E C O N O M I C R E P O R T O F T H E P R E S I D E N T

international trade is not a zero-sum game: both the United States and itstrading partners reap the benefits.Developing countries have come to account for an increasingly large shareof world trade, but some have moved ahead more rapidly than others. Developingcountries’ total trade (exports plus imports) rose at an annual rate of9.9 percent between 1989 and 1997, exceeding the 7.6 percent growth rateBox 6-2. China’s WTO Accession: Opening Foreign Markets,Extending the Rule of Law, and Encouraging Growth andDevelopmentIn November 1999 the United States and China concluded a bilateralagreement on China’s WTO accession. This agreement, which representsa crucial step in China’s accession to the multilateral organization,addresses many of the barriers to trade and investment in Chinathat now impede the flow of goods, services, and capital. Upon implementation,the agreement would benefit both U.S. and other firms outsideof China, by improving access to China’s market. China wouldbenefit as well from wider availability of high-quality foreign productsand from the introduction of best-practice skills by U.S. firms in areassuch as finance and insurance. The agreement would help address distortionsin China’s economy that have contributed to slowing outputgrowth there and have reduced the prospects for future growth.Under the terms of the agreement, China’s WTO accession wouldcontinue the remarkable process of economic reform that began theretwo decades ago. China’s economy has become increasingly marketorientedand increasingly open to trade and foreign investment.Between 1978 and 1999, China’s official statistics indicate that the country’sincome per capita rose at a rate of more than 8 percent per year,which, according to the World Bank, has helped raise some 200 millionpeople out of absolute poverty. (Some have argued that statisticalshortcomings lead to an overstatement of this long-run growth rate,but even skeptics acknowledge that the results have been impressive.)Trade has grown even faster than output, with the sum of exports andimports rising from $21 billion in 1978 to $324 billion in 1998. Over thisperiod more than $250 billion in FDI entered China.Despite this substantial progress, China has continued to maintainsignificant barriers to foreign trade and investment. These barriersinclude high tariffs on many agricultural and industrial products andother, less quantifiable restrictions. For example, some products maybe imported only by approved foreign trading companies, and foreigninvestment is sometimes restricted outside of particular sectors. Inmany sectors these barriers have shielded inefficient state-ownedcontinued on next page...Chapter 6 | 221