reform (Table 1) and the removal of export subsidies on feed grains and cotton.<sup>3 8</sup> Reform of China's manufacturing encompasses the removal of quotas on China's textiles and apparel exports to the European Union and North America,<sup>39</sup> tariff reform (Table 1) and the restructuring of China's automobile sector.<sup>40</sup> Services liberalization represents the removal of non-tariff barriers on cross-border trade.<sup>4</sup>

# _Impact on Japan and the NIEs in East Asia_

42g China will be the biggest beneficiary of accession to the WTO, gaining around US$ 10 billion<sup>43</sup> or about 1 percent of China's GDP in 2001." Japan and the newly industrialized economies in East Asia will also benefit from China's accession to the WTO (Table 2a).<sup>45</sup> As important suppliers of materials to China, these countries will observe an improvement in their terms of trade and returns to capital. In both Japan and the NIEs, the projected increases in production are driven mainly by expansion in exports to China. While these countries are well positioned to gain from accession, many of the trends from China's growing role are already underway.

**38** Huang and Rozelle (2002) estimate that subsidies on feed grains and cotton are 32 percent and 10 percent, respectively.

**9** Unlike most other developing countries - members of the GATT 1947, China was excluded from the Uruguay Round Agreement on Textiles and Clothing (ATC). Therefore, China has not benefited from the increase in quotas provided for under this agreement. This has put pressure on the transaction prices of these quotas, which are equivalent to an export tax of the same magnitude. In this paper we use estimates of the 2001 export tax equivalents in lanchovichina and Martin (2003). In the US the 2001 quotas on Chinese textiles and apparel were equivalent to an export tax of 11 and 15 percent, respectively, while in the EU those were 12 and 15 percent, respectively. With accession China will benefit from the abolition of these quotas by 2005. Based on the experience with ATC under the Uruguay Round of the WTO (Spinanger, 1999), quota removal will be back-loaded with the bulk of the impact not felt until the last two years. **40** The method adopted here follows Francois and Spinanger (2002).

**4'** Francois and Spinanger (2002) provide estimnates of the tariff equivalents of the non-tariff barriers to cross-border trade in services in China and Tawain (China) before and after accession. From these estimates cuts in tariff equivalents on direct trade in services are computed as documented in Hertel, Walmsley, and Itakura (2001). For China, the resulting annual cuts are 0.2 for trade and transport, 0.8 for communications, 2.2 for commercial services, 1.7 for other services. For Tawain (China), the resulting cuts are 0.3 for trade and transport, 0.4 for communications, 0.7 for commercial services, and 1.2 for other services.

**42** This result is consistent with findings in Ianchovichina and Martin (2001, 2003) and Wang (2002). **43** These are in 1997 US$. This estimate is conservative since it does not reflect income increases due to trade-induced productivity gains, and especially gains associated with the liberalization of China's service sectors, as well as transaction cost savings. The benefits to China from developing institutions compatible with an open and modem market could be very large as well, but were not factored in the analysis. **44** This estimate is in line with estimates in a wide range of studies, including lanchovichina and Martin (2003), Li et al. (2000), Wang (2002), Deutsche Bank (2001). Results are sensitive to the values of the Armington elasticities of substitution, but do not change qualitatively. A fifty percent increase in the values of these elasticities almost doubles China's welfare gains from WTO accession, while a fifty percent reduction in the values of these elasticities reduces the gains to China by a factor of 10.

**45** These results from CGE modeling are consistent with findings of other CGE modeling work. See Wang (2002), Ianchovichina and Martin (2003), Li et al. (2000), Deutsche Bank (2001). We find that Singapore loses from China's WTO accession. This finding should be interpreted with some care since our analysis takes into account only liberalization of cross-border trade in services. If we had taken into account the full package of reforms affecting China's services sector, we might have found that Singapore, which is well positioned to provide financial, communications and other types of services to China's growing economy, would gain from accession.