Benefits of China's joining the WTO dwindling

The initial advantages China gained from joining the World Trade Organization in 2001 are dwindling, trade experts warned on Tuesday.

Speaking at the Eighth Forum on Industrial International Competitiveness in Shanghai, experts called for further market reforms from China and the rest of the world to prevent trade frictions.

The primary benefits that China received have been eclipsed, said William Barringer, international trade director and senior partner at Curtis Mallet-Prevost Colt & Mosle LLP.

"By joining the WTO, the basic benefits are the lowering of tariffs, supported by the most favored nation treatment, and national treatment, among others," Barringer said.

As a result, China's WTO accession greatly boosted its trade volumes, notably in the textile, metals and machinery sectors.

For example, he said, textile and apparel manufacturers took full advantage of the elimination of quantitative restrictions on exports after 2005, with the sector growing 220 percent between 2001 and 2007.

The level playing field of lower tariffs allowed China to develop global competitiveness in numerous high-tech products, but while these drivers still exist, they have less momentum given the size of the trade volume, Barringer said.

He said unless China "adds value" to new products, it will fall behind as countries such as Vietnam and Cambodia prove more competitive in terms of labor costs.

As Chinese companies move up the value chain, they should start creating national brands which lay the foundation to create global brands.

The global financial crisis since 2008 saw trade protectionism pick up worldwide, with China being the "most hit", said WTO Deputy Director-General Alejandro Jara.

"Protection today accounts for the trade size equivalent of Brazil and India combined, and it is on the rise," he said, adding he supports China going through WTO procedures to uphold its rights against rampant protectionist moves.

A total of 53 trade remedy cases have been launched against China in 2012, affecting $24.2 billion of exports, seven times the amount in 2011, said Ministry of Commerce spokesman Shen Danyang.

China and the EU are set to experience more friction in trade relations due to changing product profiles from China, said Fredrik Erixon, director of the European Center for International Political Economy, a Brussels-based think tank.

"We are not going to go back to the past decade known as the golden age of China-EU trade integration, because there will be intensified competition in areas where Europe thinks it traditionally has the comparative advantage over China," Erixon said.

When China catches up in the high-tech and capital-intensive sectors, Europe is likely to act defensively in its approach to Chinese businesses, he noted.

"We are even going to see more political remedies to what Europe believes is unfair competition."

To overcome that tension, Erixon suggested both sides roll out market reforms, with China liberalizing more sectors, getting away from its high level of reliance on State-owned enterprises, and giving domestic companies greater access to capital markets.

Europe, on the other hand, should embark on reforming its welfare system by increasing incentives and pressures on people to work, he said. At the same time it should liberalize its currently highly regulated services sector.

"These efforts should combine with a change in the tax system which favors more investment and much better allocation of capital in Europe," he added.

Bao Chang in Beijing contributed to this story.

hewei@chinadaily.com.cn