28 June - 4 July 2001
Issue No.540
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Al-Ahram Weekly Online 28 June - 4 July 2001 Issue No.540 |
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Enter the dragon
China will pay a high price to enter the World Trade Organisation, writes Faiza Rady
Finally there was light at the end of the tunnel. Last Thursday, the European Union (EU) removed the last hurdle blocking China's entry to the World Trade Organisation (WTO) by officially sanctioning its candidacy. The EU's green light followed closely on the heels of a far more significant event: the stamp of approval the United States granted China at the 7 June Asia- Pacific Economic Cooperation (APEC) forum in Shanghai.
The move was expected; but no one was quite sure when it would come. The US plainly felt that a meeting of APEC, a 21-nation trade body controlling 40 per cent of world commerce, was the right place to publicise such a historic development.
The road to this turning point has been far from smooth. For years, the US blocked China's entry to the WTO. The last squabble between the two economic heavyweights concerned farming subsidies. China wanted to join the WTO as a developing nation, which would allow it to subsidise its farmers 10 per cent of their output. But the US was adamant that China join as a developed country, with a five per cent subsidy ceiling. Following fierce and drawn-out haggling sessions, the two sides finally announced they settled on a compromise: an 8.5 ceiling.
Thus the deal is finally in the bag. China's foreign trade minister, Shi Guangsheng, and US trade representative, Robert Zoellick, said that China would join the WTO by the year's end. "I believe it is very important for China to join the WTO. I hope it can happen this year," declared Zoellick. The American trade representative's chipper tone expressed satisfaction at a job well done.
US corporations have much to gain by finally admitting the Asian giant to the WTO. US-based transnationals lobbied quietly but effectively for unhindered access to the Chinese market. Over the past two years, corporations and powerful trade associations spent at least $113 million lobbying the US Congress to pass the China Permanent Normal Trade Relations (PNTR) bill, rather than have China's status ratified year by year. Global Trade Watch, a US-based trade watch- dog, reported that the PNTR campaign was the most expensive ever directed at a law.
It paid off. The law was passed in 2000, and trade has thrived. The US is the largest recipient of Chinese exports, which account for 42 per cent of China's total. US multinationals have also massively pumped money into direct foreign investment (DFI) in China. In 2000, DFI into China reached $40 billion, nearly half of it from the US.
On the other hand, the US has accumulated a gargantuan trade deficit with China of $ 83.3 billion, accounting for an estimated 23 per cent of America's worldwide trade deficit last year. But not to worry: China's accession to the WTO may very well reverse the trend. Lurking behind the scene, US investors are already banking on China's future payment of patents under the WTO's stringent intellectual property rights clause. These, they hope, will help balance the trade deficit.
But not everyone will benefit. According to labour analysts, competition with dollar-a-day Chinese workers has had a chilling effect on US wage negotiations in the 1990s, and 600,000 relatively well-paid, manufacturing jobs have been lost. In the hi-tech industry for example, joint Chinese-US ventures now produce goods which are mostly manufactured by Chinese labour. According to estimates, the Chinese workers' input to computer production accounts for 75 per cent of the finished goods, while the American workers' added value amounts to only 25 per cent. Reversing the earlier trend, when computer production was largely US-based, the US now exports computer parts to China and imports the assembled product.
Analysts warn that the trend towards plant relocation will only accelerate under the WTO regime. Legislating labour and capital "flexibility," the WTO facilitates corporate relocation to ever greener and cheaper pastures. Accordingly, it is estimated that an additional 870,000 American jobs will be lost over the next decade.
Nor do Chinese workers fare much better. Increased DFI is often used to pay for new plants in cheaper places. Wal-Mart, the US-based multinational, and the largest global importer of Chinese products, uses several thousand factories scattered across the country for production. Fearing retaliation from American labour unions and activists who would presumably publicise dire working conditions and exploitative wages, Wal- Mart literally hides its plants, refusing to disclose their locations.
They have much to hide. Facing rampant unemployment and the ravages of poverty, Chinese workers have no option but to accept substandard conditions and wages. Meanwhile, the ills of the market economy have replaced the egalitarian ethics of bygone days as the rich get richer and the poor get poorer. The People's Republic now surpasses even the US in income disparity. The richest 20 per cent control 52.3 per cent of the nation's wealth. The poorest 20 per cent scrap for a meagre 5.5 per cent. Estimates suggest 150 million subsist on seasonal employment and the odd fringe job: street vending, peddling and street hustling. This is in addition to the 27 million officially unemployed.
WTO membership will make this worse. Following the obligatory deregulation of the public sector, a prerequisite for WTO membership, the Chinese state fired 11.5 million workers in 1997, 8.9 million in 1998 and 7.42 million in the first quarter of 1999.
While deregulation of the public sector was painful, farming is suffering even more drastic ravages. The state's early preparation for stringent WTO requirements has already wiped out a staggering number of jobs over the last decade. Since the early 1990s, more than 80 million poverty- stricken peasants have migrated to the cities. The "poorest of the poor," they eke out a miserable existence as garbage collectors and street sweepers in affluent showcase cities like Beijing and Shanghai.
According to conservative official estimates, 9.7 million peasants will lose their livelihoods in the seven years after China's entry to the WTO as a result of cheaper imports of grain and other foodstuffs. Analysts predict that annual exports of US farming goods alone would rise by $ 2 billion, which will inevitably impact on local agricultural jobs.
Bracing itself over the last two years for the WTO's meaner farming subsidy allowance, the state trimmed wheat production by five per cent in 1999, slashed corn production by 16 per cent and rice production by seven per cent. Such measures only mark the beginning of deregulation and the ultimate failure of the country's proud Maoist legacy of agrarian self-sufficiency and food security.
China's access to the WTO and the market has come with a high cost in poverty and unemployment for both American and Chinese workers. Perhaps Trade Representative Robert Zoellick should sound a little less chipper.
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