Let's jointly save our WTO
Trade organization's members should not let the US dictate reforms to its own advantage
The Appellate Body of the World Trade Organization is paralyzed and it faces a swim-or-sink moment. Its future development will continue to be largely affected by China-US games. While the United States claims that the WTO needs to abolish the current rules and devise new ones, China's proposals for WTO reform focus on improving the current operation and negotiation mechanisms and expanding the coverage to issues of subsidies and areas such as digital trade, e-commerce and investment.
The US is well aware that the current WTO rules cannot contain China's improving international competitiveness.
During the 11th WTO Ministerial Conference held in Argentina, the US issued a joint statement along with the European Union and Japan that the WTO should cope with issues such as overcapacity, government subsidies, monopolies of state-owned enterprises and restrictions on data flow, all of which were aimed at China. As the China-US trade frictions escalated in 2018, the US adopted increasingly tough measures on WTO-related issues, such as blocking judicial appointments at the WTO's Appellate Body which has led to the mechanism being paralyzed with only one judge remaining by December 2019.
The US has also ignored WTO principles on tariff binding and most-favored nation treatment while turning to unilateralism-oriented trade restrictions and illegally imposing additional tariffs on countries such as China, members of the EU, Japan and India through Section 232 and 301 measures, breaking the commitment of WTO members to apply the national security exception appropriately.
Moreover, it has repeatedly opposed the principle of special and differential treatment for developing countries and issued six joint statements with the EU and Japan which hint at confrontation with China's non-market-oriented policies and action.
Although the US played a leading role in the founding of the WTO, the current US administration has refused to accept its current rules and attempted to abolish the WTO's fundamental principles and mechanisms, which notably are largely aimed at China.
First, the US claims that the multilateral negotiation mechanism is ineffective and has weakened its advantages, leading it to be unfairly treated. By abandoning the multilateral negotiation mechanism, it aims to reduce China's moral advantages and room for negotiation.
Second, it views the dispute settlement mechanism as having undermined US sovereignty and having laid international law above its domestic law. It also considers that its due rights under the WTO agreement have been undermined as the Appellate Body has supported China in several China versus the US cases.
Third, the US claims that developing countries have profited at its expense through the principle of special and differential treatment, for countries like China have developed and should not continue to enjoy preferential policies.
Fourth, it notes that the current WTO mechanism cannot effectively restrict countries with non-market-oriented economies, which is totally aimed at China. However, the WTO has never imposed a market-oriented economic system on all its members or proposed unified standards for it. Since its earlier incarnation as the General Agreement on Tariffs and Trade (GATT), the WTO has aimed to eliminate restrictions on cross-border trade which will not be directly affected by the economic system of a country.
The current US administration is attempting to restore the GATT system of the 1980s by abandoning the multilateral dispute settlement mechanism of the WTO and resorting to capricious unilateral deterrence to force other countries to accept requirements that meet the interests of the US. It wants to revitalize its manufacturing industry to boost its domestic economy, redevelop the Western alliance to exclude emerging developing countries such as China, and formulate new rules and systems and force other countries to accept them.
However, the world has changed and the power and appeal of the US have relatively declined. Canada, Mexico and the Republic of Korea have to accept its conditions, while the EU and Japan have been able to resist the US demands, especially those unfavorable for their own interests. Although the US has withdrawn from the Trans-Pacific Partnership, Japan still remains in it and has completed negotiations on the Comprehensive and Progressive Agreement for Trans-Pacific Partnership. The EU has also firmly supported trade liberalization and multilateralism, realizing a free trade agreement with Japan and independently proposing a plan for WTO reform.
Although the US, the EU and Japan share the same views on policies targeting China, their specific measures are different. The US intends to impose unilateral or group pressure on China for changes, while the EU, Japan and Canada all hope to maintain the authority of the multilateral system and formulate new rules through WTO reform.
Against US unilateralism, China has safeguarded the multilateral system and contributed to its improvement. Other WTO members also need to oppose US unilateralism and trade protectionism jointly and keep the effectiveness and authority of the WTO as a multilateral platform. The countries need to resort to the dispute settlement mechanism and launch countermeasures against US unilateralism.
Undoubtedly the WTO mechanisms and rules need to be improved. The emerging economies understand and utilize the rules differently, which cannot be addressed through the current negotiation mechanisms and may lead developed members, especially multinational companies, to lose interest in the WTO.
As the largest emerging economy, China needs to address the developed countries' issues of concern and remain flexible in negotiations. Meanwhile, it can also urge countries to address problems on agricultural subsidies, agricultural trade barriers, technological export restrictions and technological trade barriers to fulfill their obligations. WTO reform must focus on providing generally applicable rules for different countries while allowing none of the members to wantonly ruin the system.
The author is dean of the China Institute for World Trade Organization Studies at the University of International Business. The author contributed this article to China Watch, a think tank powered by China Daily.
The views do not necessarily reflect those of China Daily.