Essay: WTO and Developing World Trade

Pages: 8 (2371 words)  ·  Bibliography Sources: 20  ·  Level: Master's  ·  Topic: Economics  ·  Buy This Paper


[. . .] Aaditya Mattoo of the World Bank explains how major the restricting effort was: "China's GATS commitments represent the most radical services reform program negotiated in the WTO. China has promised to eliminate over the next few years most restrictions on foreign entry and ownership, as well as most forms of discrimination against foreign firms" (Mattoo, 2001).

Impact of Accession on China

China needed to understand that its accession would have much wider implications than was previously understood. This is because China today stands at a very pivotal position in the world and plays a tremdously important role in its region. The effects of its accession would not be felt within its own boundaries but also have a ripple effect on neighboring countries especially some regional powers like India. Supachai Panitchpakdi, the World Trade Organization's Director-General, said with connection to China's accession:

If China makes the wrong decisions, the result will be chilling, not only for the country's 1.3 billion citizens but for many people beyond its borders as well. Conversely, a China that successfully makes the transformation to a relatively affluent, open society will be both an inspiration to other countries and a locomotive that will help to power the world's economies. (Panitchpakdi,2002, p. 4)

The opening up of Chinese markets has actually had a profound impact on China's economy and its economic position in the world. Between 1995 and 2002, foreign ownership had risen sharply in China but this trend witnessed a slowdown after 2002 when the growth occurred at a more moderate pace. This decline was due to the fact that since accession, the country's income and savings have increased more dramatically than other countries in the region and hence people can invest more in local businesses and the dependence on foreign ventures has decreased. But foreign investment continues to grow in China because of higher rate of return. Foreign investment in Chinese assets has also increased by 126% and most of this has been due to China's accession to WTO. "China's accession also increases the total wealth of Chinese households. [Research] shows the share of this wealth allocated to foreign assets. In the baseline Chinese households increase their holdings of foreign assets. However with China's accession, higher relative rates of return at home make domestic investments more attractive and the share of Chinese wealth located in foreign assets falls, as the share in domestic firms rises." (Walmsley, Hertel. 2006)

China's accession to WTO has also had a positive impact on its various industries including global sourcing, finance and insurance. The country has seen rapid growth in various sectors which shows that accession has been a positive decision for the country so far and this explains why WTO accession is still highly desirable despite the challenges faced by developing countries.


It appears that despite all the challenges faced by developing world in gaining accession and later as a member of WTO, most developing countries would want to join WTO because of the same reasons why China sought accession. Most developing countries have some common political and economic characteristics such as weak economic infrastructure and a volatile political situation which make them less attractive destinations for foreign investment. In order to see better trade flow, they need to restructure their markets, and open up their economy which is only possible under the guidance of WTO regulations. The results can be highly beneficial for the economy of the developing country and hence they seek accession despite all the challenges.


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