As China headed into a weekend of speeches celebrating its 10 years as an official member of the global trade community, the rest of the world might have wanted to contemplate the exported US$49 microwave oven and the imported US$85,000 Jeep Grand Cherokee.
Sunday marked the 10th anniversary of China’s joining the WTO — a membership that helped turn China into the world’s biggest economy after the US. Companies and consumers worldwide have benefited from China’s emergence as a top trading partner. And yet, because of special breaks and loopholes China got when it joined the WTO, it still shields its domestic markets from foreign competition much more than any other big nation.
Consider that US$49 microwave oven and US$85,000 Jeep.
Microwave oven prices have plunged in the West over the past decade, largely because China has combined inexpensive labor, excellent infrastructure and heavy factory investment to produce the ovens and a wide range of other consumer goods for export, making creature comforts more affordable to customers around the world. And WTO rules against protectionism have made it difficult for countries in the West to limit China’s sixfold surge in exports during those 10 years, even as the Chinese flood of products has forced factory closings and layoffs elsewhere.
However, price tags on imported cars at dealerships in Beijing, Shanghai and other Chinese cities signal how China has continued to protect its home market under the special terms of the WTO agreement it negotiated before joining the trade group.
In the US, prices for a Detroit-made Jeep Grand Cherokee start at US$27,490. However, in China, after tariffs and other protective fees, it sells for US$85,000 or more in China. (It’s no surprise that Chrysler has sold fewer than 2,500 of them so far this year in China.)
Foreign trading partners often chafe at the way China uses the WTO rules to its advantage.
The Chinese economy’s “spectacular rise would not have been possible without the open global trading system that China was able to benefit from during the past 10 years,” EU Trade Commissioner Karel De Gucht said in an e-mail.
“At the same time, China is having to increasingly recognize and respect not only the legal responsibilities it now faces as a member of a global rules-based body, but also the WTO “spirit” of promoting open markets and nondiscriminatory principles,” he said.
Chinese officials have been effusive in the run-up to their WTO anniversary.
“We believe that our 10-year arrangement has been successful — the results of the past 10 years are welcome and a valuable inspiration,” Chinese Assistant Minister of Commerce Yu Jianhua (俞建華) said at a news conference last month in Beijing.
The roots of China’s economic model trace to the singular terms under which the nation joined the WTO, which now has 153 members.
Based in Geneva, Switzerland, the WTO was established in 1995 as the successor to an international framework called the General Agreement on Tariffs and Trade — GATT, as it was known — that had been mapped out in the early years after World War II.
After negotiating for 15 years to be admitted to GATT and then to the WTO, China was finally let in after agreeing to accept the WTO’s broad free-trade rules. However, as all new members do, Beijing also had to negotiate a lengthy document, known as an accession agreement. It spelled out thousands of details tailored to the specifics of the economy of China, which back then was still very much a developing country.