The World Trade Organization (WTO)

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Sanja Jelisavac Trošić*1 UDC 339.54:061.1(100)(510)
doi:10.5937/MegRev1901173J
Review scientific article
Received 11.12.2017.
Approved 6.9.2018.
CHINA’S ACCESSION TO THE WORLD TRADE
ORGANIZATION: THE PROCESS AND THE EFFECTS**
The aim of the paper is to present and explain the changes that have arisen in
China’s trade and economy during the accession to the World Trade Organization (WTO)
and during its membership in this organization. The article consists of four parts and
a conclusion. At the beginning of the paper, China’s negotiations with the GATT are
briefly outlined, as well as the main obstacles for not accomplishing these negotiations
successfully. The second part deals with the negotiations for the WTO membership and
the most important changes China’s economy has undergone to meet the membership
requirements. This part of the paper also outlines the most important barriers to the
membership, as well as economic reforms and the growth of the non-state economy in
China. The third part explains how China, upon its accession to the WTO, has immediately
involved in the Doha Development Round negotiations. This country became a member
of several negotiating groups within the WTO and signed certain WTO agreements.
Moreover, China has undergone a Trade Policy Review several times, which is a periodic
obligation of every WTO member. The final section describes the most important changes
in China’s trade that have come out from full membership in the WTO. During the
sixteen years of its membership in the WTO, China has achieved a never-before-seen rate
of trade growth and took the leading position in the world trade. At the end of the paper,
we conclude that China has fully integrated into the world economy and that becoming
a member of the World Trade Organization has played a major role in this achievement.
Keywords: China, WTO, GATT, accession, economy, trade, Doha Development
Agenda, negotiations.
* Institute of International Politics and Economics, Belgrade; [email protected] ** This paper was created within the project “Serbia in contemporary international relations:
Strategic directions of development and firming the position of Serbia in international
integrative processes – foreign affairs, international economic, legal and security aspects”,
No. 179029, Ministry of Education, Science and Technological Development of the
Republic of Serbia and is implemented in Institute of International Politics and Economics.
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1. China and the General Agreement on Tariffs and Trade (GATT)
China was one of the 23 original signatories of the General Agreement on
Tariffs and Trade (GATT) in 1948. After China’s revolution in 1949, the government
in Taiwan announced that China would leave the GATT system. Although the
government in Beijing has never recognized this withdrawal decision, nearly 40
years later, in 1986, China notified the GATT of its wish to resume its status as a
GATT contracting party.1
The General Agreement on Tariffs and Trade formally
received China’s application on July 10, 1986. The GATT Accession Working
Party was established by the Council on March 4, 1987.2 The tasks of the Working
Party on China’s Status as a Contracting Party were to:
• examine the foreign trade regime of the People’s Republic of China,
• develop a draft Protocol setting out the respective rights and obligations,
• provide a forum for the negotiation,
• address as appropriate other issues concerning the People’s Republic of
China and the GATT, including procedures for decision-making by the
contracting parties,
• make recommendations to the Council.3
The Working Party on China’s Status as a Contracting Party met on 20
occasions between 1987 and 1995. The strongest point of difference between
China and the major GATT trading partners, even several of the Third World
contracting parties who supported Chinese entry, was concentrated around some
‘special safeguards’ (emergency protective actions that an importing country
could take) in relation to Chinese exports. The major industrial countries wanted
China to agree to the application of ‘selective safeguards’ against its exports.
In other words, to agree to the importing markets applying restrictions solely
directed against China, with the aim to prevent what the importing countries
consider to be a threat to their domestic producers by subsidized exports from
China. The European Community, for example, sought to introduce concepts
like ‘surge in imports,’ ‘market disruption,’ etc. – the terms used in the Multifibre
Arrangement which will become GATT illegal under the Uruguay Round
1 WTO, WTO successfully concludes negotiations on China’s entry, https://www.wto.org/
english/news_e/pres01_e/pr243_e.htm. (21.08.2017.) 2 The members of the Working Party on China’s Status as a Contracting Party were:
Argentina, Australia, Austria, Bangladesh, Bolivia, Brazil, Canada, Chile, Colombia,
Cuba, Czech, Republic, European, Communities, and, member, States, Finland, Hong,
Kong, Hungary, India, Indonesia, Israel, Jamaica, Japan, Korea, Kuwait, Malaysia,
Mexico, Myanmar, New, Zealand, Norway, Pakistan, Peru, Philippines, Poland, Romania,
Singapore, Slovak, Republic, Sri, Lanka, Sweden, Switzerland, Thailand, Tunisia, Turkey,
United, States, Uruguay, Zimbabwe. 3 GATT, “Working Party on China’s Status as a Contracting Party”, L/6191/Rev.7, https://
docs.wto.org/gattdocs/q/GG/L6199/6191R7.PDF (01.07.2017.)
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China’s accession to the world trade organization: The process and the effects 175
agreements. China also indicated its awareness of genuine concerns in some
bilateral discussions, particularly from many of the developing countries, and
expressed a desire to meet these concerns through other modalities rather
than the ‘selective safeguards’ concepts. While China agreed that full market
mechanisms did not operate in price formations of products on the domestic or
export markets, they argued that considerable amount of changes and reforms
were introduced and these would soon become effective. However, both the
United States and the European Community advocated that the question of
China acceptance to the GATT should be considered only after the Uruguay
Round conclusion and establishment of its institutional arrangements.4
China has never formally completed its accession to the GATT. In the
meantime, the 8th round (the last round) of multilateral trade negotiations, held
under the auspices of GATT, ended in 1994. The Uruguay Round embraced 123
countries as “contracting parties.” The Uruguay Round led to the creation of the
World Trade Organization, with the GATT remaining an integral part of the
WTO agreements.5
The broad mandate of the Uruguay Round was to extend the
GATT trade rules to the areas previously exempted as too difficult to liberalize
(agriculture, textiles) and to the increasingly important new areas previously
not included (trade in services, intellectual property, investment policy, trade
distortions).6
2. Economic changes during negotiations
on the accession of China to the WTO
The Uruguay Round came into effect in 1995 with deadlines ending in
2000 (2004 in the case of developing country contracting parties) under the
administrative direction of the newly created World Trade Organization. China
decided to apply for the accession to the World Trade Organization under Article
XII of the WTO Agreement. In a communication dated December 7, 1995, the
Government of China applied for the accession to the Marrakesh Agreement
establishing the World Trade Organization (WTO Agreement) pursuant to Article
XII of the WTO Agreement. Following China’s application and pursuant to the
decision of the General Council on January 31, 1995, the existing Working Party
on China’s Status as a GATT 1947 Contracting Party was transformed into a WTO
4 GATT Working Party on China to resume in may (19 March 1993) http://www.sunsonline.org/trade/process/during/03191093.htm 5 Jelisavac Trošić Sanja (2015): Pregovori u okviru GATT i STO, Institut za međunarodnu
politiku i privredu, Beograd, 31-32 6 Cline William (1995): “Evaluating the Uruguay Round”, The World Economy, 18 (1): 1.
doi:10.1111/j.1467-9701.1995.tb00198.x
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Accession Working Party, effective from December 7, 1995.7
Finally, after almost
15 years of negotiations, China became a WTO member on December 11, 2001.
Initially, the Working Party on China’s status was established under the
GATT in 1987 and concerned only China’s trade regime for goods. In 1995,
it was converted to a WTO Working Party and its scope was broadened to
include trade in services, new rules on non-tariff measures and rules relating
to intellectual property rights. The chairperson of China’s Accession Working
Party was Ambassador Pierre-Louis Girard of Switzerland.8
The tasks of the
Working Party were to examine the application of the People’s Republic of China
Government to accede to the World Trade Organization under Article XII and
to submit to the General Council recommendations which may include a draft
Protocol of Accession.9 The Working Party reviewed the foreign trade regime of
China. The discussions and commitments resulting therefrom were contained
in the Report of the Working Party on the Accession of China (paragraphs
15-342) and in the Draft Protocol of Accession (Draft Protocol), including the
annexes.10 At the end of negotiations, the People’s Republic of China acceded
to the Marrakesh Agreement Establishing the World Trade Organization on
the terms and conditions set out in the Draft Protocol on the Accession of the
People’s Republic of China.11
Among other difficulties in the course of negotiations, the issue of customs
valuation, for instance, came up during the accession process. The Report of
the Working Party (November 1, 2001) reads: “Some members of the Working
Party expressed concern regarding the methods used by China to determine the
customs value of goods, in particular regarding the practice of using minimum
or reference prices for certain goods, which would be inconsistent with the
Agreement on Implementation of Article VII of the GATT 1994 (Customs
Valuation Agreement).” In response, “The representative of China confirmed
that, upon accession, China would apply fully the Customs Valuation Agreement
7 WTO, “Communication from China”, WT/ACC/CHN/1, (07.12.1995), 1-2. The terms of
reference and the membership of the Working Party are reproduced in document WT/
ACC/CHN/2/Rev.11 and Corr.1. 8 The members of the Working Party on the Accession of China to the WTO were: Argentina,
Australia, Bangladesh, Bolivia, Brazil, Canada, Chile, Colombia, Cuba, Czech, Republic,
Ecuador, Egypt, European, Communities, and, Member, States, Hong, Kong, Hungary,
India, Indonesia, Israel, Jamaica, Japan, Korea, Kuwait, Malaysia, Mexico, Myanmar,
New, Zealand, Norway, Pakistan, Peru, Philippines, Poland, Romania, Singapore, Slovak,
Republic, Slovenia, Sri, Lanka, Switzerland, Thailand, Tunisia, Turkey, United, States,
Uruguay, Zimbabwe. 9 WTO, “Working Party on the Accession of China”, WT/ACC/CHN/2, (2. April 1996.), 1 10 WTO, “Report of the Working party on the Accession of China”, WT/MIN(01)/3,
(10.11.2001.), Ministerial Conference Fourth Session, Doha, (9-13.11.2001.) 11 Draft Protocol can be viewed on pages 155-176 of the Report of the Working party on the
Accession of China.
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China’s accession to the world trade organization: The process and the effects 177
(…)”.12 This is just an example that illustrates the difficulties during China’s
negotiations on the WTO accession.
The admission of China to the WTO was preceded by a lengthy negotiation
process and required significant changes in the Chinese economy. During the
accession negotiations, China had to reform the trade regime in order to meet
the WTO requirements. The pre-reform Chinese trade regime was dominated
by between 10 and 16 Foreign Trade Corporations with effective monopolies
in the import and export of their specified product ranges.13 The Chinese trade
regime had the limited importance of conventional trade policy instruments
such as tariffs, quotas and licenses that were absent or unimportant under the
planning system. Price-based measures were unimportant since the imported
quantities could be controlled through the monopoly trading corporations. The
reform of China’s trade regime during the WTO accession negotiations had
four major dimensions: increasing the number and type of enterprises eligible
to trade beyond the initial few centrally controlled foreign trade corporations;
developing indirect trade policy instruments such as tariffs, licenses, quotas and
duty exemption schemes; reducing and ultimately removing the exchange rate
misalignments; and reforming prices so that they could play a role in guiding
resource allocation. These reforms of the trading system were inextricably
linked with the reform of the enterprise sector to allow indirect regulation
through market-determined prices to replace direct regulation of enterprise
outputs.14 The WTO accession process signified China’s deeper integration into
the contemporary world economy.
The biggest structural change in China’s economy was the rapid growth of
the non-state economy. Official figures, which are probably understated, show
that employment in the non-state sector from 1989 to 1998, including individual
entrepreneurs, private enterprises, foreign-invested enterprises, and enterprises
established by investors from Taiwan, Hong Kong and Macao, have increased
four-fold, from 21.51 million to 87.01 million, an average annual growth rate of
just over 16% (see Table 1). Although the 17 million people added to the private
sector between 1996 and 1998 cannot compensate completely for the 22 million
workers dismissed from the state-owned enterprises in those years (much less
than those dismissed from urban collectives, those newly added to the workforce
and those switching from agricultural to non-agricultural employment), it
12 Javorcika Beata S., Narciso Gaia (2017): “WTO accession and tariff evasion”, Journal of
Development Economics 125, 61-2. 13 Lardy Nicholas (1991): Foreign Trade and Economic Reform in China, 1978-1990,
Cambridge: Cambridge University Press 14 Ianchovichina Elena, Will Martin (2001): “Trade liberalization in China’s accession to
WTO” Journal of Economic Integration, 424
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nevertheless suggests the way China’s economy is developing and where the new
jobs will be created.15
Table 1. Growth of the Non-State Economy, in million people
Year Private Individual Foreign
Taiwan,
Hong Kong,
Macao
Total Percentage
1989 1.64 19.40 0.47 n/a 21.51 –
1990 1.70 21.00 0.66 n/a 23.35 8.60
1991 1.84 23.10 1.65 n/a 26.59 13.9
1992 2.23 24.70 2.21 n/a 29.14 9.60
1993 3.73 29.40 2.28 1.55 36.46 25.10
1994 6.48 37.80 4.06 2.11 50.45 38.40
1995 9.56 46.10 5.13 2.41 63.20 25.30
1996 11.70 50.20 5.40 2.65 69.95 10.70
1997 13.50 54.40 5.81 2.81 76.52 9.40
1998 17.10 61.10 5.87 2.94 87.01 13.70
Sources: Zhongguo siying qiye fazhan baogao (1999) (Beijing: Shehui kexue wenxian chubanshe,
2000), p. 33; and Zhongguo laodong tongji nianjian (Beijing: Zhongguo laodong
chubanshe, various years); taken from Fewsmith Joseph (2001): “The political and
social implications of China’s accession to the WTO.” The China Quarterly 167, p. 583.
During the negotiations, the most important and the most hotly debated
topic in China was the anticipated accession to the World Trade Organization.
After 13 years of efforts to achieve membership, the United States and China
finally reached an agreement in November 1999. Shortly after that, the European
Union and China came to an agreement. But as soon as a long-expected
membership was on the verge of fulfillment, after years of presenting arguments
with which the West kept trying to keep China out of the WTO, the prospect of
actual joining set off a large number of speculations over the impact on China’s
economy. Many began questioning the benefits of membership. They were
concerned that China’s industries would be exposed to crippling competition,
farmers would be hurt by the import of cheap and better quality foreign wheat
and corn, while China as a nation would become entangled in a global capitalist
network that would erode the country’s sovereignty. In the worst-case scenario,
15 Fewsmith Joseph (2001): “The political and social implications of China’s accession to the
WTO” The China Quarterly 167, 582-3
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China’s accession to the world trade organization: The process and the effects 179
China would become a servant to the United States.16 However, this scenario
proved to be unrealistic.
The reforms in China during the negotiations (a 15-year period) included
substantial tariff reductions and the dismantling of most nontariff barriers.
Improved market access following the WTO accession was equally important.
Few nations benefited from the participation in international trade as much as
China did, or in such a brief period of time. In 1978, at the beginning of the
reform era, China had about $20 billion of foreign trade. In 2000 that figure rose
to $474 billion, which represented a 24-fold increase. This participation in global
trade was critical for China’s turning away from a pattern of nearly autarkic,
capital-intensive growth to an export-led growth that exploits China’s natural
comparative advantage in cheap labor.17 However, the single most important
impact of the WTO on China was the reinforcement of the directions in which
China’s economy and policy was moving during accession negotiations.
On November 11, 2001, the Government of the People’s Republic of China
accepted the Protocol on the accession of the People’s Republic of China done at
Doha on November 10, 2001. In terms of paragraph 2 of Part III of the Protocol,
it entered into force on December 11, 2001.18 At the time of the accession, Chinese
President Hu Jintao said that China’s accession to the WTO was a milestone in
China’s reform and opening up, bringing them into a new era of further opening
up. To join the WTO was a major strategic decision based on comprehensive
analysis of the situation at home and abroad in order to push forward China’s
reform, opening up and socialist modernization drive.19 In the end, having
undergone major structural reforms of her economy and becoming a member of
the WTO, China made confident steps in the global marketplace, taking on one
of the leading roles in the world trade.
3. China’s sixteen years of WTO membership
The Working Party on the Accession of China to the WTO concluded
almost 15 years of negotiations with China and agreed to forward some 900
pages of legal text for the formal acceptance by the 142 Member Governments
16 Fewsmith Joseph (2001): “The political and social implications of China’s accession to the
WTO” The China Quarterly 167, 573 17 Lardy Nicholas (1991). The figure for China’s foreign trade in 2000 comes from Rongji
Zhu (5. March 20001.): “Report on the outline of the Tenth Five-Year Plan for national
economic and social development” at the Fourth session of the Ninth National People’s
Congress, China Central Television, trans, Foreign Broadcast Information Service,
CPP20010305000112 18 WTO, “Protocol on accession of the People’s Republic of China done at Doha” (10.
November 2001), WLI/100, (20 November 2001.) 19 Permanent Mission of China to the WTO (2001): “China in the WTO: Past, Present and
Future”, The Tenth Anniversary of China’s Accession to the WTO
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of the WTO. Thirty days after China notified its acceptance of the agreement
it legally became a member of the WTO.20 China became the 143rd member of
the World Trade Organization on December 11, 2001. Since 1995 China became
the 15th economy that has joined the WTO pursuant to Article XII of the Marrakesh Agreement.
The World Trade Organization has a total of 164 members, of which 36
countries and customs territories became members in the period from 1996 to
July 2016. Established in 1995, the World Trade Organization is the only global
international organization that manages trade rules between countries. By
providing a forum for governments to negotiate trade agreements and settle trade
disputes, the organization aims to help governments solve their trade problems.
The Doha Development Round of negotiations began when China became
a member of the WTO, so it actively participated in the negotiations from the
first day. At the WTO Fourth Ministerial Conference held from November
9–13, 2001, ministers from all WTO members launched the Doha Development
Agenda (DDA) and also approved China’s accession to the WTO. Since the
meeting took place just two months after the attack on the World Trade Center,
some government officials called for greater political cohesion and saw the trade
negotiations as a means to that end. Some even thought that a new round of
multilateral trade negotiations could help the recovery of the world economy,
which was weakened by recession and terrorism-related uncertainty.
The Doha Round was the first WTO trade round, which began in 2001 and
remained unresolved after missing its official deadline of 2005. China was firmly
devoted to the multilateral trading system and the successful conclusion of the
Doha Round. China actively participated in all kinds of WTO activities, including
regular Council and Committee activities and Doha Development Agenda
negotiations. It also tried to help other developing countries, multilaterally,
plurilaterally and bilaterally, in areas such as DDA and capacity building.21 Some
viewpoints even suggest that China took over the leading role in WTO.22
China is an observer to the Plurilateral Agreement on Government
Procurement (GPA) and continues negotiating its accession thereto. It is also
an observer to the Plurilateral Agreement on Trade in Civil Aircraft, and as a
participant in the Information Technology Agreement (ITA) has agreed to its
expansion. China submitted its notification of Category A commitments under
the Agreement on Trade Facilitation and on November 4, 2015, it ratified the
20 WTO, “Protocol on accession of the People’s Republic of China done at Doha”. More
on China’s negotiations to join the WTO can be found at https://www.wto.org/english/
thewto_e/acc_e/a1_chine_e.htm. 21 Permanent Mission of China to the WTO (2001) 22 See Schlesinger Jacob M., (1 November 2017): “How China Swallowed the WTO”,
The Wall Street Journal, https://www.wsj.com/articles/how-china-swallowed-thewto-1509551308
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China’s accession to the world trade organization: The process and the effects 181
Agreement.23 The Preferential trade arrangements (PTAs) that are being
implemented by China as a WTO Member are the following ones:
• China is a provider of Duty-free treatment for the Least Developed Countries
(LDC) (from July 1, 2010)
• China is a beneficiary of Generalized System of Preferences with Australia
(from January 1, 1974), Japan (August 1, 1971), Kazakhstan (January 1,
2010), New Zealand (January 1, 1972), Norway (October 1, 1971), Russian
Federation (January 1, 2010), Switzerland (March 1, 1972), Turkey (January
1, 2002).24
Dispute cases initiated within the WTO dispute settlement mechanism
involving China are as follows: 15 cases as a complainant, 39 cases as a respondent
and 142 cases as the third party.25
Regional Trade Agreements of China in force notified by the WTO are:
ASEAN – China; Asia Pacific Trade Agreement (APTA); Asia Pacific Trade
Agreement (APTA) – Accession of China; Australia – China; Chile – China;
China – Costa Rica; China – Hong Kong, China; China – Republic of Korea;
China – Macao, China; China – New Zealand; China – Singapore; Iceland –
China; Pakistan – China; Peru – China; Switzerland – China.26 Moreover, an
early announcement has been made for two Regional Trade Agreements: The
Cross-Straits Economic Cooperation Framework Agreement (ECFA) and China
– Norway Bilateral Agreement.
Regarding the acceptance of the WTO multilateral instruments, China
accepted the Protocol Amending the TRIPS Agreement (2005) on November 11,
2007. On September 4, 2015, China accepted the Protocol concerning the Trade
Facilitation Agreement (2014).
Many countries formed coalitions within the WTO. These groups often
spoke with one voice using a single coordinator or negotiating team. During the
Doha Round of negotiations, China became a member of several groups in the
negotiations:
• Asian developing members
• APEC (Asia-Pacific Economic Cooperation forum)
• Article XII Members27
23 WTO, www.wto.org. 24 Details about Preferential trade arrangements of China can be found at: http://ptadb.wto.
org/Country.aspx?code=156. 25 Details about all cases can be found at: https://www.wto.org/english/thewto_e/countries_e/
china_e.htm. 26 Details about Regional Trade Agreements of China can be found at: http://rtais.wto.org/
UI/PublicSearchByMemberResult.aspx?MemberCode=156&lang=1&redirect=1 27 Article XII Members, or Recently Acceded Members (RAMs), i.e., countries that negotiated
and joined the WTO after 1995, seeking lesser commitments in the negotiations because
of the liberalization they have undertaken as part of their membership agreements.
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• G-2028
• G-3329
• Paragraph 6 countries30
• FANs (Friends of A-D Negotiations)31
• “W52” sponsors.32
Upon the WTO accession, China became a party to the Agreement on
Textiles and Clothing and was the subject to its rights and obligations. For all
WTO members, quotas on textiles ended at December 31, 2004, but there was a
safeguard mechanism in place until the end of 2008 permitting the WTO Member
Governments to take action to curb imports in case of market disruptions caused
by Chinese exports of textile products. China agreed to limit its subsidies for
agricultural production to 8.5% of the value of farm output (according to Article
6.4 of the Agriculture Agreement). China also agreed to apply the same limit to
subsidies covered by Article 6.2 of the Agriculture Agreement.33
Also mandated in the WTO Agreement are Trade Policy Reviews, in which
a member country’s trade and related policies are examined and evaluated at
regular intervals.34 Significant developments that may have an impact on the
global trading system are also monitored. For each review, two documents are
prepared: a policy statement by the government of the member under the review,
and a detailed report written independently by the WTO Secretariat. These
Excludes least-developed countries because they will make no new commitments, and EU
members. 28 Coalition of developing countries pressing for ambitious reforms of agriculture in developed
countries with some flexibility for developing countries (not to be confused with the G-20
group of finance ministers and central bank governors, and its recent summit meetings). 29 Also called “Friends of Special Products” in agriculture. Coalition of developing countries
pressing for flexibility for developing countries to undertake limited market opening in
agriculture. 30 Group of countries with less than 35% of non-agricultural products covered by legally
bound tariff ceilings. They have agreed to increase their binding coverage substantially,
but want to exempt some products. (In paragraph 6 of the first version of the NAMA text,
later paragraph 8.). 31 Coalition seeks more disciplines on the use of anti-dumping measures. 32 Sponsors of TN/C/W/52, a proposal for “modalities” in negotiations on geographical
indications (the multilateral register for wines and spirits, and extending the higher level
of protection beyond wines and spirits) and “disclosure” (patent applicants to disclose
the origin of genetic resources and traditional knowledge used in the inventions). The list
includes as groups: the EU, ACP and African Group. 33 WTO, WTO successfully concludes negotiations on China’s entry. More about mutually agreed terms and timetables for services, specified in an annex to the Protocol of
Accession, can also be found on this page. 34 For full access to reports and all communication regarding Trade Policy Reviews follow
this path: www.wto.org > trade topics > trade policy reviews.
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China’s accession to the world trade organization: The process and the effects 183
two documents are then discussed by the WTO’s full membership in the Trade
Policy Review Body. The last report prepared for the sixth Trade Policy Review
of China was discussed during 2016.
According to the WTO rules, China is still considered a developing country.
It is under opposed pressures – from outside to make larger contributions and
from inside to protect and develop.35 In the first ten years after the accession,
China achieved a win-win outcome with the rest of the world. In terms of trade,
China has been the largest destination for the export of LDCs since 2009. China
is the only WTO member not requesting market access for LDC acceding
countries and the largest trading partner for major economies. China has been a
contributor to the Aid for Trade initiative since 2008 and the largest developing
country in terms of outward FDI.36 China’s Protocol of Accession to the WTO
allowed other country members to consider China as a Non-Market Economy
(NME) until the end of 2016. The Chinese government has been straggling to gain
Market Economy Status (MES) in order to reduce the number of antidumping
investigations against Chinese products. One research article showed that 14
out of 16 countries in the sample that recognized Chinese MES reduced their
antidumping investigations thereafter.37 This trend will correspond with China’s
intentions because it does not want to be recognized as a country that enters
into foreign markets through dumping measures. Sixteen years after China’s
entry into the World Trade Organization, the trade policy is still a major issue
for China’s relations with other countries. It is especially true when it comes to
China-US bilateral relations. The USA President Donald Trump has called out
China for its trade policies, accusing the country of conducting unfair trade with
the USA. Also, other countries argue that China is the only country that has
benefited from international trade.38
So far, China has fulfilled its WTO commitments. Continued implementation
of the WTO commitments in the coming years will further facilitate China’s
ongoing integration with the global economy and generate benefits for most
partner countries. However, it may also pose significant challenges to the
authorities in China, and the extensive safeguard provisions under the WTO
agreement represent a downside risk that could constrain China’s export
growth in the future.39 In the 13th Five-Year Plan (2016-2020) China focused
35 Permanent Mission of China to the WTO (2001) 36 Permanent Mission of China to the WTO (2001) 37 For more details look at the research: Urdinez Francisco, Masiero Gilmar (2015): “China
and the WTO: Will the Market Economy Status Make Any Difference after 2016? ”, The
Chinese Economy, 48: 169 38 See Zhang Yu, Zou Yun, “China Footprint: Who benefits from China’s trade policy?”,
https://news.cgtn.com/news/3451444d34557a6333566d54/share_p.html (21.11.2017.) 39 Rumbaugh Thomas, Blancher Nicolas (2004): “China: International Trade and WTO
Accession”, IMF Working Paper, No. 4-36, International Monetary Fund. 3
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on continuing the process of structural economic reform, which includes the
promotion of private sector participation in the economy, as well as the reform
of state-owned enterprises. The Plan contains the promotion of competition,
fiscal reform, financial sector reform to increase private capital participation
in banking and expand the provision of financial services, and making the
exchange rate and interest rate more market-oriented. How much of the planned
will be achieved remains to be seen.
4. Trade changes China experienced after the WTO accession
China’s experience as a WTO member is unique. Presumably, the WTO
accession has not demonstrated such a profound impact on the economic, legal
and political changes in any other country as it had in China.40 For our research,
we are focusing on the most important changes in the foreign trade. In 2000
China was the 7th leading exporter and the 8th largest importer of merchandise
trade – exports 249.2 billion dollars (3.9% share), imports 225.1 billion dollars
(3.4% share). For commercial services, China was the 12th leading exporter and
the 10th largest importer – exports 29.7 billion dollars (2.1% share), imports 34.8
billion dollars (2.5% share).41 China’s contribution to the international economy
has grown since it has joined the WTO.
With the entry into the WTO China has been given the necessary impetus
for accelerating the growth and development of its economy. In the first 6 years
after joining the WTO, imports increased by over 30% each year, which is a-100-
billion-dollar increase annually. Trade volume from 2001 to 2016 has jumped
from 510 billion US dollars to 3686 billion US dollars. That is a more than sevenfold increase from 2001 to 2016 (see Table 2). These are unprecedented results of
an economy on a world scale. China has also become the biggest export country
moving up from the sixth-place ranking in 2001. China cut its import tariffs
from an average of 15.3% in 2001 to 9.8% in 2010, in accordance with the WTO
rules. For some products, tariffs have been dramatically dropping. For example,
the car tariff used to be as high as 100% and now it is reduced to 25%. Average
wine tariffs fell from 120% to 14%. China’s commitment to promoting free and
fair multilateral trade has never wavered since 2001.42 These results would
be sufficient to conclude that China has made huge benefits from the WTO
membership. An interesting research paper about a link between the reduction in
trade policy uncertainty and companies’ innovation incentives implies that trade
40 More about economic, legal, and political change in: Halverson Karen (2004): “China’s WTO
accession: economic, legal, and political implications.” BC Int’l & Comp. L. Rev. 27, 319 41 WTO, WTO successfully concludes negotiations on China’s entry 42 Zhang Yu, Zou Yun, China Footprint
Vol. 16, â„– 1, 2019: 173-192
China’s accession to the world trade organization: The process and the effects 185
liberalization may promote economic growth by removing policy uncertainties
and consequently encouraging innovation.43 China is a successful example of this.
Table 2. China’s Foreign Trade 2001-2016, in billion US dollars
Year Export Import Balance
2001 266.10 243.55 22.55
2002 325.60 295.17 30.43
2003 438.23 412.76 25.47
2004 593.33 561.23 32.10
2005 761.95 659.95 102.00
2006 968.94 791.46 177.48
2007 1220.06 956.12 263.94
2008 1430.70 1132.56 298.14
2009 1201.65 1005.56 196.09
2010 1577.76 1396.00 181.76
2011 1898.39 1743.39 155.00
2012 2048.78 1818.20 230.58
2013 2209.01 1949.99 259.02
2014 2342.29 1959.23 383.06
2015 2273.47 1679.56 593.91
2016 2097.64 1587.92 509.72
Source: Compiled by the author using data from the Trade Map – International Trade Statistic, http://www.trademap.org/
In China, many expressed worries that its trade would face strong
competition from developed countries, and that especially agricultural and
infant industries would be vulnerable to the new conditions under the WTO.
Others were hoping that accession would promote the rule of law in China and
reduce the interference of the state. Also, there were hopes that China would
accelerate trade and become the leading player in the world economy.44 In one
of the most interesting researches, the results show that “the major efficiency
gains from WTO accession would accrue to China itself, but rest of the world,
especially developed countries and Asian newly industrialized economies, as well
43 Qing Liu, Hong Ma (2016): “Trade Policy Uncertainty and Innovation: Firm Level Evidence
from China’s WTO Accession”, http://economics.ucdavis.edu/events/papers/1026Ma.pdf,
(8. June 2017.) 44 Hasan Md Mehedi (2016): “China’s WTO Accession: Impacts on Trade policy and Legal
system”, Quarterly Journal of Chinese Studies; Xiamen 4(3), 54
Sanja Jelisavac Trošić
Megatrend revija ~ Megatrend Review
186
as the least developed countries, also benefit. However, integrating China into the
global trading system could induce more competition on labor-intensive products
and reduce their prices. The expansion of labor-intensive sectors in China could
increase its net imports on agricultural and capital-intensive products, drive up
their price, thus improving industrial and land abundant countries’ terms of
trade. China also increases its land-intensive agricultural imports dramatically,
and its share in total world imports more than doubled. However, its impact on
food import least developed countries is very limited because of the expansion of
agricultural production worldwide and the improvement of international terms
of trade for those countries”.45 In any case, the impact of China on the world
market and overall on the world economy is extremely large.
There has been much debate regarding the impact of China’s economic rise
on the world economy. The world economy has doubled in size since 1990. It is
its biggest expansion in history, despite the post-2007 Great Recession. China,
India and other emerging giants – representing one-third of humanity – are
rapidly catching up with the developed world.46 China’s integration with the
global economy has contributed to sustained growth in international trade.
Both its exports and imports have grown faster than the world trade for more
than twenty years. As China’s trade with the rest of the world has deepened,
its composition and geographical pattern have also shifted. Its overall share of
exports to industrial economies has increased and become more diversified.
China has also become increasingly important within the Asian regional
economy. With vertical specialization of production within Asia, China is now
among the most important export destinations for other Asian countries.47
Today it is hard to find a place in the world that does not have “made in China
(PRC)” products. China emerged as the new “workshop of the world.” It could
not have done that without the integration into global production networks.
According to the WTO Trade Profiles data, China’s GDP was 10.87 trillion US
dollars in 2015 and GDP per capita was 7503 US dollars (2013-2015). China is
the first world trade merchandise exporter and the second largest merchandise
importer in the world. As regards Commercial services, China is the third
largest exporter in the world and the second largest importer. Trade per capita
was 1677 US dollars (2013-2015), accounting for 22.3 % of GDP (2013-2015). The
breakdown in China economy’s total merchandise exports and imports can be
seen in Graph 1.
45 Wang, Z. (2001): “The Impact of China’s WTO Accession on the World Economy”, GTAP
Resource No.670 and Conference Paper, 18-9 46 WTO, World Trade Report 2017 Trade Technology and Jobs 47 Rumbaugh Thomas, Blancher Nicolas (2004): “China: International Trade and WTO
Accession”, IMF Working Paper, No. 4-36, International Monetary Fund. 3
Vol. 16, â„– 1, 2019: 173-192
China’s accession to the world trade organization: The process and the effects 187
Graph 1. Structure of China’s Merchandise Trade (2015) in %
Source: WTO, Trade Profiles 2016, p. 78.
As recently as the 1980s, China’s economy was still overwhelmingly
comprised of poor agrarian workers. Today, agriculture accounts for just 28%
of Chinese employment structure, while manufacturing accounts for 29% and
services – its fastest growing sector – account for 43%.48
China’s current account surplus totaled 330.6 billion US dollars in 2015 and
was equivalent to 3% of GDP. China’s traditional external current account surplus
reflects the excess of national savings over investment, which, after narrowing
up to 2014, widened again in 2015 to 3.4% of GDP.49 This high surplus mostly
comes from a large increase in the merchandise trade surplus. The merchandise
trade surplus increased sharply in 2014 and 2015 when it reached 567 billion US$
or the equivalent of 5.2% of GDP. This mainly reflected the decline in imports.
Imports as a share of GDP declined to 14.5% in 2015, down from 17.5% in 2014
and 21.1% in 2011. In 2015, both exports and imports of goods declined, with
exports totaling 2.28 trillion US dollars, down from 2.34 trillion US dollars
in 2014, and imports amounting to 1.68 trillion US dollars, down from 1.96
trillion US dollars in 2014. Import contraction in value terms reflects, first of
all, lower oil and other commodity prices. Manufactured products remained the
dominant component of exports, accounting for slightly over 94% of the total
exports. Among manufactured products, office machines, telecommunication
equipment, textiles and clothing continued to be China’s main exports. The
main destinations for Chinese merchandise exports are the United States, the
EU, Hong Kong, Japan, the Republic of Korea, and ASEAN countries, which
combined represent about 70% of exports. The main import countries are the
EU, the Republic of Korea, the United States, Chinese Taipei, Japan, Australia
and ASEAN countries.
48 WTO, World Trade Report 2017 Trade Technology and Jobs, 15 49 WTO, www.wto.org.
Sanja Jelisavac Trošić
Megatrend revija ~ Megatrend Review
188
The latest data show the weakness of trade in 2015 was due to a number of
factors, including an economic slowdown in China. Also, the appreciation of the
yuan may have contributed to the economic slowdown in China to the extent that
it made Chinese exports more expensive in foreign markets. Meanwhile, even
though output slowed in China, indicators of business and consumer sentiment
suggested that growth would remain stable at a lower but more sustainable rate.50
In recent years China has also been a very active player in the global economy,
a country that is leading in economic policy and brings new trends in the world
market. It became the one that makes important decisions affecting a large number
of countries. Since that suits its goals, China now firmly supports globalization and
is against trade protectionism. On the other hand, China has been an important
member of the BRICS emerging economies mechanism. Also, the “One Belt,
One Road” Initiative is the latest in China’s global integration efforts. More than
60 countries have signed up to be part of the development strategy in the three
continents: Asia, Africa and Europe. Opening new trade routes should help China
with overcapacity in sectors like manufacturing. The slowing down of China’s
economy could simultaneously give a boost to it. If this effort becomes a success
story, China will consolidate its position as a global power.
5. Conclusion
China was one of the 23 original signatories of the GATT. After withdrawal,
China wanted to resume its position and applied to the GATT but never
completed the accession. China applied and finally become a WTO member in
2001, after 15 years of negotiation. Trade reforms and accepted commitments
as part of China’s accession to the WTO have been crucial in promoting its
integration with the global trading system. The integration into the global
production networks made Chinese products accessible worldwide. During the
accession negotiations, as well as during its membership in the WTO, China
has undergone major structural changes in its economy. The largest of them is
accelerated growth of the non-state economy, substantial tariff reductions and
the elimination of most nontariff barriers.
China’s integration with the global economy has contributed to sustained
growth in international trade. Both its exports and imports have grown faster
than world trade for more than twenty years. China is now the first world trade
merchandise exporter and the second largest merchandise importer in the world.
Besides, China becomes a very active player in the World Trade Organization.
China actively supports the Doha Development Agenda and participates in the
negotiations rounds, especially in the goods negotiations, agriculture and nonagricultural market access negotiations and in the services and rules negotiations.
50 WTO, World Trade Statistical Review 2016
Vol. 16, â„– 1, 2019: 173-192
China’s accession to the world trade organization: The process and the effects 189
However, despite some expectations, China has not taken a leading role in the
Doha negotiations and in the WTO as a whole.
There is a firm belief that in the future China will continue its breakthrough
and integration into the world trade relying on an already accomplished strong
role in the world economy.
Literature
• Cline William (1995): “Evaluating the Uruguay Round”, The World Economy,
18 (1): 1. doi:10.1111/j.1467-9701.1995.tb00198.x
• Dispute cases initiated within the WTO dispute settlement mechanism
involving China: https://www.wto.org/english/thewto_e/countries_e/
china_e.htm.
• Draft Protocol can be viewed on pages 155-176 of the Report of the Working
party on the Accession of China.
• Fewsmith Joseph (2001): “The political and social implications of China’s
accession to the WTO” The China Quarterly 167
• For more details look at the research: Urdinez Francisco, Masiero Gilmar
(2015): “China and the WTO: Will the Market Economy Status Make Any
Difference after 2016? ”, The Chinese Economy, 48: 169
• GATT Working Party on China to resume in may (19 March 1993) http://
www.sunsonline.org/trade/process/during/03191093.htm
• GATT, “Working Party on China’s Status as a Contracting Party”, L/6191/
Rev.7, https://docs.wto.org/gattdocs/q/GG/L6199/6191R7.PDF (01.07.2017.)
• Halverson Karen (2004): “China’s WTO accession: economic, legal, and
political implications.” BC Int’l & Comp. L. Rev. 27
• Hasan Md Mehedi (2016): “China’s WTO Accession: Impacts on Trade policy
and Legal system”, Quarterly Journal of Chinese Studies; Xiamen 4(3), 54
• Ianchovichina Elena, Will Martin (2001): “Trade liberalization in China’s
accession to WTO” Journal of Economic Integration, 424
• Javorcika Beata S., Narciso Gaia (2017): “WTO accession and tariff evasion”,
Journal of Development Economics 125
• Jelisavac Trošić Sanja (2015): Pregovori u okviru GATT i STO, Institut za
međunarodnu politiku i privredu, Beograd
• Lardy Nicholas (1991): Foreign Trade and Economic Reform in China, 1978-
1990, Cambridge: Cambridge University Press
• Permanent Mission of China to the WTO (2001)
• Permanent Mission of China to the WTO (2001): “China in the WTO: Past,
Present and Future”, The Tenth Anniversary of China’s Accession to the
WTO
Sanja Jelisavac Trošić
Megatrend revija ~ Megatrend Review
190
• Qing Liu, Hong Ma (2016): “Trade Policy Uncertainty and Innovation: Firm
Level Evidence from China’s WTO Accession”, http://economics.ucdavis.
edu/events/papers/1026Ma.pdf, (8. June 2017.)
• Regional Trade Agreements of China: http://rtais.wto.org/UI/
PublicSearchByMemberResult.aspx?MemberCode=156&lang=1&redirect=1
• Rongji Zhu (5. March 20001.): “Report on the outline of the Tenth Five-Year
Plan for national economic and social development” at the Fourth session
of the Ninth National People’s Congress, China Central Television, trans,
Foreign Broadcast Information Service, CPP20010305000112
• Rumbaugh Thomas, Blancher Nicolas (2004): “China: International
Trade and WTO Accession”, IMF Working Paper, No. 4-36, International
Monetary Fund. 3
• Rumbaugh Thomas, Blancher Nicolas (2004): “China: International
Trade and WTO Accession”, IMF Working Paper, No. 4-36, International
Monetary Fund
• Schlesinger Jacob M., (1 November 2017): “How China Swallowed the
WTO”, The Wall Street Journal, https://www.wsj.com/articles/how-chinaswallowed-the-wto-1509551308
• Wang, Z. (2001): “The Impact of China’s WTO Accession on the World
Economy”, GTAP Resource No.670 and Conference Paper, 18-9
• WTO, “Communication from China”, WT/ACC/CHN/1, (7. December
1995), 1-2. The terms of reference and the membership of the Working Party
are reproduced in document WT/ACC/CHN/2/Rev.11 and Corr.1.
• WTO, “Protocol on accession of the People’s Republic of China done at
Doha” (10. November 2001), WLI/100, (20 November 2001.)
• WTO, “Protocol on accession of the People’s Republic of China done at
Doha”. More on China’s negotiations to join the WTO: https://www.wto.org/
english/thewto_e/acc_e/a1_chine_e.htm
• WTO, “Report of the Working party on the Accession of China”, WT/
MIN(01)/3, (10. November 2001.), Ministerial Conference Fourth Session,
Doha, (9-13. November 2001.)
• WTO, “Working Party on the Accession of China”, WT/ACC/CHN/2, (2.
April 1996.), 1
• WTO, Trade Policy Reviews, www.wto.org > trade topics > trade policy
reviews.
• WTO, World Trade Report 2017 Trade Technology and Jobs
• WTO, World Trade Report 2017 Trade Technology and Jobs, 15
• WTO, World Trade Statistical Review 2016
• WTO, WTO successfully concludes negotiations on China’s entry, https://
www.wto.org/english/news_e/pres01_e/pr243_e.htm. (21.08.2017.)
• WTO, www.wto.org.
Vol. 16, â„– 1, 2019: 173-192
China’s accession to the world trade organization: The process and the effects 191
• WTO, www.wto.org. Preferential trade arrangements of China: http://ptadb.
wto.org/Country.aspx?code=156.
• Zhang Yu, Zou Yun, “China Footprint: Who benefits from China’s trade
policy?”, https://news.cgtn.com/news/3451444d34557a6333566d54/share_p.
html (21.11.2017.)
Sanja Jelisavac Trošić UDK339.54:061.1(100)(510)
Pregledni naučni rad
Primljen 11.12.2017.
Odobren 6.9.2018.
PRISTUPANJE KINE SVETSKOJ TRGOVINSKOJ
ORGANIZACIJI: PROCES I EFEKTI
Cilj rada je da predstavi i pokuša da objasni promene koje su nastale u trgovini i
privredi Kine tokom pristupanja i tokom članstva u Svetskoj trgovinskoj organizaciji.
Rad čine četiri celine i zaključak. Na početku su ukratko predstavljeni pregovori Kine
sa GATT, kao i glavne prepreke zbog kojih ovi pregovori nisu dovedeni do kraja. Drugi
deo je posvećen pregovorima za članstvo u STO i najvažnijim promenama kroz koje je
privreda Kine prošla da bi ispunila uslove za članstvo. Ovde su pomenute najvažnije
prepreke članstvu kao i privredne reforme i porast privatnog sektora u Kini. Treći deo je
posvećen tome kako se Kina po pristupanju u STO uključila odmah i u Doha razvojnu
rundu pregovora. Ova zemlja je postala i članica više pregovaračkih grupa u okviru STO,
a u međuvremenu potpisala i pojedine STO sporazume. Takođe, Kina je i više puta prošla
kroz reviziju svoje trgovinske politike, što je periodična obaveza svake članice STO. U
poslednjem delu su opisane najvažnije promene u trgovini Kine koje su nastupile po
punopravnom članstvu u STO koristeći sve prednosti ovoga članstva. Kina je tokom
šesnaest godina svoga članstva u STO postigla nikada do tada viđenu brzinu trgovinskog
rasta, što ju je dovelo po vodećih pozicija u svetskoj trgovini. Na kraju zaključujemo da
se Kina u potpunosti integrisala u svetku privredu i da je pristupanje Svetskoj trgovinskoj
organizaciji imalo veliku ulogu u tome.
Ključne reči: Kina, STO, GATT, pristupanje, ekonomija, trgovina, Doha razvojna
agenda, pregovori.

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