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Essay on The Effects Of China's Entry Into The WTO
WTO membership requires certain fundamental changes of trade and investment policies, which can be expected in the five years following accession. These changes include:
- tariff reductions for both agricultural and manufacturing products;
- elimination of nontariff barriers in industrial sectors;
- agricultural trade liberalization, including the accelerated growth of import quotas for grains and plant-based fiber, the elimination of such import quotas, and the replacement of the quota system by a 15 percent tariff by 2005;
- opening up of major service sectors;
- phasing out of multifiber arrangement quotas on textiles and clothing by North American and European countries; and
- an increase in actual foreign direct investment (FDI) flows by more than 11 percent in the next five years (Ma and Wang 22).
Analysts do not agree, however, on what all these changes will add up to. Pessimists and optimists obviously disagree widely. Ironically, there seems to be more pessimists in China than elsewhere. The CBR was the most upbeat--estimated that China's WTO accession and consequential FDI growth would add approximately 0.45 percentage point to the annual growth rate of Chinese gross domestic product (GDP) in the first five years. This gain would come from three sources:
- more efficient allocation of production factors through increased specialization according to China's comparative advantage;
- more rapid physical capital accumulation, which would accompany the gains in efficiency; and
- more rapid growth of factor productivity as a result of technology transfer via the expansion of capital and intermediate-goods imports (Ma and Wang 22).
The model used in the CBR study showed that with China as a WTO member, Chinese exports and imports would grow at higher rates, by 6.7 percent and 5.2 percent, respectively, over the ensuing five years. It also predicted that the greatest increases in Chinese.....
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