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Two weeks ago I had the honor of attending, “The 10th Anniversary of China’s Accession to the WTO: China’s Learning Curve,” conference jointly held by the Research Center for Chinese Politics and Business at Indiana University and the China Institute for WTO Studies of the University of International Business and Economics. Sun Zhenyu, China’s former Ambassador to the WTO, was among the over 40 speakers from the WTO, Chinese and foreign governments, law firms, and leading universities scheduled to share their insights and thoughts nearly 10 years since China became a WTO member, including how China and the WTO itself has changed in the time since.
During the second panel of day one titled, “The Effect of WTO Entry on China’s Economic Reforms and Economy,” Mr. Christian Murck, President of the American Chamber of Commerce in China and Dirk Moens, the Secretary General of the European Union Chamber of Commerce in China, shared their insights on China’s current status as it moves towards a complete market economy. While both concluded that foreign companies have undoubtedly benefited greatly from China’s accession and economic progression, they both conceded there is still a lot of room for improvement. To start, SOEs continue to enjoy too much preferential treatment (easy access to low interest rates), stifling competition and some would argue, stifling innovation. Simply put, more reform is needed for China to declare itself as a true market economy. Other common problems/concerns shared by American and European businesses alike is the high degree of discretion local governments in China have when issuing and implementing laws, which makes it difficult for businesses with a nationwide presence to develop a unified China strategy. In the coming years as China’s working age population peaks, and labour shortages become more widespread, China’s hukou system must be reformed so that workers can move more freely between cities and companies can hire the necessary personnel. In fact, it can be easily argues that addressing these issues is in China’s best interest, as Chinese companies also face the same problems.
Agreement on Government Procurement
The Agreement on Government Procurement (GPA) is a legally binding and plurilateral agreement in the World Trade Organization (WTO) focusing on the subject of government and local government agencies procurement (the only one of its kind to date). The procurement in the Agreement includes a variety of goods, ranging from commodities to high technology equipment, and services. The GPA was established to eliminate discriminative laws and practices against foreign supplies and suppliers in government procurement among member countries. For member countries, the market opportunity is significant as the government procurement of goods and services typically accounts for 10-15% of GDP for developed countries, and up to as much as 20% of GDP for developing countries. Subsequently, the GPA is currently being reviewed among the 42 members, so that it “reflects the realities of government procurement in the 21st century,” according to senior Swiss trade diplomat Nicholas Niggli, who chairs the government procurement committee. An updated version will expand the coverage (range of government procurements) in terms of the entities or sectors covered, which, according to the International Centre for Trade and Sustainable Development (ICTSD), would liberalise access to billions of dollars worth of public procurement contracts.
According to a recently released working paper from the WTO’s Economic Research and Statistics Division, the total value of additional market access commitments that could result from GPA accession by 42 WTO members is in the range of USD 380-970 billion annually. The accession of the five BRICS countries – Brazil, China, India, Russia (not yet WTO member, see below) and South Africa – would, by itself, add in the range of USD 233-596 billion annually to that value. Currently, Albania, China, Georgia, Jordan, Kyrgyz Republic, Moldova, Oman, Panama and Ukraine are negotiating accession.
On 28 December 2007, China delivered its application and initial (largely ceremonial) offer for acceding to the GPA to the WTO Secretariat. Subsequently, on 9 July 2010, China submitted a revised and improved coverage offer. Although China has 15 years of WTO negotiations experience, it is taking a different approach this time around as shown in the first three years of negotiations. According to a working paper presented at the conference, China, lacking a formal political process of interest, is utilising its political leadership, organizational arrangements, academia and public opinion to help guide its negotiations. China has pledged to submit a “robust improved offer” before the end of the year, to be reviewed at the WTO's ministerial gathering on 15-17 December. According to ICTSD, the offer would outline China’s proposal for which Chinese government agencies would be covered under the agreement, what thresholds would apply, and other coverage-related details. While it is expected to well received by existing GPA members China’s accession is not expected to be concluded by the end of the year.
Russia’s Impending Accession
After 18 years of negotiations, Russia and its USD 1.9 trillion economy is on the verge of joining the WTO after recently accepting a trade deal in early November with Georgia, the former Soviet republic with which it fought a short war in 2008. The compromise deal on monitoring mutual trade was the last major hurdle that will secure Russia’s integration into the global economy and arguably the biggest step in world trade liberalization since China joined the WTO. President Dmitry Medvedev is hopeful that Russia will formally join the 153-member club by the end of the year. On November 10, Russia won approval from the WTO’s Working Party, which will draw up a final document for approval by WTO trade ministers in Geneva on December 15; Moscow will then have until mid-June to ratify its membership, which will become effective 30 days later.
Accession is expected to stimulate Russian economic growth, boost gross domestic product by an extra 11% in the next 10 years and help encourage global companies, especially those based in the European invest in Russia. The biggest beneficiaries of the WTO deal are global companies based in the European Union, by far Russia's biggest trading partner, the U.S. and other countries. According to Andrew Somers, head of the American Chamber of Commerce in Russia, "The benefits for Russia are basically long term. It's going to normalize Russia as an investment destination market. Over time, Russian companies will be forced to be more efficient and competitive." While Russian companies and exporters such as Russian steelmakers are set to benefit tremendously through more favorable treatment in tariff negotiations abroad (the average maximum Russian import tariff is set to fall to 7.8% from 10%), some domestic manufacturing industries which have been largely shielded from global competition such as food processing, textiles and construction materials, will most likely suffer. Looking ten years into the future, if Russia does indeed join the WTO, it will be interesting to see how much the business landscape in China has changed, and if China is any indication, Russia will be remarkably different.
Venue: Datong Coal Technology College Exhibition Center, Shanxi
Date: 17-19 May 2010
Organiser: Taiyuan Aides Exhibition and Planning Co., Ltd
Tel: +86 0351 786 9527
As one of the leading international expositions for coal mining equipment and alternative energy sources, this expo gathers major players in these industries to advance international communication and cooperation. A platform is provided for domestic and international enterprises to establish, maintain and strengthen their strategic partnerships. The exhibition fully showcases the energy sector’s latest technology, equipment and protective devices as well as displays the most recent professional coal mining equipment for underground transportation, coal washing and screening. Head west to Shanxi to catch this three-day exhibition.
Venue: Shanghai International Exhibition Centre
Date: 11-13 May 2010
Organiser: Shanghai Shenshi Exhibition Service Co., Ltd.
As one of the leading and most specialised international pipe fittings exhibitions in the Asia-Pacific region, this expo is intended to provide a platform for enterprises at home and abroad to build, develop and maintain relationships. The expo will showcase the latest industrial information as well as three main types of products namely pipes, flanges and pipe equipment. This expo is also intended to serve as a cross-border business bridge that can help both suppliers and users to acquire international market information, observe industrial trends and build distribution channels.
The 107th China Import and Export Fair (Canton Fair), one of China’s most significant international trade fairs with representatives from a wide range of industries, opened on April 15th, 2010 in Guangzhou. As indicators for 2010 signify global economic recovery, buyers from different parts of the world gather at the Canton Fair to scope out the wares available for what promises to be a stellar year for international commerce. On opening day alone, the fair hosted 18,487 entrants, a total higher than the year before. This positive trend in participation is an encouraging sign for both organisers and merchants alike.
Attendees noted two interesting trends in this year’s fair:
1. Difficulties in expanding the representation of importers
Organisers enlarged the size of the exhibition area designated for importers as part of an effort to place greater emphasis on import activity. However, only a handful of European and American enterprises chose to exhibit at the fair; there were representatives from the Netherlands and Poland, as well as one from the United States. Strangely, these three foreign participants do not plan to sell to mainland China. The attendee from Holland asserted that European enterprises seldom participate in The Canton Fair because the fair remains largely unknown in Europe and because European enterprises are generally unfamiliar with the Chinese market.
2. Export-dominant companies are shifting focus away from domestic markets
In the depths of the financial crisis, China's exports decreased dramatically. During the 105th Canton Fair, most exporters were trying to develop their domestic businesses. With overseas demand now recovering, these enterprises are once again shifting their focus abroad rather than on domestic sales. According to survey data, 70% of the exhibitors are interested in both local and international sales, lower than the 85% of last year. The ratio is down since a number of export-dominant enterprises have lost their previous interest in domestic sales. Besides the recovery in global demand, two reasons have been stated for this shift. The first is that overseas orders are comparatively simple. International contracts are often straightforward agreements involving a list of specifications and a price, whereas complexity arises with domestic orders in terms of the content of procurement contracts and the arrangement of distribution channels. Second, the quantities of domestic orders are usually much smaller, with the price competitiveness of foreign-trade enterprises often lost on the domestic market.
Although this year’s exporting enterprises expressed their reluctance to expand domestically, the Canton Fair, to encourage consideration for local markets, invited 8,000 domestic large and medium-sized supermarkets to seek procurement partners at the exhibition.
Catch the last days of the fair at the Canton Fair Complex on Pazhou Island in Guangzhou before it closes May 5th.
Venue: China National Convention Center, Beijing
Date: 10 - 12 May 2010
Organiser: Beijing Wuzhou Zhuoyue International Exhibition Co. Ltd.; CIEC Exhibition Company Ltd
As one of the leading international and specialized exhibitions in the field of coal, this event is intended to establish a platform for enterprises at home and abroad to build, maintain and develop relationships. Because of accurate targeting and positioning, the Expo attracts a considerable number of domestic and overseas world-class enterprises such as Siemens, SEW, ABB, Dalian Heavy Industrial, Taiyuan Heavy Industrial etc. as exhibitors. The international fair will display some of the latest industrial information as well as products, technology and equipment. The Expo will feature exhibitors of more than ten countries and regions including America, Germany, France, Britain, Italy, Sweden, Austria, Australia, Poland, Spain among others.
Venue: New International Expo Center, Shanghai
Date: 6 – 9 April 2010
Organiser: CCPIT Building Materials Sub-council; China Stone Material Association; CIEC Exhibition Company Ltd
Tel: +86 010-88374016
As one of the largest and most specialized annual international exhibitions in the field of China stone materials, this event is intended to provide a platform for enterprises at home and abroad to establish, maintain and develop relationships with clients. The expo aims to assist domestic enterprises with understanding the international stone material market, to expand the domestic and international market as well as display the latest products such as quarry stones, plates, stone carvings, tombstones, machinery, tools etc. This event will feature about 800 Chinese and transnational exhibitors, with an exhibition space of more than 23,000 square meters. The exhibition will cover various areas such as the stone industry, architecture and the building industry, and the design industry.
The 7th China International Offshore Oil & Gas Exhibition
Date: 22 - 24 March 2010
Organiser: Beijing Zhenwei Exhibition Co., Ltd.
Tel: +86 10 5823 6588
As one of the largest annual petroleum exhibitions in Asia and one of the top four expos within the industry in the world, this event is intended to provide a platform for enterprises at home and abroad to establish and maintain relationships with customers. The expo will display the latest industry information as well as the most advanced products like offshore petroleum equipment, petroleum and petrochemical pumps, valves, compressors, pipelines, auto-instruments and electric explosion-proof equipment, etc. The event will feature nearly 1100 exhibitors from China, the US, Germany, France, Italy, Norway, Russia, Kazakhstan, Japan and South Korea, among others.
Ningbo International Sourcing Expo
Date: 2 - 6 March 2010
Organiser: China Council for the Promotion of International Trade, Ningbo Sub-Council
Tel: +852 3588 9688
As one of the largest international sourcing expos in China, this event is intended to establish a bridge for enterprises at home and abroad to exchange the latest product information and technology. The event attracts various areas like baby and nursery products, beauty and health products, consumer electronics, fashion accessories, apparel home textile and interiors gifts and premiums.
Date: 9-11 December 2009
Organisers: Chinese Society of Particuology
NürnbergMesse China Co. Ltd.
Worldwide Exhibitions Service Co. Ltd.
Tel: +86 (0)21 5228 4010
As one of the largest and specialized international fair in the field of powder, granule and bulk solids technology in China, IPB 2009 is intended to establish a bridge for enterprises to/from China to promote fair exchange and fair competition within the industry. The event will display the latest products and technology such as basic mechanical processing technologies, plant engineering and processing components, particle analysis and characterization, nano particle technologies, measurement and control, safety and environmental technologies, and more.
China Forge Fair 2009
Date: 17-19 November 2009
Organisers: Confederation of Chinese Metal Forming Industry
Tel: +86 (0)10 5233 8075
As one of the leading events in the stamping, fabricating and forging sector of China, CFF 2009 will display the latest products and technology such as forging products, forging equipment, forging tooling manufacturing materials and equipment, forging heat treatment furnace and energy saving technology, and more. The event is intended as a platform for enterprises at home and abroad to gain new leads, enhance industry standing and maintain customer relationships.
China (Beijing) International Automobile Manufacturing and Production Facility Exposition
Date: 11-13 November 2009
Organisers: China Academy of Railway Sciences, MOR, China World Trade Centre Co. Ltd.
Tel: +86 (0)10 5233 8075
The objective of the event is to facilitate the development of China's automobile manufacturing industry and to promote fair exchange and fair competition within the industry. The event is intended as a cooperative platform for domestic and international enterprises to establish and maintain relations with customers.
Metro China 2009
Date: 10-13 November 2009
Organisers: China Academy of Railway Sciences, MOR, China World Trade Centre Co. Ltd.
Tel: +86 (0)10 6505 1012
As the largest metro show in China, Metro China 2009 is intended to be a platform for exhibitors at home and abroad to seek partners, tap market potential and conduct exchanges in the urban rail transit industry. The event will display the latest technology and equipment like urban rail vehicles, power supply and distribution, electromechanical systems and engineering and construction, etc.
Metalworking and CNC Machine Tool Show 2009
Date: 3-7 November 2009
Organiser: Hannover-Messe International GmbH, Hanover Milano Fairs Shanghai Ltd., Shanghai World Expo Group
Tel: +86 (0)21 5045 6700
As the most internationally-recognised business event in the metal working sector of South-East China, this event attracts various industries like automobiles, defense, shipbuilding, aviation, die & mould, electric power and electronics, and more. The appeal of this event is embodied in the many pavilions organised by larger companies and associations.