After 15 years of struggle, trade officials approved China's membership in the World Trade Organization on Sept. 19.
China's entry promises huge changes in the world economy. It will open international trade with China and potentially liberalize previously strict government control of the Chinese economy. And once the country removes anti-competitive measures, such as the tariffs and subsidies, it will compete more in the global market. This could have radical consequences for key Chinese industries like banking, distribution and retail services, and the energy and oil sectors.
The WTO is a global international organization dealing with the rules of trade between nations. The goal is to help producers of goods and services, exporters, and importers conduct their business.
The bulk of the world's trading nations are members.
Global Concerns
As the world's fifth largest exporter and sixth largest importer of manufactured goods, China's entry into the global trade body will not go unnoticed.
With a population of 1.3 billion, China is the world's largest developing country, leading many poor countries to hope that its entry will shift the balance in the WTO away from the world's big industrialized nations like the United States, those in the European Union, Canada and Japan.
But there are fears from developing countries that China's increased access to lucrative global markets will have dangerous consequences.
They are concerned that Chinese goods will capture Western markets from them, especially in areas such as textiles and footwear.
In the next few years, as China lowers its import tariffs and allows foreign firms into once highly-protected sectors such as banking and telecommunications, Chinese consumers likely will see many more products entering its market, and at lower prices.
International investors also are worried about China's actual compliance with WTO rules. Despite assurances from Chinese officials, there is concern that the country might not meet with regulations about tarrifs and taxes.
Domestic Concerns
Giving greater access to foreign business will have serious effects for China's state run heavy industries and family run farms, which are unlikely to be able to stand up against faster, more efficient foreign competitors.
Additionally, in the past three years, China has been able to sustain 8 to 10 percent growth despite global economic slowdown. Some Chinese economists wonder if long-term benefits of WTO entry will outweigh the risk of entering into an agreement with countries suffering decline.
University experts express concern about this issue too.
"There could be a positive impact for China in the long run," University Economics Prof. Mary Lee Epps said. "However, in the short run, [these new developments] may lead to many transaction costs that can make such transitions very painful."
These transactions costs can include unemployment and decline in industries such as insurance and banking.
"There will be significant effects on income distribution due to the winners and losers from trade," Epps added.
Agriculture
One Chinese industry that could be hit the hardest is agriculture because farming represents 33 percent of China's gross domestic product.
As part of the WTO agreement, China has agreed to reduce agricultural tariffs by 17 to 22 percent, the agriculture industry, without the protection of the government, may succumb to foreign competition. This could cause a surge in unemployment, only adding to the currently estimated 150 million unemployed migrant workers.
"There will definitely be effects on the domestic stability within the country, especially with farmers," Epps said.
This huge unemployment force may also lead to crime as they migrate into the cities in search of jobs. An estimated 50 million migrants are expected to move to urban areas by 2005.
Positive Outcomes
But the partnership clearly offers China pluses.
And although China may face many potential problems with its entry in the WTO, experts say it is better equipped to change than many of the smaller countries that have entered in the past. Its natural, physical advantages - a large population and geographic size - certainly will aid in its transition.
"I see a growth [rate] of 6 percent for China over the next 20 years," Commerce Prof. Bruce Reynolds said.
The effects will be positive for international companies too, who now can sell in the most populated country in the world without as many trade restrictions.
Political Consequences
Beyond the economic bonuses, China has much to gain politically from its membership in the WTO.
"It will certainly increase its political clout in the world," Epps said.
The membership will make China look and feel part of the international order. Moreover, it will help put some of the troubles of China's past behind, such as strict communist rule, riots and harsh labor laws.
The nation's participation promises to help world markets adjust to and coping with the tragic attacks in New York and Washington. Those attacks represented powerful forces trying to bring down world order and the addition of the world's largest country to the WTO immediately following those attacks is a promising sign.
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