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Book Chapter: China and the Multilateral Trading System: Misunderstandings, Criticisms and Options

11 May 2021

By Dr Xue BAI

 

China’s role in the multilateral trading system established under the auspices of the World Trade Organization (WTO) has been much debated and remains highly controversial. For example, with the rising tensions between the United States and China since 2017, the Trump Administration frequently accused China of failing to adhere to WTO rules, to transform into a fully fledged market economy and to implement the WTO rulings when it lost a case. Similar concerns are widely shared by other major players in the system.

 

However, UNSW Law’s Herbert Smith Freehills China International Business and Economic Law (CIBEL) Centre member Associate Professor Weihuan Zhou takes a more nuanced position. In his latest book chapter “China and the Multilateral Trading System: Misunderstandings, Criticisms and Options”, Associate Professor Zhou argues that these allegations are untenable and misleading.

 

In particular, he emphasised that:

 

“As a global institution, the WTO does not mandate any particular type of economic and political structure or model of development. ... Nor does the WTO require members to change the structure of their markets or patterns of ownership. … It is both unreasonable and unrealistic to expect or demand that China adopt a Western model of market capitalism.”

 

He reminds readers and stakeholders of the fact that to join the WTO, China made unparalleled commitments, which remain the most extensive and onerous among all WTO members, and many go far beyond those demanded of the most developed nations.

He further explains that whether a member has breached WTO rules must be assessed through the WTO’s dispute-settlement mechanism (DSM), based on evidence and detailed legal examination. After being involved in many WTO disputes both as a complainant and as a respondent, China has become an experienced and sophisticated player. Overall, China’s record of compliance compares favourably with those of the other key players in the system such as the US.

 

At the same time, however, he pointed out that SOEs, industrial policies and subsidies, the growing influence of the government on private enterprises and insufficient protection of intellectual property rights are prominent and long-standing issues, which continue to pose imminent challenges to the multilateral trading system. However, he argues that:

 

 “If the WTO is to function properly, with regard to China or any other member state, it needs a functioning Appellate Body and rules that are based on multilateral negotiations and that reflect the shared interests of all nations involved.”

“A co-operative approach will offer greater hope for working with China on the challenges faced by all nations and the multilateral trading system.”

 

The chapter has been published by the Australian National University Press in the book China Story Yearbook: Crisis. A digital copy of this chapter is available here.