China, Taiwan and the WTO
Published on September 24, 2001
Introduction
There are currently 30 governments
seeking accession into the World Trade Organization (WTO).
However, successfully gaining entry is not easy. In their
bids for succession, countries have to prepare, for a decade
or more, the logistics and infrastructure required in order
to successfully implement economic reforms. A country seeking
membership is expected to transform its economic structure
into a market-based one, in line with existing members.
China and Taiwan
Chinese Prime Minister Zhu
Rongji and Trade Minister Shi Guangsheng have shown great
effort in overcoming the challenges of bringing China into
the WTO.
China and Taiwan are the
world's fifth and ninth largest trading nations, respectively.
China's gigantic market is extremely desirable to many traders
around the world. However, foreign businesses have been apprehensive
about taking steps to permeate the economy until now due to
unsound domestic market practices, by Western standards.
Since Hong Kong and Macau
were separate trading states prior to China regaining sovereignty
over them from the British and Portuguese, respectively, they
were already and remain original members of the WTO, separately
from Beijing. Hong Kong and Macau joined the WTO as "Hong
Kong, China" and "Macau, China", respectively.
The Working Party
Any country wishing to enter the WTO
must be assigned a working party. A working party comprises
representatives from interested WTO member governments. It is
then the working party's responsibility to ensure that all negotiations
between WTO members and the applicant country are successfully
resolved.
Specifically, the working party has two tasks: to compile a
report based on its deliberations; and to complete a Protocol
of Accession. Applicant countries, as in the case of China and
Taiwan, must not only meet the rules and obligations of the
WTO's market-economy principles, and its policies of pro-competition
and non-discrimination, but also the market-access conditions
for goods and services which the applicant country grants to
other WTO members.
On September 17, the Working Party
on China's accession concluded almost 15 years of negotiations
between the WTO and the government of China. The Working Party
on China's Accession has been responsible for ensuring all aspects
of China's trade policies have been addressed and resolved.
The final terms between China and the WTO will be adopted formally
in November at the WTO Ministerial Conference in Doha, Qatar.
On September 18, the Working Party
on Taiwan's Accession concluded 12 years of negotiations between
the WTO and the Separate Customs Territory of Taiwan, Penghu,
Kinmen and Matsu (Taiwan). Upon conclusion, the WTO agreed to
forward the legal texts for formal acceptance by the 142 member
governments of the WTO, paving the way for the text of the agreement
to be adopted formally at the WTO's 4th Ministerial Conference
in Doha, Qatar in November.
Doha
Once ministers at Doha approve the
recommendations, as they are expected to do, China and Taiwan
will begin domestic ratification procedures in preparation for
formal WTO accession. When completed, China will be a fully-fledged
legal member of the WTO upon conclusion of the relevant ratification
procedures. These procedures are likely to be completed by early
2002.
How will China and Taiwan's
accession to the WTO affect the world market?
As a result of the negotiations, China
has agreed to undertake a series of important commitments to
open and liberalize its regime in order to achieve greater integration
within the world economy and to create a more predictable environment
for trade and foreign investment in accordance with WTO rules.
-
Within three years
of accession all enterprises will have the right to import
and export all goods and trade them throughout the customs
territory with limited exceptions
-
China will not maintain
or introduce any export subsidies on agricultural products.
Market access for goods represents
a commitment undertaken by China to gradually eliminate trade
barriers and expand market access to goods from foreign countries.
After implementing all the commitments made, China's average
bound tariff level will decrease to 15 per cent for agricultural
products. The overall tariff range is between 0 and 65 per cent,
with the higher rates applied to cereals. Some tariffs will
be eliminated and others reduced mostly by 2004, but in no case
later than 2010.
China has agreed to limit its subsidies
for agricultural production to 8.5 per cent of the value of
farm output.
Taiwan
The simple averages of nominal duty
rates for industrial and agricultural products in Taiwan
are 6.03 per cent and 20.02 per cent, respectively. These
rates will be reduced to 5.78 per cent and 14.01 per cent
on the day of Taiwan accession to the WTO. Rates for some
products will be further reduced after 2002.
By the time the scheduled tariff
concessions covering 3,470 industrial and 1,021 agricultural
items are completely implemented, these averages will be
reduced to 4.15 per cent and 12.86 per cent, respectively.
Forecasts predict that a market for imports equivalent to
roughly US$ 1 billion could be created once Taiwan's concessions
are fully implemented.
Simple Average Tariff Rates
| |
Current
|
Rate at
Accession 2002
|
Final Rate
|
| Agricultural
items1,021 lines |
20.02%
|
14.01%
|
12.86%(total
cut - 35.6%)
|
The Pros and Cons
China's entry to the WTO will benefit
China's economic development and will benefit WTO members.
Foreign companies and China's private sector are expected
to be among the biggest winners, while the biggest losers
would be state firms, which may be forced to close or lay
off workers in the face of greater competition, according
to analysts. In addition, Chinese farmers, supported by subsidized
prices, could also feel the pinch from foreign agricultural
imports.
Analysts say that China needs the WTO
to transform its economy and help make the ailing state sector
more efficient. However, some worry that China and Taiwan's
membership may bring pain as the nations enter during a global
economic slump. Others find it difficult to believe that such
a drastic change can be made in such an enormous country.
They are concerned that since it is such a huge country, not
everyone is going to be able to follow everything to the letter
of law.
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