China and the WTO: Reflections on 20 years of membership and future challenges
Amidst global shipping bottlenecks, a freight train arrived from Hamburg in Shanghai last week, carrying 35 containers of goods to be exhibited at the China International Import Expo (CIIE) by companies hoping to enter or expand in China's marketplace.
It was two days earlier that the first "Shanghai Express" arrived in Hamburg with 50 containers of apparel, auto parts and solar panels, some of which have been in short supply around the world.
Despite the global pandemic and trade disputes, the number of China-Europe freight trains surged 29 percent year-on-year in the first three quarters to 11,343. It is one of the statistics that shows China's role and contribution in today's global trade and economic growth, a role that some still refuse to acknowledge while others may have foreseen 20 years ago.
It was in November 2001, after 15 years of negotiations, that the World Trade Organization formally approved China's entry into its ranks.
Then Director-General Mike Moore called it a "defining moment in the history of the multilateral trading system," and said "with China's membership, the WTO will take a major step toward becoming a truly world organization."
The entry took effect a month later on December 11, 2001.
Twenty years on, what China has achieved and contributed to the world has confirmed that "defining moment."
Over the past 20 years, China has grown from the seventh-largest exporter and eighth-largest importer to become the largest exporter and second-largest importer.
It has become the world's major growth engine, with an average annual contribution of nearly 30 percent to world economic growth.
Further embracing the world has also led China to set many precedents in further opening up.
In 2011, China Railway Express started carrying goods between Asia and Europe. Now it covers 73 routes and reaches more than 170 European cities.
In 2013, the first free trade zone was established in Shanghai, China's economic hub. Now there are 21 FTZs, while more pilot programs and trials of new policies and measures are expected to be launched first in Shanghai. The city has set out a plan for development as an international financial center.
In 2018, China held the world's first import-themed national-level expo, CIIE in Shanghai, a landmark project affirming the country's commitment to free trade and shared prosperity. The fourth CIIE has kicked off as scheduled amidst COVID flare-ups around the world.
Twenty years on, China has become a key member of the WTO while the trade body itself has been confronted with unprecedented challenges.
To further understand disputes within the WTO, China's future role in the trade body, global trade and the world economy, Shanghai Daily talked to Zhou Hanmin, an expert on the WTO, international economic law and international trade law. Zhou is also vice chairman of the Shanghai Committee of the Chinese People's Political Consultative Conference, a political advisory body.
SD: At the recent eighth trade policy review of China, some countries made various complaints, but Vice Minister of Commerce Wang Shouwen said that "China has entirely fulfilled its WTO commitments." Why such disparities?
Zhou: You can put all the complaints into two categories – one, expectations beyond current WTO provisions; and two, beyond China's commitment to the Protocol of WTO Accession.
Criticism based on such expectations is unreasonable and unrealistic.
It doesn't mean that we are not willing to discuss concerns or expectations that were raised, of course we can discuss new agreements, but you can't call on us for violating rules based on agreements that have not been agreed upon.
For instance, it would be inappropriate to refer to provisions in other free trade agreements, such as RCEP, CPTPP or USMCA, as WTO provisions.
China's Protocol of WTO Accession is our written legal obligations to WTO. It was already the eighth review this year, and no review report had ever listed obligations in this protocol that China did not fulfill.
You only need facts and statistics to prove our fulfilment of the obligations, and in many cases, way beyond our obligations.
China had fulfilled all of its tariff reduction commitments, reducing the average tariff level from 15.3 percent in 2001 to the committed 9.8 percent. The overall tariff level is actually 7.4 percent now, exceeding the commitment.
In terms of opening up sub-sectors in service categories, 100 sub-sectors were promised and nearly 120 have been opened.
In order to comply with WTO rules, China set up, modified or abolished more than 2,000 laws, regulations and policies at the central government level, and over 190,000 at local government level.
Those related to foreign investment and intellectual property were worked on the most.
SD: The trade body itself has also been confronted with many challenges in recent years. Are those challenges getting resolved or worsened? What's China's role in that?
Zhou: Since the WTO was established in 1995, it hasn't resolved a single round of trade negotiations – the Doha Round – while its predecessor GATT largely reduced the two greatest barriers in international trade, tariff and non-tariff barriers.
There are many reasons behind the unresolved Doha Round, and one key reason is that some of the countries that originally established the rules suddenly realized that the rules may now put them at disadvantages, so they chose to shelve the issues.
The WTO is confronted with three major challenges.
First of all, a key principle is common but differentiated responsibilities. Common means it has to be obeyed by all members, and differentiated refers to treatment of developing and least developed members. Some countries want to abandon such a principle, but it is a cornerstone of the trade body, because the WTO is not the OECD. It is not a club of the rich.
Secondly, the WTO's Appellate Body, an important element of the dispute settlement system, has been paralyzed because some members consider it not in their favor. All seven "judges" have effectively left, and new appointments have been blocked.
China has both sued and got sued in the Appellate Body over the last 20 years, won and lost, but it has never abandoned the system because it lost a case.
Thirdly, global trade and the global economy last year faced the worst recession since World War II due to COVID-19. The World Trade Organization, like many international organizations, faced unprecedented challenges during the pandemic.
It would take a long time for these three challenges to be resolved, and reform is a must.
China supports WTO reform, but the reforms must ensure that the authority and effectiveness of the WTO continue. The reforms must also ensure the core values of the WTO's key principles are not reduced or damaged.
SD: Twenty years on, what is China's role in today's global trade and economy, and what will be its role in the post-pandemic economic recovery?
Zhou: China's contribution can be reflected in one number – its average annual contribution to world economic growth at nearly 30 percent, a growth contribution of the US, EU and Japan combined.
The world economy is slowly rebounding, and so is the Chinese economy, because we are part of the world. Through our economic recovery we can help with global economic growth, because our growth contribution is nearly 30 percent.
China was among the first to put the pandemic under control, to resume work, production and business activities. China's GDP growth increased by 18.3 percent in Q1, 7.9 percent in Q2 and 4.9 percent in Q3. IMF projects the yearly growth to be 8 percent, with two months left.
Amidst the global crisis, China didn't just try to save itself. No other country has devoted itself to helping the world to fight COVID and to recover the economy with both aspirations and actions.
More than 1 billion Chinese have received two doses of vaccine. China has provided over 1.6 billion doses of vaccines to over 100 countries and international organizations to date, and is committed to provide over 2 billion doses for the world by end of this year. Among these doses, 100 million were donated to the World Health Organization.
At the recent G20 summit, global vaccine cooperation was prioritized by President Xi Jinping, who talked about waiving intellectual property rights on COVID-19 vaccines when delivering his speech via video.
The resurgence of COVID flare-ups is the most uncertain and unstable factor in today's world, leading to a series of issues including supply chain crisis and shortage problems. Under such circumstances, China has not only managed to rebound its own economy, but also make unique contributions to the difficult rebound of the world economy.
SD: Regional trade agreements and trade blocs are increasingly seen as a trend and, by some, as a threat to the WTO. What's your take on this?
Zhou: They're not a threat to the framework of the international mechanism of trade and investment. If you read carefully, a country is allowed to establish regional trade and investment agreements in the pursuit of more freedom and feasibility.
Whether it is an agreement between the US, Mexico and Canada, or further development of the EU or ASEAN, or agreements like CPTPP or RCEP, those agreements are all registered with the WTO secretariat. They fit very naturally with the major trend of globalization in the sense of the economy.
But we also need to recognize why we have such phenomena – to have more and more regional, rather than international, agreements.
It could be that some countries do believe they can exert more influence in regional matters, so it's kind of an easy path for them. It is also a reflection of the international community's disappointment in those trans-national agreements that are not at all moving ahead through negotiations like the Doha Round.
So the reasons vary, but they're not a threat, rather a supplementary element.
SD: You often say that opening up leads to more reforms. China's first free trade zone was established in Shanghai in 2013. Was that a big reform and does it indicate more opening up?
Zhou: When the first FTZ was established in Shanghai on September 29, 2013, some new rules were appearing around the world, like the Trans-Pacific Partnership (TPP) or Transatlantic Trade and Investment Partnership (T-TIP), among others. The US-led pact was seen as a measure to contain China, and China's reasonable bid to join the pact was excluded by the US.
What's the countermeasure? One such is the free trade zone. Now eight years on, we have 21 FTZs around the country.
In the case of the Lingang Special Area in Shanghai's Pilot Free Trade Zone, it will match the standard of the most competitive free trade zones worldwide. All the rules and efforts are based on one principle – greater opening up.
China belongs to the world, and the world can't go without China, so cooperation is the only choice.Zhou Hanmin
SD: CIIE was another unprecedented measure that took place in Shanghai. What's the significance of this import expo, and where is it leading forward?
Zhou: In 2018, five years after the establishment of the FTZ, and amidst a trend of anti-globalization, China hosted CIIE, still the world's only import-themed national-level expo. Its scale and achievements are not only reflected in the deals signed, but also global attention on such a platform. For instance, over 80 percent of the Fortune 500 and industry-leading companies from last year's CIIE are participating again this year.
The participation of small-to-medium enterprises from overseas has increased by 30 percent, due to strong supporting measures.
Amidst the slow rebounding of the global economy, hosting the CIIE is a brave innovation. For China, there is no end to opening up.
SD: Standing at the 20th anniversary of China's accession to the WTO, how do we look to the future? Where does Shanghai and the Yangtze Delta stand in this future?
Zhou: The Yangtze River Delta region has the highest degree of openness and plays an important role in China's foreign trade and investment.
Last year, 37 percent of exports came from this region, while 62 percent of foreign investment was invested here, and 29 percent of China's outbound investment came from the Yangtze Delta. These statistics reflect the region's significance and advantages as a strong pillar of the Chinese economy and its bridge to the world.
Standing at the 20th anniversary of China's accession to WTO, how do we look to the future?
We ought to embrace the future with greater opening-up measures and stronger determinations to reform, because this future not only belongs to us, but also to the world.
China belongs to the world, and the world can't go without China, so cooperation is the only choice. Human kind with shared destinies must learn how to cooperate with each other under differentiated circumstances.