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| These developments, we felt,
were appropriate "infrastructure" measures as China turned to
building a new economic and commercial environment under the terms of
its WTO membership. But we went on to offer a cautionary comment: We perceive, however, a tone of impatience and uneasiness among some respected and experienced business observers within China over the PRC's accomplishments and intentions in some of the areas which have proven most problematic in Year One. Because we are still in "early days," American companies have not seen fit to issue, through the US-China Business Council, stark characterizations at this time, but the concerns registered in our written submission require close observation and may require additional action. The full content of the Council's written analysis, produced by Council staff in Washington, Beijing, and Shanghai, mentions several examples of worrisome developments—or non-developments—in the post-accession PRC trade and investment environment. Widely acknowledged problems with agricultural tariff-rate quotas (TRQs) and other traded goods under quota; the appearance of new procedural obstacles, such as opaque registration processes or onerous standards or prudential requirements; and the persistence of massive intellectual property abuse were a few of the concerns mentioned in the Council's presentation. The Council also pointed to signs of an apparent inability or unwillingness of some government agencies to overcome other bodies' entrenched resistance to thorough WTO implementation. In the question-and-answer session that followed, we were asked whether any particular year, in the nearly decade-long process of China's WTO implementation, was of special concern. We replied that Year Two was crucial. We suggested that China had appropriately offered unique Year One responses to the challenges of the inaugural WTO year: updating its legal framework, cutting tariffs, moving toward the kind of consultative transparency that the Internet makes so technically feasible, and training WTO-competent administrators. But as the United States and other WTO members track Chinese WTO adjustment in Year Two, they will increasingly raise questions appropriate to an ongoing implementation process:  Will China remedy the acknowledged inefficiencies and confusions encountered in Year One? China itself has acknowledged that agricultural TRQs were inadequately determined and allocated in the first year. There are other significant examples. A second year of disappointment on TRQs and these other issues will not be attributable to start-up difficulties.Will measures that were to have been completed in Year One, but that were not, appear decisively in Year Two, and closer to the beginning of the year than to the end?Will Year Two phase-ins take place on time? Delays in effecting these crucial market-opening reforms will pile up in ensuing years; prompt delivery on phase-in commitments is essential.Will China find the necessary powers of persuasion to compel full WTO implementation by recalcitrant central and sub-central agencies?The process of evaluating China's progress in adjusting to the requirements of WTO membership takes place, like everything else in international relations, in a broader context. Here are just some of the background factors that directly or indirectly relate to the WTO implementation process: US-China trade continues to expand vigorously, in spite of sluggish economic conditions in the United States, Europe, and many of the Asia-Pacific economies. First-half 2002 US exports to China were up more than 10 percent year-on-year, while Chinese exports to the United States in the same period were up nearly 15 percent. China is a critically important export market for many US firms struggling with deep declines in other markets.Foreign investment, perhaps buoyed by the terms of China's WTO entry, is moving into China at a very high rate. China and the United States appear, superficially at least, to be getting along somewhat more civilly of late, thanks to the "War on Terror" and signs that the top leadership in both countries sees the value of cooperation. Signs of progress on Chinese control of missile and missile-technology exports, a series of releases of politically sensitive prisoners, and the recent visit to China by senior associates of
the Dalai Lama are recent indications that progress can be made between the two countries. Diplomatic contacts are again in high gear, and the network of consultative arrangements between the two governments appears to be widening. The presidential meeting in Crawford, Texas, suggests a commitment at the top to continued US-China engagement.The United States is preoccupied with the possibility of major war in the Middle East; on top of the response to September 11, 2001, this preoccupation has deflected the energies of those earlier concerned with the likelihood of confrontation with China and has become the primary index by which the United States gauges every country's positive or negative relationship to the United States. Though many observers note that the underlying factors auguring for an ultimate clash of interests between the United States and China are basically unchanged, it would be hard to conclude today that the authoritative short-term American assessment of China is as gloomy as it seemed to be in 2001.And last but emphatically not least, China is on the brink of long-awaited changes in its political leadership, within the Communist Party this fall and within the government next spring. While no one expects this leadership transition to result in wholesale and radical
changes, hope appears much more widespread that new principal office-holders will at least permit forward motion to resume and gather speed on many policy issues currently perceived to be in suspended animation.Energetic implementation of China's WTO commitments must be one of the vehicles moving forward at full speed after the transition in China's political leadership. That China's new leaders will face daunting domestic economic challenges is a given: rural-urban disparities of income and wealth, East-West disparities, unemployment associated with economic transition, looming troubles in the banking and securities sectors—each of the major economic challenges facing the regime can be portrayed as dangerously susceptible to the disrupting effects of WTO compliance. It will take concentrated attention by China's new leadership team, and reaffirmation that WTO compliance is in China's clear interests, for Year Two to yield decisive progress in uncertain areas. Immediately after publishing the Council's written USTR presentation in mid-September, I heard from a number of knowledgeable friends in the Council business community in China. I close with portions of one such message. If one asks what positive difference WTO membership has meant to foreign business, it would be difficult to point to anything that the Chinese would not have done on their own, except maybe for some tariff reductions; companies that were doing reasonably well prior to WTO accession continue to advance, while companies that faced daunting barriers continue to beat their heads against the wall. ...[China has] feverishly written new regulations and trained thousands of people, and hailed all that as progress toward transparency and rule of law. But in reality there has been little, if any, evidence of the structural change that WTO was meant to trigger. Indeed, I would argue that thus far the Chinese have been busily hijacking WTO rulemaking to further obstruct foreign participation in key sectors, while maximizing the access of their own companies to more liberal foreign markets ...[such as the United States]. I still think the top leadership embraces not only the letter, but the intent, of WTO membership. But too many parts of the regime do not, and the leadership has not demonstrated a firm grip. Yes, there's a big transition taking place...[, but there are also] many entrenched interests that we knew opposed WTO. But they can't make excuses—or be excused—indefinitely. [Though] I assume your "glass half full" characterization was intended to encourage the good guys, I don't think it is accurate. It will be up to China, in Year Two, to show this writer and many others that my friend's concerns were off the mark. American business—and many in American government—want to be constructive partners with China in WTO progress. But in the end, the laws, the regulations, the judicial rulings, and the changes in work style that the world is rooting for lie in the hands of the Chinese themselves. The China Business Review, Volume 29, Number 6, November-December 2002
Copyright 1997-2008
The China Business Review Last Updated: 01-Nov-2002 |
he US-China Business Council recently joined other trade
organizations in offering a detailed analysis to the US government of
China's progress in adjusting to the demands of its World Trade
Organization (WTO) membership since it joined the world trading body
last December. The Council's presentation was part of a multi-agency
US government process of information-gathering and evaluation that
will result in an official administration report to the US Congress
by December 11, the first anniversary of China's accession. (The
Council's full presentation can be found on the Council's website,