Chinese accession to the WTO: Economic implications for China, other Asian and North American economies

Abstract

This paper, using a dynamic, multi-sector and multi-country Computable General Equilibrium (CGE) model, analyses the combined economic impact of China's accession to the World Trade Organization (WTO) and the removal of tariff and non-tariff barriers on textiles and apparel by the industrialized countries in China and North America and other major economies. The combined impacts of these two policy initiatives are studied in detail on trade flows, real output, employment and investment both at the aggregate and industry levels in China, the U.S., Canada and other countries/regions. The simulation results suggest that China's real gross domestic product (GDP) would increase by over 2 percent, mainly due to a large increase in the output of textiles and apparel industries. India too would gain considerably in these two industries from the removal of the trade barriers. Textiles and apparel industries will face considerable adjustment challenges in North America particularly in the U.S. and Canada, implying output and employment losses ranging between 20 and 30 percent. However, the output and employment gains in other North American industries will be more than offset the losses in textiles and apparel industries. Bilateral trade between China and North American economies would increase between 15 and 20 percent, but over all economic gain would be modest. Asian economies will also experience significant increase in trade with China and the output impacts are positive but modest.