Transcript Document

China’s Accession
to the
World Trade Organization
Presented
Fawn Else
Marjan Shallal
Maria Angelica Fleetwood
Pamela Hawe
October 28, 2002
Statistics for China
General
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Population: 1.29
billion
Surface area : 9.6
million sq. km
Population density
(per sq. km) : 135
Annual population
growth : 1.07 %
Life expectancy:
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Female – 70 years
Male – 74 years
Economic
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GDP: US$ 1.1 trillion
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Govt Expenditure 20%
Exports: US$ 232 billion
Imports: US$ 197 billion
GNI per capita : US$ 840
Labor force: 700 million
(1998 EST.)
Labor force (1998)
services
26%
agriculture
50%
industry
24%
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China’s Economic Development
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Before 1949
Since 1949
Great Leap Forward
Cultural Revolution
Deng Xiao-Ping's reform and open door policies:
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Rural Area – household responsibility systems
Urban Industrial Enterprises – SOE autonomy
Reform in trade and investment
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Cuts in tariffs
Elimination of export planning
Created economic zones
Banking – 1993 Peoples Bank of China made a
federal reserve bank
Joined WTO in December 2001 – 143rd member
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Why China Needs The WTO
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China will be able to participate in the formulation
of rules that govern international trade and
investment
China will be able to facilitate increased
competition in every sector of the economy
China’s economy will benefit from the expanded
range of services—insurance, finance, distribution
Consumers and companies will benefit from higher
degree of transparency and trade-related
nondiscrimination
China will be able to attract even higher levels of
foreign investments
WTO accession will help lay the foundations for
political change and reform
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China’s Entry into the Global
Economy
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Accession to WTO is an important step for
the communist regime
One of the most important events into the
WTO's history
Effects in bilateral trade with the US
China's economic relations with its neighbors
Likelihood that China will use its power to
reshape the WTO in the future negotiations.
has China voluntarily agreed to comply
Big question: Why
with the WTO's many and complex rules, if it
was the seventh largest trading country
while operating outside the WTO?
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China’s WTO Commitments
Tariff Reductions
 Service Commitments
 Systemic Reforms
 Adherence to Existing WTO
Agreements
 China-Specific Trade-Liberalizing
Provisions
 Safeguard Special, Pre-existing Trade
Agreements
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Challenges for China and WTO
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Internal and external pressures on the Chinese
government to comply with the standards for the rulebased international trading system
How China's leaders expect to leverage the increased
foreign competition created by WTO
The creation of a modern commercially oriented banking
system and the access that foreign banks will gain to the
Chinese domestic market
Country's ability to successfully generate new jobs (motor
vehicle, banking, agriculture)
Degree in to which the terms of China's entry were more
or less demanding that those imposed on other new
members
The importance of maintaining open markets in the U.S.
and other economies if China is to be successfully
integrated
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Benefits to the United States
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Increase the access of US firms and farmers
to the Chinese market
Increase American exports
Allow US companies to earn additional
income through operations in China
Allow US consumers enjoy top Chinese
imports and low prices
Reduction in tension between China and
Taiwan is of strong political and economic
interest to the US
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U.S.-China Bilateral Relations
Granting permanent normal trade relations was
in the U.S national interest because:
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Firms for Europe, Japan, Canada Australia would
gain decisive advantage over U,S, Firms specially
in the service sectors that China has agreed to
open
Failure of the U.S. Congress to grant China would
undermine the position of reformers in China
Failure of the U.S. Congress to grant permanent
normal trade relations to China undermine the
position of U.S.negotiators
Drafting of the protocol of accession and the report
or the working party were the two key documents
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Affect of Accession on Key
Chinese Industries
Steel
Telecommunications
Pharmaceuticals
Semiconductors
Financial & Legal Institutions
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China’s Steel Industry
PRODUCED
143.3 millions tons in 2001
(Largest producer in world, 13% increase from 2000)
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Joint Ventures
Increased unemployment rate in steel industry
Promising market size
Dumping problems from Chinese steel companies
are still a problem for U.S. steel industry
Demand for steel in China has increased relative to
Western Europe, and the United States
If trends continue, China’s steel industry will
become increasingly incapable of serving the
country’s needs.
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China’s Telecommunication Industry
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Mobile phone users:
 Estimated current 145 million users
 55 million new mobile users in 2002, a reduction
from last year's 60 million
 If the 20% estimated growth rate materializes the
result will be more than 260 million subscribers by
2005
 In 2001, China surpassed US in the number of
mobile phone users
Foreign companies’ will experience increased access
to ownership in mobile and fixed phone companies’
after China joins WTO
Tariffs on high-tech imports will be eliminated by 2005
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China’s Pharmaceuticals Industry
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Imitations, patent piracy - push to develop new drugs
instead of copying
Foreign pharmaceutical companies' products have
higher prices, compared to local companies’ generic
drugs.
Traditional medicines account for almost half of all
medicines sold in the country.
Western companies will be able to enter China, but
it's hard for Chinese companies to meet their
requirements in western markets.
Changes in the demographic profile of the Chinese
population & increased awareness of health-related
issues
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China’s Semiconductor Industry
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Biggest semiconductor producer in the world
and semiconductors will be duty free in 2005
Sales of semiconductor equipment in China
should reach US$4 billion this year and grow
to US$7 billion by 2003
There are publicly announced goals of
building 14 to 18 new manufacturing facilities
over the next ten years
China is the world's No. 3 I.T. hardware
producer. It has overtaken Taiwan and is now
challenging Japan
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China’s Banking Industry
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China's banking system is dominated by
state-owned commercial banks
China plans to open up its banking sector to
international competition over the next five
years as part of its entry to the WTO
Citibank was first foreign bank to offer foreign
currency services to mainland customers
Until WTO foreign banks could conduct
business only with non-Chinese residents or
foreign companies
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Securities Industry
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China's stock market is currently the second largest
in Asia
China's bond market is also one of the largest in
Asia, while it is overwhelmingly dominated by
government bonds
China has committed on JV securities houses and
fund managers in the WTO deal
The opening-up could result in:
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Short-term pains for securities houses and increased
volatility for stock market
Long-term benefit on the modernization of China's stock
market
China's stock market is expected to nearly quadruple
over the next 10 years
A collapse of China's stock market is not anticipated 16
Biggest Foreign Policy Challenge
for U.S.
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US Trade Deficit with China
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The bilateral trade between China and U.S. has grown rapidly since WTO with the US
accumulating an imbalance 84 billion
In 1999, the U.S. imported approximately $81 billion in goods from China and exported
$13 billion – a six-to-one ratio of imports to exports that represents the most
unbalanced relationship in the history of U.S. trade
It will take 50 years before the U.S. trade deficit with China stops expanding
In reality, the deficit path would lead to a financial crisis long before the deficit with
China reached anything approaching $600 billion
China is committed but changing old laws is a massive job
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China's protocol of accession will be a document so complex it will generate its own
army of legal, accounting and policy experts to deal with it.
The commitment to WTO is clear at the central level of the Chinese Government, but
there is an absolutely massive job to do in rewriting laws, regulations, and commercial
structures
Cooperation of local authorities
Chinese leaders say that they pursued Word Trade Organization (WTO) membership
as a means to continue China’s rapid economic growth, which would also help the
Chinese Communist Party maintain its monopoly on power
The U.S. Government has a limited understanding of the perceptions held by Chinese
leaders and the Chinese people of the US
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Conclusions
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China’s import of U.S. high-tech might explode ($970 million in
1992, $4.6 billion in 2001)
Increased anti-dumping suit disputes
Foreign auto makers will be able to sell cars anywhere
Foreign banks will be able to operate anywhere in the country
by 2005
Distribution will improve
Foreign accounting, legal, engineering, management consulting,
and medical service outfits will be able to have majority
ownership
Telecom companies will be able to invest directly in phone and
internet services
$2-a-day labor will effect nations whose exports rely on cheap
labor (Mexico, India, Indonesia etc..)
China is a big threat for high-tech manufacturer Asia countries,
Beijing has set machinery and electronic products to $360 billion
by 2005
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Sources
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GDP discussion:
 http://www.pitt.edu/~tgrawski/papers2001/gdp912f.pdf
 http://www.dfat.gov.au/publications/catalogue/eaaubp8.pdf
 http://english.peopledaily.com.cn/200207/27/eng20020727_1
00429.shtml
http://www.hhs.se/personal/suzuki/a-English/China.html
http://www.wto.org
http://china.jamestown.org/pub/view/cwe_001_002_001.htm
http://www.brook.edu/views/testimony/20010509.htm
http://www.citizen.org/trade/china/index.cfm
http://special.scmp.com/chinawtobid/news
http://www.fpif.org
http://www.uscc.gov
http://www.brookings.orghttp://www.csis.org/http://www.law.geor
getown.edu/iiel/
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