China's Excellent WTO Adventure

"This is a game we can win"

September 14, 2023. President Xi called the WTO an important pillar of multilateralism and stage for global economic governance, adding that there is consensus and a general trend to reform it.

In 2003 a Shanghai banker mentioned China’s accession to the WTO and I reflexively cursed it as a Cold War relic of anti-development trade norms. Without missing a beat he replied, “I agree with you but still, this is a game we can win”.

Today, after twenty years, China has won the WTO game and the West is threatening disengagement. But that would condemn the Golden Billion to rising inflation and technological disadvantage, as we are seeing with 5G and CBDCs.

Unequal treaties

‘Free trade’ has always been an imperial project and Free trade pacts waxed and waned with national power and commercial gain. British gunboats cajoled weaker nations into accepting treaties that involved no concessions by Britain herself, and the US emulated her until the WTO came into existence in 1994. At that point, the West’s 9% of global population represented 56% of global GDP – and the West wanted to keep it that way.

China had first requested GATT membership in 1986 but acceded, under punitive conditions, to the renamed WTO in 2001. Though she fought to protect twenty million jobs and vulnerable industries, her fight made little difference.

China was given seven years to reduce tariffs on trade goods by 90% (richer Brazil got 31%, India 48%); allow broader and deeper liberalization of financial, telecommunication, professional and distribution services than any comparable economy; open markets and eliminate state monopolies on imports and exports; significantly change domestic laws, regulations, and practices; open the economy to competition and overhaul all relevant domestic laws, regulations, procedures, administrative and judicial institutions across all levels of government; make deep tariff cuts for imports; liberalize services and agree that trade regulations would be nondiscriminatory and standard-setting would be transparent and based on international standards; implement stringent IP protection and independent review of all trade-related actions by judicial or administrative tribunals.

Despite nationwide panic about vulnerable jobs, Beijing launched a PR campaign supporting accession. WTO centers around the country staged thousands of seminars and published more books on WTO law than the WTO itself. Five million people competed in CCTV’s ‘WTO Knowledge Contest’ and the winner visited the WTO in Geneva. Hundreds of Chinese officials, judges and scholars visited the US for trade law training and American scholars taught it in China. (You can see where this is going, can’t you?)

Litigation transformation

Trade Ministry honchos personally attended every WTO panel as third party observers and studied every US and EU move, initially avoiding litigation by settling all complaints. Older officials were shocked that their country was a defendant in an international court, but most ‘think highly of the litigation system because third-party rulings make it easier to settle disputes’. But, when 40% of anti-dumping investigations and 75% of countervailing duties were directed at Chinese products¹, the Ministry began aggressively defending almost every case, beginning with the epic China-Auto Parts case of 2006. Since Auto Parts, the West has lost four massive cases to China, including the Pneumatic Tires case against the US (affecting $18 billion in imports) while a $5 billion action against the EU, the Steel Fasteners case, set precedent for $820 billion of US and EU imports.

I.P.

WTO membership entails participation in The Agreement on Trade-Related Aspects of Intellectual Property Rights, TRIPS, and Chinese law firms have developed strong IP practices. The Supreme Court even suggested that, where appropriate, Chinese trade law should be interpreted to comply with WTO requirements and courts should at least reference WTO law in important decisions. Huawei, with a hundred in-house counsel, hired famed international trade lawyer James Lockett from the US Department of Commerce, was Chairman of the American Chamber of Commerce in Brussels, lawyered for international firms in Europe and Vietnam, and was deeply familiar with US and EU regulatory systems. So strong is Huawei’s legal team today that it files briefs at odds with Beijing’s.

Another zugzwang?

China remains a tenacious, formidable opponent of the US and the EU and, by shaping WTO jurisprudence, has constrained America and diminished its enthusiasm for the Organization. Indeed, American officials increasingly view WTO membership as a bad bargain. Sadly, the trade arrangements they proposed proved unattractive, leaving them with choices that are both constrained and distasteful.

De-industrialization, de-education and war and have left Washington so constrained that America is no longer a superpower like China and Russia and decoupling the Golden Billion from the world has less chance of success than Napoleon’s Continental Blockade², and for the same reasons.

August 2023, President Putin said, "We recently hosted the Russia-Africa Summit in St Petersburg, where African leaders said that the total debt burden on Africa is over a trillion dollars. This is simply impossible to repay, given the level of economic development of these countries. The modern financial and credit relations in the world are structured in such a way that they serve exclusively the interests of the so-called 'golden billion.' This 'golden billion, more precisely, the leaders of these golden billion' countries exploit practically all other countries.

They abuse their position in terms of technology, information and finances. They have built international financial institutions in such a way and introduce such rules into financial and economic activities that bring practical benefit only to them. I want to emphasise that on the face of it everything looks quite favourable, but in the end all these rules and institutions serve the interests of this 'golden billion.' And this is certainly something we need to think about. We are looking into this, including within the organisation I have already mentioned, the BRICS.

Play nicely?

Washington has always demanded level playing fields for trade and, finally, they’re available. Along with everyone else, the US can now trade easier, quicker, cheaper, and safer on mBridge, the SCO, BRI, GEIDCO and LOGILINK, with access to their massive digital resources that make billions of lives cleaner, easier, cheaper and safer each day.

But, since China leveled these playing fields, it got to make the rules, set the price of admission and keeps the keys. For the US to submit to any rules, let alone Chinese rules, is nearly unthinkable – except that rejecting Trade with Chinese Characteristics means rapidly declining dollar power and rising interest rates.

Another zugzwang, in other words.

Further reading

China’s Rise: How it Took On the US at the WTO, by Gregory Shaffer and Henry Gao.

It's All About Them. But the Western Security Complex thinks it's all about Us, by Aurelien

A Word About mBridge to the New World Order, by Godfree Roberts

1. China also formally proposed limiting to two the number of complaints developed countries can bring against a developing-country members in a calendar year, since ‘the lack of human and financial resources as well as capacities and experiences of developing-country members results in de facto imbalance in the participation in the dispute settlement mechanism’.

2. After seventy years of blockades and embargoes, China’s real economic and defensive military power now dwarf America’s – thanks to the trade boost from WTO membership.