Opening up

The experience of China’s WTO membership shows that further opening-up would help push forward needed reforms

The experience of World Trade Organization membership shows that further opening-up can help push forward needed reforms.

China’s enormous success in pushing forward a series of domestic reforms in order to join the World Trade Organization offers valuable experience on how to promote interaction between reforms and opening-up.

The country revised a total of 2,300 laws and regulations at the central level and more than 19,000 local ones to facilitate its bid for WTO membership, according to data released by the Ministry of Commerce. On the fifth anniversary of its accession to the WTO in 2006, China had opened more than 100 of its 160 service areas to the outside world in accordance with its WTO membership commitments, an opening-up degree that is tantamount to that fulfilled by some developed countries. In particular, China fully kept its commitments and kept its hands away from the pricing of almost all commodities and services except for the implementation of guidance prices for grains, finished oil and postal services. It is this commitment to giving the market a decisive role in the pricing of goods and services that has helped China to further push forward market reforms and successfully make the transition from a planned economy to a market economy. This transformation has forcibly driven China’s economic development and further narrowed the gap with developed countries.

Many of the measures taken by China to introduce a market mechanism and deepen reforms over the past decade have been related to its efforts to deal with outside challenges that have resulted from its WTO membership. However, over the past decade its comprehensive national strength and international influence and the competitiveness of its companies have grown to their highest level in history.

China’s efforts for expanded opening-up since 1992 have helped inject a huge vitality into its economy and the dividends from reform are far from being over. The experiences of China’s WTO membership indicate that opening to the outside world can become an important propulsive force for further domestic reforms.

Pushing for opening-up in the spirit of reforms and promoting reforms and development through deepening opening-up has been an important experience for China over the past 30-plus years, as VicePremier Zhang Gaoli highlighted in March at a high-level Beijing forum on China’s development. More efforts are needed than at any other time for China to continue the interaction between reforms and opening up, he added. In March, during his first inspection tour of the Yangtze River Delta after he took office, Premier Li Keqiang said that China still has a lot of room to use opening-up to promote a new round of reforms to release “systematic dividends” and expand domestic demand.

The active opening-up strategy the government has vowed to adopt, as mapped out in the report delivered to the 18th Congress of the Communist Party of China in November, means that the country should be more active in pursuing new opening-up targets.

China should hold an active attitude toward the Trans-Pacific Partnership that the United States is vigorously pushing. Given that the TPP sets higher requirements for membership, in terms of financial institutions, management of enterprises and their competitiveness, more active involvement in free trade talks with the US and the European Union would offer China a new and bigger driving force for a better domestic environment and strengthen its protection of intellectual property rights. At a time when no substantial progress has been made in the WTO-led Doha Round of negotiations, China, as the world’s second-largest economy, should not turn a blind eye to the TPP, a wide-ranging economic cooperation arrangement that has drawn worldwide attention.

Compared with other free trade or economic cooperation agreements, what the TPP advocates is complete demolition of tariffs among member states, and it will not recognize “exceptionalism” in principle. If joined by Japan, it will account for 40 percent of the world’s economic aggregates and become a new stage for the making of international economic and trade rules.

There is no denying that the TPP will help rejuvenate the US economy, facilitate Washington’s bid to return to the Asia-Pacific region and share the region’s economic prosperity, and that it will boost its global competitiveness, influence and dominance. China’s active involvement in the TPP process would bring it many challenges, but also opportunities. Excessive resistance to the TPP will be detrimental to China and mean it will possibly let slip chances to take advantage of the TPP to push for deeper economic institutional reforms and promote the better and faster development of its economy. TPP membership would bring increased pressure on China to protect intellectual property rights and make greater efforts to conserve energy and reduce emissions. It would help China promote domestic innovations and sharpen its global competitiveness to adapt to new international trade and investment rules. At the same time, participation in TPP talks at an early date would help China avoid marginalization and gain a say in the making of its rules. The author is a senior researcher on foreign investment at the Chinese Academy of International Trade and Economic Cooperation, under the Ministry of Commerce.