Dissertation on China

The advantages and disadvantages of the People’s Republic of China entering the World Trade Organization

Introduction

This dissertation abstract is aimed to find out what the advantages and disadvantages are for People’s Republic of China considering joining the World Trade Organization.

The integrative processes going in the society have determined the existence of different international unions; one of the most important of them is the WTO. Sooner or later any country will have to choose whether to take part into international unions or not; China’s leaders have decided that it is better to become a member of WTO.

I have to admit that though there are supporters and opponents of the idea of entering the WTO by China, the purpose of this dissertation research is to take into consideration all factors and estimate the situation in an impartial way.

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1. The World Trade Organization

Since technology and means of communication between countries are actively developing throughout the whole world, the interaction between different institutions in these countries is also increasing in geometric sequence. Naturally international trade is one of such rapidly developing subjects and therefore requires own management institution.

The World Trade Organization is the international body dealing with trade rules between different countries; it includes a lot of agreements (bilateral and multilateral) between world countries, which are the basis for international trade transactions. Besides the most important function of legalizing trade rules between countries, the WTO also has other functions. The main of them are the following: removing different obstacles for free trade within the organization, as long as it doesn’t have a negative impact on the economy of a particular country; to unite and formalize trade treaties among its members, and one more function related with the previous one – to solve conflicts and arguments between countries concerning different issues (for example the recently discussed steel tariffs).

The main principles of the WTO are the following: non-discrimination, liberalization, transparency and predictability, and removals of distortions to trade. In general the WTO contributes to the welfare and economical development of its members as well as helps to increase the competitive ability and quality of the goods, improves trade specialization of countries.

2. The preconditions of China entering the WTO

China now has “the characteristics of a developing country and yet also possessing massive industrial and agricultural potential as well as significant technological and intellectual property capability” [2, p. 215].

China is a unique country concerning its political and economical system, it actually represents the combination of Marxism ideology and principles of free market economy; it is ruled by the bureaucratic administrative system, which is though slowly developing and changing to better due to constant liberalization of public life and economy.

China left the GATT in 1949 and was since that time practically withdrawn from the possibility to develop an active international trade system. The leaders of China have used various protectionist measures to reduce import to their country and to stimulate export (which was still rather difficult because of the lack of interaction and corresponding agreements with potential trade partners). As a result of this, the concurrence inside the country was on a rather low level and most industries and agriculture had little stimulus for development. The step-by-step liberalization has somewhat improved the situation, but the progress of Chinese economy still remains slow compared to China’s extreme trade and industrial potential. During the last decade the economy of China has been very stagnant despite different simulative measures taken by the leaders of the country.

China has taken several attempts to enter the WTO but these attempts were blocked, mainly by the US and EU, because of the inconsistency between the demands of WTO and actual state of law regulations and economy in China. The leaders of the country didn’t want to reduce entrance barriers for foreign firms; other problems were the refusal to reform and to some extent denationalize the banking system and numerous violations of the intellectual property rights in China.

The economical situation within the country has been gradually changing; China has signed numerous trade treaties with world countries, and the leaders of the country decided to make another attempt to enter the WTO. In 2001 China was finally accepted as WTO member, and in my opinion, there was a number of reasons for it. I believe that most important reason were the gradual development of Chinese economy and its increasing importance as a trade partner; also I think that the tragic events of 11 September 2001 were also a reason that quickened the entrance of China to the WTO: the world economy was seriously shaken by those events, and trade equilibrium was about to be lost. The strategic importance of Chinese market and the new opportunities for all members of WTO in case of China’s entering the organization made for accepting this country as the WTO new member.

3. Possible advantages and disadvantages for Chine entering the WTO

The main advantages for all countries entering the WTO are the new trade opportunities and reduction of trade barriers and import tariffs; for China this means a significant increase of Chinese goods export and the efficient stimulation of Chinese economy. Entering the WTO will contribute to liberation and further progress of Chinese economical system; it is most likely that interaction with the members of the organization will stimulate the banking system of China, of course it will also support the positive development of Chinese economy. There is an opinion that Chinese law system will be radically changed because of entering the WTO: due to the necessity to work with foreign lawyers new laws have to be accepted by Chinese leaders and in my opinion, a significantly different law system will be worked out as a result of such economical collaboration. Generally speaking, all branches of economy and related industries will have the opportunity to develop intensively and rapidly, and this is, in my opinion, the main advantage of entering the WTO for China.

Speaking about disadvantages, I have to mention that Chinese enterprises will experience serious concurrence from more developed, equipped, well-organized and effectively managed foreign firms. Due to the long dominance of administrative system of ruling over the development of free market in China most enterprises and firms there are not accustomed to free concurrence conditions; moreover, there exists an opinion that China lacks the proper personnel to work in the conditions of free concurrence and open economy. The policy of protectionism led to weak and slow development of Chinese economical agents, and many economists fear that these firms will not bear the concurrence with more experienced foreign exporters.

One more possible disadvantage is that Chinese system has not yet been properly adjusted to working within the international trade system; entering the WTO means starting active trade processes, concluding treaties and organizing export operations. China doesn’t have the necessary management system to fully experience the advantages of entering WTO, there will be required a lot of effort to accept the changes brought by the international trade partners. The Chinese acceptance of international laws means that there will appear social, economic and political challenges to the society, and it is obvious that though such challenges will be faced at once, the economy of China is not ready to use the new trade advantages most effectively.

Basing on this, a lot of experts say that China will not benefit from entering WTO and that its economy is unable to accept such challenges. In my opinion, this statement is not true. Chinese economy has been step by step approaching to market economy, and I believe that the time has come for China to open the barriers and become an active member of international community.

There will be significant changes in different branches of Chinese economy; first of all, in the sphere of telecommunications: China has signed a number of agreements concerning mobile services, internet service providers and telecommunications regulation. Wide development is predicted in retailing, wholesaling and logistics.

Concerning Chinese law system, there is a gap between the so-called “law-in-theory” and practical law which is likely to be eliminated after entering the WTO; some authors[4, p. 58] think that entering the WTO will change he whole culture of decision-making and dispute settlement in China. Continuing the tendency, I believe that the whole approach to human rights will after all be changed in China.

Also, there may be indirect changes not actually relating to the acceptance of the WTO demands by China, but which may rather be “a result of the more liberal environment that WTO accession will bring” [1, p. 194].

Conclusion

In my opinion, domestic effects entering the WTO for China will be positive for the long-term economic perspective but raise significant political, social and distributional challenges. It is also important to remember that China’s accession has untested potential to alter the shape, structure and content of the international trading system as a whole and to facilitate a new role for China in international geopolitical affairs.

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