Winner and losers in WTO

1
Winner and losers in WTO

• October 10, 2001

2
Key facts to keep in mind

• China joins WTO after careful calculation of
  gains and losses
• Use opening as impetus for reforms
• Trends and allocation of resources already in
  place.
• Many variables, e.g. govt ability to maintain
  growth, will be at work to determine the outcome

3
Structural transformation

• From a command economy to a market economy
• Economy from agricultural-based to manufacturing
  based
• changing demographic profile -- low fertility,
  high longevity
• Trade becomes more important in GDP -- 44 pct in
  1999 from 13 pct in 1980.

4
Chinas commitments

• Foreign firms can distribute their products in
  China.
• Tariff reduction with timeframe from immediate to
  over eight years.
• Phasing out quotas
• Open services sector finance, banking,
  insurance, securities, telecom, etc

5
Agriculture

• Calculated risk?
• Half of the workforce, 1/5 of national output
• Giving up on self-sufficiency
• Most products have a phasing-out period for quota
  and a schedule for tariff rates.

6
Manufacturing

• Sharp reduction of tariff rates in five years.
• Excess capacity, excess labor, low profitability
• Foreign manufacturers to capture a large segment
  in energy, processed food, pharmaceutical, etc.
• Textile and apparels exports to grow

7
Services

• Now about 1/3 of GDP
• Expected to create more jobs
• Banking foreign banks to conduct RMB business
• Telecom value-added and paging services,
  domestic and international services
• Distribution restrictions phased out in 3 yrs.

8
Managing Expectations

• WTO oversold in the U.S.
• Lacking understanding of the nature of the
  Chinese system and its complexity
• If benefits do not accrue, therell be
  disillusionment.

9
Clinton Adm arguments

• WTO will make China adopt western style legal
  system, will in due time make China more
  democratic.
• Political participation takes time to develop.
• Reduce trade deficit (8.3 billion in 2000)
• likely to increase as most FDI already poured in
  was export-oriented
• Chinese purchasing power take time to build

10
Looking for WTO stories

• Not just economy, but entire fabric of state and
  society.
• Ideas vs Topics (c.f. Biagi)
• Try to state your idea in question and answer
• Q Why is US-China trade gap not narrowing?
• A FDI financed plants are exporting like crazy.
• Whats my story? Whats my point?