1. China and the WTO: Some Empirical Results
Warwick J McKibbin
Australian National University
& The Brookings Institution

2. Overview Background Current Trade Barriers in China
The G-Cubed (Asia-Pacific) Model
Empirical results
Summary

3. Acknowledgement
This paper draws on an early draft of Ianchovichina and Martin (2001) “Trade Liberalization in China’s Accession to the WTO” World Bank (mimeo).

4. China is undergoing major reforms independently of the WTO accession

5. WTO Entry at a time when China has:
Moved away from trading through centrally controlled foreign trade corporations
Created trade policy instruments (tariffs/quotas/licenses etc ) and removed non tariff barriers
Unified the exchange rate in 1994
Removed many price controls

7. Focus
What are the additional impacts of WTO accession relative to what otherwise would have happened over time
This is hard to do precisely
Need a global economic model

8. The G-Cubed (Asia Pacific) Model

9. Countries United States Japan Australia New Zealand
Rest of the OECD Korea
Thailand Indonesia
China Malaysia
Singapore Taiwan
Hong Kong Philippines
India
Oil Exporting Developing Countries
Eastern Europe and the former Soviet Union
Other Developing Countries

10. G-Cubed (Asia Pacific)
Sectors
Energy
Mining
Agriculture
Durable Manufacturing
Non-Durable Manufacturing
Services

11. Key Features
Integrates micro and macro theory into an internally consistent framework
Full accounting of stocks and flows over time
Full integration of the real and financial sectors
Short run stickiness in markets
Forward looking expectations in all markets

12. Financial Markets Financial markets exist for
Money
Government Bonds
Equity
Foreign Assets
Foreign Exchange
Each financial asset represents a claim over real resources
Money over purchasing power
Bonds are claims over future tax collections
Equity is a claim over the future dividend stream of a firm
Foreign assets are claims over the future exports of the debtor country

13. Scenarios
Generate a baseline of the world economy from 2000 to 2060 assuming:
Country specific population growth
Sector/country specific productivity growth
Tax rates
Fiscal rules/monetary rules
Tariffs at current levels.

14. Scenarios
Introduce a phased reduction of tariffs in China commencing in 2002 and completed by 2005
Suppose the country risk premium falls as a result of the reforms
Might also consider the effects on additional productivity growth (not done here)

15. The shocks

26. Summary
Both trade and capital reallocation effects from Chinese trade reform
The impacts on individual countries depend on
The extent of trade with China
The extent of competition in trade with China
The impact on the return to capital in different sectors
Beneficial for world income but production reallocation through capital markets.

27. Background papers are available from: