The Rise of Neoclassical Economics and China's WTO Agreement with the United States in 1999

Abstract

Drawing on the historical institutionalists’ emphasis on the effects of ideas on policy making, this paper focuses on the importance of economic ideas and ideologies on China's trade policy making with regard to the signing of the WTO agreement with the United States in 1999. The paper argues that trade liberalization in China was a result of top Chinese leaders’ embrace of neoclassical economic ideas which conceive a small role for the state in the marketplace, mainly as the regulator of the macro-economic environment and as the enforcer of the rule of law, rather than as a major player in the marketplace. Top Chinese leaders’ socialization with neoclassical economic ideas enabled them to forge a political consensus to link state-owned enterprise (SOE) reforms with speedy WTO accession and led to China's major concessions in WTO negotiations with the United States in 1999 which were inconceivable just a few years ago.