China Wins Entry Into the WTO

More than 2,000 years after the heyday of the Silk Road linking China to the West, the world’s most populous country was accepted Saturday into the club of nations that defines global trade.

Taking a break from more contentious issues such as agriculture and intellectual property rights, members of the World Trade Organization voted unanimously to let China take its place at the head table of trading nations, a process known as accession.

The same invitation will be extended today to Taiwan, the second step in a diplomatic dance that allows the two rivals to become the WTO’s 143rd and 144th members. The votes were planned for separate days so that officials would not have to share the stage.

“This is a defining moment,” said WTO Director General Michael Moore. “The world has now changed, and changed for the better.”

Chinese Trade Minister Shi Guangsheng said the decision “is not only in the interest of China but also in the interest of all WTO members.” He challenged the organization to establish “a fair, just and reasonable international economic new order” that would deliver more of globalization’s benefits to developing countries.

The accessions will take effect 30 days after China and Taiwan each ratifies an agreement detailing the steps it must take to reduce barriers to trade in all manner of goods and services, from farm produce to foreign investment.

Though expected, the entry accelerates China’s growing role as an economic power. Amid a global slowdown, China has been one of the few countries to boast positive economic growth, and its lower labor costs have allowed it to become an important exporter and competitor around the world. In addition to the economic considerations, there are also questions on how China will change under the pressure of liberalized trade.

China’s entry concludes a long march that began in 1986, when it expressed interest in rejoining the WTO’s predecessor organization. At the time, the criteria for membership were far less demanding than they are today.

By the time the negotiations that led to Saturday’s vote were finished, China had agreed to a package of market-opening measures expected to transform its $1.1 trillion economy and touch many of its 1.3 billion people.

Under the terms of its WTO accession, China will slash import tariffs and quotas, and lift bans on agricultural products such as corn, wheat and citrus. The tariff applied to U.S.-made autos, for example, will fall to 25% from 100% over five years; tariffs on information technology products will disappear.

Foreign companies will be able to develop their own wholesale and retail distribution networks in China. Providers of legal, financial, telecommunications and transportation services will operate more freely within its borders. China must observe international standards on intellectual property rights, including patents and copyrights.

“China’s reformers have embraced the far-reaching obligations of WTO membership,” said U.S. Trade Representative Robert B. Zoellick. His European counterpart, Pascal Lamy, called the milestone “the WTO’s greatest leap toward becoming a universal organization.”

U.S. Agriculture Secretary Ann M. Veneman said agricultural exports to China should more than double, from $1.7 billion last year to at least $3.7 billion once its WTO commitments are fully implemented. Farm exports to Taiwan should increase from about $2 billion currently to $2.5 billion after implementation, she said.

Significant increases are expected in U.S. exports of oranges, apples, grapes, wine, beef, poultry, cheese, cotton, oilseeds, grains and corn.

The reforms are expected to radically alter China’s rapidly growing economy. Unprofitable state-owned industries will be dismantled. Slow-moving monopolies will feel the lash of international competition. Millions of inefficient farmers will be forced off the land and into urban labor pools.

The WTO faces big changes too. China is already the world’s seventh-biggest trading nation, with merchandise exports of $249 billion last year; America ranks first with exports of $781 billion. Some experts say China could rise to No. 2 within a decade, displacing Germany, Japan, France, Britain and Canada.

“With the accession of China at this meeting, the organization adds not only one-fifth of the world’s population, but also an enormous source of dynamism and a powerful new voice for developing countries,” World Bank President James D. Wolfensohn said in prepared remarks to WTO members.

The WTO scheduled China’s accession observance on the second day of a five-day conference where the United States and Europe are trying to generate enthusiasm for another big round of global trade liberalization negotiations. China has endorsed the idea of a new round, which would require WTO members to tackle touchy issues such as agriculture subsidies, textile trade barriers and pharmaceutical patents.

Taiwan’s accession observation was delayed until today to appease China, which considers the island a breakaway province and threatened at several points to block its entry. In official WTO parlance, Taiwan is known as the Separate Customs Territory of Taiwan, Kinmen and Matsu.

Despite the intense political rivalry between the two governments, the economies of China and Taiwan have become increasingly intertwined. Their entry into the WTO will accelerate their integration by removing remaining barriers to trade and investment.

Some Southeast Asian countries have expressed concern that China’s gains will be their losses as Beijing claims a bigger share of foreign investment and merchandise trade.

“Of course China is going to be very competitive,” WTO director Moore acknowledged. “But having China competitive under [WTO] rules . . . is in the whole world’s interests.”

China’s promised agricultural reforms will produce wrenching adjustments. It has agreed to eliminate export subsidies and curtail other forms of farm support in a nation where tens of millions of farmers depend on trade barriers to remain economically viable.

“China has already agreed to do more in so many areas that it can come to these negotiations and watch everyone else squirm,” said Nicholas Lardy, a China expert at the Brookings Institution. “They’re way ahead of some developed countries on agriculture.”

The pending accession of China and Taiwan reflects growing interest by previously insulated economies to join the world trading club. Since the WTO was created nearly seven years ago, 14 countries have been admitted. The organization is currently negotiating terms of admission for another 26 applicants, including Russia, Saudi Arabia and Vietnam.