Join The Wto, China's Strategic Trade Policy Options

In this paper we are going to discuss the share of gains from trade other than how gains from trade generate. It is mostly because the former issue plays a more significant role in directing a nation to constitute its trade policy. And that seems to involve us into the continuous dispute between free trade and trade protectionism. But our emphasis comes down to trade policy, so we are not planning to tell which one, free trade or protectionism, is right or wrong. In fact, each nation participating in international trade wants to share in as much as possible gains from trade against the minimum flow of trade, namely to improve its terms of trade. Whether bilateral and multilateral agreements or foreign trade arrangements and policies a nation constitutes relate directly to the share of gains from trade. All kinds of trade barrier are just means to participate in the distribution of gains from trade. So the actual international trade is neither pure free trade nor absolute protectionism. Every nation put into practice protectionism as they talk about free trade to the others.After its entry into WTO, China both enjoys the rights of multilateral trade system and takes the corresponding obligations at the same time. On one hand, China should protect some of its strategic industries for industrialization; on the other hand, it has to cut greatly its trade barriers in accordance with trade liberalization. Cutting trade barriers means national industries will be all exposed to international competition, making the strategic industries difficult to develop for lack of protection. Without protection, without the newly developing strategic industries, Chinese economy is not competitive in international market depending on merely such labor-intensive industries as traditional textile industry and so on. What trade policy should China take to meet the challenge of international competition under the rules of WTO? The answer itself is a significant issue to be solved. With the rising of new trade theory, strategic trade policy was put forward as the extension of the theory applied in the area of trade policy. Because it is based on the more real practice of imperfect competition and increasing returns to scale, strategic trade policy seems more convincing in directing Chinese constitution of trade policy than traditional trade theory does. Being the focus of this paper, strategic trade policy deals with the share of gains from trade. Seeing WTO from th" point of view of strategic trade policy, we will be aware that WTO's trade liberalization is not absolutely equal to free trade, which motivate us to find and to carry out with flexibility the trade policy instruments under the rules of WTO. Also, due to such an intention, it is hard to come out feasible trade policy concrete enough to be manipulated, but this paper is trying to reach the goal.