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 reform Average 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