Bloomberg News

China Marks 10 Years as WTO Member Amid EU, U.S. Criticism

December 15, 2011

(Updates with comments from WTO head in 19th paragraph.)

Dec. 12 (Bloomberg) -- China’s decade in the World Trade Organization thrust the nation into the top spot in industries ranging from textiles to cars. The world’s No. 2 economy now faces calls to open its market further and play by WTO rules.

China joined the Geneva-based WTO on Dec. 11, 2001, capping a 15-year drive to join the rules-based trading system and giving foreign companies from Yum! Brands Inc. and General Motors Co. to HSBC Holdings Plc and Nokia Oyj a bigger foothold in the world’s most-populous market.

Since then, China has become the world’s biggest exporter and second-largest importer. Trade in goods such as clothing, electronics, toys and appliances soared to almost $3 trillion last year from $510 billion in 2001, with both exports and imports growing almost fivefold.

“This spectacular rise would not have been possible without the open global trading system that China was able to benefit from during the past 10 years,” said European Union Trade Commissioner Karel De Gucht.

“At the same time, China is having to increasingly recognize and respect not only the legal responsibilities it now faces as a member of a global rules-based body, but also the WTO ‘spirit’ of promoting open markets and non-discriminatory principles in its domestic legislation, and the enforcement of it,” De Gucht said in an e-mailed statement from Brussels.

Clothing, Cars

China’s textile exports amounted to $77 billion in 2010, or 31 percent of the world’s total, and its garment shipments were worth $130 billion, or 37 percent, data released by the WTO show. The nation, which overtook the U.S. in car production and sales in 2009, will sell more than 18 million vehicles in 2011 even as deliveries rise the least in 13 years, the China Association of Automobile Manufacturers said on Dec. 9.

Foreign financing in China has climbed to more than $700 billion in the last decade while Chinese investments overseas surged to $60 billion in 2010 from less than $1 billion in 2000, Assistant Commerce Minister Yu Jianhua said last month.

Europe is second only to the U.S. in the number of trade disputes with China at the WTO. The 27-nation EU has filed five complaints against China over raw materials, auto parts and duties on steel fasteners while the U.S. has lodged 12, and the bloc imposes anti-dumping duties on almost 60 products from China, more than any other nation.

‘Intimidation’

The U.S. has been the most vocal critic of Chinese policies including what the Obama administration views as its too-slow appreciation of the yuan. China’s trade surplus with the U.S., which has helped the country accumulate a record $3.2 trillion in foreign-exchange reserves and made it the U.S.’s biggest overseas creditor, remains an irritant in relations between the world’s two largest economies.

China uses “intimidation” in its trade policy and has retreated from free-market reforms and moved toward more state control of its economy, U.S. Ambassador Michael Punke told a meeting of the WTO’s General Council on Nov. 30. He made the remarks during the final annual review of how well China has complied with pledges it made to join the WTO.

There is a “perception among WTO members that Chinese government authorities at times use intimidation as a trade tool,” Punke said. “China seems to be embracing state capitalism more strongly each year, rather than continuing to move toward the economic reform goals that originally drove its pursuit of WTO membership.”

‘We Need Evidence’

Yi Xiaozhun, China’s ambassador to the WTO, dismissed Punke’s comments.

“I don’t know what he’s talking about,” Yi said in a Dec. 7 interview at China’s mission in Geneva. “We need evidence.”

When China joined the WTO, it promised to make sweeping changes such as overhauling state-owned enterprises by ending monopolies and special treatment, slashing tariffs and prying open its markets and industries to foreign competition. While much work has been done, more remains, Yi said.

“The biggest challenge for us is to continue our opening- up process and deepen our economic reform domestically,” he said. “China benefited a lot from its opening, so we know that we will continue to do it for our own interest, and we also hope other countries, especially our major trading partners, will do the same.”

All WTO members agree to make concessions during accession talks and China was no exception, said David Hartridge, a senior trade policy adviser for the law firm White & Case LLP in Geneva and a former WTO official.

‘Growth Miracle’

“It made substantial concessions and political commitments which might not have been easy to implement and, some would say, aren’t fully implemented yet,” he said by phone. “One thing that clearly has not happened, as some people feared, is that China would be a disruptive element, a great economic power with a very strong tradition of centralized control.”

While China has enjoyed a “growth miracle” that predates its entry into the WTO, the country now needs to step up as a mature trading partner, said Pascal Lamy, the trade arbiter’s director general.

“As a global power, it is only natural that the expectations of other countries on China have also grown,” Lamy said at a forum in Beijing yesterday. “With today’s economic difficulties across the world, resolve and leadership are in desperate need. We all need a proactive China.”

China spent the weekend celebrating its 10 years as a member of the global trade community. That’s because millions of Chinese have enjoyed a better quality of life since their country became the WTO’s 143rd member, Yi said.

“Our economic growth went beyond our expectations,” he said. “The annual growth rate is around 10 percent and more than 200 million Chinese people were lifted out of poverty. That’s a marvelous achievement.”

--Editors: Leon Mangasarian, Andrew Atkinson

To contact the reporter on this story: Jennifer M. Freedman in Geneva at jfreedman@bloomberg.net.

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net.


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