China's Footwear Industry Is Locked In The Low End Of International Division Of Labor.

"China has fallen into the trap of" bad trade ". Since 1993, especially after joining the WTO, we are deeply involved in the import of high-end products.

Although it is a scholar's statement, it also makes those who have been busy for ten or even decades after joining the WTO feel miserable.

On the face of it, after China's accession to the WTO, the huge trade surplus in China and the low-end locking of international division of labor led to the exchange rate problem and the so-called "bad trade trap" that made the Chinese government scratching its head. In the deeper level, more people focused on the international framework with the WTO multilateral framework as the main body.

Demolition policy, bomb shoe industry presents a new prospect

Xue Rongjiu, vice president of the China World Trade Organization Research Association, is one of the first scholars to study GATT and WTO in China.

Although there are some origins of the three major institutions of global economic governance, the International Monetary Fund (IMF), the world bank and the general agreement on Tariffs and trade (GATT) and China, until the beginning of 1970s, China remained far from the three institutions.

"At that time, we identified the three organizations as a tool for exploiting and looting the developing countries by the imperialist countries led by the United States, that is, they are not good organizations."

Xue Rongjiu recalls "Chinese entrepreneurs".

It didn't get loose until 1974.

At that time, as the head of the Chinese delegation, Deng Xiaoping was preparing to participate in the sixth special session of the UN General Assembly (the theme is economic and Trade Development). In order to prepare speeches for Deng Xiaoping, two of the international teams of the Ministry of foreign trade and economic cooperation began to organize officials and experts to plate and learn relevant international conference materials.

During the period, Xue Rongjiu and other scholars found that GATT was not much like "an instrument of imperialism", because GATT was originally 35 clauses, but after 1965, 3 clauses were added to care for developing countries.

Moreover, the international division of labor emphasized in the GATT does not mean no exploitation. It is also very much the same as the international division of labor in Marx's economic theory.

After the reform and opening up, China has resumed its status in IMF and the world bank, and began to study "restoration".

Shi Zhongce was also invited from Geneva to participate in the establishment of the GATT's main participant in the national government.

In July 11, 1986, China's official note GATT asked for the resumption of seats in GATT, and Xue was also a member of the China Customs expert group.

A year later, China formally submitted the Q & a draft of China's foreign trade system. After that, it began a long communication and negotiation. In 1995, GATT was changed to the World Trade Organization (WTO).

With the passage of time, China's determination to enter the WTO is also growing.

"At that time, the Chinese government resolved to" enter the WTO "to solve two major problems: first, MFN treatment; and two, discrimination in trade.

Xue Rongjiu said.

Despite the great determination, the MFN issue was shelved because of the revision of the domestic laws of the United States. It was not until 1999 that China and the US resumed the WTO negotiations.

Before long, the US Congress amended the domestic law smoothly, established the permanent normal trade relations (PNTR) to China, and demolished the annual time bomb.

The issue of trade discrimination was also resolved in November 2001.

At that time, China reluctantly accepted the terms of the special safeguard measures for 12 years and the pitional period of the market economy status of the 15 year period (referred to as "two anti one guarantees") before becoming a member of the WTO.

All along, many people call these two discriminatory clauses, because the two ones in the world are formulated for China.

At that time, the advantages of some labor-intensive industries in China had been revealed. In order to prevent China from releasing huge capacity to the international market, the sophisticated Westerners put forward special safeguard clauses.

And the relevant market economic status clause is similar. "From a practical point of view, China established a socialist market economic system in 1994. Western countries also believe that we are not a completely market economy country, but a pition from a planned economy to a market economy."

Xue Rongjiu said, "but I think it's inappropriate to say that this is a discriminatory clause, and that the additional clause is better, because if China did not accept it, you would not get in at all."

The heart is gone, but the feeling of being in the throat is still strong. Until the accession to the WTO, people are still debating whether joining the WTO is the American trap, whether globalization is Americanization. In order to celebrate the victory of the permanent demolition of the bomb, many officials cheered in the night of December 10, 2001.

In fact, at that time, few people could predict the real impact of WTO on China's trade and industry in the future.

But at this time, China's mentality is willing to use this stone from other hills to hit the base of the system.

Since 2002, China has been vigorously promoting the market-oriented economy and liberalization of rules.

To clean up, review and amend laws and regulations inconsistent with WTO, to open trade management rights to enterprises of all kinds in China; in tariff terms, the MFN average tariff applied from 15.6% in 2001 to 9.7% in 2005, of which tariffs on automobiles and parts, textiles and clothing and agricultural products were even larger; in terms of non tax barriers, import licenses and import quotas were phased out on the date of accession.

All this has satisfied western countries.

In April 2002, President Bush said in a speech: "trade will bring about the habit of freedom, and those societies that are open to foreign trade will be more open in the territory."

In fact, after China's accession to the WTO, China's opening up to the outside world and its internal reform are accelerating.

In 2003, the State Council's "government work report" will deepen the reform of the economic system and expand the opening up to the outside world, and will be incorporated into the same chapter.

The year the third Plenary Session of the 16th CPC Central Committee, which advocated the marketization in the same year, is still regarded by many scholars as an important milestone in the course of China's reform.

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At the same time, China's accession to the WTO has enabled China to obtain concessions from many trading partners to China, which has made the export of Chinese products grow rapidly.

The enthusiasm of enterprises, markets and governments has been highly mobilized.

Judging from the phenomenon, China's sustained trade surplus began in 2002, which is second years after WTO accession.

The coincidence between WTO accession and sustained surplus is not accidental, but also the result of market choice.

The formulation of "international division of labor" is now familiar. China began to take part in the international division of labor with the principle of comparative advantage, and the supply of huge cheap labor, land and resources has become the main source of China's trade surplus.

In this division of labor pattern, China's surplus with Europe and the United States and a large deficit in Southeast Asia, China's core East Asian Division of labor network is rapidly maturing.

China has become the final product of the new division of labor in East Asia to assemble export bases.

The industry chain of Hongkong Gao Mei toy company is like this. The McDonald's in the US is making demands. After the two level traders in Hongkong, the order fell to the factories in Guangdong and Chongqing.

Production and processing, toys from factories to Hongkong traders, and then sent to all over the world McDonald's.

According to Huang Qiyi, general manager of Gao Mei and Kai Gao toy company, China began to produce toys for McDonald's in 2003, third years after its entry into the world in 2003.

From the order of 4 million US dollars in 2003, the order reached 150 million in a few years and the output reached more than 200 million.

"The international market is too big, so for many years, the momentum of development is not bad.

One of our factories ordered $4 million last year, which is $10 million this year, and the order has been $20 million next year.

Another change after China's accession to the WTO is that foreign capital is rapidly breaking away from the fields of light textile, household appliances and household arts and crafts, and has entered the fields of petrochemical, medicine, machinery manufacturing and other fields, and has built up new capacity in the next high-end industry, while the old fields are replenish by joint ventures and private enterprises. At the same time, due to the liberalization of foreign trade management rights, the release of Chinese capacity worries that foreigners worry about has emerged.

The global population has exceeded 7 billion, but this figure is still negligible compared with the total output of Chinese factories.

In Shengze Town, Wujiang City, Jiangsu Province, there is a eighth place chemical fiber factory, Sheng Hong group.

The seemingly humble enterprise can actually produce 12 billion meters of fabric per year.

In 2005, it was originally the first year of textile integration in the world, but because China's production volume was too large, it had to export automatic license.

Footwear is similar. In 2010, there were about 12 billion pairs of shoes produced in China. Such huge capacity was only released to the international market. Last year, China's footwear exports amounted to 9 billion 930 million pairs.

Behind this massive capacity release is "deterioration in terms of trade and stronger terms of trade in purchasing power", according to Xue Rongjiu. According to his statistics, the ratio in 2001 was 1:1, and by 2009 it had dropped to 1:0.83.

This also means that the export of the same quantity of goods can be exchanged for less and less foreign goods, which means that China's exports are based on scale, overdraft resources and environmental overloading at the expense of extensive trade mode.

What is even more pessimistic is that China's manufacturing industry based on comparative advantage theory is most likely to be locked in the low end position of the global industrial value chain.

Latin American countries are typically locked in low-end manufacturing traps. Their trade is ultimately reflected in the massive import of raw materials, then processing primary products, earning some money and importing raw materials, and then processing exports. There has been no obvious industrial upgrading process for many years.

"From the current situation, China has also seen some tendency to fall into the low-end trap. We have been developing in the labor-intensive industry for 10 years. If we want to cross the past and move towards the middle and high-end, it will definitely be longer than 10."

Huo Jianguo, director of the Ministry of Commerce Research Institute, said.

According to Huo analysis, apart from the reasons of international division of labor, there is another main reason for the excessive expansion and competition of the labor intensive footwear industry. The main reason is the existing investment and financing system of the Chinese government. After Zhejiang's enterprises are rich, they also want to do the petrochemical industry, and also want to enter the electric power. But they are sure that the project will not be approved. Finally, they can only invest in shoes, socks and ties.

"If an enterprise continues to invest in these fields, it will always encounter a limit, the marginal benefit will diminishing and the cost will reach the bottom line."

The opening result is intertwined with the path of reform.

By the end of 2005, China's footwear industry had basically established a comprehensive, pparent, non discriminatory and WTO rule oriented trading system. During this period, the government's direct intervention in the economy and trade distortions were few.

But since then, domestic policy debates on deepening opening up have increased.