Long wait over for China, Taiwan - Special Feature - to enter World Trade Organization - Brief Article

Business Asia, Oct, 2001

IMMINENT ENTRY into the World Trade Organisation has opened the door on a significant range of new opportunities for trade and investment in China, says Austrade's senior trade commissioner in Beijing Martin Walsh.

China's inclusion in the WTO was cleared last month when the terms for entry were agreed upon, fulfilling a 15-year desire to become a part of the trade body.

The terms of admission included China allowing foreign competition in industries such as autos, banking, insurance and mobile phone services.

Walsh says Australia stands to benefit from the decision in two particular areas. He believes there will be an immediate and progressive reduction in tariffs for products coming into Australia from China, including food and auto components. Also, once China goes into the WTO, there will be a general lift in economic growth.

"Economists say there will be an increase in GDP growth of between one and four per cent. I think the four per cent is a little high, but there will be growth," Walsh says.

China's GDP growth is currently growing at upward of seven per cent, which means China and Australia are two of the most strongly performing economies in Asia.

Walsh says Australia benefits from a strong Chinese economy, citing the example of how in the first six months of this year, Australian exports to China increased about 35 per cent compared to the first six months of last year.

"We think we'll see continued strong market growth for Australian exporters in the value added areas such as equipment and services," Walsh says.

Trade benefits are expected to be gradually phased in. For example, foreign banks are currently barred from dealing in local currency and lending to Chinese companies. Immediately after China joins the WTO, the banks will be able to do local currency business with foreign customers. Two years later they can extend their services to Chinese companies. After five years, Chinese individuals will be able to set up local currency accounts at foreign banks.

In terms of investment, Walsh says relations between the two countries are growing, and the WTO is all part of that process.

"We are encouraging investment because it ultimately brings us benefits for Australian exports to China," he said.

China is not going into the WTO alone. Taiwan's entry agreement terms were agreed to one day after China's.

Despite having cut tariffs and opened its economy faster, Taiwan was not granted entry before China because China regards Taiwan as part of its territory, and was subsequently not recognised as independent by the WTO, who refer to it as "Chinese Taipei".

The final WTO approval is expected to take place at a meeting in Qatar in November, allowing entry 30 days later.

Political rifts aside, the two countries have strong trade links, and it is predicted these economic ties will be strengthened by WTO entry. China's entry to the World Trade Organisation will boost economic ties with Taiwan and could be a "turning point" for realising direct links with the island, a Chinese official said.

China is expected to join the WTO before year-end, followed immediately by Taiwan. Taiwan has rejected Beijing's one-China principle. China views the island as a renegade province that must eventually be reunited with the mainland, by force if necessary.

But a Taiwan panel recommended in August that Taipei scrap its ban on direct links, in place since a civil war in 1949. The presidential advisory panel urged Taipei to hold talks with Beijing on opening the links within the framework of the WTO.

Additional reporting by Bloomberg and Reuters.