After fifteen years of torturous negotiations, China finally became a member of the World Trade Organization (WTO) in December 2001. In a keynote speech delivered as part of the recent HBS Asia Business Conference, Charlene Barshefsky, former US Trade Representative, outlined her views on the significance and implications of China’s WTO accession.
As U.S. Trade Representative during the second Clinton administration, Barshefsky led the American delegation in the negotiation of a landmark Sino-American trade agreement in November 1999. During the talks – which were regarded as the biggest stumbling block impeding China’s path to WTO membership – Barshefsky gained a reputation for being a tough, detail-focused negotiator. In order to bring the arduous talks to a close, Barshefsky reportedly resorted to tactics such as calling her opposite number in the Chinese delegation at midnight to schedule meetings at 4:30am, and threatening to leave Beijing for Washington unless compromises were quickly reached.
Historically, Sino-American relations were “characterized by a lack of common interest and a limited ability to communicate, punctuated by crises, and dominated by mistrust,” began Barshefsky. However, the Clinton administration was of the opinion that difficulties in relations between the two countries could be overcome. Moreover, China’s WTO accession was seen by Washington as critical in order to move ongoing bilateral discussions on trade and other topics towards a more common ground. In return, China’s role in the pacific economy would be immeasurably strengthened through its membership of the WTO.
Barshefsky glossed over the difficulties that she encountered persuading Congress to extend China Permanent Normal Trading Relations (PNTR), the unconditional “Most Favored Nation” tariff status that WTO members accord each other. “The WTO negotiations were long and difficult … [but] that debate is now closed,” she said.
Going forward, “we need to be modest in our forecasts” of the implications of China’s WTO accession, Barshefsky continued. In particular, the former Trade Representative focused on three areas which would be directly affected by China’s WTO membership.
First, China will become a key shaper of the global trade system. Since China left the GATT talks in the 1940s, it has not played a role in global trade negotiations. Membership of the WTO will afford China the power to shape trade agreements to fit its own needs. China is likely to have strong views on the future WTO accession of Russia and Vietnam. As savvy negotiators, “the Chinese are more pragmatic, and less idealistic” than many countries, Barshefsky recounted. The fact that China has recently surpassed Japan as Singapore and Korea’s greatest importer demonstrates its growing role in shaping the Pacific economy.
Secondly, Barshefsky focused on China’s internal economic development. As a result of WTO membership, China’s domestic economy will become “more competitive and technologically advanced,” with “better access to markets, more freedom for entrepreneurs, and less arbitrary trade discrimination,” according to Barshefsky.
Thirdly, the former Trade Representative addressed the issue of American debate on relations with China. Barshefsky emphasized the need to develop stable Sino-American relations. In the first instance, America will have to monitor carefully the implementation of the terms of bilateral trade agreements. “Ministries that opposed WTO membership are now charged with implementing the new agreements,” Barshefsky explained. Progress has already been made, however. Against the backdrop of a global drop in exports of 5%, last year exports to China were up 18%. Barshefsky pondered the bigger question of whether political reform (for example, increasing political pluralism) would follow in the wake of economic reform. “US-Sino relationships will continue to be an emotional subject for both sides,” said the former Trade Representative.
The media coverage given to the events of September 11 have meant that the challenges facing the East Asian economies have all but “faded from the headlines,” Barshefsky continued. The Twin Towers were a “physical expression of the importance of world trade,” said Barshefsky, referring to the fact that Taiwanese and Chinese, as well as Israeli and Arab companies often were located on the same floor. China’s willingness to support the global fight against terrorism stems from pragmatic concerns about Islamic fundamentalism in Central Asia. It is likely to be concerned by the large presence of US military forces for an indeterminate length near its western border.
Barshefsky ended on an optimistic note, forecasting that US-Sino relations would be characterized by more co-operation. “I look at the challenges ahead with cautious optimism … common interest and shared benefit will outweigh suspicion and fear … nationalistic prejudices will be left behind,” she concluded.
Charlene Barshefsky is now a Senior International Partner with Wilmer, Cutler & Pickering. She received the Harvard Law School’s 2001 Great Negotiator Award for “skillfully [representing] the United States in a variety of highly complex and sensitive trade negotiations,” and is a protagonist in a series of case studies to be published by HBS this fall.