By Zhang Bin
Published: 2008-05-23
The time has come for the World Trade Organization (WTO) to review if China's trade policies meet the standard of global trading system on May 21 and 23. This is the second time since China's accession into the world body to undergo the Trade Policy Reviews (TPR).

TPR is an exercise mandated in the WTO agreements, in which member countries' trade and related policies are examined and evaluated at regular intervals. The previous review on China's trade regime was in 2006.

A WTO report issued shortly before the TPR session recognized China's efforts in structural reforms, including trade liberalization, that resulted in annual real GDP growth rates over 10% over the past four years and poverty reduction.

However, it also raised concerns over economic imbalances, including that of current account surplus and inequality in wealth distributions.

Prior to the review, the EO interviewed WTO director-general Pascal Lamy, who disclosed that about 700 written questions were prepared by member countries for the discussion.

Among the focus of upcoming discussion, Lamy noted, would be China's export measures, particularly in tariffs and import restrictions, and the enforcement of laws related to intellectual property.

Below is the full text of the interview:

EO:  As the second review is nearing, what is the progress in preparation work so far?

LAMY: A Trade Policy Review is like doing a "spring cleaning": you look at what has happened in your trade policy in the couple of years, you put those issues which are in line with WTO aside and you focus on those where more work is needed in the future.

This exercise is done every two years for the world fours largest traders, ie China, the US, Japan and the EU. On 21 to 23 May, a large Chinese delegation lead by Ms. QIU Hong, Assistant Minister of Commerce, is in Geneva to present the main features on Chinese trade policy since 2006. Other members have already prepared around 700 written questions which will help guide the discussion. 

EO:  The first TPR took place over two years ago. What are the areas that China promised to improve have indeed been delivered? What are the areas that needed further improvement?   

LAMY: In its previous Trade Policy Review in 2006, China was clear that its trade policy would be central to its reform efforts, and since then, China has continued to open its trade with other members. Indeed, today the average tariff is relatively low at below 10%.  But there was some concern about the use of export restrictions. 

In a broader context, China indicated in its 2006 review that it wished to achieve annual GDP growth of 7.5% over the next five years.  Since then, China has grown at over 10%; this clearly is continuing to reduce poverty, but certain challenges are also becoming clear. One of these is that growth is driven by exports and investment rather than domestic consumption.  The Chinese government has already identified this as a challenge, and is taking measures to address it. China views its trade policy as an instrument to further integrate into the globalized economy and make sure its resources are used efficiently.    

EO: Which areas will the TPR this time round focus on?  

LAMY: The 2008 Report notes that the exports/investment-driven growth is reflected in large current account surplus. At the same time, inflationary pressures have increased in China.  An essential element in addressing these challenges is an efficient means of intermediation between the large amount of savings that the economy generates and profitable investment.

For this, any economy requires a sophisticated financial system. Members will note this, as has the Chinese government. Opening its financial market in a multilateral framework can help China in its current quest for a more performing financial system. This may be one of the main areas of focus in the Review. 

But others are likely to be: China's export measures, prospects for continued opening of Chinese market to imports, particularly in tariffs, import restrictions, and perhaps access to Chinese public procurement market. China's intellectual property rights protection is also likely to be an area of discussion;  the laws in this area have been reformed, and in addition to reviewing the laws it is likely that there will be a focus on enforcement.  

EO: Since last year, Europe and the United States have taken more trade actions against China, including in the area of subsidies; what are the reasons for this?

LAMY: If I look at the statistics of trade remedies adopted by the EU, the US or Japan against China, I have not seen major changes from previous years. The number of trade cases opened against China, as those opened by China against third countries, are in line with China's position as the world third largest trading partner. I nevertheless believe that exercises such as the Trade Policy Review can help shed some light over domestic trade practices and lead to a better mutual understanding.

EO:  What is your view on Chinese trade policy?  

LAMY: It is noteworthy to see that continued trade opening liberalisation and structural reforms in China have contributed to real GDP growth rates in excess of 10% over the past 4 years, resulting in rising per-capita income and poverty reduction.  China has continued to attach high priority to the multilateral trading system, and its trade policies continue to be open. 

China submitted its application for accession to the Agreement on Government Procurement in December 2007. At the same time, WTO Members have played an important role in making such growth possible by keeping their markets open to China's exports. This is a clear evidence that the WTO membership can be a win-win game.

China has also continued to be one of the largest recipients of inward FDI and has become a large provider of outward FDI, reflecting its increasing integration into the global economy.  Nonetheless, as I mentioned before, challenges remain, particularly in regard to addressing various economic imbalances. I am confident that the Chinese leadership will address these challenges for the good of its people and for the better of the multilateral trading family.