China's entry into the World Trade Organization (WTO) will offer considerable economic benefits both for China and the United States, as well as the opportunity to make progress on economic, security, and political issues in the Sino-American relationship. At the same time, China's transition into the WTO poses significant challenges for both countries. For China's leaders, the chief challenge is implementing a sweeping and unprecedented set of economic reforms in a number of key sectors, while simultaneously managing the social dislocation and unrest that such reforms engender. For the United States, the greatest risk lies in a political backlash if China's entry does not produce immediate benefits to American workers and industry or significantly reduce China's trade surplus with the U.S. This report underscores these problems and addresses how cooperation between the two countries on trade issues can improve the prospects for U.S.-China relations in general.