BY: Sultan M Hali
On the 15th Anniversary of China’s entry into WTO
November 11, 2001, marked a red letter day in the history of China’s trade – nay, the world’s trade, commerce and economy, when Shi Guangsheng, the then Chinese Minister of Foreign Trade and Economic Cooperation, signed the protocol on China’s accession to the World Trade Organisation (WTO) in Doha, Qatar, thus enabling China to become the 143rd member to join this prestigious system.
The WTO was established on 1 January 1995, as a result of the Marrakesh Agreement, signed by 123 nations on 15 April 1994. Its fore runner, the General Agreement on Tariffs and Trade (GATT), established fifty years earlier had provided the rules for the system. WTO is the only global international organisation dealing with the rules of trade between nations. It is governed by WTO agreements, negotiated and signed by the bulk of the world’s trading nations and ratified in their parliaments. The goal is to help producers of goods and services, exporters, and importers conduct their business. WTO is not just about liberalising trade, and in some circumstances its rules support maintaining trade barriers — for example to protect consumers, prevent the spread of disease or protect the environment. While the work done at WTO may have received acclaim, there has also been criticism on the world body of widening the social gap between rich and poor it claims to be fixing.
It is pertinent to examine that on occasion of the 15th anniversary of China’s WTO entry, which marks a milestone in China’s engagement with the global economy, what impact if any has China’s presence in this august world body made and what is the way forward.
China, itself having risen from abject poverty, is cognizant of the needs of the developing nations and has taken concrete steps to bridge the gap between the haves and the have-nots. The advent of the Asian Infrastructure Investment Bank (AIIB) and the BRICS Bank, the launch of mega projects like the Belt and Road Initiative (the Silk Road Economic Belt and 21st Century Maritime Silk Road), and the Transatlantic Trade and Investment Partnership are clear examples of multilateral arrangements and Regional Comprehensive Economic Partnership. China’s aim is to enable the countries struggling with weak economies to establish infrastructures which will provide them the opportunity to stand on their own feet.
China’s entry into the WTO has been a welcome change from the norm, particularly its shift from being a rule-taker to a rule-maker. China’s trading partners and the WTO itself had to adapt to China’s growing involvement, and consider the possible future paths of the WTO and the multilateral trading system. China’s active participation in the world body has earned it the right to be named a market economy; unfortunately, not everyone is comfortable with this reality.
Some western nations (more specifically, the US) feel threatened by China’s rising economy and greater influence in the WTO. The Wall Street Journal of 9 December 2016 in its Op-Ed titled ‘China Faces Off Against World on Open Global Markets’ claims: “China’s 15-year anniversary as a member of the World Trade Organisation threatens to trigger a clash with growing forces in the West that cast Beijing as an abuser of open global markets.” This is a very harsh statement and necessitates examination as it has also been quoted by other opinion makers including Jessica “Jet” Moody, who is the press secretary for the Alliance for American Manufacturing (AAM).
Moody has indulged in a long tirade in her Op-Ed ‘15 Facts About China on its 15th Anniversary of Joining the World Trade Organisation (WTO)’ enumerating conjectures and apprehensions which lead her to conclude that calling China a Market Economy would “remove many risks of punishment when Chinese companies are accused of selling products below cost.” These are strange remarks coming from a country which benefitted immensely from over two decades of low priced goods – which it now labels as the “Walmart Syndrome”.
The various factors cited by Occidental analysts range from the cumulative U.S. trade deficit with China which has cost the US 3.2 million jobs between 2001 and 2013; the feeling of some US companies that they felt foreign businesses are less welcome in China; that seventy-five percent of new steel stock since 2000 has come from China and there being over 1,000 antidumping cases initiated against China globally since 1995.
The detractors gloss over the fact that China bailed out the US economy by investing three trillion US Dollars in 2008 when the US was facing bankruptcy. The cost of labour is far cheaper in China than in the US. For Chinese companies, who acquired failing industries and services in the west, it is cost effective for employing the most economical factors of production – including labour – just to turn them around. The objectors tend to remain oblivious of the commitment that China took in 2001 i.e. to move, during those 15 years, from a centrally planned economy to one where the market allocates resources and fixes prices and costs. During this time China became a trading power. It progressed from representing 5.9% of world exports in 2003, to 13% in 2015, while import´s share increased from 5.4% in 2003 to 11% in 2015. China moved from producing 223 million tons steel in 2003 to 804 million in 2015. Its installed capacity, multiplied 4.2 times, from 278 million in 2003, to 1,154 million in 2015.
The world tends also to ignore the fact that global governance in its existent form is facing challenges, so a new form of global governance is emerging. With the Doha Development Round of the WTO coming to a halt, the major economies, which are in dire need of new global trade rules, have accelerated the pace of talks among themselves where China can play an effective role.
Wang Huiyao, president of Center for China and Globalisation (CCG), notes that the United Kingdom benefited from the earlier stages of globalisation, the United States did so from the later stages, and China is benefiting from the current stage. As such, China needs to continue to support globalisation and take the process forward by making better use of these arrangements to be able to write new global trade rules.
He Yafei, former vice-foreign minister of China opines that while defending the existing global governance mechanism with the United Nations at its core since the end of World War II, China advocates reform of international relations to establish a new win-win model based on common prosperity and shared development. Its proposals are in accordance with the interests of the entire international community. China is a defender of and contributor to the global governance mechanism, not a violator as some Western media outlets allege.
China supports the global trade and investment system featuring free, open and fair trade. It should continue to participate in and lead global governance to make it more open and transparent.
Beijing has been playing an increasingly important role in international relations; its initiatives of trade and commerce mentioned earlier, need to be applauded rather than opposed. Beijing aspires for world peace, which can only come through economic parity. This is a constant factor which Beijing realises – because once upon a time, it was treated as a pariah. Other WTO members started treating China as equal is one of the greatest benefits China got by joining the WTO. In other words, WTO rules regulate not only China’s policies toward the other members, but also the latter’s policies toward China. In many cases, these rules have helped China avoid becoming the victim of the domestic policies and politics of some Western countries. A case in point is the 2005 accusation by US senator Chuck Schumer, who accused China of “currency manipulation” and moved a bill to levy 27.5 percent tariff on all Chinese products exported to the US. Had that bill been passed, it would have spelled disaster for Sino-US trade because products labeled “Made in China” would cost 27.5 percent more in the US. The move sparked fierce discussions in the US, and Schumer was eventually forced to withdraw the bill, because it was against the multilateral rules of the WTO.
On occasion of the 15th anniversary of China’s entry into WTO, let us take an honest and unbiased look at China’s achievements, fulfilling its commitments to the world and understand that despite domestic pressures, a relative slow down of its own economy, doesn’t China deserve kudos for steering on a course of playing a more positive role as a major economic power?
Published in: Pakistan Today (December 16, 2016)