled more than 190,000 laws and regulations.

In addition, China has sought to safeguard the credibility and authority of the dispute settlement mechanism of the WTO. It has enforced every decision of the organization’s appellate body, including unfavorable rulings that required it to make painful changes.

For example, in compliance with a WTO ruling, China’s national legislature amended the country’s copyright law in 2010, an action that was unprecedented worldwide. Former WTO Director-General Pascal Lamy rated China’s enforcement of dispute settlement rulings “A-plus.” To substantiate his conclusion, he pointed out that it would naturally be brought to the WTO’s dispute settlement system if China had broken the rules. The fact is that, all told, only 47 cases have been lodged against China since 2001, compared with 109 cases against the U.S. during the same period.

Apparently, the accusations of habitual violations of WTO rules against China by some developed members do not hold water. Their rush to judgment and focus on the development of new trade rules — rather than taking China to court at the WTO — is telling: Their grievances against China reflect their frustration (as the EU’s white paper on the WTO put it) with gaps in the WTO’s rulebook, rather than with China’s alleged fooling around with the rules.

China’s contribution to the authority of the WTO is also demonstrated in its efforts to preserve and salvage the organization’s appellate body. Together with the EU and other members, China has striven to keep the crown jewel of the organization going, and to restore it after it was paralyzed by the U.S. 

Whether by design or coincidence, China’s rapid economic development following its accession to the WTO has served as an inspiration to many poor countries, instilling confidence in the multilateral trading system. China, in the words of Okonjo-Iweala, is a “textbook case for how global trade integration can drive growth and development,” and it has convinced many in the developing world to stay with or join the WTO.

Moreover, China has been a driving force in pushing for trade liberalization globally. It has spearheaded the negotiations on the Environmental Goods Agreement, Investment Facilitation Agreement and domestic regulation of services. Its status as a developing country, coupled with its free trade mentality and multilateral approach, has allowed it to play a unique role in building consensus and balance the interests of developing members with those of developed ones. 

As China marks the 20th anniversary of its marriage with the WTO, it looks more than ever to be committed. In response to the concerns by some developed members, China has recently expressed its willingness to engage in negotiations on industrial subsidies and State-owned enterprises. As it is expected to play an active and constructive role in the reform and revitalization of the organization, its accession to the WTO was a great deal and will continue to serve the multilateral trade body and the global economy. 

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