By Bhagwati, Jagdish; Lingle, Christopher
Insight on the News , Vol. 13, No. 44
Yes: The built-in sanctions of the WTO will speed China's market reforms.
China has replaced Japan as the Lex Luthor in America's imagination and in its public-policy domain. It is facile, however, to conclude that we need an enemy to feel comfortable and that the end of the Cold War has left us with a withdrawal symptom that makes us yearn for a devil to fear and a monster to slay.
Yes, China is truly off the curve regarding its economic organization and its civil and political regime. Its economy, despite the massive inroads made by capitalist roaders, is marked by residual features of the extensively planned system by which it had been managed since the triumph of the communists almost a half-century ago. At the same time, having put perestroika (economic restructuring) ahead of glasnost (political liberalization), the Chinese communists have continued to preside over an authoritarian regime that violates all conventions of a civil and civilized society, offending not merely the human-rights groups, but anyone with a moral sense and a social conscience.
The question of China's entry into the World Trade Organization, or WTO, thus has been caught up in the acute reactions that China provokes among some trade-policy elites and virtually all of the human-rights activists. In one of those rare alliances that make politics ever fascinating, these groups, normally in unison only in their distrust of each other, have come together in opposing China's entry into the WTO. But I believe they are fundamentally mistaken. In fact, the goal of getting China to conform more to rules-based and market-determined trade and to respect human rights will be reached more quickly by admitting her to the WTO.
Among the many fallacious arguments advanced by the opponents of China's entry, three stand out. Foremost among these is the claim that China does not have a market economy. It has been claimed that the WTO requires that member states be "market economies," since they must accept meaningful obligations in regard to matters such as access which cannot be implemented if the economic system does not nermit markets.
But put this claim in perspective. The General Agreement on Tariffs and Trade, or GATT, already permitted communist states -- Czechoslovakia and Poland -- to join. We therefore face a genuine question: Is China, which surely has moved away from communism to markets in a dramatic (though incomplete) fashion, to be considered less favorably than previous members which had not made the move at all? The best, and not necessarily partisan, Sinologists are divided on the question of how far markets have gone in today's China. But there is no debate about the fact that markets are indeed here and that they are steadily increasing in scope.
Take import markets: Already in bilateral negotiations with the United States (often backed by threat of sanctions and counterthreats by the Chinese), the People's Republic has proceeded to make pledges to publish the rules and procedures American exporters must follow, while reducing or eliminating import licenses, quotas and other controls that impeded access to China's markets.
The same is true of state trading. Here again, we should recall that GATT traditionally accommodated occasional state trading, adding safeguards to ensure, however imperfectly, the preservation of market-access obligations and nondiscrimination between different exporters. True, China presents a more difficult problem because of the preponderance of state-owned companies. But even here, profound change is on the way. With the economic realities of inefficient state enterprises all too evident to the Chinese authorities themselves, the latest Chinese Communist Party Congress finally has resolved to reduce them to a negligible share of the economy.
Indeed, the Brookings Institution's China expert, Nicholas Lardy, has shown fairly conclusively that China's goods markets have been liberalized in farming and distribution sectors as well, whereas the labor markets also are functioning to allocate labor in the rural and small-scale manufacturing sectors. …