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Economy

Passive No More in WTO

Dec 29, 2021
  • Zhang Monan

    Senior Fellow, China Center for International Economic Exchanges

On Dec. 11, 2001, China officially became the 143rd member of the WTO after 15 years of negotiations to resume its status as a contracting party to GATT.

China’s WTO accession was a milestone in the country’s economic and social development and its reform and opening-up process. It was an important turning point in accelerating the process of economic globalization and reshaping the global economic landscape.

China is both a beneficiary of the multilateral trading system and also its biggest contributor. Since joining the WTO, China has not only integrated with the global economy but has become an important driver of it. China has contributed more than 30 percent annually to global economic growth while blazing a path from passive compliance-based opening-up to active rules- and system-based opening-up.

Over the past 20 years, China has established a new system of foreign trade based on laws and regulations that are transparent, predictable and highly compatible with the rules of the WTO. It has completed — on or ahead of schedule — the commitments it made upon WTO accession and has further expanded its opening-up. China has amended its laws and regulations as promised and established an economic and trading system compliant with WTO rules.

Its reforms in the areas of tariff policy, trade facilitation, openness and laws and regulations have been effective. Taking two legal texts as the standard — the Protocol on China’s Accession to the WTO and the Report of the Working Party on the Accession of China to the WTO — China has not only fully fulfilled but also exceeded its accession commitments.

In terms of tariff and trade facilitation commitments, it has significantly lowered the institutional costs of import links, and the overall level of tariffs has been steadily reduced. Tariffs on goods has dropped significantly from 15.3 percent in 2001 to 7.4 percent, far below the 15 percent average tariff level of developing countries. The average tariff rate in the agricultural market has been reduced from 23.2 percent to 15.2 percent, which is about one-fourth of the world average tariff on agricultural products, and is close to the level of developed countries and developed market members in opening up to the world.

In the area of trade in services, China has continuously revised and improved a series of rules and regulations to further open up. Its commitments in the area of trade in services have been implemented, and market access has been significantly relaxed. At the time of WTO accession, China promised to open up 100 sub-sectors in nine major categories, and has now opened up more than 120 subsectors to varying degrees.

It is steadily expanding the opening-up of the financial sector, deepening the opening-up of agricultural, mining and manufacturing industries and accelerating the opening-up process in the fields of R&D, telecommunications, air transport, education, medicine and culture. Its opening-up has approached the average level of developed members.

In its 20 years of WTO membership, China fully integrated into the multilateral rule system globally and transformed from passively accepting rules to actively helping make rules. Internally, China has actively promoted the alignment with international norms of domestic rules, regulations and standards. Since the 18th National Party Congress, China has introduced a large number of policies aimed at alignment with high-standard international rules, including adjusting and standardizing industrial subsidy policies, cleaning up differential treatment policies for foreign and domestic enterprises and deepening government procurement reforms.

It is of particular note that as it faced the pressure of a new round of global rules competition, China took the initiative to expand its openness by promoting the development of free trade pilot zones and free trade ports. For example, it has accelerated the exploration of integrated management with respect to the negative lists for foreign investment and cross-border services at its Hainan Free Trade Port.

Externally, China has actively initiated and participated in the negotiation of regional economic and trade agreements, making outstanding contributions to the formation and development of bilateral and regional economic and trade rules. As of November this year, China had signed 21 free trade agreements (including upgrade agreements) and actively participated in improving international economic and trade rules and signing high-standard free trade agreements with other economies. For example, it actively promoted the signing of the Regional Comprehensive Economic Partnership Agreement (RCEP) and the China-EU Comprehensive Investment Agreement and proposed to join the Comprehensive and Progressive Trans-Pacific Partnership Agreement (CPTPP), the Digital Economy Partnership Agreement (DEPA) and other new initiatives. This highlights China’s firm determination to push domestic reforms forward and expand its openness more vigorously.

In recent years, China has firmly upheld the multilateral trading system with the WTO as its cornerstone and practiced its responsibility and commitment to genuine multilateralism. Not only has China actively promoted WTO reform by issuing documents such as the Position Paper on WTO Reform and China’s Proposal on WTO Reform, but has also accelerated open plurilateral negotiations. For example, as a major facilitator, China has taken the lead in initiating open plurilateral negotiations on investment facilitation and has gained wide support at the WTO, contributing Chinese approaches to strengthen the multilateral trading system.

Recently, China also co-sponsored negotiations on trade in services under the WTO, which culminated in the Declaration on the Completion of Negotiations on Services Domestic Regulation with 67 WTO members. The newly revised schedule of service concessions will be applied to all WTO members in accordance with MFN treatment.

However, in the context of global political and economic changes, the new round of WTO reforms continues to struggle. Not only is the existing decision-making mechanism failing to address the inequality between developed and developing members but the dispute settlement mechanism, one of the core pillars of the WTO, has come to a standstill because of the continued obstruction of judge selection for the Appellate Body by the United States.

This has dealt a heavy blow to the multilateral trading system. It is therefore imperative to revitalize the WTO negotiation function, break the deadlock of the Appellate Body and restore the normal operation of the dispute settlement mechanism.

As a responsible power, China should not only consider its own interests but also consider the design and promote the reform of the WTO mechanism from a broader perspective. It should support further plurilateral agreement negotiations on specific issues and bring a more positive and stable force into the effort to reform the multilateral trading system.

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