Asian economies a challenging one. Thus, our primary objective is to provide a systematic discussion of the main channels by which China's WTO accession will have an impact on regional economies, and then provide initial quantitative assessment of the impact using a multi-region dynamic general equilibrium framework.

This approach is well-suited for the problem at hand since it offers a systematic way for determining the likely pattern of changes in factor and commodity prices, and production around the world in response to an exogenous shock, while taking into account the complex sectoral and regional linkages over time. The general equilibrium approach has been used to quantify the impact of China's WTO accession in a number of studies.<sup>9</sup> Detailed studies focusing on specific sectors and issues have also been conductedl<sup>0</sup> and a number of papers have given special attention to the impact of China's WTO accession on the countries in East Asia. " This paper improves upon the earlier work by taking into account duty drawbacks in China and Vietnam, constructing a baseline that reflects most recent growth projections'<sup>3</sup> and major trade commitments in the region,'<sup>4</sup> using China's final WTO offer and recent estimates of nominal rates of protection and subsidies in agriculture,'<sup>5</sup> representing the efficiency gains in the automobile sector induced by the WTO reform 9 See Lejour (2000), Fan and Li (2000), Li _et al_ (2000), McKibbin and Tang (2000), lanchovichina and Martin (2001, 2003), Wang (2002), Walmsley and Hertel (2001), Walmsley et al. (2001), Deutsche Bank (2001) (see also Gilbert and Wahl (2000) for a survey).

'° Huang and Rozelle (2002) and Anderson, Huang and Ianchovichina (2003) analyzed agricultural policy reforms as part of China's WTO accession and their impact in light of existing distortions to agricultural incentives in China. Francois and Spinanger (2002) studied the impact of WTO reforms on the automobile sector, while Pangestu and Mrongowius (2002), Bhattasali (2002), Wenping and Findlay (2002) analyzed the impact of WTO reforms on China's telecoms, financial and logistics sectors, respectively. Sicular and Zhao (2002) and Hussain (2002) focused on labor market issues and the design of safety nets, respectively. Hertel, Fan and Wang (2002), and Chen and Ravallion (2002) conducted analysis of the impact of WTO accession on different households and poverty in China. Mattoo (2001) discussed China's WTO conimnitments in the service sectors, Maskus (2001) - the intellectual property rights, and Messerlin (2002) - the antidumping and safeguard provisions in China's accession package.

"See, for example, Lejour (2000), Li et al. (2000), Wang (2001), lanchovichina and Martin (2001), and Deutsche Bank (2001).

12 Lejour (2000) acknowledges the importance of duty exemptions, but implements them as simple proportionate cuts in tariffs across all sectors and as duty exemptions on imports used in production, instead of exemption on imports used in the production of exports. This introduces bias in his results. 13 Source: World Bank.

**14** These include the Uruguay Round, the Agreement on Textiles and Clothing, AFTA, and the reform in China prior to 2001. lanchovichina and Martin (2001) incorporate duty exemptions on imports used in the production of exports, but ignore the impact of AFTA in the baseline.

5Lejour (2000) assumed a simple 50% cut in all tariffs that introduced distortions into the sectoral liberalization story. It is also misleading to comnpare statutory tariffs and post-accession rates in order to assess the extent of liberalization in agriculture as part of China's WTO accession. Recent research (Huang and Rozelle, 2002) reveals that nominal protection rates on important agricultural commodities (rice, vegetables and fruits, livestock and meat) were negative in 2001 and are likely to remain uschanged in the post-accession period. Consequently, the reduction in agricultural protection is likely to be far less than presented in earlier studies. Nonetheless, greater scope for imports in China are likely for a range of agricultural products (wheat, oilseeds, sugar and dairy products) that are protected mainly by tariffs, scheduled to be reduced substantially, and cotton and feedgrains, where export subsidies are ruled out. These important findings are not incorporated in earlier studies.

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