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FOREIGN POLICY DYNAMICS OF CHINA'S ENTRY TO WTO
INTRODUCTION
For many countries like China, Globalization is now considered inevitable and
thus significant to one's economic development. It has been defined as " the
integration of national economies into the international economy through trade,
direct foreign investment, short term capital flows, and flows of technology." It also
refers to the growth of the cross-border economic activities. As an outcome,
globaization refers to the emergence of highly interdependent national economies
(Oatley, 2005).
The WTO's main goal is "to improve the welfare of the peoples of its member
countries, specifically by lowering trade barriers and providing a platform for
negotiation of trade". The organization seeks to realize "free trade" through
neoliberal restructuring of the world's economy. In its eleven years of existence, the
WTO has resulted in the wide scale removal of protective barriers to international
trade such as import bans, import quotas, tariffs and so on. It has also brought more
and more countries into this regime of international trade as well as open up various
concerns to support trade enhancements such as patents, customs procedures and
so on (IBON,2005).
Before its admission to the WTO, China was the largest economy, after the
United States and Japan; and the world's tenth largest trading economy. It was a
rapidly growing competitor and market and a relatively lightly protected economy
with strong interests in reform at the WTO. China has no choice but to engage in
global competition according to the rules of the WTO because of the awareness that
isolation from the global system would deny it the opportunity to catch up with the
most advanced countries of the world. Chinese leaders recognize that China has
been a major beneficiary of the existing international economic order, and it seeks
to influence its gradual integration into the system rather than oppose it.
There are also obvious reasons why China would view its WTO membership
as beneficial. First, China stands to benefit from the recognition and prestige that
WTO membership brings. WTO membership will also deepen China's integration into
the world economy and signal its status as a world economic power. Conversely, the
costs of remaining outside of the WTO may well exceed the costs of joining. WTO
membership will give China a more stable access to foreign markets because it will
reduce disruptions in foreign trade that are caused by unpredictable policy shifts.
The economic benefits derived from China's WTO membership are not confined to
static gains in efficiency from the re-allocation of resources among industries and
among firms. In the long run, dynamic gains from increased competition brought
about by China's entry into the WTO will be even more important. Increased
competition on level playing fields will reward efficient and innovative firms,
regardless of whether they are local or foreign, private or public (Cheng, 2002).
Impact on China
China's WTO entry has significant impacts not only in the country's economic
aspect but also in its political and socioeconomic development. Upon its accession,
foreign companies have easier access to the China market thus signifying the
country's being open to a more liberal and free market. WTO membership also
forced China to engage in a process of liberalizing its own rules on investment,
foreign ownerships, tariffs, and other trade barriers. While much remains to be
accomplished in these areas, WTO membership and the initial steps taken by China
to honor its commitments have provided confidence to foreign investors, business
partners, and importers that China would not be subject to unpredictable changes in
the business climate. Thus, the investment and purchase orders have poured in.
Through changes in China's imports and exports, the principal trade-related impacts
of China's WTO accession on other countries were great (Palanca, 2001).
China has emerged as a major player in the world trading system since
joining the WTO in 2001. The dramatic growth of China's exports in the three years
following accession, when it doubled its growth and vaulted China to the world's
third largest exporter, were a dramatic sequel to the 15 years of frequently exciting
negotiations that led up to accession. China made substantial progress in reducing
the coverage of non-tariff barriers, reducing tariffs, and abolishing the trade
distortions created by the exchange rate regime as its policy reforms deepened
during the 1990s. The implications of its accession cannot be fully assessed without
an understanding of the policies that preceded it, and the path of reform in the
period leading up to accession (Palanca, 2001)
Similarly, the essential function of the WTO has also been described as
providing a means to "resolve conflicts of interest within, not between, nations."
WTO accession acts not just as a lever to force reform, but it also serves to lock in
economic reform and make it irrevocable. In adopting the rules in China's protocol
of accession, the WTO framework acts as a sort of constitution, imposing economic
discipline by constraining the ability of those in China's government who might wish
to take a different course of action. Thus, China's recent accession illustrates how
the commitments imposed as a condition of WTO membership may provide the
political leverage necessary to move difficult economic reforms to the next stage.
The most direct form of discipline that WTO accession brings is the increased
competition that China's state-owned sector will face from opening up to foreign
trade (date retrieved: July 27,2007/ http://www.bc.edu/schools/law/lawreviews/meta-
elements/journals).
China's WTO membership has not only brought about significant economic
changes but also paved the way for fundamental changes to its government. The
economy has long been affected by abuse of governmental functions and confused
and obscure laws. These problems conflict with the WTO rules. And in order to meet
the requirement of its WTO membership, the government has initiated a campaign
to clarify and unify governmental regulations to meet the WTO rules. More
beneficial conditions in an advantageous position in the global agricultural market
were also achieved by the country (Date Retrieved: Sept. 20, 2007 Source:
www.china.org.cn)
The question on how China's foreign policy changed with its accession to the
WTO is considered to be a significant issue for it covers the unparalleled economic,
legal, and political change that has confronted China during its accession. China's
long road to its accession and how this process worked for the country is in fact said
to be a unique process.
China's deeper integration in the global economy has made the country a
more constructive participant in a new round of global trade liberalization. China's
leadership already has recognized the economic advantages of increased
globalization and has even gone so far as to suggest the formation of a free trade
area with the Association of Southeast Asian Nations, something that would have
been unthinkable even a few years ago. These are just but some of the visible
effects in China’s entry to the WTO.
Using the levels of analysis we can explain and identify China's entry to the
WTO as an interstate level for it “focuses on the anarchic characteristic of the
system or with international and regional organizations and their strengths and
weaknesses” (Waltz, 1954). It also involved trade agreements which basically
comprise the activities in the WTO. Diplomacy through alliance in international
organizations (in this case, the WTO) are formed. Bargaining and Reciprocity
between states and nations are also vivid in the interstate level of analysis.
China's entry to WTO and the foreign policy dynamics which occurred along
with it can be explained using the theory of Neoliberalism; which is basically an
economic theory in favor of laissez-faire and the free market. And as we all know,
free market or free trade is the main concept promoted by the WTO. As mentioned
earlier, China's entry didn't only affect its economy but also its access to a more
democratic or open political system. Although it has not completely given up being
a Communist country, through its entry to the WTO, it has gained access to a fair
mechanism for trade dispute settlement; thereby safeguarding the rights of Chinese
exporters in international trade.
As manifested in China's experience over the few years after its entry to the
WTO, it has proven that "power" in the international system is more on the
economic side rather than on the military. Although this has been a controversial
issue for quite some time now. But for many who believe in the concept of
Capitalism and free trade along with its promise of development, it is still one of the
best instruments to fight poverty, hunger and inequality.
CONCLUSION
There is no question, therefore, that after China's entry to the WTO in 2001 it
has emerged as a great economic power which will rank as one of the major issues
confronting the international system. China which was once a "sleeping giant". Now
as the world's fastest growing major economy, it is often called a "waking giant" and
the 2nd largest economic power of the world which is geared to continous and
"unstoppable" development. Thanks to dramatic progress in technology,
transportation, communications system, especially in foreign trade, China will wield
far more power in the global economy.
Dramatic changes in its foreign policy especially on trade can explain its
economic and political strength. If not for the country's continous efforts to reform
and open up its doors to the outside world, China would not be as it is today. China
is also better prepared to be a world economic leader today for it has come to
realize and accept the significance of interdepence in a borderless world such as
ours.
China now is an important engine for economic growth across the globe. It's
reforms led to rapid growth and a more market-based economy. Because it has
allowed liberal trade policies to attract investment it challenged its market for new
innovations which paved for more economic developments. Although many argue
that it has also paved for more inequalities and it didn't restrain corruption in its
local government. Nonetheless, China will continually seize to amaze the
international community over its developments which have an impact on almost all
people around the world. As China's size within the world economy grows, so will its
influence, in the way that its domestic economic decisions affect the rest of the
world economy.
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