China's accession into the World Trade Organization has spawned an intense debate over whether admitting the world's most populous nation would bring democratic change to the communist regime in Beijing. The debate is justified so far by the fact that democratic reform has either not been made a priority, or simply been suppressed by Beijing. Rather than open itself to democratic changes, Beijing has opted to liberalize its economy, boost economic efficiency and growth, and improve living conditions for its people in order to remain in power. Like scholars that have studied the subject before him, Nicholas Lardy believes that China has taken a gamble by joining the WTO, which has improved the odds for economic success in that country of 1.3 billion people. The economic implications deriving from China's WTO accession are immense, which is the subject of Lardy's study. This book has been praised for its thoughtful analysis and comprehensive treatment of a subject that demands knowledge of China's policies regarding world trade.

China and Taiwan became full members of the WTO in January 2002, each holds a significant position in world trade. But while Taiwan's economic data have been regarded as transparent and its economic progress over the last decades has been thoroughly studied, China presented a muddier image as to the course of its economic expansion. One reason for this lack of clarity is the fact that China has been plagued by severe criticism over the falsification of economic data. Such criticism reached a new peak as recently as 2000, which was acknowledged in a meeting of the Standing Committee of the National People's Congress. But Lardy reveals an aspect often overlooked, which is that China prepared itself well before it entered the WTO and was ready to accept changes in the organization of its economy with the aim of propelling it into playing an active role as one of the world's economic powers. Lardy calls China's commitments to open its economy in order to gain WTO admission "sweeping." Opening the economy and accepting WTO rules demanded costly restructuring and sacrifice. In the early 1990s, China began significant tariff reductions and by the time of its WTO accession, its average statutory import duty was only 15 percent -- well below the levels of import duty in the 1980s. The systematic tariff reductions instituted by China before its admission were about half of the average tariff level that existed in India and approximately the equivalent of tariff levels in Brazil and Mexico.

In 1998, Premier Zhu Rongji's call for solving problems in state-owned companies that were losing money within two years resulted in the firing of 36 million state workers, Lardy says as an example of China's willingness to reform its economic institutions.

The book lists many examples of China's commitment to reforms, including tariff reductions on agricultural products that were carried out before the required deadline of 2004. Tariff reductions have also been carried out in other sectors like services, telecommunications, finance service and constructions.

"China's WTO commitments, on market access and on rules-based issues far surpass those made by founding members of the WTO and, in some cases, go beyond those made by countries that have joined the organization since its founding in 1995," Lardy says.

But he says China is faced with downward risks by gaining WTO membership. Lardy cites the most vulnerable economic sectors are motor vehicles, agriculture, banking and financial services. To give an example of vulnerability, particularly in employment, Lardy says China's imports of agricultural products are expected to increase by 2010. One reason for this is because of China's shrinking agricultural land. As a consequence of the increased imports of wheat, feed grains, cotton, etc. employment related to each of these agricultural sectors is expected to shrink by millions. Lardy mentions that WTO membership will also benefit China in some ways. For example the WTO will allow it to settle disputes to protect its economic interests -- in anti-dumping cases for example. He says China had been helpless in the past in anti-dumping cases, and that WTO membership will change that.

Lardy rejects critics who claim that China is uninterested in meeting its WTO obligations. He says China's, as well as Taiwan's, WTO accession has significant implications for world trade. As for China, he says the membership presents a "unique" event in the world's trading system because of the large mass of consumers and the vastness of the country and its resources.

"The country (China) seems almost certain in the next few years to overtake Canada, France, and the United Kingdom to become the fourth largest trading country in the world," Lardy says.

The emergence of China in world trade has called for adjustment in the policies of industrialized countries like the United States. Lardy rightly points out that China is not an industrialized country, but has been able to propel itself into the ranks of the world's largest trading partners.