China and the World Trade Organization

The World Trade Organization (WTO) was established on the 1st of January 1995, as a successor to the General Agreement on Tariffs and Trade (GATT). It is the only global international organization that deals with the rules of trade between nations. Its aim is to raise the standards of living, ensure full employment, promote the growth of real income and effective demand and expand trade in goods and services, while taking into account the objective of sustainable development as well as the needs of developing countries. This aim should be accomplished through reciprocal and mutually advantageous arrangements which will reduce tariffs and other barriers to trade and eliminate any type of discriminatory treatment in international trade relations.

Establishment of the GATT

Towards the end of the Second World War the United Nations Monetary and Financial Conference was held at Bretton Woods, New Hampshire. This led to the creation of two international organizations, the International Monetary Fund (IMF) and the International Bank for Reconstruction and Development (more commonly known as the World Bank). Both were created to oversee stability in international monetary affairs because at the time it was commonly accepted that the lack thereof was one of the contributing factors to the Second World War. After Bretton Woods it was decided that there should be a third institution, which would be responsible for the trade side of international economic cooperation, the International Trade Organization (ITO).

While the negotiations on the establishment of the ITO were continuing, 23 countries agreed on a document which consisted of trade rules as well as 45.000 tariff concessions, the GATT. This document provisionally came into force on the 30th of June 1948. At that time the Charter of the ITO had already been agreed upon and signed by the different parties. Unfortunately ratification of the Charter did not take place because of strong opposition of the US Congress, which led to the ITO being stillborn. This meant that the only multilateral agreement at the time that included rules on international trade was the GATT. And that would remain to be the case until the establishment of the WTO in 1995.

Establishment of the WTO

Even though the GATT was successful in promoting the liberalization of world trade and the reduction of tariffs, it had many defaults. It did not cover trade in services, its dispute settlement system showed some serious flaws and its contracting parties were spending large amounts of money on subsidies, just to name a few. This led to a common belief among the members of the GATT that something ought to be done. That something were the Uruguay Round negotiations, held from 1986 to 1994, in Punta del Este, Uruguay. These negotiations led to new rules concerning trade in services, intellectual property rights, trade policy reviews, etc while including a structural revision of the GATT. The biggest achievement of the Uruguay Round, however, was the agreement on the establishment of the WTO, which can be regarded as a milestone in the field of international trade law.

China's membership of the WTO

China was one of the 23 original signatories of the GATT but after the Chinese revolution in 1949 the government in Taiwan announced that China would withdraw from it. It was only in 1986 that China notified the GATT about its intention to resume its status of contracting party. This, however, was not accepted. China would have to start anew. Therefore, a Working Party was established in 1987 whose responsibility it would be to supervise the negotiations between China and the other members of the WTO and to make sure that all aspects of China's trade policies would be dealt with. It then had to compile a report on China's accession to the WTO and complete a Protocol of Accession. On the 10th of November 2001 these documents were adopted by the Ministerial Conference, thus allowing China to enter into the WTO. China officially became a member of the WTO on the 11th of December 2001, after accession negotiations which lasted 15 years and 5 months, the longest ever experienced by any member of the WTO. It is important to remember that Macau and Hong Kong, even though they are part of the People's Republic of China, are separate members of the WTO. They were actually contracting parties to the GATT thus making them founding members of the WTO. Taiwan is also a separate member. It joined the WTO on the 1st of January 2002 under the name of Chinese Taipei or separate customs territory of Taiwan, Penghu, Kinmen and Matsu.