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China’s WTO Accession: Some Lessons for Vietnam

China’s WTO Accession: Some Lessons for Vietnam. Will Martin World Bank 3 June 2003. WTO and the Policy Reform Process. In China and Vietnam the reform process has been incremental and experimental WTO accession involves a change More reliance on legal commitments

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China’s WTO Accession: Some Lessons for Vietnam

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  1. China’s WTO Accession: Some Lessons for Vietnam Will Martin World Bank 3 June 2003

  2. WTO and the Policy Reform Process • In China and Vietnam the reform process has been incremental and experimental • WTO accession involves a change • More reliance on legal commitments • Schedules for future reform • Important to keep the focus on development

  3. China and WTO : issues for Vietnam • What does China’s accession involve? • How did it fit into China’s development strategy? • What are the policy implications for Vietnam?

  4. Accession Involves • Uniform administration and transparency • Non-discrimination between suppliers • and between domestic and imported goods • Trading rights liberalized • Tariffs bound and substantially reduced • Abolition of all NTBs except state trading • Abolition of multiple-tier pricing • Abolition of TRIMs • Abolition of MFA quotas on textiles

  5. And… • Trade-Related Intellectual Property Rights • Retention of state trading for oil and key agricultural products • Tariff-rate-quota regime for some imports • Non-market economy treatment in antidumping for 15 years • Product-specific safeguards for 12 years • Special textile safeguards for 3 years

  6. A long-term program of trade reformAverage Tariffs

  7. Agriculture • Protection generally low in China’s agriculture • Significant reductions in protection to maize, cotton, sugar, dairy, oilseeds • Helps lock in an efficient agricultural sector • But need to assess impacts on the poor • Like Vietnam, China has strong agricultural export interests

  8. Manufacturing • 6% cut in protection needed, vs 33% since 1992 • Big reductions in tariffs on beverages/tobacco and motor vehicles • Massive restructuring of the motor vehicle sector required • should allow output to rise despite the fall in protection

  9. Abolition of MFA Quotas • Removes a major burden from China’s exporters of textiles and clothing • China’s clothing exports to go up over 100%, employment up more than 50% • If Vietnam does not join WTO, she will be the only major exporter subject to quotas

  10. GATS • General principles of transparency & MFN • China has committed to opening in 57% of sectors/modes vs 39% in Vietnam’s Bilateral Agreement with the US • “The most radical services liberalization ever negotiated in the WTO” • Extensive use of pre-commitments to lock in future reforms and strengthening of the regulatory framework

  11. How does China’s accession affect Vietnam? • Some key reform lessons • Gains from increased market access • Gains from increased imports • Losses from third market competition • Possible impacts through increased competition for investment

  12. Key reform lessons • Can be used to deepen the reform process • Improve the legal system • Strengthen financial sector regulation • Rigorous negotiation process with demanding technical requirements • Many requirements likely to be difficult • Most help promote reform & development • Some, like safeguards, inhibit development • Requires involvement by top leaders

  13. Market access impacts • Vietnam gains from increased exports to China, especially products where Vietnam has a comparative advantage • eg rubber, palm oil, oil and gas • Exports of intermediates for global production sharing– electronics, textiles • Producer services • Complemented by AFTA-China access

  14. Increases in imports from China • China has become a more important supplier to other developing countries, for example • Consumer goods • Possibly automobiles and components • Producer goods • FTA access may help expand this trade

  15. Changes in China’s trade

  16. Third market competition • Vietnam likely to face considerably stronger competition • Many exports are similar to China’s exports and face substantial competition • But only in textiles/clothing are China’s exports likely to rise very rapidly • Important to ensure the trade regime allows other exports to grow

  17. Overall welfare impacts

  18. Some potential policy responses • WTO accession process helps increase integration, strengthen institutions • And to abolish the textile/clothing quotas! • Welcome the market access opportunities • Benefit from imports from China • Improve efficiency in competiting goods, especially textiles and clothing • Consider regional trade initatives

  19. Conclusions • Most features of China’s accession to WTO promote reform & integration • Reforms like these help Vietnam’s development • Important to resist measures like non-market economy treatment & safeguards • Policies need to encourage direct trade • Improve efficiency in competing sectors

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