China's accession to WTO worth celebrating

Updated: 2011-12-12 08:00

By Pascal Lamy (China Daily)

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GENEVA - December 11, 2011 marks the tenth anniversary of an event, which profoundly changed the global economy: China's accession to the World Trade Organization.

It is difficult not to overstate the effects of this accession, certainly on China, but also on China's trading partners and on the global trading system itself. By integrating fully into the global economy, China has become the largest exporter of manufactured goods and the second largest economy in the world. This remarkable trade expansion has contributed significantly to China's growth and development and has helped lift some 500 million people out of poverty.

This is not to suggest that China's success is entirely due to WTO accession. But WTO membership helped the Chinese government to anchor the reform and opening-up initiated by former leader Deng Xiaoping by binding China into the global trading system. These reforms improved the efficiency of the Chinese economy and boosted growth.

WTO accession helped China's economic development efforts in three vital ways. The goal to become a WTO member acted as a formidable lever for the process of domestic modernization. It generated the trust of foreign investors, who have been key actors in China's take-off through massive foreign direct investment and the transfer of technology. And now China itself is becoming a significant provider of new technologies. WTO membership also underpinned Chinese export-led growth with a strong insurance policy against protectionism. This has proven crucial in the current economic crisis, which could have had a disastrous effect on China had it not been a WTO member.

While many in China point to the concessions the country had to make to join the WTO, the important thing to remember is that China first took the decision to reform its economy for its own good, and it then decided to bind these reforms within with the WTO. It was the result of a domestic choice that saw in the opening-up of the Chinese economy a way to grow, to develop, to reduce poverty and to provide Chinese citizens with a decent future.

Gains have accrued to the Chinese economy by making Chinese enterprises more competitive. To some extent, this has come about because of the technology transfer and best practices brought into the country by foreign investors. But a large part of the efficiency and productivity gains accruing to China have emerged because of the need for Chinese enterprises to improve their competitiveness. Such improvement has enabled Chinese workers to benefit with real average wages rising by 12.6 percent a year during the last decade, according to the International Labor Organization.

While the gains to China of membership in the WTO are clear, there is a tendency sometimes to forget how much China's trading partners have also profited. China is now the world's second largest importer and imports have risen nearly six times to $1.4 trillion since the accession. The Chinese market has become one of the most important in the world for many exporting nations, including the United States and Brazil.

But as it develops, China is also facing important challenges such as regional and income distribution imbalances, the need for stronger social safety nets, environmental degradation and an aging population. It is also working to achieve more balance between external and domestic demand and a better protection of intellectual property.

Just as China faces these challenges, the global trading system is also being severely tested. The delay in concluding the Doha Round is raising doubts about the WTO's capacity to deliver further trade opening and global trade regulation.

Looking into the future, as a key member of the WTO family, China's role and influence will be vital in our collective endeavor to advance trade opening and global trade regulation.

And this in turn is linked to the continuation of China's reform and opening-up process. Anchoring in WTO further reforms of China's services sector or further opening of its procurement markets can bring welfare gains and can help sustain China's growth for the next decades. China can also provide tremendous opportunities of growth for other countries. Because growing together is more stable and sustainable than growing alone.

The WTO offers a stable, transparent and predictable environment in which trade can flourish. Certainly, this has been of benefit to China, and hopefully there is still more to come.

The author is director-general of the World Trade Organization.

(China Daily 12/12/2011 page8)