CHINA: WTO entry will trigger mass dislocation



The United States has scored another victory in its long campaign to ensure China pays dearly to enter the World Trade Organisation, forcing the country to agree to limits on agricultural subsidies tougher than those on other Third World members.

The July agreement will limit Beijing's ability to soften the blow of trade liberalisation on the country's 900 million peasantry. Many producers will be driven off the land by the expected flood of cheap agricultural imports from the major Western countries.

To justify its latest demand, Washington has said China's sizeable economy will distort world trade and must be restrained. It demanded China accept the status and obligations of a developed country, so far as agricultural produce is concerned.

This would have meant that, rather than having the option to subsidise its agricultural sector to up to 10% of the value of output, as other developing WTO members can, China's subsidy rate would be capped at 5%, as developed country members are. Beijing resisted.

China had seemed close to being admitted more than a year ago, after it had ironed out crucial bilateral deals with the US and the European Union, only for the wrangle over agricultural subsidies to grind negotiations to a halt. China has been seeking entry to the world trade body since 1986.

Beijing gave in on the subsidy battle only in July, accepting a compromise cap of 8.5%, and now once again seems to be on the verge on joining the 141-member body.

Some Third World countries, especially India, are gravely concerned, however, fearing the higher subsidy limit will be used as a precedent to squeeze them. They have requested a clear note in the China deal that the Chinese limit does not set a precedent. This has been rejected by Washington.

To improve its entry prospects, China has already accepted an earlier demand that it is a developed country in regard to obligations on manufactured products. Some commentators see this as particularly ironic, given that China's once robust state industry has been bled dry, while most industrial activities are now in foreign-owned, labour-intensive sweatshops — very much a Third World, rather than First World, industrial model.

There's also a major question as to which country's economic weight is more distorting: China's or the US's, which is economically nine times its size? Rather than meeting tougher requirements to match its supreme weight, Washington has been able to gain special treatment in its favour, even on agricultural subsidies.

Washington: Do as I say

At the end of World War II, while pushing for a controlled global trade regime, the US insisted that rules mustn't be applied to either agricultural export subsidies or import quotas for agricultural products. The US, as well as the countries which later formed the European Union, took full advantage of those exemptions, subsidising their farmers with huge sums every year.

This subsidisation has enabled them to dump cheap agricultural produce overseas as a strategy to destroy their competitors, especially those in the Third World, take away whatever independence they might have had in food production and impose irreversible dependence on Western supplies.

That strategy has scored victory in one poor country after another, as their farmers crumbled in the face of cheap imports. Thanks to government subsidies, US wheat, for example, has been selling overseas at 30% below production costs in recent years.

China's massive agricultural sector now faces the same prospect.

The Agreement on Agriculture, a product of the 1986-93 Uruguay Round of trade negotiations, carries in its non-binding preamble promises to reduce export subsidies and other distortions to world agricultural trade.

But predatory export dumping by the imperialist powers has increased instead, and remained perfectly "WTO-legal". In the US alone in fiscal year 2000, such "WTO-legal" subsidies grew to US$28.2 billion.

As Beijing restores capitalism, it has neither the intention nor the fiscal power to fund much more than the 2% subsidies to agricultural output that it has been providing in recent years. But pressing social needs and other extreme situations may warrant a sharp increase of the support levels later. This policy option will now be curtailed.

China's duties for agricultural produce will fall from 22% to 17.5%, including a reduction from 31% to 14% by January 2004 for US priority products and down from 25-85% to 9-18% for rape oil, butter, mandarins and wine, as demanded by the EU. But wherever the demands originated, the offer must eventually be made available to all other members.

Deep cuts in subsidies and protection have also been sealed for manufacturing products, services and distribution rights.

Foreign operators will, immediately after accession, be able to own a 25% share in mobile telecom firms, rising to 49% after three years. They can own 30% stakes in internet, paging and other value-added telecom services upon accession in Beijing, Shanghai and Guangzhou, rising to 50% in two years with no geographical constraints. Tariffs on many high-tech products like telecom equipment will be phased out and eliminated by 2005.

Import tariffs for automobiles will fall from 80-100% to 25% by mid-2006 while many restrictions on vehicles produced by foreign-owned joint ventures will be lifted in the two years after entry. Foreign banks can conduct domestic currency business with Chinese firms after two years and with Chinese individuals after five years anywhere in China.

Foreign insurers in many key lines of business can run fully owned operations with no geographical restrictions in one to three years.

The state monopoly on oil will be trimmed, with 3.6 million tonnes of oil products and 10% of crude imports reserved for the private sector. Retail oil distribution will be opened three years after accession, allowing foreign firms 30 petrol stations each, and the wholesale market will be opened two years later.

Also for the first time, China will phase out restrictions on distribution services for most products, including on large department stores and virtually all chain stores, within three years.

Largely due to WTO pressures, Beijing last year asked state-owned firms to retreat from another 150 industrial sectors. According to the China Daily, early last year they were already accounting for less than 40% of China's economic production.

Red China is fading

China's elaborate controls started after the 1949 revolution to protect the country's vulnerable economy from imperialist onslaught, following a century of invasions and semi-colonial subjugation. Though already watered down in the last two decades, such reductions of state control occurred little by little. The new concessions are tantamount to opening a flood gate.

The only major area where China appears set to benefit is in textiles and clothing. Not being a WTO member, China is presently subjected to highly restrictive quotas on these export items, limiting, among other things, its foreign exchange earning power. This restriction will now formally end in 2005 if China becomes a member. But importing countries can still resort to special "safeguard" measures to impose restrictions until 2008.

The imperialists' strategic goal through the WTO requirements is to lock China into its current path of capitalist restoration. With 1.3 billion people, China has enormous potential as a market to take in more of the crops, goods and services that the imperialist centres have desperate need to dispose of, profitably.

But they have another equally pressing goal — to deal a decisive blow to what's still left of socialist China. Despite being already seriously undermined by Stalinist misleadership, as well as by the gradual steps to restore capitalism in the last two decades, China's influence among the oppressed nations as an alternative has not been wiped out.

This objective seems to coincide with that of the pro-capitalist faction in the Beijing bureaucracy, which appears to be making use of the WTO regime to help push what it couldn't yet otherwise achieve.

Despite the enormous impact of the WTO concessions, critical open discussions on the subject are rare within China.

However, few have doubts that WTO entry will deprive tens of millions of the rural population of a means of livelihood — on top of the estimated 100 million already displaced.

WTO advocates have promised there will be more than enough jobs created to compensate in areas of China's "comparative advantage". They are referring mainly to some labour-intensive cash crops and sweatshop assembly.

The moves of Wal-Mart and Sears are indicative of what is likely to come. The two US chain stores set up production facilities in Tianjin, northern China, some years ago, paying 50 US cents an hour but were mandated to provide health and retirement benefits, overtime pay, pension insurance and sick days.

Last year, they moved to the booming sweatshop towns in southern China, paying 13 US cents an hour, with work shifts stretched to 14 or more hours a day, seven days a week and benefits eliminated.

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