World Trade Organization Impacts on China and Hong Kong

What is WTO?  The World Trade Organization (WTO) is a global international organization dealing with the rules of trade between nations.

Some facts about WTO  Location: Geneva, Switzerland  Established: 1 January 1995  Created by: Uruguay Round negotiations ( )  Membership: 149 countries (on 11 December 2005)  Budget: 175 million Swiss francs for 2006  Secretariat staff: 635  Head: Pascal Lamy (Director-General)

Functions of WTO  Administering WTO trade agreements  Forum for trade negotiations  Handling trade disputes  Monitoring national trade policies  Technical assistance and training for developing countries  Cooperation with other international organizations

China’s accession to the WTO  Joined WTO on 11 Dec  The world’s 9th largest trading entity.

Commitment undertaken by China  China will provide non-discriminatory treatment to all WTO Members.  China will eliminate dual pricing practices as well as differences in treatment accorded to goods produced for sale in China in comparison to those produced for export.  price controls will not be used for purposes of affording protection to domestic industries or services providers.

Commitment undertaken by China  the WTO Agreement will be implemented by China in an effective and uniform manner by revising its existing domestic laws and enacting new legislation fully in compliance with the WTO Agreement.  Within three years of accession all enterprises will have the right to import and export all goods and trade them throughout the customs territory with limited exceptions.  China will not maintain or introduce any export subsidies on agricultural products.

What are the implications?  Substantial tariff reductions for trading partners  Access to more trading partners  Facilitate more efficient allocation of resources among the trading partners  Further promoting global economic growth

World Bank’s estimation  China’s share in world export: 3.7% to 7.3% (in 5 years’ time)  China’s share in world import: 3.4% to 7.2% (in 5 years’ time)

Potential for development  Open sectors of economy to the world: telecommunications, financial services and distribution industries  Revolution in information technology  Opening channels for FDI and technology transfer

Will Hong Kong be benefited?  Growth of coastal cities in China, e.g. Shanghai = decreasing importance of HK as intermediary between China and the rest of the world.

Benefits of WTO to HK  Growth of coastal cities in China = More business opportunities for HK  Develop HK with its unique characteristics as a financial centre  Shanghai as a domestic financial centre while HK as an international financial centre

Benefits of WTO to HK  Will boost re-export trade;  industries of financial, technical and professional services  Liberalization of economy in China provides immense opportunities for HK

Impacts of WTO on HK  More larger companies are opening branch offices across the border  EXAMPLE: HK-based company that operates our container port facilities is expanding its operations into ports in China  Growth of internet services  Further surge in banking business