pros-and-cons-after-china-entering-WTO.docx

After entering WTO and some economic integration organizations, what advantages and disadvantages will China confront with? After 15 years of negotiation, and making maximum concessions to WTO members, China eventually gained accession to the WTO in 11th December 2001. The Chinese economy is now subject to the rules-based system of the WTO, enhancing economic competition and creating a more open environment for trade and foreign investment.Now we will talk about the advantages and disadvantages that China will confront with after entering WTO.Advantages:1. Chinas broad commitments in streamlining subsidies, lifting price controls, providing effective juridical procedures, making transparent the decision-making process, allowing greater participation of the private sector in economic activities, will assist greatly Chinas transition from a still heavily regulated economy to a rules-based market economy. All the rules and regulation of the integration organization like WTO which are negative to regulated economy country will also urge China to reform and change to market economy to gain more benefit through world trade.2.Chinas accession to the WTO and other integration organization means application of clear and credible rules in Chinas commercial relationship with other WTO members. it will mean more external trade, and external trade of a better quality. There will be substantial tariff reductions among Chinas existing trading partners and there will be access to more trading partners for China. This means more predictable and stable commercial relationship with Chinas trading partners.3China will be cutting its tariffs on a broad range of products, from agricultural to industrial. Tariff reductions allow comparative advantage greater play. The task was not always easy but throughout this period we have seen China, in implementing the terms of its accession to the WTO, progressively lower its tariffs, phase-out non-tariff measures and reduce restrictions on trade in services. In trade in goods, Chinas simple average tariff rate dropped from 42.9 per cent in 1992 to 10.4 percent at the beginning of 2004. The cutting of tariffs and the canceling of kinds of restriction of import will bring more both industrial and agricultural products to China with much lower price, through which increase the welfare of Chinese consumers.4. Increased foreign competition in the areas above will force Chinese enterprises to speed up their reforms to meet the challenges. From a larger and longer perspective, further economic liberalization and integration into the global economy will undoubtedly be a stimulus to regulatory, institutional and cultural change within Chinese enterprises. Without participating in integration organization, the speed of reform and improvement of Chinese enterprises will be much slower. Especially, it will help the development and improving the competiveness of Chinese service industry. The boundary between the manufacture and service industries is become increasingly vague, as manufacturers, especially in developed countries, combine more services with their products. China is now at a critical phase amid economic globalization, a great opportunity to develop its own service industry and transfer services and products from high quantity to high value,5. More foreign companies streaming into China, which not only helping simulate Chinese economy and technology, but also providing a huge sum of job opportunities, which, in a sense, will release the unemployment problem of China. And also connecting to the world will bring China more international talents, they include students study oversea and foreign professors who are just needed in todays China.6.It improves the overall environment in which Chinas economy operates and in which Chinas foreign trade is conducted. Some analysts expect certain sector-specific benefits, e.g., possible increase of textiles and apparel exports due to the application of quota elimination and increased quota growth for China by restraining countries; a possible rush of foreign investments into China, thus boosting employment and economic growth.7. Hong Kong, Macao, Mainland China and Taiwan have entered World Trade Organization (WTO) one after another in accordance with the WTO provisions on membership. A situation of “one country, four seats” in WTO has emerged. The relations among the “four seats in one country” are not only characterized by equal membership within WTO, but also by different customs regions within a sovereign State. It is argued that the “one country , four seats” situation reflects the latest development of international law , enhances the awareness of the “One China” Principle in international community ,and provides new opportunities for Mainland China , Hong Kong , Macao and Taiwan to establish closer economic and trade relations among themselves.The general view, nevertheless, is that WTO entry will mean growth, integration and globalization for the mainlands economy.Disadvantages:Of course, in joining the WTO, China will both enjoy its due rights and undertake corresponding duties, this will unavoidably bring certain pressure and challenge to us. 1. Further opening the market will cause some domestic products, enterprises and industries to face more intense competition. After its projected entry into the WTO, China must observe WTO stipulations on opening the market , this will form certain pressure on the speed and steps of our opening the market. Along with the expansion in market access, the reduction of tariffs and the abolition of non-tariff measures, more foreign products, services and investments will possibly enter Chinese markets, domestic enterprises will face fiercer competition. 2. Chinas foreign economic and trade management will, to a certain extent, be subject to the restriction of WTO rules. Chinas current foreign-related economic laws, regulations and policies still do not completely conform with the stipulations of WTO regulations, although this is also an important task in Chinas effort to deepen its economic and trade management, there still exist many areas of conceptual and institutional inadaptability. There is still a big disparity in the working methods of government offices and managerial personnel. 3. The adjudication on the solution of multilateral disputes may possibly produce results unfavorable to us. China lacks experiences in dealing with the multilateral disputes and always fails to protect its legitimate rights and interests by using the regulations and laws of WTO properly. For example, China has suffered from being wrongly accused of dumping its products to other countries by the anti-dumping organizations, resulting in a large loss to the export enterprises in China.4. After entering WTO, the turmoil of the world economy and market will exerts a more direct and deeper impact on China, making it more difficult for China to regulate and control the macroeconomics and to prevent the financial risks. Being a member of WTO, Chinese economic will be part of the world economics and be more dependent of the foreign trade. Meanwhile, the Chinese fixed assert investment will be more dependent of the international assert market. Especially the service industry will be influenced to a deeper degree. The monopoly status will be broken up and the market will be separated and many service enterprises will collapse in this process. Therefore, the shock in the international commodity market and the international assert market will influence the Chinese economics to a larger degree.5. China makes a promise that it will carry out a more substantial reduction of the tariff after entering the WTO, which makes the import increase rapidly. In 2005, the average tariff of industrial products decreased to 9.4% while that of farm produce fell to 17%. The quota on import products and the license system will be cancelled in the future. With more foreign products entering into the Chinese market, some industrial sectors may be shocked, especially the monopoly industries that have been protected by the government and lack of competitiveness. Some service enterprises may even face the risk of bankruptcy. For example, a significant increase in the imports of farm produce will have negative impact on China, a large agriculture country whose agriculture has not modernized. Whats more, the rapid growth of imports will lead to a trade deficit that impacts the balance of our payments.6. Entering WTO will also exert a complicated influence on the employment in China thereby putting a burden on our country which is abundant of labor force. In the employment structure aspect, the agriculture and the secondary industry will employ much less people while the service industry will need more. However