The recent fifth round of the China-US Strategic and Economic Dialogue (S&ED) in Washington from July 10-11 harvested 91 results and covered a whole spectrum of strategic and economic issues, including responding to regional and global challenges, strategies, web security, energy, environment, economic policy, financial stability and reform, open trade and investment, science and technology, agriculture, public health, sub-national cooperation, and others. It has charted the general course of China-US cooperation, and prepared the specific agenda for the next twelve months.
A noticeable result was the joint consensus and commitment to support the multilateral trading system, and the targeting of the early harvest of the Doha Round in the WTO. The paragraph in the joint declaration goes reads that: “The two sides reiterate their support for the multilateral trading system…”, and “The two sides commit to intensifying communication and coordination to jointly advance the talk on the early harvest package and approaches to move forward negotiations on the remaining elements of the Doha Round, with a view to successfully concluding negotiations.” It marks a good step forward in China-US cooperation for fostering the multilateral trading system, as a similar statement was not found in the fourth S&ED joint declaration.
Another noticeable point is the absence of any statement on the TPP; nor on CJK and RCEP.
What signals does this send?
These moves clearly show that both China and the US have realized that the global multilateral trading system, represented by the WTO mechanism, is the most important, all-inclusive umbrella for open trade and investment in the years ahead. The Doha Round, the current global trade liberalization negotiations, provides the fundamental base for all the relevant regional and bilateral FTAs. While pursuing each other’s own RTAs and FTAs, the Doha Round still prevails.
Doha Round at a Critical Juncture
The Doha Round, launched at the WTO Doha Ministerial Conference in November 2001, has been lingering for nearly 12 years, without a definite sign of conclusion. The sharp differences between the developed and developing member states on agricultural subsidies, and the related non-agricultural products market access (NAMA) once led the whole negotiation to a deadlock. The parties also have failed to share positions on transparency in government procurement, interaction between trade and competition policy, and the relationship between trade and investment. Those three topics were later dropped.
At one time, the Doha Round looked like it was still alive, but without consciousness. All the “doctor” members around the bed pledged to save him, but couldn’t agree on the medical prescription.
The 9th WTO ministerial meeting (MC9) is scheduled for December 3-6, 2013, in Bali, Indonesia. If the MC9 still fails to reach a partial deal, the ultimate fate of the Doha Round will be in real danger.
There is, however, a chance for partial success. WTO members had intense and tenacious negotiations in the past year. Negotiations on trade facilitation, least developed countries (LDC), and dispute settlement understanding have resulted in a positive outcome. LDCs have obtained eight years more leeway on protecting intellectual property. The negotiation on special and different treatment is also moving forward with six agreement proposals. Pascal Lamy, the WTO director general, has described the June-July negotiations as “the last gas station before Bali.” Hence, the Doha Round is gathering some momentum again. Now, an early harvest package plan is on the table. A strong, persistent push and meticulous consultation among members will most likely lead to an agreement on this package, meaning a half-way deal and a new prospect for the full conclusion in the future.
China and the US are the world two largest trading powers, with the total trade volume combined accounting for over 20% of world trade. Both countries are major stakeholders in the multilateral trading system, and thus play a key role in the Doha Round. Now that we have a joint commitment, China and the US should lose no time in working together to prepare various proposals and negotiations, and communicate with different groups of WTO members. Both sides should focus on facilitating trade (with an emphasis on assistance for least developed countries) and dispute settlement understandings, and try to clinch a broad consensus among all the WTO trade ministers before December, in order to secure a solid agreement at MC9. If done, China and the US will make great contributions, not only to world trade liberalization, but also to the logical evolution of various RTAs and FTAs on the common base of the WTO.
RTAs/FTAs and WTO are Complementary
The TPP, TTIP, CJK , RCEP and the like are hot words of the day. There have been over 300 RTAs and FTAs developing at the same time. It can lead to a misunderstanding that WTO is no longer functional, and that countries have to find their own ways through various RTAs and FTAs. The US is energetically pushing forward the Trans-Pacific Partnership (TPP) and the Transatlantic Trade and Investment partnership (TTIP). China is not a player in either of them, but it has its own RTAs and FTAs agenda. China is actively pushing forward with the China-Japan-South Korea FTA (CJK), with a Regional Comprehensive Economic Partnership (RCEP) among the ASEAN 10 plus 6. China has just concluded a FTA with Switzerland and is negotiating another with Australia. The US, in turn, is a player in none of the above. Therefore, people are trying to figure out how the two countries should handle the integration of them all. However, we should all do a good job in making the Doha Round a success in any way we can to avoid a serious issue.
Post-war history has repeatedly proved that regional or bilateral arrangements on trade, currency, investment or broad economic cooperation can be fruitful only under a global umbrella. The European Monetary Mechanism in the 1990s was workable, partially because of the role of the IMF. While various regional development banks have functioned well, they can never replace the World Bank. While hundreds of regional summits, country unions, or inter-government institutions are active each day, none of them can replace the UN; rather, they have been reinforced by the UN umbrella. The WTO mechanism provides the basic principles and trade rules in global free trade, and thus provides the very foundation for each of the RTAs and FTAs to move a step further. Numerous free trade arrangements at regional or bilateral levels, without a global umbrella, will undoubtedly conflict with each other, leading to conflicts on specific matters, or a declining benefit for all.
By jointly contributing to the multilateral trading system, China and the US will find new common interests and solutions in handling the interactions of TPP, CJK , RCEP, and others. In turn, the bilateral trade relationship can also be solidly anchored in a broader, more constructive multilateral trading system context.
He Weiwen is Co-director of the China-US/EU Study Center at the China Association of International Trade, and a standing council member at the China Society for WTO Studies.