Policy analysis and some issues of Vietnam's trade after joining the WTO

the region with the South as a long-term development strategy rather than immediate damage.

Synchronously innovate other macro policies

Like other transitional economies, the legal system is a fundamental constraint in China. To ensure a positive trade environment, China has made fundamental adjustments to its trade-related legal system. The most important document is the Foreign Trade Law promulgated in July 1994, replacing 1,183 legal documents, including 744 documents issued by the Central Government and 439 documents issued by local governments, contributing to the transparency of China's trade policy. On September 2, 1993, the Law on Anti-Unfair Competition was also promulgated to combat the abuse of monopoly, privilege, illegal competition and encourage the flow of goods. The Law on Anti-Unfair Competition has become an important bitter medicine to deal with state-owned monopolies, contributing to promoting the business efficiency of these enterprises.

China has developed many legal documents on goods, services, investment, and intellectual property based on WTO standards, such as quota management policies, licensing, anti-dumping regulations, application of countervailing duties, licensing regulations in service sectors such as insurance, telecommunications, and copyright enforcement, which were all issued from 1999 to 2001, right before China joined the WTO. A typical example is the Law on Anti-Dumping and Subsidies issued in March 1997, which immediately had a very good effect. By 2001, China had investigated 12 cases such as newsprint from the United States and South Korea (1997), stainless steel from Japan and South Korea (June 1999), and polyethylene from Japan and Thailand. Some of these cases were found to have dumping behavior and were subject to anti-dumping duties.

Maybe you are interested!

Not stopping at trade policy reforms, China has simultaneously carried out reforms related to exchange rate policy, legal system and active investment environment, and market institutional innovation. Reforming the state-owned enterprise system is the top goal in the economic reform strategy in the current period. The proportion of state-owned enterprises in GDP has decreased from

76% in 1980 to 28% in 1999 and continued to decline in the following years to 20-25%. China accelerated the process of handling outstanding debts, converting debts, reducing public obligations and expanding equitization, raising capital on the stock market to attract investment heavily for state-owned enterprises. By 2000, for the first time after 20 years of decline, China's state-owned enterprises were profitable and held the most important sectors of the economy. This was one of China's most important successes in the reform process.

In order to accelerate the exploitation of the comparative advantages of the economy, China pays special attention to building an open policy to attract foreign investment. Foreign investors have wide access to invest in almost all fields to promote the country's available resources, including the most sensitive fields such as real estate, finance, insurance, telecommunications, civil aviation, railways, establishing branches of law and accounting. Moreover, foreign investors also receive a firm guarantee of legal procedures from all levels of government from the central to local levels. In 1995, the Chinese government published a Catalogue of Calls for Investment for Foreign Investors to encourage investors to invest in the infrastructure sector. Many multinational corporations have been present in China. 400 out of the world's 500 largest multinational corporations have been present in China. By the end of 1996, 9 out of 10 German multinational companies, 19 out of 20 Japanese companies, and 16 out of 20 American companies had invested in China with increasing sales and investment capital. Typically, 19 Japanese companies had 213 factories in China. Siemens initially built only 2 factories, but by 1996, it had 50 factories. Toshiba had 43 factories, and Samsung had 18 factories. Six large multinational companies in China had invested in 770 factories. On average, each investment project was worth up to 10 million USD. China has truly become a springboard for these multinational companies to the regional and world markets. The export results of products such as automobiles, electronics, and telecommunications equipment from China in recent years have had an important contribution from that economic strategy. Thus, China's trade liberalization is a process implemented according to a consistent and comprehensive policy of the state [72],[81].

Protection linked to export goals, promoting competitive advantages

China's trade in the 1990s has effectively exploited labor-intensive economic sectors, exploiting the country's comparative advantages. The growth rate of China's labor-intensive goods from 1978 to present has always reached approximately 20%. The highest level compared to other developing countries in the East Asian region, including ASEAN countries such as Thailand, Malaysia, and the Philippines. China's most important export products include garments, textiles, footwear, and toys, all based on the advantage of cheap and abundant labor. This is an item for which China is currently the world's largest exporter and will continue to be the main supplier for these products for a long time because it will certainly take several more decades for labor to become scarce and expensive in this country of more than 1.2 billion people, with nearly 75% of the population living in rural areas. However, the trend of positive transformation of China's export structure is becoming increasingly evident. In 2001, among China's top 20 export items, in addition to the above items, many industrial items with high added value, using large capital and modern technology can be mentioned. Typically, electronic items including computers and data processing machines with an export turnover of over 13 billion USD, are the second largest export item after the garment industry. Telephones and telecommunications equipment with an export turnover of over 4 billion USD is the 6th largest exporter in the world. China is also the leading exporter of electronic circuits and components with an export turnover of 2.6 billion USD and television exports reaching 1.6 billion USD. China's electronics industry now accounts for 23% of China's export turnover and ranks first in many important markets such as the EU and the United States.

Regarding the protectionist approach in China's trade policy, it can be seen that the most important point of that policy is the issue of protectionism associated with export orientation (see Appendix 2). China maintains average tariff rates for products with clear comparative advantages (based on export capacity in previous years) such as textiles (17%), fabrics (14%), toys (20%), footwear.

(24.5%), Aquatic products (0-17%) and agricultural products (10% except for sensitive products with tax rates up to 65% such as cereals). It is easy to see that these protected products are all products that are currently exploiting the country's available resources well and will continue to be exploited for many years in the future.

The lowest tax rate is applied to input items serving production and business activities and necessary to increase intra-industry exchange such as coal, electronic components and circuits (10%), wood, paper (7.5%). In contrast, products that are increasingly emerging in the export structure such as computers, telephones and telecommunications equipment, automobiles and chassis, and furniture all have a fairly high tax rate of 30%. We can see the correlation between export products with large turnover and high growth rates and quite high tariff protection levels such as: computers and information processing machines, telephones and telecommunications equipment, televisions, automobiles, and furniture. Products with clear comparative advantages, large export turnover but slow growth rates such as textiles, footwear, fabrics, and toys all have lower protection levels. In addition, the development of manufacturing industries is always closely linked to participation in “value chains” or “supply chains” from production sources to consumption places, contributing to creating more added value for goods and boosting export capacity. Obviously, China’s protectionist approach is closely linked to the goal of developing exports and promoting the structural transformation of the economy.

The issue of liberalization of trade in services

China's implementation of service trade liberalization is a need that comes from the demands of the economy itself. In 2000, the proportion of China's services reached less than 35% of the total GDP, including economic sectors in the infrastructure system of the economy such as telecommunications, banking, finance, and construction. Meanwhile, the economic growth rate and especially China's foreign economic activities are developing at a high rate (GDP increases on average 8-10% per year and trade in goods is 20%) inevitably giving rise to the risk of imbalance between the requirements for developing service sectors and the demands of the economy. China has clearly identified that risk and given due priority to attracting foreign investment in the sectors.

Box 1.2: Some commitments in China's WTO accession

Trade in goods - all tariffs on imported goods will be eliminated or reduced, mostly by 2004. Tariffs on industrial goods will be reduced to an average of 9%, and import quotas will be eliminated by 2005. Tariffs on agricultural products will be reduced to an average of 15%.

Trade in services - Foreign participation will be ensured through transparent procedures and automatic licensing in various areas, including banking and insurance services, legal and other professional services, telecommunications and tourism. In particular:

* Business and distribution rights: within two years (by the end of 2003) foreign service providers will be allowed to participate in retail trading of all products; within three years (by the end of 2004) all companies will have the right to import and export all goods except those subject to State business monopolies (for example: oil or fertilizer); within five years (by the end of 2006) foreign companies will be allowed to distribute almost all domestic goods online.

* Foreign banks and financial institutions will be allowed to provide services without customer restrictions on foreign exchange trading upon accession; local currency services to Chinese companies within two years (until December 2003); and services to all Chinese customers within five years (until December 2006).

Business and investment environment

* National treatment/non-discrimination - Measures and practices that discriminate against imported goods or foreign companies will be eliminated.

* Export subsidies - Upon accession, all forms of export subsidies inconsistent with WTO rules, including subsidies and tariff exemptions related to exports, are eliminated.

* Trade-Related Investment Measures (TRIMS)- Foreign investment approvals will no longer be subject to mandatory requirements (e.g. technology transfer or local content requirements).

* Trade-Related Aspects of Intellectual Property Rights (TRIPs)- China will immediately enforce intellectual property protection in Chinese territory.

* Agricultural subsidies - China has agreed to limit domestic agricultural subsidies to 8.5% of production value (less than the 10% limit allowed for developing countries under the WTO agreement on agriculture), and to eliminate all agricultural export subsidies upon joining the WTO.

Self-defense measures

* Product-specific safeguard mechanism during transition period - Under the WTO agreement on safeguards, a country can impose import restrictions if it considers that they cause or threaten to cause serious injury to domestic companies producing similar products.

* Special safeguard mechanism for Chinese textile and apparel exports (see annex 12)

* Anti-dumping (to foreign markets). Under the WTO agreement, other members can invoke the "non-market economy" provision to determine cases of dumping for 15 years after accession. But the "non-market economy" provision implies that domestic prices cannot be used as reference prices in anti-dumping investigations.

service sector, including sensitive service sectors. The most important point of the service trade policy is to attract large-scale investment, modern technology, techniques and abundant knowledge that the economy itself cannot easily meet. Prime Minister Zhu Rongji said that "liberalization of service trade also contributes to reducing the brain drain of the economy and increasing the economic efficiency of the country". With that goal, in recent years, China has issued a series of important regulations to perfect the legal framework in the service sector, creating the necessary basis for gradually opening the service market to foreign countries. For example, in 2001, China issued regulations on the management of resident foreign lawyers, regulations on foreign telecommunications enterprises, and charters.

on foreign insurance companies, regulations on maritime transport service business activities ( 12 ). In which, it specifically regulates issues to ensure the stability of the service system, which not all developing countries have. In that way, China turns the passive opening of the service market into its own initiative. Studying the table of commitments on liberalization of trade in services of China, it can be clearly seen that the orientation is to accelerate the liberalization speed in most service sectors at the same time as determining the subjects participating in investment.

The service sector is very clear. With regulations on capital, experience, and technical requirements, China wants to give priority not to small and medium-sized enterprises from developing countries with weak competitiveness, but to giant economic groups from advanced countries. For example, the capital of a foreign bank wanting to establish a branch in China is 30 billion USD, and insurance is 50 billion USD. Obviously, in its service development strategy, China has prioritized economic efficiency.

China's experience in negotiating WTO accession

China's accession to the WTO was not a smooth road, but required great determination from the Chinese leadership. The "substantive" decision to join the WTO began with Premier Zhu Rongji's visit to the United States in April 1999 and later ended with a historic agreement.

12 Report dated May 3, 2002 of the Vietnam Trade Office in China sent to the Ministry of Commerce.

on China's accession to the WTO with the United States on November 15, 1999. The Chinese government clearly perceives integration into the global economy as an opportunity to accelerate reform ( 13 ). That view was clearly demonstrated during the negotiation process for accession to the WTO. It is worth noting that China has accepted the pressure of international economic integration very positively. China's level of trade liberalization is much higher than the commitments of other developing members. In 2005,

China reduced tariffs to 10%, and committed to sectoral liberalization in the fields of information technology, pharmaceuticals, medical equipment, etc. with a 0% tariff ( 14 ). The average commitment level for industrial products is 11.6%, agricultural products is 15.8%, and aquatic products is 14.3%. Most quotas and licenses are abolished upon accession, including long-term managed products such as cereals, wool, cotton, and fertilizers. Regarding services, China has made significant commitments in more than 80 service sectors.

Services include particularly important and sensitive areas such as banking, insurance, telecommunications... In general, after about 8 years, most service industries are free to compete between domestic and foreign enterprises[34], [65].

For the long-term goal, China also accepted to fulfill obligations higher than the WTO regulations to join this organization such as committing not to subsidize seeds and raw materials for farmers, committing to open the agricultural market, accepting to let WTO members have "temporary self-defense rights" until 2013 to limit imports from China even if the imported goods have not caused any material damage, etc. After 15 years since China applied to join GATT/WTO, but only in the last two years, the substantive and main negotiations with the United States, EU, Japan, Mexico... took place and completed the WTO accession procedures. This is the result of a process of preparation, readiness and calculation with ripe conditions.

China's economic reality after more than 4 years of joining the WTO : since joining, China has achieved great achievements admired by the whole world.

13 Chinese Deputy Minister of Trade Long Yongtu in his speech on the occasion of bilateral negotiations with the United States on joining the WTO (November 1999) said: "China must become a market economy to become a component of the global economy as well as effectively participate in the process of economic globalization."

14 See details in Appendix 11

China's economy and society have maintained a good development trend. China's economic strength, comprehensive strength and international status have been significantly improved. China has effectively controlled unstable factors in the development process, overcome the challenges of major epidemics and natural disasters, and successfully responded to changes after joining the World Trade Organization.

China's economy has consistently maintained the highest growth rate in the world. The value of gross domestic product (GDP) increased by an average of 8.8% per year. GDP per capita increased from 856 USD in 2000 to about 1,380 USD in 2005. Economic efficiency has been significantly improved. Industrial enterprise profits increased from 439.3 billion yuan (1 yuan is approximately 1,900 VND) to 1,134.2 billion yuan.

In terms of technology, the industrialization and information technology process was accelerated. The industrial growth rate in the period 2001-2004 reached an average of 10.7%. The proportion of industry in the economy increased from 43.6% in 2001 to 45.9% in 2004. The output of important products increased sharply, such as steel billets increased by 144 million tons, finished steel products increased by 165.77 million tons, cars increased by 3 million units, all more than doubled; cement increased by 373 million tons, an increase of 62%; electricity increased by 831.4 billion kWh, an increase of 61.3%.

China's import and export of goods has continuously achieved high growth rates; in 2005, it reached a total of nearly 1,300 billion USD, an increase of more than 2.7 times compared to 2000, bringing China from 8th place to 3rd place in the world in terms of trade. The structure of export goods has been further improved, with electromechanical products and high and new technology products accounting for 54.5% and 27.9% of the export structure, respectively. People's lives have been significantly improved. In 2005, the income of urban residents reached nearly 10,000 yuan, an increase of 59% compared to 2000; Farmers' income was about 3,200 yuan, an increase of 42% compared with 2000. The number of poor people in rural areas decreased from 32.09 million in 2000 to 26.1 million in 2004. The gap between rich and poor has been significantly reduced.

Social welfare activities developed rapidly. The state increased the budget and provided support for science and technology, education, culture, health care, and sports. Many important basic scientific and technological projects were built. The great achievements representing China's progress in science and technology were:

Policy analysis and some issues of Vietnam's trade after joining the WTO - 8

Comment