(January 31) – “A sleek silver BMW flying the red flag of Communist China delivers a group of blue-suited delegates to the Breydel building, home of the European Commission. It is a reminder that, after the United States and Canada, it is now the turn of European negotiators to wring concessions out of Beijing in its bid for membership in the World Trade Organization,” write Peter Cook in today’s Globe and Mail.
“In the first weeks of the new year, Wall Street mega-deals and the decline of the euro have been competing for attention in the financial media and, by comparison, the China WTO membership deal that the United States approved last November seems like old hat. But it is a fair bet that, given the politics of it, China’s trade bid will emerge as the big continuing story of the year.
“Unfortunately, the location of that story will be the United States, where the potential for a merger between opponents of trade and opponents of China promises to greatly enliven the U.S. election season. Of course, it also promises to complicate China’s bid to join the world trade body after 13 years of trying. Even Mexico’s attempt to enter the North American Free Trade Association did not stir up the passions that this will.
“That the story is a U.S. one is a travesty, because the opening up of China is directly relevant to only a small group of companies, just 1 per cent of total U.S. output, who are active in the United States. It is Beijing that is taking the brave leap by offering to compete globally and suffer possible consequences such as crippling unemployment, as well as offering, on paper at least, to create a legal system that cannot be overruled by the Communist party.
“Beijing, of course, is an authoritarian place where the views of those who will be disadvantaged by the deal do not count. To that extent, there is no story. However, even in China, the public mood matters. The current leadership is well aware that joining the WTO involves the biggest internal shakeup in the economy since (former supreme leader) Deng Xiao-ping launched his open-door policy of modernization in 1978 and is, for them, a monumental risk.
“Looking at what must change in China, the emphasis is often put on inefficient state-owned industries and the state banks that prop them up. But the challenge is wider than that. Consider another sector: agriculture. Here the Chinese employ 900 million people either directly or indirectly on land resources that are so stretched that there are just 0.1 hectares of land for each farm worker, compared with 2.4 hectares in the United States. Chinese farmers are desperately poor by world standards. Yet, because of the pressure of population, the cost of Chinese farm produce is 30 per cent higher than on the world market. Already China has millions of rural workers drifting to the cities in search of jobs. Open China’s food sector to competition of any kind, and many more millions would join them.
“China needs WTO membership if it is to guarantee itself uninterrupted access to world markets and attract foreign investment for the next stage of its economic development.
“At the same time, others need China. Fred Hu, an economist and China expert with Goldman Sachs in Hong Kong, talks of the country averaging an annual growth rate of 7 per cent between now and 2025. That would transform it into the world’s largest economy by size, bigger even than the United States, with a per capita gross domestic product of $12,000 (U.S.) in 1985 prices. If these kinds of growth rates are achieved, the result would vault the Chinese into the ranks of the world’s middle class as consumers of other people’s products. All this, however, is for the future.
“The next months promise to be messy. In the Bill Clinton camp, the hope was that a U.S.-China deal on WTO membership could be done early last year, and Congressional approval obtained before domestic politics started to interfere. The administration would like to put the deal to a vote in late April. But Congress won’t look at it until the entry terms of Europe and others are known.
http://www.globeandmail.com/gam/ROBColumns/20000131/RCOOK.html