Enter the Dragon VII: Finding China’s Proper Role in WTO Negotiations

Ever since China’s accession to the WTO in 2011, one of the most intriguing questions has been: what does the Chinese accession mean to multilateral trade negotiations?

Answer: it depends on whom you happen to ask. Some commentators argued that the addition of China would strengthen the developing country bloc and make the WTO a more balanced institution. Others, however, were not so optimistic and worried that the Chinese accession would upset the status quo of the WTO and make it more difficult to conduct negotiations and reach decisions.

So which theory turned out to be true? If we look at China’s track record in WTO negotiations over the past decade, we can see that it doesn’t neatly follow either prescribed path. Instead, there have been two distinctive stages in China’s participation.

In the beginning phase of the Doha negotiations, China took a rather cautious approach. While it submitted its first negotiating proposal as early as six months after its accession, most of its earlier years in the WTO were spent on observing the negotiations rather than making active interventions. Most of the time, the Chinese delegates would sit quietly in the negotiating room and take notes. On the rare occasion that they took the floor, they usually just recited word by word from pre-prepared notes and refrained from interacting with other delegations.

There are several reasons for China’s reticence:

First, this is a deliberate choice by China. As a newly-acceded Member, China argues that, it has already made substantial commitments in its accession package. Thus, it should not be required to make more concessions in the new round. At least during the first few years after China’s accession, most other WTO Members were sympathetic to this argument, and this provided China the breathing space to digest and implement its accession commitments.

Second, even if China wished to participate more actively, it wouldn’t have been able to do so due to its lack of familiarity with both the substantive rules and operating procedures in the WTO.

Third, even if China had both the intention and capacity, it wouldn’t have much role to play in the early years of the Doha Round, when agriculture was the main focus of the negotiations. As the US, EU, India, Brazil and Australia each had strong interests in agriculture trade, they formed the core negotiating group in the Round. In contrast, China did not have a strong interest in the agricultural negotiations as it is a net importer of agricultural products and most of its agriculture products were sold in its huge domestic market. Instead, China was preoccupied with the discriminatory clauses that were tailored-made for China, which had a much more direct impact on Chinese exports than general WTO rules applicable to other members, at least during the transitional period.

However, things started to change in 2006, when the Members managed to resolve most of the outstanding issues in agricultural negotiations and moved to the next major item on the agenda – non-agricultural market access (NAMA), or industrial tariffs. As the largest manufacturer and exporter of industrial goods, China is regarded as the key to NAMA negotiations. This view is shared not only by developed countries, which have very low tariffs on industrial products, but also by developing countries, which notwithstanding their much higher tariffs still worry about the competition from Chinese products in both their domestic market and world market. This concern is well captured by the remarks by the Brazilian Foreign Minister Amorim, who argued at the 2007 min-ministerial conference among US, EU, Brazil and India in Potsdam, Germany that Brazil needed to maintain its right to impose high tariffs on manufactured goods to provide “policy space” against risk of “deindustrialization” by China.

However, by then, China has become well-versed in the craft of trade negotiations and started to adopt a more practical approach to the negotiations. On the one hand, as the largest exporter, China shares many interests with developed countries. One example is trade facilitation. While many developing countries are against the inclusion of the issue, given its position as one of the top exporters in the world, it is actually in China’s interest to push for the inclusion of trade facilitation in the WTO framework to make the customs processes of its exporting destinations more efficient and cheaper. On the other hand, as a country with a large low-income population, China also sympathizes with the concerns of many developing country members. This is why China supports the demand by India that developing countries should be entitled to a list of special products that will be exempted from tariff cuts, as well as a special safeguard mechanism that can deal with surge on particular agricultural imports.

In summary, after many years hiding in the shadow, China has finally emerged in the centre of the WTO negotiations.  However, as discussed above, this is not of China’s own volition, but more the result of the collective efforts by other major players to “push” China into the inner circle.  Given China’s importance as one of the biggest traders, including China in the “big boys’ club” is probably a good thing for the WTO. At the same time, the other major powers should also try to resist the temptation of making excessive demands to China. They have to recognize that, while membership in the coveted inner club certainly entails more responsibility, they cannot have unrealistic expectations for China, a country that has grown up, but has yet to learn how to use its newly-developed muscles. Indeed, given its painful history of being pushed around by world powers between 1840 and 1949, China cherishes its hard-won sovereignty and resents being bullied in international affairs. Thus, any attempt to single China out in the WTO negotiations probably would not go down well with China. Instead, shared rather than forced responsibility is what will truly integrate China into world trade governance.  

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