Rewards from China’s Integration into the WTO Far Outweigh Risks for Both the United States and China, Concludes Council-Sponsored Independent Task Force

October 11, 2001 – Both the United States and China will run risks as Beijing moves ahead with membership in the World Trade Organization (WTO), but the potential payoffs for both countries are well worth it. This is the central finding of the Council-Sponsored Independent Task Force, "Beginning the Journey: China, the U.S., and the WTO." The group also says that increased trade and investment will provide considerable economic benefits to both nations and thereby improve overall Sino-American relations, thus creating a better context for managing security and human rights issues.

The task force warns, however, that China’s transition into the WTO poses significant challenges for both China and the United States. For Chinese leaders, the chief challenge is how to manage the tension between maintaining their power and accommodating the social and political pressures arising from continued economic reform. The resulting potential for social dislocation and unrest will test Beijing’s resolve for further economic reform and development of the rule of law.

For the United States, the risk lies in a political backlash if China’s entry into the WTO does not produce quick benefits to American workers and industry and if China’s trade surplus with the United States grows too rapidly.

Chaired by Robert D. Hormats, Vice Chairman of Goldman Sachs International, the task force includes former ambassadors, prominent business people, and other former high-level members of the U.S. government. (List follows.)

The task force report discusses possible problems during the transition period but explains ways in which cooperation between Beijing and Washington improves prospects for resolving difficulties. They include the following recommendations outside of the WTO process:

• Build mutual confidence with an agreed agenda of "early harvest" accomplishments in key sectors, such as agriculture and information technologies.
• Remove impediments to the renewal of U.S. trade and technical assistance to China.
• Develop mechanisms for resolving mutual disputes outside the WTO process to avoid overloading the WTO.
• Urge other nations and institutions such as the European Union to encourage China’s compliance with WTO rules so that Washington, D.C. will not be alone in monitoring enforcement.
• Recognize that there may be instances in which the WTO may rule in favor of China.
• Develop congressional-private sector oversight to minimize potential conflicts from special interests that could derail the WTO process.

TASK FORCE MEMBERS

Woodrow Ahn, Investment Banker, Salomon Smith Barney Inc.

Lisa B. Barry, Vice President, International Public Policy, AOL Time Warner Inc.

Harry G. Broadman, Lead Economist, The World Bank

Jerome Alan Cohen, Adjunct Senior Fellow, Asia Studies, Council on Foreign Relations

Elizabeth Economy, Senior Fellow, China Studies; and Deputy Director, Asia Studies, Council on Foreign Relations

Jeffrey L. Fiedler, Consultant, FAST, AFL-CIO**

Maurice R. Greenberg, Chairman and CEO, American International Group, Inc.

James B. Heimowitz, President and CEO, JBH Consulting Group, Inc.

John L. Holden, President, National Committee on U.S.-China Relations, Inc.

Robert D. Hormats, Vice Chairman, Goldman, Sachs & Company

Peter Howell, Former Group Marketing Executive-Asia, Citibank

Virginia A. Kamsky, Chairman, Kamsky Associates, Inc.

Robert A. Kapp, President, U.S.-China Business Council

Nicholas R. Lardy, Senior Fellow, The Brookings Institution

Deborah M. Lehr, Chairman, International Trade Practice, Mayer, Brown & Platt

Herbert Levin, Director, America-China Forum

John P. Lipsky, Chief Economist and Managing Director, J.P. Morgan Chase & Co.

Winston Lord, Co-Chairman, International Rescue Committee

Robert Manning, Senior Counselor for Energy, Technology and Science Policy, U.S. Department of State**

Kevin Nealer, Senior Fellow, Forum for International Policy

Margaret M. Pearson, Associate Professor of Government and Politics, University of Maryland

Joshua C. Ramo, Senior Editor, Time Inc.*

David E. Sanger, White House Correspondent, The New York Times*

Richard H. Solomon, President, United States Institute of Peace**

Edward S. Steinfeld, Assistant Professor of Political Science, Massachusetts Institute of Technology

I. Peter Wolff, Executive Advisor, AOL Time Warner Inc.

Alice Young, Partner and Chair, Asia Pacific Practice (U.S.), Kaye Scholer, LLP

*Individual participated in the Task Force; however, his institutional affiliation precludes taking an official stance on the report.

**Individual did not endorse the report and contributed a dissenting opinion.

RESEARCH ASSOCIATE

Eric B. Aldrich, Research Associate, China Studies, Council on Foreign Relations