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WTO Reform: China’s Approach

Nov 12, 2020
  • Chen Lu

    Assistant Fellow, Institute of World Economic Studies, CICIR

On Oct. 28, the World Trade Organization convened an informal meeting for heads of delegations and announced that Nigeria’s Ngozi Okonjo-Iweala would be its next director-general. The choice was supported by most WTO members but rejected by the United States. The U.S., saying it would continue supporting Republic of Korea candidate Yoo Myung-hee, drove the historically consensus-based process to impasse.

This scenario is a classic example of the status quo at the WTO in recent years. Impasse, paralysis and helpless are all words that have been used frequently of late to describe the organization’s executive appointments and operations. Geopolitical wrangling has appeared frequently on the WTO stage.

Members agree unanimously that the watchdog, which has made outstanding contributions to global trade development and economic governance, has reached a point where reforms are imperative. Yet they are divided over how much to reform, where to start and how to proceed.

China has consistently supported the multilateral trading system, with the WTO at the core, and actively participated in all dialogues on reform. It believes that reforms should answer the call of the times by first tackling the existential crisis the organization faces now by enhancing its authority and effectiveness. The drastic, fundamental reforms a small number of members have proposed, and their abuse of veto power, are harmful to the WTO’s long-term development.

China believes a dysfunctional dispute resolution mechanism caused by the de facto paralysis of its appellate body is the foremost problem — one that endangers its very existence. Without effective mechanisms, the international trade order will decay to the law of the jungle, where national strength and diplomacy determine wins or losses and every dispute can evolve into a trade war in which countries react and retaliate through tariffs or other means. In this jungle, the relatively weak developing nations of the world are the main victims.

The U.S. role in the creation of such a scenario is obvious to all. More than 120 WTO members have called for restarting the process of screening judges for the organization’s appellate body as soon as possible. China agrees that the WTO’s dispute resolution mechanism has defects, yet it also resolutely supports the mechanism’s pivotal role in the WTO and has been working with members like the European Union to find a way out of the crisis.

The multilateral provisional appeals arbitration arrangement China now participates in is just a temporary mechanism. China remains devoted to ultimately restoring the normal operations of the appellate body. The U.S., on the other hand, has repeatedly blocked reform plans that other members have proposed but has yet to come up with any of its own. U.S. Trade Representative Robert Lighthizer’s June statement that it would be good if the WTO appellate body never gets back to work set many to doubting the current U.S. administration’s sincerity about reforms.  

Since 2017, the abusive use of national security exceptions by the U.S., combined with unilateralist measures and trade protectionism, have disrupted the international order and the rules by which the game is played. Like many other WTO members, China believes there should be effective countermeasures. As of today, however, the phenomenon is yet to be contained or restrained because of the dysfunctional dispute resolution mechanism.    

China concedes that WTO negotiations have been slow and have lagged behind the demands of our time, resulting in a situation in which some existing rules are obsolete and some needed ones are absent. So it has participated in ongoing negotiations on such topics as fishing subsidies, agricultural subsidies and e-commerce in an active and constructive manner, spearheaded multilateral discussions on such emerging subjects as investment facilitation and worked to perfect WTO rules so they are fair and inclusive. China also encourages all parties to WTO negotiations to be pragmatic and consensus-oriented, while ensuring transparency and inclusiveness.

Development is the focus of the WTO’s work, a focus that has attracted many developing nations to join. As the world’s largest developing country, China holds that developing countries deserve customized, differentiated treatment. This is a right that flows from history, and it should not be forsaken because of one member’s dissatisfaction. Rather, countries should give it full play and apply it effectively.

China is also flexible and made clear early on that at such future time that it no longer needs special and differentiated treatment, it would leave opportunities to other developing members. In fact, the special and differentiated treatments China now enjoys are quite limited. Chinese Ambassador to the WTO, Zhang Xiangchen said that of the 155 clauses on special and differentiated treatment in the current WTO agreement, only 25 directly involve members’ rights and obligations. China enjoys only eight of those substantial rights.

As to the attempt by such members as the United States and Japan to include so-called market orientation conditions in WTO reforms, China insists that changing a country’s economic model should not be a WTO goal. No member should be subject to discriminatory treatment because of its political or economic system.

Many people have found reason to doubt those who have raised a question: Are impulsive moves to hike tariffs, strangle the state-owned enterprises of other countries, impose pressures on trade negotiations and disrupt market order in line with a market orientation?

The COVID-19 pandemic has increased the pressure on global supply chains. Protectionism has gone rampant. The trade environment has suffered severe blows. And fair and efficient distribution of vaccines and related therapeutics faces challenges. The world needs a powerful and effective WTO now more than anytime before. As always, China will actively participate in consultations on WTO reform. It will contribute to the revitalization of the multilateral trade regime and the establishment of a fair and just global trade system in accordance with its own capabilities. It also hopes that all concerned parties will make a concerted effort to help the WTO rise above its current troubles.

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