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The impact of China's WTO accession on East Asia

  • Ianchovichina, Elena
  • Walmsley, Terrie

China's World Trade Organization (WTO) accession will have major implications for China and present both opportunities and challenges for East Asia. Ianchovichina and Walmsley assess the possible channels through which China's accession to the WTO could affect East Asia and quantify these effects using a dynamic computable general equilibrium model. China will be the biggest beneficiary of accession, followed by the industrial and newly industrializing economies (NIEs) in East Asia. But their benefits are small relative to the size of their economies and to the vigorous growth projected to occur in the region over the next 10 years. By contrast, developing countries in East Asia are expected to incur small declines in real GDP and welfare as a result of China's accession, mainly because with the elimination of quotas on Chinese textile and apparel exports to industrial countries China will become a formidable competitor in areas in which these countries have comparative advantage. With WTO accession China will increase its demand for petrochemicals, electronics, machinery, and equipment from Japan and the NIEs, and farm, timber, energy products, and other manufactures from the developing countries in East Asia. New foreign investment is likely to flow into these expanding sectors. The overall impact on foreign investment is likely to be positive in the NIEs, but negative for the less developed East Asian countries as a result of the contraction of these economies'textile and apparel sector. As China becomes a more efficient supplier of services or a more efficient producer of high-end manufactures, its comparative advantage will shift into higher-end products. This is good news for the poor developing economies in East Asia, but it implies that the impact of China's WTO accession on the NIEs may change to include heightened competition in global markets.

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Paper provided by The World Bank in its series Policy Research Working Paper Series with number 3109.

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Date of creation: 31 Aug 2003
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Handle: RePEc:wbk:wbrwps:3109
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  1. John Gilbert & Thomas Wahl, 2002. "Applied General Equilibrium Assessments of Trade Libereralisation in China," The World Economy, Wiley Blackwell, vol. 25(5), pages 697-731, 05.
  2. W. Hertel, Thomas, 2001. "Dynamic Effects of the “New Age” Free Trade Agreement between Japan and Singapore," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 16, pages 446-484.
  3. Ianchovichina, Elena & Martin, Will, 2001. "Trade liberalization in China's accession to the World Trade Organization," Policy Research Working Paper Series 2623, The World Bank.
  4. Will Martin & Elena Ianchovichina, 2001. "Implications of China's Accession to the World Trade Organisation for China and the WTO," The World Economy, Wiley Blackwell, vol. 24(9), pages 1205-1219, 09.
  5. Ianchovichina, Elena, 2003. "GTAP-DD: A Model for Analyzing Trade Reforms in the Presence of Duty Drawbacks," GTAP Technical Papers 1192, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University.
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  7. Finger, Michael J. & Schuler, Philip, 1999. "Implementation of Ururguay Round commitments : the development challenge," Policy Research Working Paper Series 2215, The World Bank.
  8. Will Martin, 1993. "The Fallacy of Composition and Developing Country Exports of Manufactures," The World Economy, Wiley Blackwell, vol. 16(2), pages 159-172, 03.
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  10. Hertel, Thomas W. & Terrie Walmsley, 2000. "China's Accession to the WTO: Timing is Everything," GTAP Working Papers 403, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University.
  11. Keith E. Maskus, 1993. "Intellectual property rights and the Uruguay Round," Economic Review, Federal Reserve Bank of Kansas City, issue Q I, pages 10-25.
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  13. Sebastián Claro, 2002. "Tariff and FDI Liberalization: What to Expect from China´s Entry into the WTO?," Documentos de Trabajo 209, Instituto de Economia. Pontificia Universidad Católica de Chile..
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