How China’s Economic Heft Can Reshape The WTO And Global Trade For The Better



Wang Huiyao | South China Morning Post

Inside the concrete compound on the shores of Lake Geneva that houses the World Trade Organization is a colourful classical Chinese garden. Bearing elegant rock formations, arches and calligraphy, the Gusu Garden was a gift from China in 2013 to commemorate its entry into the WTO.

The garden also reflects China’s enduring commitment to the multilateral trading system, as China’s then-ambassador to the WTO, Yi Xiaozhun, said at the time. The Gusu Garden is far from the only mark China has left on the WTO, though.

This year marks 20 years since China joined the WTO as its 143rd member. This landmark event has transformed China over the past two decades and brought great benefits to the country.

But, equally, China’s accession has also changed the face of world trade and brought great benefits to the WTO and its members. Now, as the WTO opens a fresh chapter under new leadership, China is well placed to help the organisation rebuild itself to become the driving force of free trade for the post-pandemic world.

Given China’s place in today’s global economy, it is easy to forget the arduous process of overhauling its legacy command economy to join the WTO. Accession negotiations took 15 years, longer than those to form the organisation itself.

To adapt to WTO commitments, Beijing modified more than 2,300 national laws and regulations, while a further 190,000 were modified or cancelled at the local level. Trade-weighted average tariffs fell from 32.2 per cent in 1992 to 7.7 per cent by 2002, falling further to an average of 4.8 per cent between 2003 and 2017, according to the World Bank.

Institutions were reformed and China enhanced protection of intellectual property rights. This ongoing process has led to the creation of dedicated IP courts in Beijing, Shanghai and Guangzhou, as well as special judicial organs in 15 intermediate courts.

These changes opened China’s economy to the world and spurred a period of rapid growth. In 1999, China’s GDP was less than Italy’s and ranked only eighth in the world. Today, China is the world’s second-largest economy and its largest trading nation.

In the past 20 years, China’s exports have grown sevenfold and its imports sixfold. The country now accounts for 12 per cent of global trade and is the largest trading partner of more than 120 countries.

Meanwhile, China’s share of global service exports has doubled from 3 per cent in 2005 to 6 per cent in 2020, while its share of service imports has grown from 3.3 per cent in 2005 to 8 per cent in 2020.

As trade has changed China, China has also changed the global economy. The country’s opening up and integration into the global economy coincided with the fall of trade barriers and costs associated with shipping and communications, facilitating the rise of global value chains. This has seen trade surge in the past 20 years and major benefits accrue to developed and developing countries alike.

In a recent round table on China’s two decades in the WTO, held by the Centre for China and Globalisation in Beijing, Yi – who recently completed his second term as WTO deputy director general – highlighted some of the ways the world economy has benefited during this time. For example, since joining the WTO, China’s average contribution to global growth has doubled to almost 30 per cent.

Affordable Chinese products have saved US consumers US$15 billion annually, and China has also absorbed a growing share of the world’s exports, including 25 per cent of exports from less-developed countries since 2008.

China’s crucial role in world trade came to the fore last year as Chinese exporters provided essential supplies at a time when other economies were severely disrupted by the Covid-19 pandemic.

China has changed beyond recognition since it entered the WTO. During this time, the Centre William Rappard, which houses the WTO, has also been extensively remodelled and expanded to house new functions and make room for delegates from the WTO’s growing membership.

Unfortunately, the institution itself and the rules that govern world trade have barely changed in this period. This failure to adapt to important shifts in the global economy has caused tension and seriously weakened the organisation.

However, after reaching a nadir under the Trump administration as the WTO found its dispute settlement mechanism paralysed, hopes are rising that the organisation can reinvigorate itself under Ngozi Okonjo-Iweala, the new Nigerian director general who took over in March after the position had been vacant for six months.

As the world emerges from unprecedented health and economic crises, the WTO has a chance to prove its relevance. Successfully negotiating a vaccine waiver that would boost access for developing countries would give it a lift.

However, the long-term task of reforming the WTO remains fraught with difficulty. Okonjo-Iweala has already warned that some countries might try to weaponise WTO reform. As she has made clear, China is central to reforming the organisation.

Twenty years after accession, China is well placed to use its heft in the WTO constructively to help retool the organisation and revive the multilateral trade agenda for the post-pandemic era.

Eyes now turn back to Geneva, which later this year will host the 12th WTO Ministerial Conference. Delayed from last year because of the pandemic, it is perhaps the most important such meeting in recent history. Expectations are building that it will help re-establish the authority of the WTO in the global trade order.

If we are to see a rebirth of the WTO, then there is perhaps no more fitting place than the city where the WTO and so many other international organisations were born.

Wang Huiyao is the founder of the Centre for China and Globalisation, a Beijing-based non-governmental think tank.

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