It has taken all of 15 years, but agreement has been reached at last on China’s application for membership of the World Trade Organization. It was absurd that the world’s most populous nation, with its burgeoning manufacturing base and substantial exports, was kept out of the magic circle which seeks to order and regulate international trade. However, China had contributed to the delay. From the start, it tried to cut a deal that was clearly so advantageous for itself that it would have been unworkable, even had it been ratified by other members of the trade organization.
But the Chinese used the goodwill generated by the fact of the negotiations to excellent effect. Chinese companies embarked upon highly profitable exporting campaigns. Their cheap and disciplined labor enabled them to bid competitively to manufacture a huge range of consumer goods. Their exports to the United States began in earnest in 1975 and by the last decade of the old century, China has displaced Japan as America’s biggest trading partner. The greater part of that trade was from China to the US. In dollar terms the imbalance has long been considerably in Beijing’s favor.
Americans, of course, at first welcomed China’s economic resurgence and supported the principle of GATT and then WTO membership. But it was when US businessmen began to move eagerly into China that they discovered that they were operating in a parallel trading universe. All sorts of joint ventures were established, not just with the Americans but with the Europeans, the Japanese and other Asia-Pacific countries including the Australians. However, with few exceptions, these businesses only flourished if the ultimate management were Chinese, the capital and technology foreign and main markets overseas. In short, the Chinese wanted it all their own way.
Before long, complaints began to mount. The authorities in Beijing became masters of listening sympathetically to protesting foreign businessmen, sending them away with no end of comforting assurances and then carrying on precisely as before. But this was always going to be a finite process, as US and other overseas trade authorities well realized. The Chinese were being lured into the honey pot of the world trading order. It got so that in the end, China’s foreign markets became so crucial to its continuing economic growth that the threat of economic sanctions became of real concern. China can no longer afford the risk of trade sanctions, promoted by the US. It had to talk turkey and once it did so, agreement was reached fairly rapidly.
There are those who will say that China got a better deal than it deserved, but in the end, the long-term effect of the deal is what matters. Subject to final ratification by the WTO board, the world market place is just about to grow by over one billion consumers. China has signed up to having its trade, its imports as well as exports, regulated by the rest of the global commercial community. There are sure to be rows. After all the US and the European Union are forever arguing.
But from hereon in, there is a groundwork of rules to be applied, to everyone’s benefit. In a week of wretched news, this is something really good.
