WTO
China’s 20-year engagement with the WTO: Opportunities, challenges, and responses
Published 05 December 2023
China’s accession to the World Trade Organization in 2001 ushered the integration of the world’s largest transitional economy into the rules-based trading order. In a new book, Hinrich Foundation advisor Henry Gao and co-editors Damian Raess and Ka Zeng assess the impact of China’s entry to the WTO on the power dynamics within the multilateral system and the country’s domestic development. Here’s an introduction.
The year 2021 marked the 20th anniversary of China’s accession to the World Trade Organization (2001), an event that has stimulated the unprecedented integration of the world’s largest transitional economy into the rules-based multilateral trading system. Since its entry, China has benefited significantly from enhanced trade flows made possible by its WTO membership, becoming the largest trader in goods and the second largest trader in services in the global economy today. Beijing’s efforts to implement its WTO accession commitments have generated profound changes in its domestic regulatory framework in the areas of trade and beyond.
At the same time, China’s involvement in various WTO activities such as trade negotiations and dispute settlement has also changed the power dynamics within the WTO and presented unparalleled challenges to the functioning of the organization due to both the size of its economy and its unique economic model.
Outside of formal international economic institutions, China has actively negotiated bilateral investment treaties (BITs) and preferential trade agreements (PTAs) to secure expanded market access for Chinese goods, services, and capital. At the same time, Beijing’s ambitious Belt and Road Initiative is increasingly subsuming much of China’s economic (and political) involvement abroad (Ferdinand, 2016; Shaffer and Gao, 2020).
While these developments have accelerated China’s economic rise, transforming the country into the manufacturing center of the world and unleashing a global buying spree by Chinese firms, they have also provoked a strong backlash against Chinese influence (Colantone and Stanig, 2018; Raess, 2021). The ongoing trade war between the United States (US) and China, which, at the time of this writing in July 2022, has completed its fourth full year and still has no end in sight under the US administration of President Joe Biden, further speaks to the potential for the long-term strategic rivalry between the world’s two largest economies in the years to come.
Looking back, the 20 years since China’s accession to the WTO provide excellent opportunities to take stock of the implications of China’s economic rise (for an assessment of China’s first decade in the WTO, see Zeng and Liang, 2013). In particular, they raise important questions about the impact of WTO membership on China’s domestic development, China’s influence on the evolving global economic governance structures, and government responses in countries that are engaging China economically, responses that in turn shape global trade governance (for a broader evaluation of the country’s trajectory in the international political economy, see Breslin, 2007; Zeng, 2019).
On the first question, contributing authors suggest that China’s WTO accession has had a profound effect on the Chinese economy and society. Notably, WTO membership has stimulated China’s phenomenal trade and economic growth. It has additionally prompted substantial domestic policy changes in China as the Chinese leadership sought domestic reforms to comply with multilateral trade disciplines and adverse WTO rulings in areas such as agricultural trade and intellectual property rights (IPR) protection. In the latter case, for example, the WTO’s Agreement on the Trade-related Aspects of Intellectual Property Rights (TRIPS) has generated many benefits and incentivized the Chinese leadership to improve its IPR regime in an effort to encourage indigenous innovation.
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In the sensitive area of legal reform, efforts to implement its WTO obligations and commitments have introduced changes to the Chinese legal system. Even though barriers deeply entrenched in Chinese culture and society have impeded Beijing’s ability to fully comply with its WTO obligations, China’s growing integration into the rules-based WTO system has increasingly subjected it to WTO discipline in ways that have had transformative effects on Chinese society.
The domestic changes brought about by WTO membership have in turn increased China’s economic clout and its weight in the global trading system, generating growing frictions between Beijing and its trading partners. Consequently, this volume additionally examines how China’s rise has altered the power dynamics within the WTO. Contributing chapters suggest that China’s status as both the second largest economy in the world and the largest developing country has heightened the tensions between its preference for special and differential treatment (SDT), on the one hand, and the organization’s key underlying principle of reciprocity, on the other hand, precipitating heightened competition between the US and China that have threatened to derail major multilateral trade initiatives.
This clash was further exacerbated by the growing divergence in the economic interests of China and developing and emerging economies. This latter set of conflicts has undermined the hope for solidarity among the Global South and introduced a new competitive dimension that further complicated the North-South divide which has impeded multilateral trade negotiations in the past. Overall, these developments highlight the challenges that China’s emergence as a key player has posed to the WTO and their implications for the stability and viability of the multilateral trading system. In view of the developments outlined above, how have governments and the public in major trading partners been responding to China’s economic ascent? This volume engages this question and addresses reactions to the rise of China at both the government and individual levels.
At the government level, frustrations with the difficulties of engaging China within the WTO have resulted in the revival of unilateral trade policies, as reflected in the recent trade war that Washington has launched against China. They have also led foreign governments to embrace the use of targeted, unilateral discriminatory measures to address trade concerns with China. Despite ongoing discussions of WTO reform, the substantial differences in the preferences and negotiation positions of the major players have continued to dim the prospect of multilateral trade cooperation. At the public level, China’s economic rise has raised important questions about the degree to which attitudes toward China may be conditional on factors such as the presence of compensatory welfare and labor market policies or bilateral political relations.
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Author
Henry Gao
Henry Gao is Professor of Law at Singapore Management University and Dongfang Scholar Chair Professor at the Shanghai Institute of Foreign Trade.
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Author
Damian Raess
Dr. Raess joined the WTI, University of Bern, as SNSF Professor in 2017. He is a political scientist specializing in International Political Economy.
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Author
Ka Zeng
Ka Zeng is Distinguished Professor of Political Science and Director of International and Global Studies at the University of Arkansas. Her research focuses on China’s role in the global economy, in particular Chinese trade policy, China’s behavior in global economic governance, and China-related trade dispute dynamics.
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