U.S. to China: Join the WTO, But Real Work Lies Ahead

Report Asia

U.S. to China: Join the WTO, But Real Work Lies Ahead

December 9, 1999 4 min read Download Report
Stephen Yates
Senior Associate Fellow in African Affairs

After 13 years of negotiations, the United States and China have agreed to terms on China's entry into the World Trade Organization (WTO). A similar deal expected with Canada and the European Union makes China's accession to the WTO nearly inevitable. Although Congress's approval is not required in this process, Members of Congress have a role in determining how much the United States will benefit from the fruits of these hard fought negotiations. Early next year, they will vote on whether to extend on a permanent basis China's normal trade status with America--a fundamental benefit afforded all WTO members. Denying normal trade relations to China will not block its accession to the WTO. But it would deny the United States (and no one else) all of the market access concessions China offers in the process.

Debate is already underway over how beneficial or harmful this trade pact with China will be for U.S. interests and whether it will lead to positive changes in China. Policymakers should be cautious in considering the polarized views that characterize most China or trade policy debates. One side argues that American jobs will be sacrificed to Dickensian Chinese factories and a modernizing, hostile military, while the other heralds the advent of a liberal trade era in China fostered by its integration into a rules-based international institution.

In reality, China's membership in the WTO is not likely to dramatically increase U.S. investment and participation in China's market in the near future , nor is it likely to ignite a passion for liberal democracy within China's borders. But neither will it hinder America's ability to protect its national security interests and promote freedom in China.

Benefits. The U.S.-China agreement is a step in the right direction, despite the fact that it will take several years before China's market-opening pledges are realized. The policies in the agreement would advance U.S. commercial interests by:

  • Expanding China's private sector. Private sector expansion will do more than increase the potential consumer base for U.S. exports. It also will limit Beijing's ability to micromanage people's lives and free China's citizens from the world's largest welfare state.

  • Implementing the Trade Related Investment Measures (TRIMs) Agreement. Full implementation of the TRIMs Agreement will protect firms from forced technology transfers, local content requirements, and foreign exchange restrictions. Especially in the area of dual-use technology, this agreement should help improve protection of sensitive U.S. military technology and valuable intellectual property.

  • Moderating China's external behavior. The WTO's multilateral mission to reduce import barriers will limit China's ability to continue its past practices of playing one trading partner against the other and raising mercantilist barriers to foreign competition. Making China a stakeholder in a multilateral regime also will increase the likelihood that Beijing will abide by the WTO's rules and obligations.

  • Setting a precedent for other economies. The terms to which China has agreed are an important benchmark for future membership offers. Saudi Arabia and Russia lead the list of nations currently seeking WTO membership.

What's Required. To ensure that the U.S.-China WTO agreement delivers these benefits without compromising significant U.S. security and human rights interests, Washington should:

  • Insist on Taiwan's simultaneous accession to the WTO. The WTO may prove to be the most effective legal framework through which China and Taiwan can manage current and future economic interaction. Taiwan is America's 7th largest trading partner and the world's 7th largest investor. Taiwan's accession, unfortunately, has been delayed for political reasons.

  • Find a new forum to address human rights and national security concerns. Permanently extending normal trade relations to China will eliminate an annual forum for debate over U.S. policy toward China. Advocates of extending permanent normal trade relations to China should work with their opponents to establish an effective means of addressing legitimate human rights and national security concerns.

  • Continue national security-based export controls. Because the WTO's primary focus is banning import barriers, export controls are not subject to its rules. Since the United States now maintains national security-based controls over exports to current WTO members, China's WTO membership should not affect the application of such controls over sensitive U.S. exports to China. To be effective, however, Washington should establish a forum to discuss national security-based export controls with U.S. allies.

  • Establish non-sanction methods to address human rights. Washington should do more than publicly denounce Beijing's retrograde steps to subdue or intimidate perceived threats. It should support positive measures within China that foster the foundations of domestic freedom (from the rule of law to markets and elections), and improve relations with China's neighboring states that are making significant progress toward these ends.

  • Hold China to WTO discipline. The United States must be as vigorous at enforcing this agreement as it was in negotiating its terms. Policymakers should understand that while most Americans view a contract signing as the close of negotiations, the Chinese traditionally view it as the beginning of new negotiations on how to implement the agreement.

Conclusion. The United States should welcome China's commitment to market liberalization and reform, as represented in this WTO accession agreement, by extending normal trade status to China on a permanent basis. With presidential and congressional leadership support next year, China likely will be granted permanent normal trade status. It is critical, however, that policymakers view the conclusion of 13 years of negotiations as the beginning of a long period of implementation. The success or failure of this agreement rests upon as much details as on the determination of American leaders to continue to press for progress on security issues, human rights, and Taiwan.

Stephen J. Yates is a former Senior Policy Analyst in the Asian Studies Center at The Heritage Foundation.


Stephen Yates

Senior Associate Fellow in African Affairs