Long Yongtu: Industrial protection is not conducive to the development of China's auto industry
The second reason I felt deep emotion during the negotiations for China's accession to the World Trade Organization, particularly regarding the auto industry, was because of the intense public concern and expectations surrounding this issue. At the time, many people believed that China’s entry into the WTO would have a massive impact on two key sectors: agriculture and the automobile industry. The automobile sector, in particular, was seen as highly vulnerable. There were fears that once China joined the WTO, its domestic auto industry would be overwhelmed by foreign competition and could potentially disappear altogether.
This fear was not unfounded. For years, China had maintained high tariffs and strict import quotas, which were meant to protect the domestic industry but ultimately hindered its growth. These protections kept the industry isolated from global competition, preventing it from catching up with international standards. By limiting foreign investment and restricting access to advanced technology, China’s auto industry fell further behind the rest of the world.
Moreover, the high tariffs led to rampant smuggling. In 1997, the official tariff on Chinese cars was as high as 180%, yet the actual tariff was only around 26%. The World Bank reported this discrepancy, highlighting how the high tariffs created a black market and encouraged illegal trade. The U.S. negotiators even pointed out that China’s effective tariff was already close to their proposed target of 25%, emphasizing the need for real reform.
This situation made it clear that without significant concessions, China’s auto industry would not survive in the long term, and our WTO accession could be jeopardized. As a result, we made major adjustments during the negotiations, agreeing to reduce the auto tariff from 180% to 25% and establish a timeline for eliminating import quotas. The process was extremely challenging, with fierce debates over the exact timing and implementation.
Initially, there was disagreement about when the 25% tariff should take effect. China proposed 2008, while the U.S. pushed for it to be implemented immediately upon joining the WTO in 2001. After much back-and-forth, Deputy Prime Minister Qian Qichen suggested a compromise: June 2006. This date became the final agreement, though it was the subject of intense discussion throughout the negotiation period.
In addition to the tariff reductions, there were also discussions about the phasing out of import quotas. The U.S. wanted all restrictions removed on the day China joined the WTO, but we managed to push for a delayed implementation, aligning it with the end of the global textile quota system in January 2005.
These negotiations highlighted the complexity and difficulty of China’s WTO accession, especially in the auto sector. They reflected not just the economic challenges, but also the political and diplomatic efforts required to balance national interests with global commitments. The auto industry negotiations were one of the most contentious and critical parts of the entire process, and they demonstrated the importance of strategic compromise and perseverance in achieving long-term goals.
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