China - China keeps word to WTO along bumpy road

It takes about five years of intricate talks on average for a candidate nation to join the World Trade Organization (WTO), but for China, such a process took 15 years plus five months.

China’s prolonged and uneven journey to the WTO manifested its incompletion under the framework of global trade, as 10 years ago when the talks were started, China remained relatively secluded from the common trade rules and standards.

In the 10 years of WTO membership, China fulfilled its commitment by lowering tariffs, demolishing non-tariff barriers and widely opening up the domestic market. It also revised laws and regulations in accordance with WTO rules and took concrete steps to promote market reforms.

Ten years on, China has become the world’s biggest exporter and the second largest importer, but it has also suffered the most from trade protectionism. Its low-price products gender antipathy from not only developed nations but also emerging economies that have front competition with China.

China will continue to vigorously push forward the opening up policy to facilitate global trade and investment, Commerce Minister Chen Deming told a forum held at the 15th China International Fair for Investment and Trade (CIFIT), which opened Wednesday in the southeastern coastal city of Xiamen.

Win-win

By the end of 2000, prior to the WTO accession, the volume of China’s merchandise exports and imports was $249.2 billion and $225.1 billion, respectively. Within a decade, as of the end of 2010, China’s merchandise exports reached $1,600 billion and imports amounted to $1,400 billion.

The general tariff rates have been lowered from 15.3 percent in 2001 to 9.8 percent at the end of 2010.

The trade boom has prompted China’s nearly double-digit economic growth, which has propelled the economy to become the second largest in the world. It also accumulated the world’s largest reserve of foreign exchange and created millions of millions of jobs.

“China’s trade-driven growth also had a trickledown effect to other developing nations. The high domestic consumption led to a significant increase in demand for natural resources and conversely benefited resource rich developing nations,” said Kandeh K. Yumkella, director general of the United Nations Industrial Development Organization.

China’s efficient production system also has led to the global availability of a wide array of consumer goods at affordable prices. This in turn has led to an indirect increase in purchasing power of consumers in developing countries, and in turn has had a poverty-reduction impact, he added.

According to MOC data, the inbound Foreign Direct Investment (FDI) rose to $114.7 billion in 2010 from $46.9 billion in 2001.

Chen Deming said, “China has opened up almost its entire manufacturing sectors and more than 100 service categories. The degree of openness is no less than some developed nations.”

Foreign companies also profit from China’s economic boom. “A company’s future is possibly determined by its performance in China. This is no exaggeration,” said Hisao Sakuta, chairman of the BOD, Omron Corporation, at the forum.

Omron, a leading sensing and control technology company, embarked on its first operations in China in the 1990s. At present, its revenue in China ranks second only to Japan, where its headquarters is located.

The number of Omron’s employees in China accounts for nearly half of its global total. It also operates two R&D centers and nine plants in the country.

Thanks to the sound socio-economic administration of the government, China today is not just a manufacturing powerhouse, but also rapidly emerging as a vast consumer market, Hisao said.

“We are more committed than ever to our investment strategy in the Chinese market,” he added.

China will maintain prominent advantages in the investment environment in the long, but foreseeable future, Chen Deming said.

While admitting China is challenged by a series of new problems, including environmental and resources restrictions and rising labor costs, Chen said China still has prominent advantages, such as comprehensive industrial facilities and infrastructure, and abundant human resources as well as close links to the outside which world offer investors staunch support.

Frictions

“Made-in-China” goods are known for their reasonable prices, but that has become a major source of friction between China and other countries that complain the massive inflow of low-priced products impair their domestic industries and cost jobs.

Li Zengli, an official with the Fair Trade for Imports and Exports Department of the Ministry of Commerce, said Sept 7 at a meeting in the eastern city of Nanjing, that the country has been targeted most in the anti-dumping investigations for 16 consecutive years. It is also come under the most anti-subsidy probe in the past five years.

Certain developing nations with an endowment structure similar to China, like those in South America and southeastern Asia, experienced keener competition in labor-intensive exports and lower prices for their products, Kandeh said.

In addition to the economic reasons, political factors have been more often tangled in the trade frictions today.

The MOC on Sept 6 expressed regret over the WTO’s ruling to reject its complaint against punitive U.S. tariffs on Chinese tire imports.

In September 2009, US President Barack Obama decided to impose punitive duties of up to 35 percent on Chinese tire imports in the next three years, citing damage to the domestic tire industry.

US tire imports from China declined by 6 percent year-on-year in the first half of the year after falling 23.6 percent in 2010; however overall imports increased 20.2 percent, MOC data showed.

Experts analyze that under the new tariffs, some 100,000 Chinese workers would lose their jobs and the country’s tire industry might suffer a loss of $1 billion in exports while 100,000 tire-related jobs in the United States could be affected.

Observers point out that Obama was strongly influenced by the Steelworkers’ union, the filer of the petition to raise the tariff, because he desperately needed to win domestic support to emerge from the current difficult period by pushing forward new policies.

Cui Xinsheng, a financial commentator, said as major Western economies are grappling with debt crisis and the faltering economic recovery, trade protectionism is unlikely to ease in the foreseeable future.

To reduce its dependence on external demand, China is determined to rebalance its development model by digging out more domestic consumption.

Edmund Phelps, a Nobel Prize laureate in economics, expects as wealth goes on rising in China, it will continue to exert a force pushing up wages, and that will be the end of the so-called “export-led” growth.

It is inevitable that Chinese consumer demand will grow in importance as Chinese wealth levels grow in relation to output. A surge of investment activity is expected in the business sector to a more important level and, above all, more innovation, he said.

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