Game-Changer or Game-Maker: 20 Years of China in the WTO

By Reetuparna Vishwanath

In December 2021, China completed 20 years as the 143rd member of the WTO, having joined the trade organization on December 11th, 2001 and having followed several years of accession negotiations. To reflect on China’s incredible journey through these years, including both its triumphs and concerns, CEAS and OpenEconomics hosted a panel discussion with experts in the field on Monday, 2nd May. The event was opened by WTO Deputy Director-General, Xiangchen Zhang, and was moderated by WTO Chief Economist, Dr Robert Koopman.

In his keynote speech, DDG Zhang chose to take a diplomatic stand on China’s accession journey, highlighting China’s role from a positive perspective–lifting millions out of poverty–on the one hand, and the “China Shock” or the “gap between China’s performance and the expectations of some members,” on the other. He acknowledged the great strides made by China in these 20 years, such as moving up from the 15th spot in 2001 to the top exporter in the world, becoming the world’s largest economy, lifting a fifth of the global population out of poverty as well as mutually benefiting its trading partners. He explained the China Shock by attributing it to the negative effects of globalisation, rebuked the blame game against China, as it is a fact that there are both gainers and losers in international trade, and encouraged a discussion based on analytical research.

There was general agreement amongst the panelists that we need less finger-pointing and as Ms Verghese, Policy Lead in International Trade and Investment at the World Economic Forum said, “accession is not the end of the story,” rather “a lot of work needs to be done domestically afterwards.” Recognizing the benefits that China’s trade growth has brought to the table, including a reduction in trade distortions, and benefits to multinationals entering the Chinese market, there is now a need to focus on, as Dr Yuan, assistant professor at IHEID, said, “compensating the losers while making the cake bigger.” In the same vein, Ms. Verghese contends that there is a need for strengthening the relationship between China and the other members and building trust, rather than having a “divorce” between the key players.

However, the glaring concerns raised by various members of the WTO against China’s way of doing business must be addressed if there are any hopes of improving trade relationships and making headway in dealing with, as Dr Koopman stated, the problems of the global commons like the next pandemic or climate change. There has been much dialogue in recent years about leveling the playing field. Issues that need to be addressed, including forced technology transfer, lack of regulations in the WTO regarding state-owned enterprises and special and differential treatment, are at the forefront of discussions now more than ever. As Ms Verghese mentioned, China’s response to these raised concerns has been that “WTO reform cannot just be about China” and that there are “other systemic concerns like unilateral actions, the use of national security exception, the appellate body crisis and the use of trade remedies” which need reform, all the while keeping the interests of developing countries in mind.

When found guilty of WTO rule violations, China has responded by taking steps to remedy its actions, unlike the US and the European Union which have ignored several WTO rulings. At the same time, China has ramped up its efforts in furthering other plans which the US does not agree with, such as state subsidies. Ms. Verghese also pointed out how the WTO “almost steps away in times of crises”, that “the rules stop for a member once it determines that they are in a crisis” and that guidance is needed as to what international organizations like the WTO can do to have better enforcement of rules as well as greater clarity in determining which situations can be considered as crises while making economic sense of them.

The discussion then moved on to regionalization and restructuring of Global Value Chains, with Dr Koopman raising concerns about whether the international community should be worried about a “new economic iron curtain” as a result of the recent US-China trade wars. The world  is witnessing a unique time in history wherein, with increased globalization, we see multinationals also getting regionalized in their supply chains due to political divisions. Additionally, with China’s dual circulation model, we might see a shift in the demand side of GVCs from being centered in the US to moving to China and other Asian countries. Dr Yuan endorsed the dual circulation model of China and justified that it is imperative to rebalance disparities and to have insulation from global supply chain shocks, especially in light of the pandemic and the Russia-Ukraine war. In her view, dual circulation does not mean that we will have two markets simultaneously, rather it is a way for China to grow in a more balanced manner.

Going forward, China has shown interest in participating in the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), which is viewed by some as a trick move to disturb the trade bloc’s momentum, with some having doubts about China’s motivation to adhere to the rules of CPTPP. For China, being part of CPTPP would mean following stringent rules against state subsidies on state-owned enterprises, a ban on data localization and the forced transfer of source code data which are not in line with China’s data laws. Whether or not China’s interest in being a part of CPTPP is a “spoiler” is yet to be seen.

As a takeaway from this panel discussion, there is no doubt that China’s achievements have greatly surpassed everybody’s expectations, including its own, over the last 20 years. China has been able to benefit from the international trade exposure without conforming to Western democratic ideals that some members were hoping for. From what we have learnt from history, China has set its path, navigating the rules of the WTO to its advantage, while also bringing great economic development both within the country and for its trading partners in the developing world. There is hope for comprehensive WTO reforms that address both the concerns of developing economies and the challenges faced by other members regarding a level playing field. Notwithstanding, as Dr Lu, Managing Director of LEDECO Geneva, rightly pointed out, “WTO is not the panacea for all problems, and anything that is rooted in domestic problems cannot be solved with international trade regulations.” Hence it is time that the major powers, instead of finger-pointing, look inward for domestic reforms and aim for more efficient multilateral cooperation.