China stands for WTO as US shuns it

By Kerry Brown Source:Global Times Published: 2018/7/2 20:38:39

Illustration: Liu Rui/GT

The Chinese government issued a white paper from the State Council on China and the World Trade Organization (WTO) at the end of June. This is the first time that it has produced such a document. It comes at a time when the global trading order is under unprecedented strain. The timing of this paper therefore carries symbolic meaning.

The paper presents China's position on two issues. First, it shows a commitment to the continuation of the WTO and a need to support it. Second, it argues and presents data, which show that China has been a faithful and supportive partner in the system, and most importantly, has fulfilled its obligations.

China's effort to join what was originally the General Agreement on Tariffs and Trade (GATT) dates back to the 1980s. 14 years of tough negotiations with the almost 160-strong membership of what became the WTO in the 1990s culminated in the evening in late 2001 when the announcement was finally made that all the bilateral discussions had concluded and that the bloc accepted China as the member.

Joining was regarded with some ambiguity by commentators inside and outside China at the time. The premier in 2001, Zhu Rongji, argued that external competition would help in moving forward domestic reform. He had already implemented some of the most far-reaching changes in the State-owned sector from 1998, and having multinational companies come in and work in areas like manufacturing, technology and services would be beneficial. Those who were more skeptical said that Chinese business, and in particular agriculture, were yet not ready for such a radical change. They still needed support. There were many outside too who felt that the terms on which China joined the organization were too ambitious and that it would have a hard time fulfilling its commitments.

The following years saw China fulfill all of these obligations on time. It implemented the changes in tariffs and the opening up of the sectors that it had promised, as set out in the white paper. China also aligned its domestic rules with those of the rest of the WTO members. It abided by WTO rulings, when they were given. This was one of the key means by which China came to work in the global economy more smoothly.

There is good reason for why China is so supportive of the WTO today. 2001 and WTO entry will be seen as marking the moment when China's GDP simply exploded. There was a big rise in productivity which saw the Chinese economy quadruple over the ensuing decade.

It is ironic that now the increasingly protectionist Trump presidency has created a situation where it is China that is defending the global norms based system rather than the country that was so instrumental in setting it up, the US. Trump has in the past threatened to withdraw from the organization. This is mostly due to the large surpluses in trade figures that China, amongst others, currently enjoys with the US. Because of these, the American government imposed tariffs in mid June on some Chinese imported goods, and is saying that it will proceed to put in place more in the next few weeks depending on how Beijing responds.

Some of Trump's actions can be put down to frustration at the fact that China's entry to the WTO has been such a complete success but has evidently not brought about the broader political changes that many in the US and elsewhere were expecting. China has maintained its system, but successfully adopted the WTO economic reforms. For those around Trump, the issue is that China has appeared to win in this gambit - something they find impermissible in the era where everything is about "Making America Great Again." But China can rightly respond that this was never part of the agreement they signed, so why should there be such sour grapes about this issue today. What they signed, they honored.

The white paper on WTO therefore makes clear that China is frustrated at the way in which it has been perceived - as a passive member of the system, taking benefits and not giving anything back. It sets out reasons for why China in fact has been positive, supportive and a contributor to the global system.

More importantly, the very fact that a white paper like this is being issued also speaks to something more significant and strategic - a growing awareness in China that it, rather than the US, now needs to speak up more clearly in support of a global system which is under attack from the very country that put it in place. America's retreat from the global order creates a vacuum that China did not want, and has no choice now but to work with others to mitigate.

The WTO had plenty of problems. But it was the only system in place. A world without it functioning at least moderately effectively would be a far less predictable, and stable, one in terms of trade flows and business sentiment. For that reason, China is now speaking up forcefully for an entity it took 14 years to join, and which so many thought it would never be able to fully function in. We live in the era where China is the great defender of the values of world trade, and the US under Trump is fast becoming an antagonist and opponent.

The author is professor of Chinese studies and director of the Lau China Institute, King's College, London, and an associate of the Asia Pacific Programme at Chatham House.

Posted in: VIEWPOINT

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