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Free trade means competition
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Liu Fuzhong
“CHINA'S accession into the World Trade Organization will not solve all problems in the country, nor will it make the country any worse off," a US trade expert said on Wednesday.
“It only provides the country with a framework for free market competition," continued Robert Cassidy, former assistant Trade Representative of the United States and lead negotiator for completion of China's market accession, at a seminar hosted by the US Consulate-general in Guangzhou.
Cassidy says that China, with its great landmass and the world's largest population, will certainly play a critically important part in the world's largest trade body. However, he discounts both the overly pessimistic and optimist arguments, saying that the free trade agreements involve both benefits and obligations for any member.
“We in the US want to see a stronger and wealthier China, which means, in turn, more trade and more jobs for the US," he said.
“China is going to be a big economy in the world. And a free trade system within the country will enable China to enjoy the full benefit of economy of scale. Removal of trade barriers eliminates unnecessary costs of transaction," he added.
The former assistant trade representative also believes, however, that it is equally important for China to remove trade barriers within the country by unifying tax policies in different provinces.
“The provincial divisions actually add to the transaction cost, offsetting the benefit of free trade with the outside world," he said.
Indeed joining the WTO will bring many structural changes in the economy and social impact as well, according to Cassidy.
“Competition may mean more unemployment in some industries. There must be an adequate social security system during this transitional period," he said.
“As part of the bilateral agreement between China and the US, China has a transitional period, which is different for different industries, to open up. The US side believes that the two countries can reach an agreement only by giving China a period of time to adjust to the new trading environment," Cassidy said.
Although China and the United States have differences over the appropriate tariffs for certain commodities, he said, “I believe the differences show that the WTO system works."
He cited that the US had some differences within the North America Free Trade Agreement (NAFTA) with Canada and the EU which never seem to end. But he believes the differences between China and the US will push forward the efforts on both sides to reach new levels of co-operation.
Cassidy believes that big commercial cities like Guangzhou and Shenzhen, at the leading position of China's opening-up effort, stand a good chance of reinventing themselves after China's accession into the WTO.
“In Hong Kong the service sector accounted for 69 per cent of its GDP in the year 2000, the highest in the world. By opening the service sector, big Chinese cities will witness big growth in the sector, which will greatly contribute to the national economy," he concluded.
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