China and the World Trade Organization

In many ways, China’s entry into the World Trade Organization (WTO) was a historic event that changed many of the old ways of doing business in China. China’s membership defines how China’s market will open to foreign competition in both goods and services and sets out a timetable of China’s commitments. The agreement not only opens China’s market but also puts in place a defined set of rules that’ll make foreign investment and trade more predictable in China.

Here are the two biggest impacts of China’s entry into the WTO:

✓	China must adhere to the WTO’s rules for doing business.
✓	China must open up more businesses to foreign involvement.

For more information on the implications of China’s membership in the WTO, check out China and the WTO: Changing China, Changing World Trade (Wiley). And of course, read on.

Agreeing to play by the WTO rules

The World Trade Organization (WTO), an international organization that helps promote global trade and commerce, defines rules that are designed to help all member countries play fairly in the global market. The WTO has 150 members representing most countries in the world.

When members of the WTO don’t agree with each other, the WTO acts as the official umpire on trading disagreements. The WTO’s mission is to help the global economy go about its business as smoothly as possible. In China, the WTO is trying to make rules for global trade and services clearer for investors and to create a system that’s fair to all who are interested in investing there.

Getting the world’s most populous country and fastest-growing economy to join the club was a huge breakthrough for world trade. At more than 15 years, China had the longest application process for any member to join the WTO. The country made the bold decision to join in the early 1980s, and the process was finalized on December 11, 2001. In the end, more than 900 pages of legal documents were submitted with China’s application.

The U.S. government played a significant role in China’s entry into the WTO, though China saw the benefits as well. The Chinese leaders know that they have to play by the WTO rules in order to become a major player in today’s global economy.

Changing how China does business

Under the WTO, China agreed to a timetable for changing the way it does its business. The agreement makes changes to key investment areas such as financial services and logistics, China’s legal system (including intellectual property rights), and import and export rules (tariffs, quotas, and approvals).

China is under a yearly review process by the WTO authorities. Along the way, China has made some good progress, but there are some concerns about whether the country is making all the required changes.

The first five years as a member of the WTO required China to open up certain protected industries that were off-limits to foreign competition. These industries included banking, telecom, and retail, where some Chinese companies are market leaders. The phase-in period to WTO also expected China to get tougher on enforcing copyright protection to reduce counterfeiting of popular Western consumer brands. China introduced many new laws to clarify its new commitments to the WTO.

China today says it’s open for business and is obeying all the rules under its WTO obligations. Some critics — especially the U.S. — say China didn’t meet some of the promises made to the WTO and that China’s track record is mixed at best. But don’t let your business get too caught up in the criticism — these times of noncompliance are likely just bumps in the road as China evolves into a major player on the world economic stage.