The big moment of choice of China in terms of trade policy

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Author: Tom Westland, ANU

It has been twenty years this week since China was admitted as a member of the World Trade Organization (WTO). It foreshadowed a remarkable increase in Chinese trade, industrial transformation on a scale never seen before in human history, the emergence of China as the world’s largest trading nation and its integration into the global economy in a way that was difficult to imagine two decades earlier. . It is no wonder that the WTO is today one of the most respected international institutions in China.

China’s rapid growth since joining the WTO – per capita incomes are now well over four times higher today than they were in 2001 – has been the event for poverty reduction the most important of the last century. China’s decision to join the WTO and the strict conditions it had to meet to be accepted were the main drivers of the vast structural change away from subsistence agriculture, making China the undisputed factory of the world economy. Its rise as a manufacturing power has profoundly shaped the workings of the global economy, leading to an increase in demand for raw materials, challenging manufacturing industries in other industrialized countries and causing a major shift in the balance of power. geopolitical powers away from the United States and the United States. Europe and to Asia.

The navigation has not always been smooth: while China has a good track record of adhering to the letter of WTO law, it has not always lived up to its spirit.

Last month, the WTO completed its last trade policy review, the eighth since China’s accession 20 years ago this month. The mood at the Review was darker than in the past, as a number of countries, including Australia, the United States, Japan and India, took the opportunity to highlight the diplomatic pressure on China’s recent attempts to use economic coercion – primarily through the application of strategically chosen import bans – in the service of its geopolitical objectives. Other delegations, while drawing attention to the work still to be done by China, were more positive.

These complaints are not new, and not all of them are unwarranted: in more or less all of China’s reviews since the first in 2006, Western countries have singled out Beijing for what they see as a setback on reforms. . Perennial grievances include opaque customs procedures, trade bans with shaky or no rationale, and lack of transparency over the wide range of subsidies it has distributed to domestic industries. In contrast, subsidies to the wind industry, for example, have been removed at the instigation of the WTO.

China’s record at the WTO is much better than Western accounts suggest. He implemented his protocols of accession to the WTO not only because he accepted them, but because they brought about the domestic reforms that the leaders wanted to put in place. The roadmap for the accession agreement lasted only 10 years. While China has not always respected the spirit of its accession agreement, it has generally accepted the rulings of WTO arbitration.

Perhaps the most severe critic of China’s track record, the US-China Business Council, has made it clear in the past that although “China has fulfilled most of the specific obligations of the accession agreement, China has failed to implement a number of important commitments ”. More specifically, “new areas not envisaged at the time of the accession negotiations were not covered by the agreement”. The rules are outdated and have not kept pace with trade in this century, a problem not entirely China’s fault, as the United States itself has chosen not to abide by the rules. old WTO rules and forging new ones.

The dominant view in Washington these days is that China’s stated desire for a more open and market-oriented economy should not be taken seriously, and that it will continue to exploit a interventionist model of state intervention in the economy for decades to come. That’s more than a little hypocritical, given the recent bipartisan adoption by Americans of industrial subsidies and managed trade with China and Europe. He also seriously underestimates both the major role markets place in resource allocation within the Chinese economy and the political will for reform in Beijing. China’s recent request to join the Comprehensive and Progressive Agreement on Trans-Pacific Partnership (CPTPP) will require a major commitment from Beijing to dismantle the role of state-owned enterprises in the Chinese economy.

While the United States no longer has the will to lead the world trading system, it is far from clear that, despite the progress it has made in the twenty years since joining the WTO, China has the ambition or the ability to oversee it. , That is. It is a dangerous time for a lack of global leadership. Pandemics breed protectionism. Given its weight in the global economy, Asia (including China) needs collective leadership that will defend, preserve and expand the mandate of the WTO. As China’s experience since 2001 has shown, participation in a liberal rules-based trade order is a prerequisite for sustained catch-up growth, a lesson low-income countries, especially in South Asia, have learned from. South and Africa, can learn a lot. But this negotiating order can only last as long as its participants commit to playing by the rules of the game – and updating those rules if necessary.

In Davos in January 2017, Chinese President Xi Jinping defended globalization and the order that ensured it as “the right strategic choice”. China’s interest – and, by extension, Asia – in a new leadership to defend this order requires that its actions now be true to the word of its president.

Tom Westland is Research Director in the Asian Bureau of Economic Research, Crawford School of Public Policy, Australian National University.


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