Lesson 21WTO and ChinaAfter 15 long years of hard negotiations, China became a formal member of the World Trade Organization on Dec. 11, 2001. People may wonder whether it pays(值得be worthwhile) for China to devote such a lot of time and efforts for accession to加入the organization. So some knowledge about the WTO as well as the opportunities it provides and the challenges it poses to China is quite necessary.The origin of the WTO can be traced back to(date back) the early post World War II years. To guard against the threat of trade wars, major trading nations sent their representatives to Havana in 1947 to create an International Trade Organization for the promotion of international trade. That objective was, however, not realized for controversy（争议）over the extensiveness of the powers of the proposed ITO（拟成立的ITO）（这一目标由于对拟成立的ITO 的权力广泛性有争议而没能实现）, mainly for the refusal by the UnitedStates to ratify（批准approve by signing）the charter of the stillborn organization. Nevertheless,the General Agreement on Tariffs and Trade(GATT) was formed as a conduit（channel渠道）for multilateral negotiations on a variety of international trade issues.Headquartered in Geneva, GATT provides a framework within which international negotiations are conducted toward creating global trade rules and a consultative mechanism for resolving differences and settling disputes under those rules. It alsoprovides technical assistance to developing countries in the form of seminars and training courses on trade policy issues.T he general aims of GATT are the improvement of standards of living, full employment, a large and steadily growing volume of real income and effective demand, the full use of the world’s resources, and the expansion of production and international trade. It is the specific task of GATT to contribute to the attainment of these objectives through arrangements directed to the substantial reduction of tariffsand other trade barriers and to the elimination of discrimination.Initially, GATT consisted of only three basic parts. In part 1 the basic obligations which are to be fulfilled by the contracting parties are laid down —the most-favored nation clause and the schedules of tariff concessions.In the years followed, the text of the General Agreement was revised, numerous amendments were reached relating mainly to the expansion of exports of less-developed countries and a part 4 was added. In the new part, thecontracting parties agree that the attainment of the general aims is particularly urgent where less-developed countries are concerned. In the interest of the less-developed countries, endeavors (efforts) must also be made to ensure the stabilization of commodity prices, better access to the markets of the developed countries, and the diminution 减少of the burdens which the developing countries assume承担in the interest of their economic development.The Generalized System ofPreferences (GSP) is meant to assist developing countries in their economic development efforts. It was established in 1968 after years of endeavors by developing countries in the UNCTAD and the GATT. Under the system, developed countries grant (give) developing countries favorable lower tariffs without granting them to developed members. And the developing countries do not have to reciprocate (exchange; give in return) such favorable treatment to the developed countries. So the GSP is an important exception tothe non-discriminate principle of MFN.A number of tariff negotiating conferences were held under the auspices of GATT during the course of the years GATT was functioning. Altogether 8 rounds of protracted yet fruitful multilateral trade negotiations were held since GATT entered into force in 1947 till the end of 1993 when the last round, the Uruguay Round finally concluded. The cumulative effect of the 8 rounds realized substantial reduction of tariffs. Tariff rate by the developed countries fell from anaverage of over 40 percent to about 3 percent in 1995.Despite GATT’s success in coordinating international trade policy, it is only an interim body without a fully defined institutional structure and with little legal enforcement power. So a big decision was made at the last Round to establish a permanent organization, the World Trade organization, to take the place of GATT.On January 1, 1995 the WTO established on the basis of the document signed before theconclusion (完成) of the Uruguay Round by the ministers of 97 countries started its operation and began its administrative work, taking over all the unfinished work left by GATT and continuing to carry out the agreements reached during the Uruguay Round. Being a new, improved replacement of GATT, the WTO is a permanent international organization to which all the members of GATT automatically become members. It is the organization’s aim to facilitate the creation of an optimal environment for international tradeand further strengthen the multilateral trading system.The WTO has three major objectives: 1. To promote free trade by encouraging members to adopt nondiscriminatory歧视, predictable trade polices; 2. To further reduce trade barriers through multilateral negotiations; 3. To establish more effective trade dispute settlement procedures.Instead of being a mere replacement of GATT, the WTO differs from its predecessor/ successor in several prominent dimensions (aspects). Firstly, as thename suggests (indicates), the GATT is only an agreement, or more exactly an interim secretariat, rather than an organizational entity in the true sense, while the WTO is a full-fledged (机构完善的) permanent organization, with the biennial ministerial meeting as its supreme decision-making body, affording it more political clout (influence) and a higher international profile (image). And its subsidiary bodies specialize in different areas. Secondly, the WTO has a much broader mandate. In addition to promoting commoditytrade which used to be the focus of GATT, the WTO is also responsible for service trade, international intellectual property protection a nd trade-related investment. Thirdly, the WTO has far greater enforcement powers. Unlike GATT，the new organization has a clearly defined dispute settlement mechanism. Its verdict is binding （有约束力的）on all its members. In this respect, the WTO is akin to （similar to）an international court of justice for world trade with the institutional strength and legal mandate (power) to implement itsdecisions.China’s efforts to gain accession to the WTO can be divided into two periods. During the GATT days, China made strenuous endeavors for the restoration (恢复) of its status as a contracting party. Though the goal was not realized, the work laid some foundation for negotiations in the second period after the WTO came into being. At the turn of the century when China was on the threshold of the WTO, the pros and cons of entry into the organization was a subject of topical interest.There were worries as well as great expectations. Now that three years have passed since China’s accession to the WTO, it is time to review China’s performance as a WTO member.As a responsible large nation, China has been doing a lot in honoring its commitments兑承诺for entering the WTO. In a short span of three years, China amended over 2300 laws and regulations of which over 800 were abolished. The overall tariff level was lowered from about 40% to 10.5%. Non-tariff measures including quotaand import license were removed step by step. The sector of service trade has been opened further and protection of intellectual property right considerably strengthened. All these efforts have produced positive results both for the other members of the WTO and for China itself who has made good use of the opportunities offered by the organization.China’s total volume of import and export doubled from 500 billion US dollars in 2001 to over 1.1 trillion US dollars in 2004, ranking the third in the world, onlyafter the United States and Germany. For three consecutive years, the country remained the largest recipient（destination）of foreign direct investment with the average yearly figure exceeding 50 billion US dollars, showing the improvement of its investment environment in line with 符合the requirement of the WTO. Contrary to the worry of some people that there would be trade deficit after entry into the WTO, China still enjoys a favorable balance of trade of 12 billion US dollars. And China’s foreign exchange reserveincreased to 550 billion US dollars, being the second largest foreign exchange reserve next only to that of Japan. The sensitive industries liable (likely) to the impact of the WTO entry such as agriculture, automobile, retail business, banking, insurance, and telecommunication all registered (获得) encouraging development.Despite all the achievements, China still faces big challenges. The first is the protectionist measures prevalent in some countries that place various barriers to trade. They intensified 加剧的anti-dumpingand countervailing measures to restrict the export expansion of other countries. Among the anti-dumping investigations, as many as 380 are directed（targeted）against China, constituting about one seventh of the total, making China the largest victim of such investigations. With the complete removal of textile quotas from January 1st 2005, antidumping investigations against China will be further intensified, and we must get mentally prepared and endeavor to reduce the negative effects.The second is the increasingcompetition faced by commercial banks and insurance enterprises from their foreign counterparts. The foreign banks already enjoy national treatment in China and they have offered over 100 items of services, tripling those by domestic banks. From Dec. 1st 2004, the number of cities where foreign banks are allowed to handle Reminbi business for enterprises increased from 13 to 18. And from 2006 Reminbi business for individuals will also be open to foreign banks. As for foreign insurance companies, all thoseentering the Chinese market are well-known enterprises with a long history and rich experience, constituting formidable competition against domestic insurance companies.The third is the challenge faced by agriculture. China committed itself for entry into the WTO not to provide any export subsidy for its agricultural produce, and ultimately lower its import tariff for farm produce to about 15%. Tariff quota will be applicable to the import of bulk produce, but the quotas are fairly large and thetariff rates within the quotas are as low as 1% to 10%. All those form great pressure on China’s agricultural production and market.。