Benefits and drawbacks to China’s impending admittance into the World Trade Organization
China’s acceptance into the World Trade Organization will have long-term benefits for both China and the United States but will also cause short-term problems, said Kevin Huang, an economics professor at Utah State University.
Huang, a native of China, said both countries will benefit economically when China and its 1.3 billion people join the 142-member organization which assures a continuous and secure flow of trade between countries next year, but some aspects concern him.
“This is the start they have to make. I’m not sure if China is ready for change. It’s a good thing for China, but in the short-run China will suffer for a while,” Huang said. “For the U.S. I think some special groups will be hurt.”
China is expected to be formally admitted to the WTO next year. The agriculture and banking sectors in China will hurt in the short-term along with the auto industry, Huang said, while steel and other manufactures could be hurt in the United States.
However, the loss of manufacturing jobs will help the United States become a more high-tech economy, Huang said.
Terry Glover, a USU economics professor, said when a market opens up to imports, domestic manufacturers generally suffer as a result of other countries having better technology.
“But I think it will have a favorable impact,” Glover said. “It will probably improve the world’s economy. China finds big markets and gets into them. It will also provide immediate goods and cheaper imports for us.”
Multi-national agreements will probably result as China enters the WTO which leads to free-market international trade which leads to consumers’ economic gains, Glover said. By joining the WTO, national quotas are eliminated and tariffs are equal among member countries, he said. Quotas place limits on the number of imports a country allows for products during a year while tariffs are taxes on imports. Quotas distort the economy more than anything else, Glover said.
Edwin Stafford, a business administration professor at USU, does not think the United States will see an influx of imports from China because they already have a lot of access to our markets. Even though the Chinese love foreign products, Stafford said he does not think there will be an increase in exports to China.
“There is an aura about China with its 1.3 billion consumers as a new frontier. They’ve bent over backwards to get into the WTO. They have forgone a lot of subsidies for state-run businesses and lowered tariffs,” Stafford said. “The WTO will eliminate a lot of barriers but not cultural ones. Not a lot of Americans speak Chinese.”
Huang said, “The impact will be more significant than NAFTA.”
There will probably be short-term job losses as China cuts off subsidies to state-run businesses, Stafford said. Some estimates show 30 million jobs lost over the next five years as a result of China joining the WTO, he said.
Huang said the unemployment problem will probably be short-term. There is also a question if Chinese government can make a smooth transition to a more open market.
Others are worried China will not fully abide by WTO rules, said USU political science professor Shannon Peterson. If China does not abide by the rules, it could weaken the rules in general, she said.
“But I don’t think it would be good to keep them out,” Peterson said. “It will bring China into world trade rules.”
Stafford said there is some controversy over China’s environmental record.
Huang said he has seen a dramatic environmental change in China as a result of advancing at all costs, including environmental costs.
“I was in Beijing and Shanghai 10 years ago and I could see the blue sky,” Huang said. “Several months ago, I returned and was really disappointed about the pollution. If China keeps growing along this avenue, they could come close to polluting like the U.S.”
Stafford said five of the 10 most polluted cities in the world are in China. They are also the largest producers of ozone depleting agents, he said. One of the changes in China impacting the environment will be people using credit to buy cars – which could also lead to urban sprawl, he said.
“WTO acceptance will lead to tariffs on cars being lowered from about 100 percent to about 25,” Stafford said. “When China creates pollution, it doesn’t just stay in China. It gets into the weather system and impacts our weather.”
United States businesses could have made a lot of money selling China the technology for cleaner manufacturing, Stafford said, instead of allowing China to continue polluting the environment at harmful levels.
The United States granting most-favored nation status to China is a prerequisite to joining the WTO, and has been a bargaining chip for the United States to have China improve its human rights record, Peterson said. By granting this status without China improving their human rights record, we lose that bargaining chip, she said.
“But some think it is the best way to do it,” Peterson said. “There is an argument that democracy, human rights and capitalism go hand in hand.”