China's WTO Updates
Big Changes over the Past Half Year Since China's WTO Entry

The following is a dialog on this topic conducted between MOFTEC Minister Shi Guangsheng and People's Daily Correspondent Gong Wen. The dialog focuses on the following points.

Overall Influence of China's WTO Entry on Its Economy Over Past Half Year Is Positive

Reporter Gong Wen: Half a year has passed since China joining the World Trade Organization (WTO). Although "polemics over the advantages and disadvantages" have come to an end, views about the short-term effect and long-term effect remain divergent, some people feel the changes are rather big, there are also people who think there are not any changes. How do you think the real effect exerted by WTO entry on China's economy over this period of time?

Shi Guangsheng: Generally speaking, China's economy has been operating steadily over the past half year, the foreign economic and trade situation is better than anticipated.

Due to the fact that the central government has adopted effective macro-control measures, continued to pursue a proactive fiscal policy and a stable monetary policy and reformed the foreign-related economic management system in line with WTO rules and in light of China's national conditions, China's national economy has maintained a certain growth rate, with the economic growth rate exceeding 7 percent, export growth 13.2 percent, the growth of actual use of foreign capital 12.4 percent in the first five months, clearly better than other countries and regions, trade surplus and tax revenue have also seen different degrees of growth.

The situation of economic growth and the trend of foreign economic and trade relations over the past half year show that the overall influence exerted by joining the WTO on China's economy is positive and the change entailed is gratifying. For the whole year, China's foreign economic and trade sector will be able to maintain a steady growth, and will even possibly achieve a synchronous growth with GDP.

Beginning to Enjoy Rights While Honoring Commitments

Gong: Currently, some people abroad have doubts and misgivings about whether China can earnestly carry out WTO agreements, some people at home are worried that if China earnestly carries out the agreements, it would increase pressure on domestic social and economic development, what's the situation concerning implementation of the agreements over the past six months? Is it possible to achieve "win, win, or all win" in the process of fulfilling commitments as what was originally stated? Before China joined the WTO, you had mentioned time and again that becoming a WTO member was helpful for the establishment and perfection of a socialist market economic structure and for China's participation in the process of economic globalization. At present, have we adapted ourselves to the change of our status from being an "observer" to a "full member" and really enjoy the benefits brought about by WTO entry?

Shi: We have been earnestly performing our obligations over the past six months. So far, the Chinese government has basically completed the work of sorting out and revising related laws and statutes, thus providing a legal guarantee for the fulfillment of our commitments. For instance, in light of our promises, we have promulgated new statutes and regulations allowing foreign capital to enter China in some important service trade fields, there are also other regulations which are under active making. China's intellectual property right protection, in legislation, is expected to fully meet the requirements of the TRIPS (Trade-relative Intellectual Property Stipulations) Agreement. We have revised three basic laws and detailed implementing rules concerning foreign direct investment, including the Law on Sino-Foreign Joint Ventures, so as to conform them to WTO stipulations. Take another example. In compliance with WTO requirements, we have reduced the scope of commodities under quota and license management.

So, no one should doubt the Chinese government's sincerity and ability to carry out its commitments. Honoring commitments means that China will manage its economy in accordance with common international rules, adjustment of domestic policies after WTO entry has provided an opportunity for the development of the export-oriented economy, import and export trade has tended to become more brisk, transnational companies have whipped up a new round of investment heat, this will put us in an initiative position in international competition and help us go with the tide of the adjustment of global production structure, in the long run, it is fully possible to achieve the "win, win or all win" result.

As a WTO member, we should also fully enjoy rights. Over the past half a year, we have fully, actively and constructively participated in various WTO activities. In the past , we have observed the rules set down by others, now we have achieved the right to formulate rules on an equal footing, this is very important for safeguarding the rights and interests of China and the numerous other developing countries. Not long ago, in a new round of WTO negotiation on agriculture we put forward China's plan, demanding the developed countries to abolish export subsidies and lower high tariffs, our plan received support from many WTO members. We have begun to handle Sino-foreign economic and trade disputes in accordance with WTO rules and regulations, thus safeguarding China's legitimate rights and interests. As for the change of roles, there is the typical example: In the past 15 year, China negotiated with other countries in the capacity as an applicant for accession, now we, in the capacity as a WTO member, negotiate with other countries such as Russia and Vietnam who are applying for WTO entry.

Of course, we must admit that the rules and operational mechanisms of the WTO are very complicated. We can only say that we have initially adapted ourselves to the role as a WTO member, we still need to expend more time and energy to learn, grasp and use WTO rules, fully enjoy our rights and safeguard our interests.

Increase in the Volume of Some Imports Depends Mainly on Demand

Gong: In the past few months, the import volume of iron and steel, urea, sugar and some other products has increased sharply, in the first quarter of this year, the import of rolled steel alone grew almost 18 percent, is this situation normal? Some people impute the series of phenomena, such as the sharpening contradictions caused by surplus domestic production capacity at the present stage, the fall of the general level of consumer price, the increasing difficulties facing the operations of some enterprises as well as the continuing decline of the re-employment rate, to the impacts brought by increased imports after WTO entry, do you agree to this view?

Shi: China is carrying out the commitments made on market access for entry into the WTO, but the key factor deciding import growth still is market demand. Many people are worried that the measures taken by China early this year to lower tariffs and abolish some non-tariffs would possibly trigger a sharp increase in imports, but the Jan-May statistics released by the Customs indicated that the situation of a rapid growth in imports did not emerge, contrarily, the increase of imports was lower than anticipated. The rapid rise in the import range of steel products had something to do with the special guarantee measures and the interim guarantee measures implemented by the United States and EU. From the perspective of the development trend of import, the import of some individual products, such as auto vehicles and fertilizers, on which restrictions were lifted this year will possibly increase rapidly, but it is expected that not much influence will be exerted on import. On the whole, China's importation in the first five months was normal and steady.

At present, confronted with the grim international economic environment and intense international market competition, China faces very heavy tasks of expanding domestic needs and adjusting the industrial structure, the deep-seated problems of the economic structure remain to be resolved, there are still difficulties in the production of some enterprises and in workers' daily lives, the pressure on employment and social security has increased and market economic order is chaotic. These problems were not brought about by WTO entry, but rather they arose in the course of the transformation of China's economic system from the planned economy to the market economy, so they are the difficult problems encountered on our road of advance, they will be gradually settled along with the deepening of reform, the adjustment of the economic structure and the development of the national economy.

Increase in Trade Frictions Is Nothing Strange

Gong: One of the important aims in joining the WTO is to make use of the stage of the WTO to further improve China's external environment and expand new space for opening to the outside world. However, since last year, fit seems that China has more frequently encountered foreign trade barriers, developed and developing countries alike are using various non-tariff measures to set up restrictions on China, cases such as the 201 iron and steel provisions, the CR regulations of the EU and animal source food, as well as special protective provisions and non-market economy treatment, all these give people the sense that China has begun to be pressed hard from all sides on the international market. Some people state that the Chinese have just begun to "learn the rules", while many WTO members have long before reached the point of "playing rules", so in international economic and trading disputes, China can only be increasingly passive and be led by the nose. How do you look upon this type of questions?

Shi: True enough, trade frictions between us and our trade partners have indeed increased somewhat since WTO entry, particularly the EU has repeatedly implemented a restrictive policy toward China's products, in the aspect of trade in iron and steel and farm products, the United States has also adopted some measures deviating from WTO rules. At the same time, the tendency of economic regionionalization is strengthening and trade protectionism is being increasingly intensified. According to WTO statistics, currently there exist more than 160 free trade areas and bilateral free trade agreements, agreement members' demand for things from outside the areas has greatly declined, all these have exerted certain influence on the eternal environment for China's development of foreign economic and trade relations. Currently, international trade protectionism is rife, in the final analysis, however, this is caused by difficulties emerged in the world economy, particularly the Asian financial crisis and the decline of principal economies of the West in the past two years. This has no necessary cause-and-effect linkage with China's WTO entry. No matter whether China is a WTO member or not, the tendency of the intensified international trade protectionism is an objective existence and we have to face up to this reality.

Fortunately, under this situation, we have joined the WTO. So, when are waging struggles against trade protectionism of every hue, we have the criteria for judging right from wrong and the means of rules for waging struggles.

Nevertheless, since China has been the sixth trade power globe-wide, particularly its export has been developing rapidly, trade friction will inevitably increase. This is nothing strange, it is true of the world's trade powers, too. We should have full mental preparation for this.

A Fall in Customs Revenue Doesn't Mean Decline in Overall Taxation Capability

Gong: China has promised to reduce tariff to 10 percent on average by 2005, this absolutely is good news to foreign investors, after WTO accession, with the dramatic lowering of China's tariffs, foreign investors are animate to come to invest in China. But another fact is the trend of dramatic increase in the Customs revenue for years on end was changed in the first four months, over 6.2 billion yuan less compared with the corresponding period of the previous year, down by 7.7 percent, will this affect the overall tax income?

Shi: In a bid to further expand opening to the outside world and keep abreast with the situation of economic globalization, as early as 1993, the Chinese government declared that it would reduce the average tariff level to about 10 percent by 2005. For this, we made concrete promises at the time of joining the WTO. Beginning from January 1 this year, China reduced to varying degrees the import tax rates on 5332 tax items. After tax-cut, China's general tariff level was down to 12 percent. Since the beginning of this year, the reduction in customs revenue compared with the same period last year has aroused the concerns of various quarters, and this is only natural.

However, it should be noticed that under the situation of the acceleration of economic globalization and trading facilitation and the reduction in tariff barriers, currently the tariff levels of the developed countries have dropped to 4 percent and will continue to fall stepwise; the average tariff levels of the developing countries have reached around 10 percent. China's present tariff level is identical with that of other developing nations. The developing countries will also further lower the tariff level, this is the general trend of the development of international trade. Since we want to participate in economic globalization, we should likewise adapt ourselves to this trend after WTO entry.

On the other hand, removing tariff and non-tariff barriers is an important means for our present aim to bring about the facilitation of trade and investment. Although reduction of the tariff level would lead to a decrease in customs revenue for some countries, particularly the developing ones, fundamentally speaking, it facilitates the development of world trade and proceed to push forward the development of the world economy. We must not fail to see this trend.

A drop in the tariff proportion in the financial revenue is also a worldwide trend. Lowering tariffs can boost the advancement of trade and investment and correspondingly it will bring about growth in other tax incomes and financial revenues.

We should honor our commitments made at the time of WTO entry and adapt ourselves to the new situation, at the same time, under the circumstance of the lowered tariff level, we should maintain the steady taxation growth by means of developing trade, tightening control on tax collection and cracking down on smuggling activities. This is the work we must now do our best to strengthen.

"Government WTO Entry" Will Not Affect Macro-Control

Gong: In a sense, WTO entry is government entry into the WTO, do you feel any improvements in government WTO entry in the past half a year? Some people say that previously when fluctuations emerged in the domestic economy, some methods and measures adopted for macro-control had produced remarkable results in guiding and improving the situation of economic operation, but with increase in external factors and enlargement of uncertainties arising after WTO entry, some previous methods proved effective in practice seem to have become not so effective now. On this base, they hold that WTO accession has weakened the government's macro-control capability. If things go on this way, overall, the economy would run out of control, what's your comment on the above-mentioned viewpoint?

Shi: I think China's WTO entry will not affect the government's macro-control, still less cause the overall economy to run out of control. The crux of the matter is that we must understand what means the government should employ and how should it exercise control.

For quite a long period of time in the past, the government mainly used administrative and planning means to exercise control over the economy. Under the condition of the planned economy, doing so proved very effective. However, under the conditions of establishing a market economic structure in China, it is indeed not so effective if the government continues to use the administrative and planning means to regulate and control the economy. So long as our government is familiar with WTO rules, properly uses the market economic means and establishes an effective legal system, macro-control under the market economy will still be effective. After China's accession to the WTO, the government continues to strengthen opening and control in important and sensitive fields. So long as we properly use economic means, the government's macro-control over the economy will be more effective.

It Is Urgent for Enterprises to Learn and Master Rules in Practice

Gong: After WTO entry, a WTO upsurge was set off in various localities. Many people, particularly entrepreneurs, say that through study and training, they have understood the basic rules, but after they returned to their work units and contrasted these rules with their actual work, they found there were tremendous differences, so they were at a loss what to do in the face of a multitude of things, they generally lack an operational tactics to deal with these things, in the face of the new situation, they don't know where to start with. If this condition is allowed to continue, will the positive effect of WTO entry be influenced in the future?

Shi: Over the past six months, many related training activities have been organized by various social sectors, which are very helpful for everybody to get familiar with and understand the WTO. But I think what is more important is the need to learn and study these rules in practice, it is especially necessary for enterprises to do so.

Governments and intermediary organizations should strengthen the study and application of these rules, our enterprises should also go into action as soon as possible, besides purposefully training WTO professionals, first of all, we should understand the series of measures adopted by the Chinese government to keep abreast of the new situation. Secondly, along with the quickening pace of China's opening to the outside world, our policies have become more transparent, and we have greater foresight, enterprises should exploit this opportunity to earnestly study related policies, actively suit themselves to the change in China's foreign trade system and strive to incorporate enterprise development into the scope of China's and even global economic and trade development. Finally, in the face of international trade disputes, enterprises should remain calm, on the one hand, they should quickly master related knowledge and actively cope with the situation; on the other hand, they should use the rules to avoid disputes as far as possible; at the same time, they should transform the pressure coming from outside into a motive power for the enterprises to enhance their own competitiveness.

The Whole Society Should Further Enhance Their Awareness of Rules

Gong: Earlier, I covered WTO Director-General M. Moore, he said what China lacks most after WTO entry are not funds, technology and talented people, but the whole society's awareness of rules; in addition, our system does not conform to the requirement of the circumstance, given this, even if the transitional period is over, we still can't suit ourselves to the WTO. How do you look upon this matter?

Shi: The awareness of rules is the inherent requirement of the development of the market economy, the lack of this awareness is directly manifest in the chaotic order of China's market economy. The requirement set on us by China's WTO entry is to form the awareness of conscious observance of rules in the entire society. At the same time, various social circles, including enterprises, should consciously observe laws and regulations, consumers should also reject acts that disrupt the market order. Only when the awareness of rules is made our criterion of morality, and honesty the norm for our economic activities, can we thoroughly set up a social economic order conforming to the requirement of the market economy.

Future Emphasis Be Placed on Study of Taking the Initiative in World Competition

Gong: In your opinion, from which aspects should we further step up our efforts to do our work well?

Shi: On the basis of conscientiously honoring our commitments, we should do our work well in the following aspects:

First, we should actively participate in WTO multilateral trade negotiation and in the formulation of multilateral trade rules.

Second, we should earnestly study WTO rules, learn to use these rules to manage our economy and protect our own interests and take the initiative into our own hands in the intense international competition.

Third, we should strengthen training, we should train a batch of qualified professionals, so as to properly handle enormous and complicated foreign economic and trade affairs after WTO entry. On the other hand, we should popularize WTO knowledge among government functionaries and entrepreneurs of different levels, fields and regions.

China has just joined the WTO, in the future when participating in the multilateral trade system and economic globalization, we will still face more complicated circumstances, the task will remain very arduous. But I firmly believe that under the guidance of Deng Xiaoping Theory and Comrade Jiang Zemin's "three represents" important thinking, and with the rich experiences accumulated in the reform and opening up program, achievements gained in economic construction and ever-growing overall national strength, so long as we firmly grasp the opportunity, actively take on challenges, we will definitely be able to create a brand new future featuring China's opening to the outside world and rapid economic development.

(People's Daily July 11, 2002)

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