By John Ross Source: China.org.cn Published: 2018-7-3
Maintaining the framework of the World Trade Organization (WTO) is a key issue for the prosperity of every country – including China. In developing countries well over a billion people have been lifted out of poverty by economic growth underpinned by globalization, while international trade strongly supports the living standard of advanced countries.
A recent report by the highly-respected Western analytical company Oxford Economics concluded that the average U.S. family saved US$850 a year due to low priced imports from China. Given threats to the framework of the WTO by recent unfortunate tariff actions by the U.S. administration against the EU, China, India, Canada, Mexico and other countries, the publication by China`s State Council Information Office of the report "China and the World Trade Organization" is therefore extremely timely. The facts of international trade since China joined the WTO in 2001 strongly confirm the reports conclusions.
The report is unequivocal regarding its analysis of the WTO: "The multilateral trading system, with the WTO at its core, is the cornerstone of international trade and underpins the sound and orderly development of global trade."
Regarding its own position, the report notes: "China has been a strong advocate for free trade." As it is not only in the interests of other countries, but also in China`s direct self-interest to strongly uphold the rules and framework of the WTO, therefore: "China has participated in all aspects of WTO work, made its voice heard and contributed its own proposals on improving global economic governance. China is an active participant, strong supporter and major contributor in the multilateral trade system. Accession to the WTO has boosted China`s development and benefited the rest of the world."
The paper details the great and ongoing efforts made by China to reinforce and remain in line with the WTO: "After its accession, China launched major efforts to review and revise relevant laws and regulations, involving 2,300 laws, regulations and departmental rules at central government level, and 190,000 policies and regulations at sub-central government levels, covering trade, investment, IPR protection, etc. In 2014, China issued an official document on furthering trade policy compliance with WTO rules, requiring government at all levels to assess proposed trade policies in accordance with WTO agreements and China`s commitments."
Actions always speak louder than words, so China`s record on imports, the most sensitive trade issue for most countries, indicates the practical situation. "By reducing import costs to boost trade, China has shared its development dividend and growing markets with the rest of the world. By 2010, China had fulfilled all of its tariff reduction commitments, reducing the average tariff level from 15.3 percent in 2001 to 9.8 percent. It lowered the average tariff rate of manufactured goods from 14.8 to 8.9 percent. It cut the average tariff rate of agricultural products from 23.2 to 15.2 percent, about one fourth of the global average and far lower than those imposed by the WTO`s developing members (56 percent) and developed members (39 percent). China`s maximum bound tariff rate of agricultural products is 65 percent, while the corresponding rates of the United States, the European Union and Japan are 440, 408 and 1,706 percent respectively."
Overall: "According to the WTO, China`s trade-weighted average import tariff rate had fallen to 4.4 percent in 2015, only 1.5 to 2 percentage points higher than those of developed economies such as the U.S. and the EU. By the end of 2017, China had reduced tariffs on more than 900 tariff lines."
The result has been that China has become by far the world`s most rapidly growing national import market. The report notes: "From 2001 to 2017, China`s imports increased by an annual average of 13.5 percent, 6.9 percentage points higher than the global average; and China has become the world`s second largest importer. Since 2009, China has been the largest export market for the LDCs [Least Developed Countries] and absorbed 20 percent of their exports."
The practical effects are clear. China joined the WTO in 2001. The Chinese mainland`s share of world trade has risen from 4.8 percent in 2000 to 11.5 percent in 2017. Taking only China`s goods imports, which rose in the same period by US$2.0 trillion compared to an increase of US$0.7 trillion for the U.S.
With China`s imports rising by more than two and a half times as much as the U.S., China`s growth in imports is far exceeding any other country. Only the entire EU`s increase in imports, at US$3.4 trillion, exceeded China – and a large part of that was trade within the EU.
China has also respected the decisions and multinational framework of the WTO: "China had been complained against in 27 disputes, of which 23 had been concluded…. China also actively defended the cases against it, respected the WTO rulings, and made adjustments to its measures according to WTO rules." It is particularly striking that: "Up to now, none of the complainants has requested for retaliation against China."
China has also opened itself up to inward investment. As the report notes: "Since 1992, China has consistently topped the list of FDI recipients among developing countries for 26 years consecutively. After China`s accession to the WTO, its FDI increased from US$46.88 billion in 2001 to US$136.32 billion in 2017, up by an annual average of 6.9 percent."
It is clear why maintenance of the WTO framework is in the interests not only of other countries but of China itself – and clearly understood self-interest is always the best guide to every country`s actions including China.
International trade, by definition, involves more than one country. If one country were allowed to set the rules it would inevitably make these in a way which benefited itself and not others.
The principle of mutual agreement therefore guided the enormously beneficial development of the international trade system which culminated in the creation of the WTO. The huge effort necessary to create the WTO was shown by the fact that it took 46 years to bring it into existence through seven rounds of negotiations in the previous General Agreement on Tariffs and Trade (GATT). With 164 members, the WTO, since the accession of Russia in 2012, includes all the world`s largest trading economies.
The WTO directly incorporates approximately 60 different agreements with international legal status. With a Brazilian Director General, and Deputy Director Generals from Germany, China, the U.S. and Nigeria, the leadership of the WTO is representative of the most important world trading countries or trading groups.
With this truly international framework the disputes settlement mechanism by the WTO is most internationally impartial that can be achieved at present – and far superior to any system of unilateral decisions by individual countries.
In summary, it is in the interests of China and of every country to uphold the WTO and its principles. For those who need further details of how China does this, the report "China and the World Trade Organization" amply supplies them.
John Ross is Senior Fellow of Chongyang Institute for Financial Studies, Renmin University of China.