Question

In: Economics

Why would China joining the WTO have such a profound impact on U.S. firms competing in...

Why would China joining the WTO have such a profound impact on U.S. firms competing in a Global Economy?

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Expert Solution

On December 11, 2001 China became a member of World Trade Organization (WTO). A milestone for the Chinese economy, admission of China to WTO was in itself was a long process of negotiations and it required significant changes to Chinese economy.

WTO in itself is the global organization which deals with the rules and regulations between nations of the world. The objective is to help the economies in export and import of their business. It also ensures that economies should comply with agreed directives.

Many producers and business houses producing textile material, and other goods believe that China’s entry into WTO would negatively influence their business. The impact with China joining WTO is minimal, as USA is a member of WTO and it does not have to lower any trade barrier as a result of China’s entry. Trade deficit between USA and China would be reduced. In the quest for WTO membership for China, the USA has refused the argument by many human rights and environmental groups that they should be attached to obligations by China to improve human rights and standards.

Financial and farming would get a boom. US banks and insurance companies will also benefit as now they will assist Chinese customers too. US firms can also make automobile loans to their Chinese customers therefore promoting sales US firms to be free to distribute their country made products throughout China without any Chinese middlemen or agent.


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