Robert A. Kapp
China's Dialogue on the Coming of WTO
While America grinds through its election and post-election rituals and prepares for a new administration, hoping that the newcomers will make fewer of the inevitable first-year mistakes than most of their predecessors have made, China grapples with the coming of the World Trade Organization (WTO).
Even before the tortuous Geneva accession negotiations conclude, the Chinese are engaged in a heavy discussion of what the WTO means for China-not just in terms of jobs or exports, but in terms of China's own future as an economy and a society. I have read several lengthy and well-informed book-length analyses of the likely impacts of WTO membership on the Chinese economy, sector by sector. Articles from every province and city appear in print and online daily.
Combined with the avid study of information about the WTO's rules, operations, and dispute resolution experiences, the sheer volume of published material on the WTO-what Chinese are saying to each other where all can see and hear it-is impressive, and ought to be of real interest to US business and to US policymakers. As in any debate over a big new international trade agreement in any country, some of the material is repetitive, even predictable; certainly that was the case in the United States during the NAFTA and Uruguay Round debates. But taken as a whole, China's current debate reveals where China hopes-and sometimes worries-the WTO will take it.
Our dialogue with China on the WTO, as on other matters, will be more productive if Americans have a living sense of issues under debate within China on any given subject, and indeed if the Chinese, in turn, have that same living sense of America's key concerns on issues we debate regarding China. The WTO offers a good example.
Here, then, is a short example of what is being said within China about the WTO. The writer, Zhao Yihuai, is an official of the Shanghai Municipal Office for Restructuring the Economy. He published his piece recently in the major Shanghai newspaper, Liberation Daily. The article was then posted to a rich compendium of WTO essays found on the website of the national newspaper of the Chinese Communist Party itself, the People's Daily (www.peopledaily.com.cn). You have to read Chinese to plow into this "China Enters the WTO" collection, but if you do, or if you know someone who can help you, it is a worthwhile trip.
What follows are excerpts from "How Should the Government Respond to WTO Entry?" by Zhao Yihuai (my translation):
China's entry into the WTO is first and foremost a government entry. Never mind whether it is the central government or local governments: all have to be adequately informed. For a long time, our economy has been a government-led economy: government policies and system regulations were formed from a single, internal, national understanding and set by the nation's own circumstances. After China enters the WTO, it faces a new environment. China must accept rules of the game already put in place by the WTO. We may not simply change those rules without authorization, but instead must obey and support them. Therefore, governments need to ratchet up the modification of our laws and regulations to make them compatible with the basic principles and the basic spirit of the WTO, so that we can effectively adapt to this new economic environment. Concretely, we should start with the following:
- The first step, naturally, is to speed up our own structural reforms. Compared to the reform process in the past, the biggest change in our reform process after WTO entry will be from "We Want Reform" to "We Must Reform Ourselves." This imposes a new system of reform upon us. To meet this challenge, governments must consciously increase the intensity of their reform efforts, and speed up the steps leading to the marketization of the national economy. In keeping with the requirements of the WTO, we must deepen the reforms of our financial structures, our food distribution structures, our social insurance systems, and so on, rooting out the discrepancies and the frictions between our domestic systems and international rules. Elimination of such conflicts is the precondition for the true alignment of our national economy with the world economy.
- Next, we must expand the grounding of government policy in law, and increase the transparency of government policies. Enhancement of legality is necessitated by the requirements of the market economy. Any country entering the WTO is considered to be a market economy. This requires government conduct to advance along tracks defined by law. Conceptually, this means changing from "omnipotent government" to "limited government." With WTO entry, China must erect both a new conceptual basis to undergird government conduct and new forms of government action. Looking at today's realities, the first task is to eliminate many outmoded internal regulations and policies that are not compatible with WTO rules. For example, in dealing with the non-public economic sector, governments must realize the commitment to nondiscrimination, in order to create a fair environment for the operation of the nongovernmental economy. That means to the greatest possible extent avoiding preferential policies and subsidies for state-owned enterprises, in order not to provoke retaliation from abroad.
- Next, China must energetically enhance the economic management abilities of governments. WTO entry does not signal the general weakening of the managerial skills of governments. On the contrary, it is through the reform of government systems of economic management and the strengthening of the rational professional skills of governments that we will be able to preserve the basic interests of the people and the national economic security in a globalized environment of intense competition.
- Specifically, this means, a) providing correct guidance and active fine-tuning. These roles are recognized under the WTO system.... And b), it means energetically supporting our own interests. We must utilize all the safeguard methods authorized by the WTO for its members to use in guarding their infant industries. We must actively explore effective support mechanisms, to defend against the massive onslaught against our national production sectors and our vulnerable products in the midst of bitter competition. Of course, the purpose of such government protections is not to protect backwardness; rather, it is ultimately to end such protections and to raise the international competitive power of the producers and products afforded the protection.
In sum, entering the WTO drives forward our country's historic opportunity to develop along market economy lines. It serves as a new driver of all facets of our nation's reform and "opening." Agencies of government cannot but actively rise to this challenge, advance the reform process within the framework of the WTO, and only by so doing preserve the autonomy of our nation's economy amidst the competition of a global economy.
As America endures a laborious political transition, and US companies peer into the future at home and overseas, China's discussion of its future in a WTO-based global economy goes on apace. The adjustment to life in the WTO may not be easy for China or its trade partners. But there is plenty of evidence-far more than I've been able to offer here-that suggests that the WTO is being taken with the greatest seriousness in the PRC, and that its implications for economic and other changes within China are very much in public view. The more we can know about the dynamics of the WTO discussion within China, the more effectively the US-China Business Council and its member firms can pursue with Chinese counterparts the full and successful realization of China's new rights and responsibilities.