BOOK REVIEWS

China’s Accession to the WTO: A Historic Turning Point?

On December 11th 2001 the People's Republic of China (PRC) became the 143rd member of the World Trade Organisation (WTO) after more than fifteen years of preparatory work, thus bringing to a close one of the longest and most difficult negotiations in its diplomatic history.

Described by Mike Moore, Director General of the WTO as “a historic moment for the WTO, for China and for international economic co-operation”, this accession, carefully orchestrated by the Chinese media, was to fulfil the unparalleled expectations of a rising power subject to unprecedented political, economic and social pressure(1). A miraculous performance by a state propaganda machine experienced at reaching the masses, China's entry into the world free market forum seems to have been unanimously supported by a political class unable to conceal its dissension and by an international business community eager to harvest the returns on its investments, not to mention coming to grips with China on a whole range of bones of commercial contention, if the expectations surrounding the possibility of resorting to the WTO's mechanism for the settlement of differences are to be believed(2).

Three months later the euphoria seems to have subsided, giving way to more qualified analyses of the opportunities and challenges facing the Chinese people and their government, in terms of the economic and social cost as well as the adaptation of the Chinese legal corpus to the norms of the WTO.

To better understand this decision, which some compare with the launching of the policy of reform and openness in 1979, one must situate it in the history of the People's Republic. This relationship with economic multi-lateralism does indeed form part of a continuing determination to open up to a world seeking to guarantee the economic development and socio-political stability of a state in transition.

In 1949, it was the necessity of an alliance with the Soviet Union which preoccupied a China that sought to serve as a vehicle of Marxist dogma, rather than the free market considerations of a provisional, embryonic and uncertain Agreement on Tariffs and Trade, in which the Republic of China, which had recently found refuge in Taiwan, soon ceased to participate. Politics and ideology had the upper hand for a long time, and China was to learn only much later how to make economics a diplomatic weapon.

Thus it was on July 10th 1986 that the government in Peking presented an official request to the Director General of the GATT to “resume”, in the name of the continuity of the Chinese state, its status as a “contracting party” to the Agreement. It must be said that, bolstered by its seat at the United Nations, where it replaced the Taipei regime on October 25th 1971, the People's Republic had begun negotiations with a view to getting closer to the principal international economic and financial organisations. On May 15th 1980, China thus reoccupied its seat at the International Monetary Fund and the World Bank, of which it had been a founder member. It then participated, in 1981, in the Third Multi-Fibre Agreement, formally becoming a member of the GATT textile committee in 1984. It must be specified once again that the diplomatic offensive aimed at reoccupying a seat in the GATT had begun in November 1982, when Peking sent a delegation to participate as observers in the thirty-eighth conference of the contracting parties, emphasising at the time its status as an original contracting party to the agreement. In November 1984 China obtained the authorisation to be present as an observer at the GATT council and the conferences of its subsidiary organs. Then, in April 1985, it became a member of the consultative committee on developing countries. Things accelerated again in 1992, not only because the business of the working group on China's accession to the GATT and the related bilateral negotiations had made encouraging progress, but also because Taiwan applied as a distinct customs territory.

This shows the importance of the diplomatic and political dimension of a question which sometimes tends to be analysed exclusively from the economic point of view. Determined to recover its status as an original contracting party, and to clarify the position which it should have always occupied within the Agreement, China then brought everything to bear on acceding to the GATT before the creation of the WTO, as is shown in the demanding protocol of December 20th 1994. But Peking's ambitions at the time seemed unrealistic because they did not correspond to its real economic performance and structures. The WTO was thus created without China, on January 1st 1995, with Hong Kong and Macau, among others, as founding members. Another six years were needed for Peking to join the WTO, by dint of a real diplomatic battle which led to the negotiation of 37 bilateral agreements and the signing of a 900-page accession Protocol. A double question now needs to be answered: what will the WTO bring to China, and what will China bring to the WTO?

It is no doubt easier to answer the second part of this question. One might indeed suppose that since it has come into this multilateral commercial organisation as a developing country, China might take the side of that group of countries, at least when its interests so dictate and when its power strategy is not put at risk: China could, alongside countries such as India, contribute to a readjustment inside the institution. In fact, Peking has shown only a limited interest there in the cause of the Third World, and much less clearly than other capitals, especially Delhi.

This does not mean that China will restrain itself in the recourse to all the new legal and diplomatic weapons which the WTO provides. In fact, one of the fears of those who opposed China's entry into the WTO was specifically of an increase in the disagreements needing to be settled by the WTO's arbitration arm, which could overwhelm and block the organisation. Needless to say, this danger is real, because of the number of complaints proffered by the Chinese about Western protectionism, as well as by the US and Europe about Chinese dumping. Nonetheless, one may think that on both sides, precisely in order to avoid any breakdown in the WTO mechanism, governments will play a conciliatory role and will find ways to mediate and attenuate—or at least spread and manage over time—disagreements that will inevitably arise or have already appeared (as in the disagreement over steel between Peking and Washington).

The question of the transformation of China by the WTO is much more complex. In this special report, contained in two issues of China Perspectives, the first primarily legal and institutional, the second more economic, we have made the most wide-ranging attempt possible, without however managing to be completely comprehensive, so numerous are the repercussions of this shock therapy conceived over fifteen years ago.

Let it be said immediately that we have put aside one essential but highly speculative question: will China's accession to the WTO bring democracy to the country? In the first article Leïla Choukroune shows how direct but complex and gradual, not to say uneven, will be the impact on the Chinese legal system. For example, the establishment of independent courts beyond the control of the Communist Party, which has been one of the recurring refrains of the WTO, is laden with an obvious political dimension and constitutes, and will continue to constitute, a stumbling block for any legal reform in the People's Republic. The contribution included here from Antoine Kernen, addresses an equally political question: the almost immediate effects of China's accession to the WTO on the employment situation, particularly in state industry, a seriously ailing sector despite the efforts made by the Chinese authorities for many years. Case-by-case conflict management at the lowest possible level of the government apparatus, in a sort of transposition of the principle of subsidiarity, remains the norm, and any legalisation of independent unions, despite China's ratification, in 2001, of the United Nations agreement on economic, social and cultural rights, will remain out of the question for many more years.

Some will say that it is all a question of presentation, of “packaging” as salesmen would say. This is why analysis of the propaganda and of the discourse which have accompanied the accession process inside China is vital (see Pierre Hagmann's article). Indeed, the Chinese authorities have been forced to position themselves on a narrow line, to strike a balance which makes it possible to silence most of the criticisms made by the New Left who see in globalisation the imminent death of the socialist economy, without however excessively encouraging the hopes of Chinese and foreign free marketeers who hope to transform the process into the main stimulus of political and institutional change.

An important question, and one with obvious political dimensions, is that of the environment. Presented with detailed precision by Andreas Oberheitmann, the implications of China's accession to the WTO for the ecological balance of the country with the largest population and one of the most dynamic economies in the world are numerous. Because of the braking effect this preoccupation or this new awareness could have on development, these implications are to some extent destabilising.

Closely tied to the People's Republic's accession to the WTO is obviously that of Taiwan. Since the beginning of the negotiations, the authorities in Peking have wanted it to be so, in an attempt to maintain the fiction of a single Chinese nation, although this nation has been divided into two states for over fifty years. Having said that, the new situation will have a major influence on relations between both sides of the Taiwan Strait—and probably a beneficial one overall, as the article by Lawrence Liu demonstrates. While direct air and sea links will take longer to establish than is often said—in particular because Taipei can invoke certain WTO security clauses and thus maintain political control over the process of opening up—both economies will see their integration speed up, thereby increasing the overall cost of any extreme or hostile initiative, whatever its origin.

Finally the first instalment of this report on the WTO closes with a region which is exceptional in both economic and political terms: Hong Kong. No doubt, now that mainland China has joined the former British colony (and Macau) in the fold of the successor to the GATT, the latter two territories will be increasingly tempted to melt into the great development zone made up by the Pearl River Delta (Peter Chiu). Altogether more difficult to assess is the longer term impact on the institutional and political regimes of these diverse territories, long separated in the past, but which the future can only more strongly unify.

The reforms of the last twenty years are not, as has sometimes been written, the result of “simple” decisions made by a “strong, efficient and pragmatic” state, but the fruit of internal struggles within the Chinese leadership, of political decisions with immense consequences so heavy are their potential effects on the social stability of a country torn between growth and underdevelopment(3). The wager of accession to the WTO is therefore not yet won. As yet unknown is how China will instrumentalise this political choice during the 16th Party Congress, and how it will manage to cushion the shock waves of externally imposed reforms in the years to come.

This introduction would be incomplete if we did not mention that the whole of this report was co-ordinated by Leïla Choukroune, who deserves the warmest thanks of the editorial staff of China Perspectives for having brought together in the pages that follow, and those that will appear in two months' time, a series of analyses which we hope you will appreciate and enjoy.

Translated from the French original by Michael Black