Economists fear losers lurking among win-wins

With 15 years of tough bargaining on China's World Trade Organisation bid finally over, now comes the hard part.

China has described its impending entry into the WTO as a win-win situation. While that may be true in the long run, there will be plenty of winners and losers in the short term, and one of the biggest losers may be the government itself.

'This is a strategic decision that brings us into the world economy and overall will have a beneficial effect in the long run,' said Pan Yingli, economist at East China Normal University.

'But the government itself will face new difficulties from this because it will reduce the role of the state and increase the importance of the market.

'The government has been used to interfering in the economy and saying what you can or cannot do. Now it will have to keep its hands off and change its role to that of a service provider. At the moment, it does not have the right attitude for that.'

Economists also said WTO membership would not be a win-win situation as far as the different regions of the mainland were concerned.

Fleet-footed coastal areas will be able to take advantage of the new business opportunities, while the interior, which is still much less market-oriented, will be left behind.

'The coastal areas will benefit quickly but not the west and central regions,' Ms Pan said. 'Local governments will have to co-operate and remove local trade barriers.'

Many economists see China's programme to develop the west as designed partly to offset the imbalances that will be created by entry to the world trade body. Beijing has pledged to put more money into the interior in an effort to give the economically lagging areas of the country a helping hand.

Not every economist is so gloomy about the impact of the WTO on the hinterland.

'I don't see this as a matter of the interior losing out,' said Mao Yushi, head of the private think-tank, the Unirule Institute of Economics. 'Some industries will benefit while others lose out but this ultimately will help reform our economy.'

One of the main hurdles in the WTO discussions was agriculture, where China is particularly lacking in competitiveness. Its negotiators managed to win a compromise that capped subsidies at 8.5 per cent of agricultural output - considerably higher than some Western countries wanted.

But it is unclear whether that will be enough and if the government would actually want to accept such a heavy a financial burden in helping its farmers.

'Opening up the agricultural sector will certainly put a lot of pressure on farmers. In this area, China has paid a high price and it is not a win-win situation,' State Council's Research Development Centre economist Cheng Xiusheng said.

'It is not only a question of whether we can afford this. It is also unclear whether these subsidies will be enough to sustain our farmers.'

There is no question China's light industry will benefit from accession to the WTO. Textiles will have to struggle with quotas until 2008, but eventually will become even more of a powerhouse than they are today. Other export industries will benefit as they are able to take advantage of the WTO's dispute-resolution mechanism. In the past, trade problems have hampered an array of Chinese products - from long-life electric bulbs to bicycles and steel products as well as many others. China would have new armaments to combat trade sanctions such as those imposed by Tokyo recently on mushroom imports to Japan.

For foreign companies hoping to expand their share of the mainland market, there clearly are new opportunities. Cars, telecommunications, banking, insurance, retail, wholesale and distribution networks all stand to benefit - at least on paper.

The question for these foreign companies is how much of an appetite they have for defending their interests.

Businessmen say they may prefer to avoid head-on conflict with the Chinese Government and prefer not to risk future goodwill.

Moreover, if these foreign businesses press for a resolution of their trade disputes they will have to relay their cases through government channels. That additional workload will fall on the embassies and consulates in China but little attention has been paid to expanding official staff.

'Win-win is an official description,' Ms Pan said.

'What we are not able to do very well at this point is measure the pluses and minuses in terms of the effects on gross domestic product. That will take time.'