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Dreams, Dread of China Trade

Business: For many, WTO entry can't happen soon enough. Others see doom.


HONG KONG — Marjorie Yang is ready for Asia's future.

As head of a high-end textiles business strung across China and four other countries, she will save time and money once Beijing loosens its grip and allows entrepreneurs like her to freely move goods around the country.

"It's going to benefit everyone doing business in China," she said.

She will be able to pass her lower costs down the economic chain, where others may benefit as well, including Americans who buy labels such as Nordstrom, Brooks Brothers and Tommy Hilfiger.

The ripple effect of breaking the government monopoly on shipping textiles and thousands of other products within China is just one small part of a sea change that is about to sweep the Asia-Pacific region.

China's entry into the World Trade Organization--the 142-member club that sets the rules of global trade--will open an increasingly unfettered flow of commerce, investment and ideas. For better or worse, it will reshape Asia's economies, and in some cases, its societies. It also is a huge political gamble for the Communist Party leaders who rule over one-fifth of the world's population, carrying the risk of implosion if the strains of suddenly opening so much of the economy prove too great.

For these leaders, the payoff is greater economic growth and global clout.

"In terms of importance, China's admission to the WTO is equivalent to exploding its first nuclear device," said Claude Smadja, principal advisor to the Geneva-based World Economic Forum. "It is the next step to China's accession to the club of world rule-setters."

At a more mundane level, it will touch the lives of consumers on both sides of the Pacific and beyond, transforming the way business is done with China and the way China does business with the world.

For people such as Hong Kong-based Yang and California businessman Steve Sanett, who can see the obstacles about to fall, it can't happen soon enough. In Bangkok, Thailand, agro-products export manager Vivat Ansavanop sees an open Chinese market as the challenge of his young career.

Others are less enthusiastic.

Worried farmers in China's rural Hubei province consider the WTO little more than a dark, three-letter cloud. For them, the prospect of contending with competitively priced, good-quality imports is just one more piece of depressing news in a life that barely rises above subsistence levels.

In Shanghai, Bank of China middle manager Zhang Tao's job may not survive foreign competition, while in New Delhi, social activist Vandana Shiva warns that cheap Chinese imports could decimate India's small-scale manufacturing sector.

Finalizing the terms of China's WTO entry dragged well beyond the expected date of early this year, in part because of the complexity of the task. More than 14 years after Beijing first applied for membership and after 63 separate, protracted negotiations, agreement was announced early this month on the last major issues. China is expected to become a full member by early next year.

The view from Sanett's company, Chatsworth-based Penta Laboratories, is just one example of the ripple effect of China's entry.

Penta already takes advantage of China's lower labor costs to produce large vacuum tubes for industry for about 40% less than it could in the United States. But if Beijing honors its WTO commitment to reduce red tape and cut duties by nearly two-thirds on the raw materials Penta must import into China to have the tubes made, the company's costs will drop further.

Even more critical to Penta is increased access for its Chinese-made tubes in global markets. While the company already sells its products in 50 nations, countries such as Mexico and India have traditionally maintained tariffs as high as 100% on thousands of Chinese-made products, including vacuum tubes. These barriers have already begun to fall, and once China joins the WTO, they will have to go completely.

Consumers Likely to Be Big Winners

With such savings, consumers in many countries, including the United States, are likely to be among the big winners.

"If the WTO promotes distribution of Chinese products throughout the world by lowering tariffs, then it will help us everywhere," Sanett said.

That's exactly what worries Shiva in New Delhi.

An ardent defender of India's small-scale farming and cottage industries, Shiva argues that low-cost Chinese imports have already put thousands of village enterprises out of business, driving workers into squalid urban areas to cut bricks or sort garbage.

The end of remaining import controls, she insists, could mean the demise of a way of life at the heart of India's identity--the idea promoted by Mohandas K. Gandhi that some domestic industries, including spinning, weaving and some farming, be protected as small-scale endeavors to preserve tradition and guarantee employment for the rural poor.

"Silks, textiles, toys, small electronic goods--all are threatened," she said in an interview.

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