PACIFIC BASIN ECONOMIC COUNCIL
MAIN PAGE | SPEECHES & EDITORIALS | 2001 | CHINA'S WTO ACCESSION

The Importance of China's WTO Accession Robert Novick former General Counsel Office of the US Trade Representative 2001 Annual Policy Conference PBEC U.S. Member Committee January 31, 2001 THANK YOU FOR INVITING ME TO SPEAK and Stuart in particular for putting together such a great program. As a recently separated Administration official I appreciate the phrase "will work for food." When I got the agenda however, I realized I wasn't on the lunch program. I am delighted to be here. PBEC has been a constant and vital force in shaping trade policy and economic policy towards insuring a truly liberalized trading regime in the region. Moreover, this is a particularly appropriate time for this panel and this day's program not simply because there has been a change in Administration, but because we are at a critical point of departure in moving towards implementation-concrete implementation-of the Bogor vision and a truly stable, prosperous, and peaceful Asia region. The launch of the FTA negotiations with Singapore is a first step toward concrete progress in implementation of the Bogor vision. And, of course, China and Taiwan's accession to the WTO will bring expanded trade and hopefully other cooperation, not only for the benefit of the United States, but for the benefit of the entire region. And that brings me to China's WTO accession. What I'd like to do briefly is discuss the status of those negotiations, the obstacles that lie ahead, remind people of the importance and the benefits of not being complacent about this process, and suggesting a few next steps for the new Administration. The status of the negotiations. I think as every one in this audience knows, the next vital step is conclusion of the working party-that is the protocol and working party report-so that the issue of China's accession can be forwarded to the General Council for a vote. It is the point of departure both for Chinese membership and the point of departure for the President certifying that the multilateral agreement is at least equivalent to the bilateral agreement and ultimately to PNTR. A lot of progress was made in the late fall and at the last meeting of the working party which concluded exactly two weeks ago. We visited Beijing to visit with Premier Zhu Rongji who reaffirmed China's commitment to expeditious conclusion of the process and China's accession to the WTO. Since that time, the substantive issues that the working party confronted have been narrowed substantially, but they include more than simply agriculture. What is particularly noteworthy is the genuine commitment that all the trading partners have made to move this process towards closure. The Chinese in particular deserve enormous credit for the efforts they've brought to the process-the resources of their Ministries and the State Council to make difficult policy and political decisions, and actually to begin the process of identifying and changing the laws and regulations that will need to be changed to come into compliance with their WTO commitments. The United States and the other trading partners have also devoted substantial resources-people, time, political and policy energy-to try to bring this process to closure. Having said that, closure is not a goal in and of itself. Closure on the proper terms has to be the goal. I think its fair to say that all the trading partners working at the Geneva process understand that and are looking to China to not only put together a protocol and working party report that reflects the commitments in the respective bilateral agreements but also that the implementation of those commitments will result in meaningful commercial access. Having said all that, you may think that the process is destined to conclude without any particular reinvigoration. I think that is a mistake. Indeed, I think we face some serious obstacles and I do not view time as a friend of this process. I think it is important to reinvigorate it immediately, particularly in light of certain re storm clouds on the horizon. One is the annual normal trade relations (NTR) vote. Many of us have put that out of our mind, but the reality is that under the PNTR legislation until China is a member of the WTO, Jackson-Vannick remains in place which means that we'll have to go through the annual ritual of an NTR vote. I certainly appreciate that we rely on the outcome of that ritual, but that ritual is always fraught with unpleasantness, tension and unpredictability. And the ability to close this process and get China into the WTO before we get to an annual NTR vote is, I think, worthy of some consideration. I think it is possible, but it will require effort. The second, and much of it was alluded to in the panel just preceding this, is whether China can continue to hold the consensus domestically to move forward with WTO accession. Premier Zhu and the economic reformers in China were bold and victorious in moving the leadership towards making some very difficult decisions and meaningful commitments in the bilateral agreement with the United States and others and with moving forward this WTO accession process. But I think everyone would have to recognize that it is not a universally held view in the leadership, and in China generally, that WTO accession is the right course. There are many internal issues that raise some serious questions about the internal consensus. One we heard about earlier is rampant unemployment. Privatization of state-owned industries will lead to further dislocation. There is unemployment in the rural sector and people migrating to the urban areas are seeking jobs. You have what was referred to earlier as rampant corruption. I will call it local and provincial fiefdoms that do not like to lose their control, much of which will be lost as part of WTO accession. These are just some of the obvious internal forces that raise questions about whether a domestic consensus can be maintained. Why is that particularly relevant now? Well, we have just concluded our political season to the extent we ever conclude our political season. China is in a sense beginning its political season or very much in its political season. We are looking at a change of leadership in 2002 and there is certainly jockeying for position to emerge in that new leadership structure. Criticisms of the current leadership for being too pro-Western have existed and I suspect that the current leadership is not immune from continued criticism as people vie for important positions in the new Chinese administration. So that said, it is of some concern that no one be complacent about the process that has made so much progress and is actually so close to conclusion. Obviously, in the relationship with China we always also deal with unintended developments. The unthinkable always seems to happen at exactly the wrong time. But why do I emphasize the point that we have to move forward? I think, not this audience, but audiences more broadly have forgotten why it is so important to get China into the WTO. Not simply for the United States, but for the region and for the future of trade policy in the multilateral system in general. If you watched the Senate hearing yesterday of USTR designate Zoellick, there were only one or two questions about China's accession focused mainly on whether Taiwan would accede at the same time as the PRC. I found that somewhat perplexing given how important this issue is and how overriding it ought to be today, as it was just a few months ago in our political and policy debate. So let me just remind people again of the benefits and the importance of doing this. The economic benefits I need no repeating; they clearly cover all goods, all services, all agricultural products. We saw the presentation earlier today of the World Bank's estimate of the benefit not only to China but to the rest of the world. They speak for themselves. The security benefits, again this audience needs no reminder of the importance of stability in the region and the hopes that WTO accession will accelerate and promote security. China's own economic development-and therefore its internal stability-translates into security in the region. Again, we saw this morning the estimates of the benefits of WTO accession, most of which flow to China. Meaning that it will allow China to better deal with unemployment and it will allow growth to secure jobs, both of which are vital not only from an economic perspective but from a security perspective as well. Taiwan's entry. Taiwan certainly will enter when China enters the WTO. That creates not only economic benefits to the US but creates benefits in the region and hopefully will promote further cooperation in the region as well. Finally, a point that never really was made, but is worth making at this stage, relates to Russia. Once China enters the WTO, Russia will remain the only major economy not in the multilateral system. Russia has been tentative at times but seems interested in moving the process of WTO accession forward. Once China enters, whether it is the pressure on Russia increasing or the incentive for Russia to move forward increasing, a corollary benefit of China's accession is expediting Russia entering the system, which has its obvious economic and security benefits. The question then is how do we proceed from here, or how does the new Administration proceed from here? None of this is particularly sophisticated but I do think it is important. First, a clear message should be sent to the Chinese very early about the U.S. continued commitment to move the WTO accession process to closure expeditiously. Second, the U.S. must reinforce those words with deeds. The new Administration ought to set up meetings with the Chinese whether in China or here, not to negotiate, but simply to demonstrate a serious commitment to moving this process forward. They ought to communicate with the Chair of the working party and schedule the next meeting. When the last meeting broke up there was no formal meeting scheduled, but there was receptivity to a meeting in late February or March. That is not that far from now and it is important to lock that meeting down to try to drive this process to closure. Finally, the Chinese I think need to consider their interest in moving this process to closure. I am delighted to have heard, as I think has been true from the beginning, that the Chinese would like to see WTO accession at the earliest possible time. But there are reasons now, maybe more than ever, to move forward. Not only because of the risk that I see on the horizon of maybe delaying this process beyond the immediate future, but also for China to fully participate in the rules that are being made. We heard earlier the notion that the price to get in keeps getting higher-and it does. As multilateral negotiations proceed, new rules and new requirements are created which are going to be required of any new entrant. China not only wants to get in at the price it is already committed to paying, but also I assume would like to shape those new rules. In sum, it is for all of these reasons critical not only that the new Administration, the Chinese, and other trading partners stay the course, but also that they act expeditiously so that complacency does not set in during this transition when other priorities may dominate the agenda. The consequences are much too high. Thank you.