Dimensions: 6'' x 9'' 120 pages AEI Press  (Washington) Publication Date: August 1999 Hardcover ISBN: 0844741078 Price: $ 29.95 Add to Cart   Examination Copies

Prospects for the accession of the People's Republic of China to the World Trade Organization in the near future have diminished considerably. Recently, many policymakers predicted that the PRC would most likely enter the WTO no later than 1999 or 2000. Given a variety of recent economic and political developments in both Asia and the West (particularly the United States), it now seems likely that the negotiations concerning China's accession will be much more protracted.

In Tiger by the Tail, the authors analyze that impasse by assessing the sticking points in particular sectors. More importantly, they propose guidelines for how the WTO should address the accession not only of China but of other nonmarket economies as well. The authors focus both on the terms of China's accession to the WTO and on the terms of transition after China inevitably enters. How the WTO deals with nonmarket economies will be critically important to building an effective multilateral trading system based on the principle of free trade.

Some argue that the WTO should measure PRC compliance by looking at trade outcomes, as opposed to the process by which such trade is conducted. By emphasizing outcomes, however, the WTO would in essence be "managing" trade between and among foreign trading partners. Under a managed-trade system, the PRC would commit to certain quantifiable targets, such as imports or foreign-market share for particular products.

In contrast, the authors propose a rules-based, as opposed to a managed-trade-based, solution for China and the WTO. A system focused on the processes by which China conducts its trading relations will discipline China to abide by WTO rules and induce it to continue along its path toward a market-oriented economy. The authors propose specific reforms in the administrative and judicial systems in China, including the establishment of specialized courts to handle foreign economic issues related to trade and investment. They also argue for changes in the way the WTO might resolve the inevitable conflicts that will arise after China becomes a member.

Claude E. Barfield is a resident scholar at AEI.