UNIT15
The World Trade Organization(WTO) and China
As China has been admitted
to the World Trade Organization (WTO),
it is very apt at this time
to compile some important data
about this international organization.
The conception of the WTO
took place during the 1995 Uruguay
round of talks of the General Agreement
on Tariffs and Trade (GATT).
The WTO actually replaced GATT.
This latter organization,
a composite of many countries,
was formed after the Second World War
to preside over the stabilization
of trade among nations.
The new organization, the WTO,
is dedicated to allocating the resources
of the world by using fairer trade practices
and providing economic security
for the more vulnerable,
less developed nations.
The WTO provides the apparatus
for making this happen through increased cooperation
among member countries.
The execution of such agreements
will be instrumental in enhancing the esteem
of less developed members and
will provide a more stable infrastructure
for profitable trade for members of the WTO.
Is there a way to describe in simple terms
what this is all about?
What underlies this international pursuit
of free trade among nations?
Students of introductory Economics
would recognize the theory of
“comparative advantage”.
Briefly, this economic theory states that
a country can produce all or most goods
and services more efficiently than
most or all other countries,
but still gain from specializing in production
and trading with other nations.
They not only receive economic benefits
for themselves, but also help other countries
achieve similar benefits in the process.
Let's look at a simple example.
Assume that there are two countries,
Alpha and Beta,
that produce the same two products,
bananas and office desks,
and nothing else.
We will assume that
each country has 200 units of productive resources
(resources such as land,
labour and capital,
used in the production of bananas and desks).
In this case we will use labour.
Before trading each country,
using the productive resources each has available,
might produce the following combinations:
Bananas（tons）
Alpha 300 (100 units of labour)
Beta 100(100 units)
Totals 400
Desks Alpha 100 (100 units)
Beta 25 (100 units)
Totals 125
Assuming that each country
used the same amount of productive resources
in the production of both bananas and desks,
you will notice that
Alpha produced more bananas
and more desks than Beta
but produced desks more efficiently
(higher ratio 4∶1) than bananas (3∶1).
Alpha produced four times
as many desks as Beta
given equal units of resources (100 units)
and three times as many bananas as Beta.
Alpha has a comparative advantage
in producing desks and therefore
could make economic gains
by transferring some of its labour resources
into the production of desks.
If the two countries were agreeable
to specialize and trade with each other,
the following might be possible:
Bananas（tons）
Alpha 210(70 units)
Beta 200(200 units)
Total410
Desks Alpha 130(130 units)
Beta 0(0 units)
Total 130
This example shows that,
by specialization by each partner,
total production of bananas
would increase from 400 tons to 410 tons
and the production of desks
would increase from 125 to 130 desks.
This means that more of each product
would be available to both countries
to share through specialization and trade.
This may be an oversimplification
of the concept of comparative advantage,
but it is the economic principle
which explains why countries want more free trade,
and why China wants to join the WTO.
It also explains
the United State's ambitious pursuit
of freer trade arrangements
throughout the world.
Immersed for more than a decade
in negotiations,
the climax has been reached for China.
Its official membership in the WTO
commenced in December 2001.
It has not been an easy road
to reach this goal and the country
will now embark upon an even tougher road
of more formidable challenges.
Many issues surrounding China's bid
are not only economic,
but also social in nature.
For example, the United States
has amplified the issue of human rights
in discussions between itself and China.
The reasons for this obsession
over human rights are not readily evident,
but in some quarters suggestions
for it have been offered.
Since the end of the Cold War,
and the demise (or fall) of the Soviet Union,
the United States has had no clear opponent
to justify the work of its many agencies
that were originally assimilated to
deal with former Cold War opponents.
The promotion of international human rights
allegedly has filled part of this void,
to become the major target
of the new direction
in American foreign policy,
and it has become commonplace
for China in particular.
It should be noted that
there are some current members
of the WTO that have worse human rights records
than that of China but were
not treated in the same manner.
Also, it is erroneous to suggest that
the United States itself is completely innocent
of human rights violations.
This is a major contradiction
in current American foreign policy.
It is also suggested that
the real threat to the United States
is that China is a huge country
with a robust economy that
has been growing by leaps
and bounds over the last twenty years.
Henceforth, a fear is growing that
the potential economic strength of China
will threaten the prevalent position
of the United States in world affairs.
