Implications of China’s Accession to the World Trade Organisation for China and the WTO

Abstract

China’s accession package to the WTO provides China with some substantial advantages. In terms of market access, the most important advantage to China is the promised phase-out of the quotas on textiles and clothing originally introduced under the Multifibre Arrangement. But accession will provide important additional gains on the export side by securing current market access and the rules under which China operates on world markets. It will also provide China with important future opportunities to increase its market access in areas such as labor-intensive agricultural products and textiles and clothing, where exports are currently tightly constrained. Domestically, the accession negotiations have helped China to bring about a major reform of trade policy that will increase its openness to the world economy in a way that is projected to increase economic welfare and, by raising demand for unskilled labor, to increase the incomes of the poor. The longevity of China’s liberalization commitments is more assured than if they had simply been made without the binding commitments that are part of the WTO process, and the greater credibility of these commitments should help attract investment into the efficient industries that benefit from these reforms. China will have a major impact on the WTO by increasing the WTO’s share of world trade by about 5 percent (with Taiwan, China), and by introducing another major developing country with a wide range of interests. The wide range of reforms being undertaken, and the inevitable lack of clarity in some of the commitments involved in China’s accession means that there is likely to be a considerable upsurge in dispute settlement activity. This poses some risks for the WTO system if the dispute settlement is used in a confrontational manner, rather than as a basis for devising agreed solutions to the inevitable trade problems.