CHINA WTO ASCENSION SEEMS CERTAIN
Byline: Joanna Ramey / Kristi Ellis
WASHINGTON — Barring last-minute snafus, U.S. officials expect China to join the World Trade Organization by the end of the year, but that doesn’t mean all barriers facing foreign retail expansion there will be lifted.
Large department stores and mass retailers such as Wal-Mart, which already has 11 stores in China, will still face some crucial difficulties. Among lingering impediments are requirements that foreign-owned stores larger than 20,000 square meters or 65,616 square feet, and chains of more than 30 stores must have Chinese business partners. By comparison, Wal-Mart Supercenters in the U.S. reach upward of 216,000 square feet.
“China has made the development of large-scale retail operations, with many outlets, nearly impossible,” stated the International Mass Retail Association in recent comments on China trade filed with the House Trade Subcommittee.
However, U.S. retail officials, along with those in most business sectors, are wildly enthusiastic about China joining the global trade body. They foresee China, once required to follow WTO rules, eventually dropping its remaining vestiges of a state-run economy, making it easier to sell to China’s 1.3 billion people.
At a luncheon on Tuesday at the national Press Club, Chinese ambassador Yang Jiechi said he is optimistic about further improvements in U.S.-China relations and accession into the WTO.
“Though the relations have experienced some difficulties, both sides desire to improve ties and they’ve taken concrete steps resulting in an obviously improved situation,” Yang said.
China is in the process of finalizing negotiations with other WTO countries in Geneva, Yang said, and expects “to get the final push to get the job done so that China can become a member of this global trade body very soon.”
There will be some immediate benefits for foreign retailers in China because of its WTO membership. Retailers will no longer need to have a separate Chinese business partner for each store for licensing and financing purposes, as long as a chain has 30 stores or less and units are 20,000 square meters or less. Procedures by which retailers obtain licenses to do business also have been simplified.
Even more crucial will be China’s lifting of tight restrictions on distribution of products and ownership of warehouses over a three-year period. Foreign companies currently can’t own distribution centers and can only distribute goods around the country if they’re manufactured in China. That job is now reserved for Chinese concerns.
Highlighting how crucial the distribution issue is, U.S. Trade Representative Robert Zoellick secured a commitment last month at a negotiating session in Shanghai from his Chinese counterparts that ownership restrictions on chain stores won’t interfere with U.S. companies owning distribution outlets in full.
“Clearly, there are going to be some major changes to the economy” of China once it joins the WTO, Rep. Sander Levin of Michigan, the top Democrat on the House Trade Subcommittee, said at a recent hearing on China trade.
Levin singled out changes in Chinese distribution regulations as a huge plus for U.S. companies — changes, he said, that “will make the markets in China more accessible to us than Japan.”