unctad.org | Shanghai WTO Affairs Consultation Center (SCC/WTO) Annual Conference 2011
Statement by Mr. Supachai Panitchpakdi, Secretary-General of UNCTAD
Shanghai WTO Affairs Consultation Center (SCC/WTO) Annual Conference 2011
Shanghai
19 Nov 2011

China and the Future of the Multilateral Trading System
In commemoration of the 10th anniversary of China´s accession to the WTO

Excellencies,
Ladies and Gentlemen,

It is a great pleasure for me to be here and to address you at this event to commemorate the 10th anniversary of China´s accession to the WTO.

The accession of China to the WTO was a significant transformation for China, for the rest of the world, and for the multilateral trading system. I would like to take this occasion to reflect on the impact this membership has had on all three fronts, before briefly looking at some of the challenges and opportunities emerging on the horizon.

For China, WTO membership served firstly to consolidate economic reforms that had already been enacted on an experimental basis, mostly in the coastal regions, and has also advanced the expansion of these reforms to inland provinces, thus cementing them at the national level.

Secondly, China´s commitments in the WTO were amongst the deepest and most extensive of any member. This has meant that China´s trade and investment regime has changed substantially since its accession.

In addition to full national treatment provided to imported goods, China has bound all its tariff lines and the average tariff rate for industrial goods has been reduced to and bound at around 9 per cent at present; its agricultural tariffs are now bound at around 15 per cent, far below the world average of 62 per cent and much lower than some major developed countries; China removed its export subsidies upon accession, whilst such subsidies are only scheduled to be removed multilaterally by other members in 2013, subject to the completion of the Doha Round. In the area of services, around 100 out of 160 sub-sectors have been liberalized fully or partially, and full national treatment is provided to foreign services and services suppliers in most of the sub-sectors.

Finally, and perhaps most significantly, China´s accession to the WTO has served to support the strengthening of the rule of law, transparency and public participation in the rule-making process.

Overall, WTO membership has been one of several catalysts for China´s phenomenal growth. Enjoying the benefits from multilateral trade rules while opening its own market, China has become a major trading power and increasingly prosperous as a result. In 2001, its exports and imports were of the order of US$250 billion, both ranking 6th in the world. In 2010, those figures had reached US$1.58 trillion of exports and US$1.40 trillion of imports, making China the world´s biggest exporter of goods. China alone accounts for 10% of global exports. But it is also the second largest importer of goods with a share of total world imports at 9%.

This export-oriented growth, combined with an active policy agenda, has allowed China to lift hundreds of millions out of poverty. Indeed, China alone accounted for 90% of global poverty reduction that occurred over the period 1990-2005.

But, as is often the case in the global economy, China´s success has also benefited other members through world trade. With a predicable trade environment assured by WTO membership, China has become the top market for developed countries, including the United States, EU and Japan. According to the US-China Business Council , US goods exports to China have increased by 330 per cent between 2001 and 2009 and its services exports to China by 212 per cent. Given China´s sizable domestic market, China is also among the most attractive FDI destinations for transnational corporations. For example, in 2009, whilst global FDI shrank by 38.7 per cent, China only witnessed a decline of 2.6 per cent.

Perhaps even more importantly, China has also become an export destination for many developing countries, including least developed countries (LDCs), not only in the region, but across the globe. For LDCs, most of which are located in Africa, China surpassed the European Union in 2008 to become their largest export market, absorbing 23 per cent of their exports. In many cases, this can be largely attributed to the duty-free and quota-free treatment China has provided to them as part of its South-South cooperation initiatives. Trade between China and African countries grew from $10 billion in 2000 to over $125 billion in 2010.

Ladies and Gentlemen,

Of course, from a systemic perspective, China´s accession to the WTO is more significant than the story told by the trade and investment figures. Bringing this major economy with an enormous development potential into the WTO was a giant step towards making the multilateral trading system truly universal. China´s accession has also helped rebalance governance in the multilateral trading system under which trade rules have historically been determined by developed country members. Together with other active developing countries in the WTO, China´s participation in rule making strengthens the negotiating power of developing countries as a group.

In this context, it would be hard to argue that WTO membership has been anything but a success for China, the rest of the world, as well as the multilateral trading system. This is therefore an occasion for celebration.

Nevertheless, we must also look forward, and I would like to briefly mention three challenges that I see ahead for China in the multilateral trading system and the wider global economy.

The first relates to the fact that China´s phenomenal trade success has catapulted it in a historically unprecedented position: Never before have we seen a country that is both a global player -- the world´s second largest economy -- yet at the same time has a per-capita GDP of less than US $4500 (in 2010), ranking 94th in the world. This implies that China will be put into ever more delicate situations in WTO negotiations, where it will be seen as an industrialised powerhouse whilst it still faces some familiar developing country constraints and challenges, such as poverty reduction in rural areas, environmental degradation, massive job creation for an increasingly urban labour force and widening income inequality. In some ways, the fact that China has become a victim of its own success is reflected in the number of disputes launched against it - China has been a respondent in more than 20 disputes, more than the next three respondents together. China is also receiving demanding requests from its major trading partners to assume more responsibilities in the Doha Round negotiations. How to carefully balance the greater demands and scrutiny with its development status remains a key challenge for China in the future.

Secondly, the financial crisis and its aftermath has reminded us that trade and finance are very closely interlinked. China played a constructive role in mitigating the damage from that crisis. However, global imbalances persist and China will have a very important role to play in seeking greater coherence across the multilateral system as the international community seeks ways to bring about a more stable global economy.

Finally, the slowdown in demand in the developed markets following the crisis is putting into question whether a strongly export-oriented development model will continue to yield the same benefits in a post-crisis environment. China has done phenomenally well in implementing such a model throughout the last decades. However, there may now be a need to put greater emphasis on stimulating domestic demand so as to sustain virtuous growth cycles and to continue to propel China towards prosperity. In doing so it will be important for policy makers in China to consider the possible consequences of the adjustments this will entail not just on the Chinese economy but also on other developing countries.

I am confident that the Chinese people will be able to overcome these challenges with their openness, diligence and above all wisdom and creativity, and that China will become an ever stronger pillar of the multilateral trading system.

Thank you very much.



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