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PERSPECTIVE: China Addresses 40 Years of Trade and the WTO

Sara Hsu 2018-11-19 14:53 PM
PERSPECTIVE: China Addresses 40 Years of Trade and the WTO

Without naming any obvious names, China last week released a white paper titled, "China and World Trade Organization," making its case for being on the right side of the current trade war with the U.S., and underscoring its commitment to free trade and a multilateral trading system.

The paper comes out as China is celebrating 40 years of reform, and at a time when the U.S. has resorted to high levels of protectionism. The paper was written by the State Council, the highest executive level of the state, which emphasizes the importance of the document.

What&`#`39;s Successful

The white paper states that "opening-up was key to China's economic growth over the past 40 years." The paper focuses on China's accession to the World Trade Organization (WTO) as central to China's liberalization process. Freer trade in goods was prompted by a reduction in import tariffs, the lowering of non-tariff barriers, and the allowance of a larger number of institutions to trade.

These were major achievements, as China's economy had been almost entirely closed to trade under Mao Zedong and changed rapidly into the world's factory and one of the largest trading nations in the world. At present, China is focusing on opening up the services sector, expanding the number of services subsectors available for trade, and reducing restrictions on foreign investment.

The paper highlights China's strides in developing open and transparent legal institutions, enforcing intellectual property rights (IPR) protections, honing in on its strengthened legal system and enforcement in this area, and honoring commitments regarding transparency regarding WTO notifications.

China has reiterated the initiative it has taken to strengthen its law on IPR protection, listing several campaigns the nation has taken to combat IPR violations, including the "Convoy Campaign" to protect patent rights, the "Sword-net Campaign" to eliminate online piracy, the "Sweeping Campaign" to end illegal publication in the copyright field, and the "Network Sword Campaign" and "Sword Actions on Quality Control" to wipe out counterfeit products.

The paper makes clear that China is aware of its status as a global driver of growth and poverty reduction. China has made a concerted effort to reduce poverty, and this would not have been a possibility if the nation had not developed rapidly by promoting industrialization through opening up to trade with the rest of the world.

What It Tells the U.S.

In a thinly veiled message to the U.S., the paper also notes that "China explicitly opposes unilateralism and protectionism. Unilateralism goes against the law of the market and international rules, causes injury to others but ends up defeating oneself. Pursuing protectionism is like locking oneself in a dark room. While wind and rain may be kept outside, that dark room will also block light and air." The underlying idea is that China maintains it is right in following the policy of free trade, and Trump's U.S. is wrong in rejecting this tenet.

The paper stresses China's commitment to the WTO's rules-based trading system and to increasing imports. The promise to remove import tariffs on all common drugs and reduce "most favored nation" tariffs on automobiles to 15 percent supports the idea that China is not engaging in "unfair" trade practices, an accusation U.S. President Donald Trump has reiterated. China is also increasing market access to foreign investment, another point that Trump has questioned.

In the conclusion, the paper states that "China calls on all countries to jointly shoulder the responsibilities of our times…." Indeed, this is a call to action aimed especially at the U.S., which has rejected its responsibility to other nations in maintaining the auspices of free trade.

What&`#`39;s Left Unsaid

However, the paper does not explicitly mention the U.S. and Trump; that would go against its opaque manner of communicating criticism. The paper also does not mention the trade war, which will cost the U.S. and China many billions of dollars in consumption and investment. There are no attacks on the U.S. for imposing tariffs on China to reduce the U.S. deficit and to punish China for intellectual property violations.

The paper also does not take responsibility for intellectual property rights violations through forced technology transfers from American firms doing business in China to domestic Chinese firms. This is in line with China's stance that it has not engaged in such illicit activity.

At a WTO session in May, Chinese Ambassador Zhang Xiangchen said "there is no forced technology transfer in China." Chinese officials have stated, in fact, that the U.S. stands to gain more from technology partnerships since Chinese innovation stems from the people's entrepreneurship.

The clear gist of the white paper is that China has followed the global rules of the game and even become a leader in promoting the rules. China has demonstrated its commitment to free trade and has benefited from the system.

Recent news shows that China is keeping its promise; even during the trade spat with the US, China has cut tariffs on imports a wide range of goods, from food to medicine. China has ended up the leader of free trade ideology; this would not have been anticipated 40 years ago.