WTO NEWS: SPEECHES — DG PASCAL LAMY

Shanghai, 6 September 2006

“China was strong when it opened to the world” – Lamy

China has a strategic interest in safeguarding a strong WTO and working for a successful Doha Round of negotiations, and members have acknowledged China's serious and responsible commitment to its obligations, Director General Pascal Lamy told an audience in Shanghai on 6 September 2006. This is what he said:

China in the Multilateral Trading System: Its role and implication
Address by WTO Director-General Pascal Lamy on China's fifth year of WTO membership

Ladies and Gentleman,

It is my pleasure to be in Shanghai on my first trip to China in my capacity as Director-General of the WTO. And it is even a greater pleasure to celebrate with you the fifth anniversary of China 's accession to the WTO. It is, I believe, a good opportunity to look back on what WTO accession has meant for China but also for the rest of the membership.


Today's China is an open economy

Today's China is very different from the one that started the road towards WTO accession more than two decades ago. Since its accession to the WTO China has been the fastest growing trading nation in the world. Its trade growth has been faster than that of other developing countries. As a result China is today the world's third largest trading economy, behind the European Union and the United States.

The Chinese government has substantially reduced barriers to imports which today stand among the lowest in developing countries. The average of applied import duties dropped to 9.7% in 2005, down from 15.6% in 2001. In the same year, average applied rates in India , Brazil or Mexico were 20%, 11% and 12% respectively.

Furthermore, China 's ratio of imports to GDP, which is a criteria to measure an economy's openness, is high. This ratio has moved from 5% in 1978 to 30% in 2005, about twice that in the US and more than 3 times the ratio in Japan. It is also higher than other developing countries such as Argentina , Brazil or India. Only other small open economies such as Korea or Chinese Taipei have import ratios as high or higher than China.

Thirdly, the number of imported goods that has been subject to import licenses or quantitative restrictions has dropped substantially. At the peak in the late 1980s, China imposed licensing requirements on almost 50% of all imports. By the time China joined the WTO in 2001, this share dropped to around 4%. In 2005, the government eliminated all licensing requirements.

From 2001 to 2005, China imported goods worth nearly 2.2 trillion USD, with an annual growth rate of 28%. Throughout the 1990s China was the fastest growing export market for US companies. This trend accelerated from 2000-2005, as US exports to China rose by 160% while exports to the rest of the world rose only 10%. But China has also become a destination for other developing country exports. China is the world's third largest importer from the world poorest countries, after the EU and the US , absorbing nearly 40% of their exports.

For a country with such a big domestic market and where trade is equivalent to over 60% of GDP, which ranks third in world trade and with the world fastest growth of exports it is easy to understand why trade is so critical for China 's growth and development.


China 's Implementation of WTO commitments

In June the WTO conducted the first review of China 's trade policy. The overall appreciation is a positive one. Even if there are still areas that need some improvements, the political commitments and determination showed by the Chinese government is serious and responsible and all members have acknowledged it.

The Chinese implementation of WTO commitments in many areas has set a good example. China 's agricultural tariffs are today lower than most developing countries; they are even lower than some developed countries such as the European Union or Japan. China also provides less trade distorting subsidies than that of the US or the EU. Or on industrial tariffs which are today the lowest in developing countries.

There are, however, other areas where work needs to continue. For instance, in the area of Intellectual Property Rights (IPR) protection, we have seen important progress made by China this year. We know that it will take some time to solve and will require the collective efforts of all countries involved. Today I would like take the opportunity to encourage the Chinese government to continue its efforts in this direction, because it is also in China 's own interests in the long run.

The Trade Policy Review has also identified creative new non-trade barriers replacing some of the old tariffs, which will need to be addressed. Finally the review has also encouraged China to speed up efforts in subsidy notifications, where insufficiencies remain.


Why the WTO and the Doha Round are important for China

Let me now turn to the on-going WTO negotiations and share with you my view on why this Round is of particular importance to China.

A successful Doha Round can provide China a stable and predictable global trading environment and offer the prospects for another 10-15 years period of peaceful economic development. In the Doha Round, we are negotiating the trade regime which will apply to all its members for the next 10 years. A trading system based on strong multilateral rules is the least expensive insurance policy against the risks of protectionism available to China and to the world economy.

There are some signals that trade protectionism whether in developed or in developing countries would be on the rise. Given China 's insertion into the world economy, multilateral trade opening and strong multilateral disciplines are the best means to safeguard China 's trade interests whether home or abroad. Without the Doha Round and without a well functioning WTO, China could well be one of the biggest victims.

A strong WTO is also in line with China 's long-term strategic foreign policy objectives. China is calling for building a “Harmonious World”. Supporting multilateralism has always been China 's long term foreign policy. The success of WTO is a success of multilateralism and China should have a strategic interest to make it a success.

China has fundamental interests in an ambitious outcome in these negotiations. Given its relative openness, it has an offensive interest in ensuring a decrease of tariffs for many of its key manufactures in many third countries. On agriculture, having become a net food importer, the Doha negotiations can help China ensure adequate supply of food for its growing population at affordable and stable prices. At the same time, the on-going negotiations offer China the possibility to protect a limited number of agriculture sensitive products so that the balance in its still large agricultural sector is not upset. Further reduction of trade-distorting agriculture subsidies in developed countries will also benefit China 's agriculture production. As the main target of antidumping measure, strengthening the use of trade defence measures is also in China 's interest. A further opening of its services market can contribute to China 's thriving economy in sectors such as banking, telecommunications, insurance, and transport services. Finally, new rules on trade facilitation will help China 's exports by cutting down customs red tape.

Finally, let me also briefly mention that free trade agreements (FTAs) whether bilateral or regional cannot, in my view, replace the WTO. Nor do they constitute an alternative option for China , given its trade size. FTAs are, by nature, discriminatory to non-parties. China is currently actively negotiating FTAs with a number of its neighbours. These may serve China 's geopolitical interests or short-term commercial interests, but not China 's systemic interests in the long run. If FTAs continue to proliferate worldwide, as China would not be able to be involved in most of the FTAs in the world, the environment of China 's exports will deteriorate, not improve.

To conclude, China will be a big beneficiary of an ambitious Doha Round. Strategically, China has an long term interest to safeguard the multilateral trading system.

As you know the negotiations were suspended last July, further to the failure of WTO members to overcome their differences over two key issues on agriculture: the amount of the reduction of domestic subsidies, the size of the reduction in agricultural tariff protection. Given the blockage over the agriculture issue, other questions such as industrial tariffs or services could not move forward.

One month after the suspension of the talks, many voices have been heard in practically all our membership stressing the serious dangers of a collapse of the Doha Round and calling for a resumptions of the talks. I share those concerns, even more so given the current geopolitical instability and the numerous risks affecting the world economy. We now need to translate these concerns into positive action. WTO members need to rethink their positions in the two key agriculture areas I have mentioned above so that the existing differences in positions can be bridged. Let me say that what separates members, although politically very resonant, is economically modest when compared to the price of an agreement. Indeed, what we have on the table today is already more than twice what we achieved in the last round of negotiations ten years ago. It is now time to reflect, to consult with constituencies, to crunch numbers, to work discreetly so that a resumption can take place soon with renewed positions brought to the table.


Conclusion

China has a tradition of trade in the history. The famous silk road opened the trade between China and the West. In the Tang dynasty, Chang An was the largest and most prosperous city in the world. When Zhen He sailed to Southeast Asia , to India , and to the east coast of Africa in the largest fleet in the world 600 years ago, the Ming Dynasty spread its civilization and technology, together with silk and porcelains.

China was strong when it opened to the world. When the Middle Kingdom closed its door, it fell behind. Let's hope that we can all learn from history. Let's work for a stronger, more open and more equitable trading system.

Thank you for your attention.