The Real China Question: The Case for Conditional Free Trade. (China's Acceptance into the World Trade Organization)

By Mastel, Greg | The American Prospect, July-August 1997 | Go to article overview

The Real China Question: The Case for Conditional Free Trade. (China's Acceptance into the World Trade Organization)


Mastel, Greg, The American Prospect


Links between Chinese officials and U.S. political campaigns--coupled with renewed concern about human rights abuses by the Chinese government--have put China policy center stage. But while public officials and many commentators here have focused their attention mostly on the contentious issue of whether to renew China's most-favored-nation trading status, the more important question is whether China should be admitted into the World Trade Organization (WTO)--and whether formerly communist states such as Russia should be next.

Created in 1994 as a more potent successor to the General Agreement on Tariffs and Trade (GATT), the WTO is the Geneva-based organization that sets and enforces the rules for world trade among developed nations. By agreeing to abide by WTO rulings, countries forfeit some control of their trade policy to gain access to foreign markets.

Although controversial at its founding--in part because American critics alleged it would compromise U.S. sovereignty and environmental laws--so far the organization has performed respectably, if not admirably. The organization's settlements of disputes between members have been well received, and recently it concluded two new agreements on information technology and telecommunications services and equipment.

Yet with several formerly communist (and some still communist) nations applying for WTO membership, the organization is at a difficult crossroads. The growing economic power of these nations makes them difficult to ignore. But their repeated refusal to play by many WTO rules suggests that they would exploit the economic benefits of membership without abiding by the rules that are the very premise for the WTO's existence.

China, which is pushing hard for WTO admission, is by far the most important and dangerous of these candidates. In the months to come, the WTO will make a decision on whether to admit China--based in large Part on the disposition of the United States--and that decision will set the standard for future applications from nations like Russia and Vietnam. Some argue the United States should block Chinese membership altogether; others: including the Clinton administration, argue that such a move would be either futile or disastrous. China's disdain for civil liberties on the mainland, and perhaps now in Hong Kong, and the fact that conservative Republicans along with many liberal Democrats are skeptical, combine to widen the odds against China's WTO membership this year. However, supporters of China's accession to the WTO argue, with some logic, that the world community will have more leverage on China's domestic behavior with China in the WTO rather than out.

Both arguments have some merit, The best policy, as I will argue, may be a middle course: allowing the Chinese to join gradually. This could mean creating more than one tier of membership, and forcing them--as we did for other formerly communist nations entering GATT many years ago--to meet hard numerical targets for trade balances in order to gain admission.

It was perhaps inevitable that the status of communist and formerly communist nations would pose such a challenge for the global trading system. The WTO's predecessor, the General Agreement on Tariffs and Trade, was a postwar invention designed to unite free market nations and, in part, to thwart communism. Initially GATT included only the world's major trading powers, but it grew in the intervening years to its current membership of well more than 100. Nations with nonmarket economies were not a problem, because they were outside the GATT system,

Unfortunately, this also meant that GATT was ill equipped to manage the post-Cold War world-an era in which foreign threats were often of an economic, not a military, nature, and in which potential adversaries included vibrant democracies as well as totalitarian states. Beginning in the 1970s, Japan and several other GATT nations used their positions to create one-sided trade relationships with wealthy consumer nations such as the United States.

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