China must continue to improve its trade regime
- By Zhang Lijuan
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China.org.cn, December 11, 2011
Next week?marks the 10th anniversary of China's entry into the World Trade Organization. China has benefited greatly from its WTO accession and the trade liberalization that followed it. China's trade has made a major contribution to its growth into the world's second largest economy. "Made in China" has become a label ubiquitous on products around the world. China has gained unprecedented access to world markets, made its labor-intensive products available from Chicago to Capetown and promoted productivity through trade and investment inflows.
As it reviews its miraculous achievements in trade, China also needs to look beyond trade volume to rethink its trade regime. Active trade flows have stimulated the Chinese economy, but they cannot solve the problems its economy faces today. Only an improved trade regime can address challenges in areas such as labor standards, environment protection, social stability, and sustainable development.
Since China set off down a path of economic reform in the late 1970s, the central and local governments have worked hard to maximize exports and, to a lesser degree, attract foreign direct investment.
Now, the era of export-oriented trade based upon cheap labor, cheap land and cheap capital is ending. The "export for foreign exchange" model, which drove China's economic growth over the past 32 years, is broken. China needs institutional reforms to create a more balanced, free and fair trade regime and to find the middle ground between expansion and social tension. Over the past thirty years, inadequate attention has been given to whether the existing trade regime was consistent with China's social and development goals. The time has come for China to reevaluate its trade policy.
| China's WTO decade |
Whether the Chinese economy is better off than the United States' is unclear. But the U.S. certainly has a better trade regime, which is open enough to allow it to run the largest trade deficit in the world. Because of its competitive trade regime, the United States is still the world's most powerful trader, with more bargaining power than any other nation.
A country's trade regime matters. As the WTO's Doha Round has made little progress, the world's system for trading labor-intensive goods from developing countries will see scant improvement in the near term. And as wages rise, China will continue lose its advantages in labor-intensive products.
Today, China has become a major target of international trade disputes. Since the world financial crisis began in 2008, China has continually found itself on the brink of trade wars with the European Union, the United States and other major trading partners.
The American economic recession and EU debt crisis will continue to cripple growth in the developer economies, meaning China will likely suffer the fallout of increased trade protectionism. If China cannot improve its bargaining power and reform its trade regime in a timely fashion, it may become the ultimate loser of such developments. The agriculture sector is a prime example. U.S. corn exporters have doubled sales to China, and major Chinese soybean and wheat markets have been taken over by "Grown in America" products.
China must rethink its export-oriented trade policy. China has a vast labor pool, but its trade policy should encourage more than just cheap exports. Instead, trade development should be coordinated to produce both wealth and social welfare. Fair labor standards have to be clearly outlined in our trade policy. Occupational healthcare and safety must be protected. Minimum wages have to be amended and enforced. Unemployment insurance and social security nets have to be built.
The fast-growing trade China enjoyed in the 1980s and 1990s was due largely to vast and cheap labor resources. In the future, China should focus on job creation, living standard promotion, industrial competitiveness, and fair trade practices. An efficient trade policy should also systematically prevent local governments from taking advantage of cheap land and labor when creating political and statistical data. Trade data cannot stand alone as an indicator of economic development.
In conclusion, trade can be good for development, as long as it is coupled with the right trade policy regime. None of today's rich countries have developed by simply opening themselves to foreign trade. At the same time, the Chinese government should tailor its trade regime to its own idiosyncratic circumstances. No one theory can possibly guide China's trade policy; it must make its own.
The author is a columnist with China.org.cn. For more information please visit: http://m.keyanhelp.cn/opinion/zhanglijuan.htm
Opinion articles reflect the views of their authors, not necessarily those of China.org.cn.
