The Linkage Politics of Negotiations on China’s Accession to GATT and Price Reform: 1986–1994

Abstract

The aim of this study is to understand how international negotiations on China’s accession to the General Agreement on Tariffs and Trade (GATT) were linked with the country’s domestic economic reform, specifically, price reform. Negotiations on China’s accession to the GATT were held from 1986 to 1994. The Chinese government decided to seek GATT membership in 1986, and its representatives began negotiations with GATT members such as the United States and Japan.

The United States was the largest negotiation partner during this period, and one of the requirements it demanded of China was price reform. Price control is one of the remarkable differences between a market economy and a planned economy. The United States government sought the abolishment of this system because it was seen as an unfair non-tariff barrier to trade meant to protect China’s domestic market.

Domestically, beginning in earnest in 1984, price reform had become a major issue in economic reform within China because price liberalization meant abandoning the government’s means of economic control. As solutions to reform the centrally planned economic system were explored, the issue of price reform, or the deregulation of price controls, was a sensitive political issue both internationally and domestically.

Previous studies conducted in the 1990s and early 2000s have provided a rough picture of negotiations on China’s accession to GATT. This study aims to answer the following research question: Why were negotiations on China’s GATT accession delayed? Previously analyses of this question have considered China’s negotiations that took place from 1986 to 1994; however, the relation between an individual economic policy and these international negotiations has not been fully studied. This study refines those analyses and demonstrates the linkage between the international negotiations and domestic economic reform surrounding China’s accession to GATT as a case study of price reform.

As a result of analysis, the paper points out three points about this linkage. First, the stability of the power base of the Communist Party of China (CCP) leader was important in advancing GATT accession negotiations. Second, GATT accession negotiations were strongly constrained by domestic economic reforms and macroeconomic trends. Third, China’s economic reforms and policies were affected by GATT negotiations. The outline is as follows. Since the mid-1980s, Zhao Ziyang, the General Secretary of the Central Committee of CCP, was promoting both price reform and GATT membership. However, he forced to give up its power to make economic policy decisions due to the failure of price reform after August 1988. Then, with the failure of price reform, negotiations with the United States which demand China price liberalization stagnated.