With considerable fanfare, the United States and China struck a historic agreement on China's membership in the World Trade Organization (WTO) in November 1999. The agreement is one of a series of bilateral understandings, to be followed by a multilateral WTO protocol of accession, that must be completed before China's WTO membership is finalized. In political terms, however, the agreement between Washington and Beijing is the most important step in the process and the one that has blocked progress in recent years.

It now appears that it will take some months for China to complete the WTO accession process, but China seems almost certain to join by the end of 2000. In recent years, it has been the United States that has pushed China hardest to embrace reforms as the price for WTO membership. Other countries with a strong economic interest in pressing China to abide by trading rules, notably the European Union (EU) and Japan, seem quite happy to allow

Washington to do the lion's share of the work vis-a-vis Beijing's WTO application. Nonetheless, after Washington declared victory, the EU and other countries have sought to improve the bargain on particular issues of interest to their exporters.

Although it has received only limited attention thus far, perhaps the most fundamental issue raised by China's accession concerns the readiness of the WTO to handle the unique challenges posed by China's legal and regulatory system. The WTO has had difficulty handling similar challenges in countries, such as Japan, which maintain a legal and regulatory system much more similar to the western model. The accession of China and a number of other form non-market economies that are likely to join in the next several years, such as Russia, could present an insurmountable challenge both to WTO dispute settlement and future negotiations.

HISTORY OF CHINA'S WTO MEMBERSHIP EFFORT

Before delving into some of the details of the issues surrounding China's compatibility with the WTO, a brief review of the events that led to the current state of affairs is useful. After WW II, the Republic of China (ROC) was an original member of the General Agreement on Trade and Tariffs (GATT), now known as the WTO. When the communist revolution succeeded in driving the ROC government from the mainland to the island of Taiwan, the ROC withdrew from the GATT. 1

Initially, the People's Republic of China had little interest in western economic institutions like the GATT. With its opening to the world in the 1970s, however, China became increasingly interested in western markets for its products, investment, and loans. China's early achievements in textile and apparel exports induced it to establish ties with a GATT-affiliated organization known as the Multi-Fiber Agreement (MFA) in order to secure markets for its textile exports.2 In the mid-1980s, China's increasing success in exporting to western markets and expanding economic ties with the West drove it to seek GATT membership under the leadership of then leader Deng Xiao Peng.

The process of membership in the WTO, however, was complicated by the reality of an economy still dominated by the government and increasingly difficult relations with the West on other fronts. In 1989, the Tiananmen Square massacre brought on a chill in relations between Beijing and most western powers, notably Washington. This effectively froze progress on the issue until the mid-1990s.

As is always the case with requests to join the world trading system, a working group was formed to consider China's WTO application. The working group is made up of WTO members that express a particular interest in trade with the applicant country. In China's case, several dozen countries, including the United States, the EU, Japan, and Canada, became members of the working group. An applicant must complete bilateral negotiations with each of the members to gain membership. Usually these agreements involve commitments from the prospective member to lower tariffs and make other concessions of interest to the existing member. These bilateral negotiations aim to bring the trade regime of the prospective member more in line with those of the existing WTO members, most of whom have been opening their markets in successive multilateral negotiations for decades.

Since the WTO's MFN principle requires all WTO members to receive the same treatment, the concessions granted to one WTO member must be extended to all. Before the working group completes its work and forwards the application to the WTO Council for final approval, the various bilateral understandings are combined and fashioned into a single comprehensive multilateral understanding. Any general multilateral understandings on the application of rules or other related matters are also joined into a single document at this point to create a single accession protocol.

The bilateral understanding between the United States and China was hailed as the definitive breakthrough in China's WTO application process. Ultimately, this assessment will likely prove accurate since it is the United States that had expressed the most comprehensive reservations to China's membership and seemed to have the most concern about China stemming from other matters. After the U.S. announcement, it quickly became apparent that other working party members, including the European Union, Canada, and others, sought to address other matters. The EU expressed particular interest in the financial services sector and automobile barriers, while Canada expressed concern over access for agricultural exports.

In the case of China, the multilateral accession protocol will also include a number of important generic provisions, such as a safeguard provision that would allow temporary limits on Chinese exports that disrupt other markets, rules on calculations of dumping (unfair pricing) of Chinese exports, and measures focused on oversight of the implementation process. The substance of some of these provisions is already negotiated through bilateral understandings, but the drafting process is likely to push China's WTO accession further into 2000.

In the United States, China's WTO accession has sparked a heated congressional debate. Unless procedures are changed, there is no need for a vote on China's WTO accession. The agreement on WTO accession was negotiated under the President's constitutional authority to negotiate with foreign powers and since the agreement does not directly require changes in U.S. law, no implementing legislation is needed. With the assent of the Clinton administration and the other members of the WTO, China can join the WTO without congressional approval.

The Congress does, however, have a potentially important role in the process. The extension of MFN by all WTO members to all other members is perhaps the most central provision of the WTO agreements. Since 1972, however, the United States has conditioned the extension of MFN to a list of communist countries, of which China is one, on the practice of a liberal emigration policy. The 1972 Act that established this policy, known as the Jackson-Vanik Amendment, was aimed primarily at improving the flow of Jewish