China
China, officially the People's Republic of China (PRC), is a country in East Asia. It is the world's most populous country, with a population exceeding 1.4 billion, slightly ahead of India. China spans the equivalent of five time zones and ...
became a member of the
World Trade Organization
The World Trade Organization (WTO) is an intergovernmental organization that regulates and facilitates international trade. With effective cooperation
in the United Nations System, governments use the organization to establish, revise, and ...
(WTO) on 11 December 2001, after the agreement of the Ministerial Conference.
The admission of China to the WTO was preceded by a lengthy process of negotiations and required significant
changes to the Chinese economy. China's membership in the WTO has been contentious, with substantial economic and political effects on other countries (some times referred to as the
China shock), and controversies over the mismatch between the WTO framework and China's economic model.
Background
Until the 1970s, China’s economy was
managed by the
communist government and was kept closed from other economies. Together with political reforms, China in the early 1980s began to open its economy and signed a number of regional
trade agreement
A trade agreement (also known as trade pact) is a wide-ranging taxes, tariff and trade treaty that often includes investment guarantees. It exists when two or more countries agree on terms that help them trade with each other. The most common tr ...
s. China gained observer status with
GATT
The General Agreement on Tariffs and Trade (GATT) is a legal agreement between many countries, whose overall purpose was to promote international trade by reducing or eliminating trade barriers such as tariffs or quotas. According to its prea ...
and from 1986, began to work towards joining that organisation. China aimed to be included as a WTO founding member (which would validate it as a world
economic power) but this attempt was thwarted because the
United States
The United States of America (U.S.A. or USA), commonly known as the United States (U.S. or US) or America, is a country primarily located in North America. It consists of 50 states, a federal district, five major unincorporated territorie ...
, European countries, and
Japan
Japan ( ja, 日本, or , and formally , ''Nihonkoku'') is an island country in East Asia. It is situated in the northwest Pacific Ocean, and is bordered on the west by the Sea of Japan, while extending from the Sea of Okhotsk in the north ...
requested that China first reform various tariff policies, including
tariff
A tariff is a tax imposed by the government of a country or by a supranational union on imports or exports of goods. Besides being a source of revenue for the government, import duties can also be a form of regulation of foreign trade and pol ...
reductions, open markets and industrial policies.
Preparations
After the
1997 Asian financial crisis, China sold off or merged many unprofitable
state-owned enterprises. In 1998, China reformed the
State Council State Council may refer to:
Government
* State Council of the Republic of Korea, the national cabinet of South Korea, headed by the President
* State Council of the People's Republic of China, the national cabinet and chief administrative auth ...
to greatly reduce the mandate of the
State Planning Commission and increase the mandate of the State Economic and Trade Commission. This shift also corresponded to the change in premiership from
Li Peng
Li Peng (; 20 October 1928 – 22 July 2019) was a Chinese politician who served as the fourth Premier of the People's Republic of China from 1987 to 1998, and as the Chairman of the Standing Committee of the National People's Congress, Ch ...
to
Zhu Rongji
Zhu Rongji (; IPA: ; born 23 October 1928) is a retired Chinese politician who served as Premier of the People's Republic of China from 1998 to 2003 and CCP Politburo Standing Committee member from 1992 to 2002 along with the Chinese Communist ...
, the latter of whom strongly believed that China needed deeper
economic restructuring
Economic restructuring is used to indicate changes in the constituent parts of an economy in a very general sense. In the western world, it is usually used to refer to the phenomenon of urban areas shifting from a manufacturing to a service secto ...
. This restructuring, which had been happening since the 1980s, included
crackdowns on corruption and the establishment of
chambers of commerce
A chamber of commerce, or board of trade, is a form of business network. For example, a local organization of businesses whose goal is to further the interests of businesses. Business owners in towns and cities form these local societies to a ...
.
The
World Trade Organization Ministerial Conference of 1999
The WTO Ministerial Conference of 1999 was a meeting of the World Trade Organization, convened at the Washington State Convention and Trade Center in Seattle, Washington, USA, over the course of three days, beginning Tuesday, 30 November 1999. ...
and related
1999 Seattle WTO protests were the penultimate step before Chinese accession.
United States' role
Formal diplomatic relations between the United States and the People's Republic of China were not
established until 1979, and even afterwards, trade relations were hampered by the high tariff rates of the
Smoot–Hawley Tariff Act
The Tariff Act of 1930 (codified at ), commonly known as the Smoot–Hawley Tariff or Hawley–Smoot Tariff, was a law that implemented protectionist trade policies in the United States. Sponsored by Senator Reed Smoot and Representative Willi ...
of 1930. After the two governments settled asset claims dating from the
Korean War
, date = {{Ubl, 25 June 1950 – 27 July 1953 (''de facto'')({{Age in years, months, weeks and days, month1=6, day1=25, year1=1950, month2=7, day2=27, year2=1953), 25 June 1950 – present (''de jure'')({{Age in years, months, weeks a ...
in 1950,
Congress
A congress is a formal meeting of the representatives of different countries, constituent states, organizations, trade unions, political parties, or other groups. The term originated in Late Middle English to denote an encounter (meeting of a ...
temporarily granted China
most favored nation status in 1980. However, Chinese-American trade was still hindered by the
Jackson–Vanik amendment
The Jackson–Vanik amendment to the Trade Act of 1974 is a 1974 provision in United States federal law intended to affect U.S. trade relations with countries with non-market economies (originally, countries of the Communist bloc) that restrict fr ...
of 1974, which made trade with the United States contingent on certain
human rights
Human rights are Morality, moral principles or Social norm, normsJames Nickel, with assistance from Thomas Pogge, M.B.E. Smith, and Leif Wenar, 13 December 2013, Stanford Encyclopedia of PhilosophyHuman Rights Retrieved 14 August 2014 for ce ...
metrics.
The Jackson–Vanik restrictions could not apply, however, to WTO members, because of WTO rules that prohibit this kind of discrimination.
By 1984, the United States had become China's third-largest trading partner, and China became America's 14th largest. However, the annual renewal of China's MFN status was constantly challenged by anti-Chinese
pressure group
Advocacy groups, also known as interest groups, special interest groups, lobbying groups or pressure groups use various forms of advocacy in order to influence public opinion and ultimately policy. They play an important role in the develop ...
s during US
congressional hearings
A United States congressional hearing is the principal formal method by which United States congressional committees collect and analyze information in the early stages of legislative policymaking. Whether confirmation hearings (a procedure unique ...
. For example, U.S. imports from China almost doubled within five years from $51.5 billion in 1996 to $102 billion in 2001. The American
textile industry
The textile industry is primarily concerned with the design, production and distribution of yarn, cloth and clothing. The raw material may be natural, or synthetic using products of the chemical industry.
Industry process
Cotton manufacturi ...
lobbied Congress for, and received, tariffs on Chinese textiles according to the WTO
Agreement on Textiles and Clothing
The Agreement on Textiles and Clothing (ATC) succeeded the Multi Fibre Arrangement (MFA) and facilitated the gradual dismantling of quotas that were in effect during the MFA period. The Agreement on Textiles and Clothing (ATC) stipulated a systema ...
. In reaction to the
1989 Tiananmen Square protests
The Tiananmen Square protests, known in Chinese as the June Fourth Incident (), were student-led demonstrations held in Tiananmen Square, Beijing during 1989. In what is known as the Tiananmen Square Massacre, or in Chinese the June Fourth ...
' suppression, the
Bush I administration and Congress imposed administrative and legal constraints on investment, exports, and other trade relations with China.
The
Clinton presidency
Bill Clinton's tenure as the 42nd president of the United States began with his first inauguration on January 20, 1993, and ended on January 20, 2001. Clinton, a Democrat from Arkansas, took office following a decisive election victory over ...
from 1992 started with an
executive order
In the United States, an executive order is a directive by the president of the United States that manages operations of the federal government. The legal or constitutional basis for executive orders has multiple sources. Article Two of th ...
(128590) that linked renewal of China's MFN status with seven human rights conditions, including "preservation of Tibetan indigenous religion and culture" and "access to prisons for international human rights organisations"—Clinton reversed this position a year later. Other challenges to Sino-American relations in this decade included the
investigations into Chinese
nuclear espionage
Nuclear espionage is the purposeful giving of state secrets regarding nuclear weapons to other states without authorization (espionage). There have been many cases of known nuclear espionage throughout the history of nuclear weapons and many case ...
which produced the
Cox Report
The Report of the Select Committee on U.S. National Security and Military/Commercial Concerns with the People's Republic of China, commonly known as the Cox Report after Representative Christopher Cox, is a classified U.S. government docum ...
, the persecution of Taiwanese-American scientist
Wen Ho Lee
Wen Ho Lee or Li Wenho (; born December 21, 1939) is a Taiwanese-American scientist who worked for the University of California at the Los Alamos National Laboratory in New Mexico. He created simulations of nuclear explosions for the purposes of ...
for unproven allegations of espionage for the PRC, and the 1999
United States bombing of the Chinese embassy in Belgrade
On May 7, 1999, during the NATO bombing of Yugoslavia (Operation Allied Force), five U.S. Joint Direct Attack Munition guided bombs hit the People's Republic of China embassy in the Belgrade district of New Belgrade, killing three Chinese state ...
. But relations warmed after the September 2001 initiation by
George W. Bush
George Walker Bush (born July 6, 1946) is an American politician who served as the 43rd president of the United States from 2001 to 2009. A member of the Republican Party, Bush family, and son of the 41st president George H. W. Bush, he ...
of the
War on Terror
The war on terror, officially the Global War on Terrorism (GWOT), is an ongoing international Counterterrorism, counterterrorism military campaign initiated by the United States following the September 11 attacks. The main targets of the campa ...
.
Conditions
These changes were difficult steps for China and conflicted with its prior economic strategy. Accession meant that China would engage in global competition according to rules that it did not make. China's admission was "an enormous multilateral achievement" that marked a clear commitment towards
multilateralism
In international relations, multilateralism refers to an alliance of multiple countries pursuing a common goal.
Definitions
Multilateralism, in the form of membership in international institutions, serves to bind powerful nations, discourage u ...
.
When China joined the WTO, it agreed to considerably harsher conditions than other developing countries. After China joined the
World Trade Organization
The World Trade Organization (WTO) is an intergovernmental organization that regulates and facilitates international trade. With effective cooperation
in the United Nations System, governments use the organization to establish, revise, and ...
(WTO), its service sector was considerably liberalized and foreign investment was allowed; its restrictions on retail, wholesale and distribution ended. Banking, financial services, insurance and telecommunications in China were also opened up to foreign investment. Furthermore, China had to deal with certain concerns linked to
transparency and
intellectual property
Intellectual property (IP) is a category of property that includes intangible creations of the human intellect. There are many types of intellectual property, and some countries recognize more than others. The best-known types are patents, cop ...
that the accession to WTO underlined.
Non-market economy
Under Article 15 of the protocol by which China joined the WTO, China was recognized as a Non-market economy (NME). This status allows special treatment within the WTO. The status was set for 15 years and has been disputed after 2016, the year when the 15 years had passed.
Other related WTO members
*
Hong Kong
Hong Kong ( (US) or (UK); , ), officially the Hong Kong Special Administrative Region of the People's Republic of China ( abbr. Hong Kong SAR or HKSAR), is a city and special administrative region of China on the eastern Pearl River Delt ...
was admitted as a WTO member on 1 January 1995, before Hong Kong was handed over to
China
China, officially the People's Republic of China (PRC), is a country in East Asia. It is the world's most populous country, with a population exceeding 1.4 billion, slightly ahead of India. China spans the equivalent of five time zones and ...
in 1997.
See also
*
Chinese economic reform
The Chinese economic reform or reform and opening-up (), known in the West as the opening of China, is the program of economic reforms termed " Socialism with Chinese characteristics" and "socialist market economy" in the People's Republic of C ...
*
China shock
References
{{reflist
Foreign trade of China
World Trade Organization