Trade
China’s big moment of choice on trade policy
Author: Tom Westland, ANU
It’s twenty years this week since China was admitted to membership of the World Trade Organization (WTO). That presaged a remarkable surge in Chinese trade, an industrial transformation on a scale not seen before in human history, China’s emergence as the world’s largest trading nation and its integration into the global economy in a way that was hardly possible to imagine just two decades earlier. It’s little wonder that the WTO is among the most widely respected international institutions in China today.
China’s rapid growth since its accession to the WTO — per capita incomes are now well over four times as high today as they were in 2001 — was the single most important poverty-reducing event of the past century. China’s decision to join the WTO, and the stringent conditions it had to meet to be accepted, have been major drivers of the vast structural change away from subsistence agriculture, making China the undisputed factory of the world economy. Its rise as a manufacturing powerhouse has profoundly shaped the way the world economy operates, leading to soaring demand for raw materials, challenging manufacturing industries in other industrial countries, and leading to a major shift in the balance of geopolitical power away from the United States and Europe and towards Asia.
The sailing has not always been smooth: while China has a good record of abiding by the letter of WTO law, it has not always lived up to its spirit.
Last month, the WTO completed its latest Trade Policy Review of China, the eighth to take place since China’s accession twenty years ago this month. The mood at the Review was rather darker than in the past, as a number of countries, including Australia, the United States, Japan and India, took the opportunity to stick the diplomatic boot in over China’s recent attempts to use economic coercion — mainly by application of strategically chosen import bans — in the service of its geopolitical goals. Other delegations, while drawing attention to work still to be done by China, were more positive.
These complaints are not new, nor are all of them unjustified: in more-or-less every one of China’s reviews since the first in 2006, Western countries have needled Beijing over what they see as reform backsliding. Perennial grievances include opaque customs procedures, trade bans with flimsy or non-existent justifications, and lack of transparency over the vast array of subsidies it has doled out to domestic industries. On the other hand, subsidies on the wind turbine industry, for example, were wound back at WTO instigation.
China’s record in the WTO is much better than Western narratives suggest. It implemented its WTO accession protocols not only because it agreed to them but because they propelled the domestic reforms the leadership wanted to put in place. The accession agreement roadmap only ran for 10 years. If China has not always stuck to the spirit of its accession agreement, it has usually accepted the rulings of the WTO’s arbitration.
Perhaps the harshest critic of China’s track record, the US-China Business Council, has been clear in the past that although ‘China has fulfilled most of the specific obligations of the accession agreement, China has not implemented a number of important commitments’. Specifically, ‘new areas not envisioned at the time of the accession negotiations were not covered by the agreement’. The rules are outdated and have not kept up with commerce in this century, a problem that is not entirely China’s fault as the United States itself has opted out of playing by the old WTO rules and forging new ones.
The dominant view in Washington these days is that China’s declared desire for a more open, market-oriented economy is not to be taken seriously, and that it will continue to operate a dirigiste model of state intervention in the economy for decades to come. This is more than a little hypocritical, given the recent bipartisan American embrace of industrial subsidies and managed trade with China and Europe. It also seriously underestimates both the major role that markets place in allocating resources within the Chinese economy and the political will for reform in Beijing. China’s recent application to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) will require a major commitment on Beijing’s part to dismantle the role of state-owned enterprises in the Chinese economy.
If the United States no longer has the will to lead in the global trade system, it is…
Trade
Self-Reliance and Openness: Core Principles of China’s Third Plenary Session
The Third Plenum communique from the CCP indicates a prioritization of stability and compromise in response to China’s economic challenges. It highlights the concept of Chinese-style modernization and establishes political guidelines for balancing regulation and market forces.
The CCP’s Third Plenum communique signals a focus on stability and compromise in the face of China’s economic challenges. It emphasises Chinese-style modernisation and sets political directions for balancing regulation and market forces. While not as groundbreaking as previous plenums, it acknowledges the importance of market mechanisms and technological self-reliance, aiming to address issues like high youth unemployment and private sector uncertainty. The communique seeks to navigate the complexities of global competition and domestic innovation, potentially reshaping global supply chains and trade dynamics. Overall, it presents a pragmatic blueprint for China’s economic future.
Source : Self-reliance and openness central pillars of China’s Third Plenum | East Asia Forum
Trade
Trade Prevails Over Political Persuasions in China-Germany Relations
China and Germany maintain a strong bilateral relationship, rooted in economic cooperation despite ideological differences. Recent visits and agreements focus on expanding trade and addressing mutual concerns, navigating challenges while nurturing ties.
Evolving Bilateral Ties
China and Germany share a strong bilateral relationship, rooted in history since 1972. This connection has seen moments of cooperation intertwined with periods of tension. German Chancellor Olaf Scholz’s April 2024 visit underscores Germany’s commitment to fostering this partnership, reflecting a mutual interest in maintaining economic ties despite ideological differences.
Economic Pragmatism
As the second and third largest global economies, China and Germany’s economic interdependence is crucial. Germany emerged as China’s primary trading partner in 2023, with trade values reaching €254.4 billion (US$280 billion). In response to global scrutiny, Germany has taken a balanced approach, emphasizing economic stability over political discord. This was evident during Scholz’s prior visit in November 2022, where his diplomatic tone contrasted with broader EU sentiments.
Facing Challenges Together
Despite increasing public skepticism in Germany regarding China’s global influence and human rights issues, both nations continue to seek common ground. Their October 2023 Joint Statement highlights intentions to pursue cooperation in areas like carbon neutrality and open markets. To navigate these complex terrains, Germany can utilize its institutional frameworks to enhance dialogue, while also considering supply chain diversification to reduce dependency on China. The intertwining nature of their economies suggests that, despite challenges, both countries will continue to prioritize their substantial trade relations.
Source : Trade trumps political persuasions in China–Germany relations
Trade
Fixing fragmentation in the settlement of international trade disputes
Fragmentation in global trade due to the lack of development in multilateral trade rules at the WTO has led to an increase in FTAs. The Appellate Body impasse has further exacerbated fragmentation, requiring a multilateral approach for reform.
Fragmentation in Global Trade
Fragmentation in global trade is not new. With the slow development of multilateral trade rules at the World Trade Organization (WTO), governments have turned to free trade agreements (FTAs). As of 2023, almost 600 bilateral and regional trade agreements have been notified to the WTO, leading to growing fragmentation in trade rules, business activities, and international relations. But until recently, trade dispute settlements have predominantly remained within the WTO.
Challenges with WTO Dispute Settlement
The demise of the Appellate Body increased fragmentation in both the interpretation and enforcement of trade law. A small number of WTO Members created the Multi-Party Interim Appeal Arbitration Arrangement (MPIA) as a temporary solution, but in its current form, it cannot properly address fragmentation. Since its creation in 2020, the MPIA has only attracted 26 parties, and its rulings have not been consistent with previous decisions made by the Appellate Body, rendering WTO case law increasingly fragmented.
The Path Forward for Global Trade
Maintaining the integrity and predictability of the global trading system while reducing fragmentation requires restoring the WTO’s authority. At the 12th WTO Ministerial Conference in 2022, governments agreed to re-establish a functional dispute settlement system by 2024. Reaching a consensus will be difficult, and negotiations will take time. A critical mass-based, open plurilateral approach provides a viable alternative way to reform the appellate mechanism, as WTO Members are committed to reforming the dispute settlement system.
Source : Fixing fragmentation in the settlement of international trade disputes
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