Pictured above is the headquarters of the WTO in Geneva, Switzerland. Despite various challenges, the WTO framework remains the most important institutional guarantee for economic globalization.

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Featuring trade and investment facilitation, economic globalization has advanced global stability and prosperity, conforming to the common interests of countries around the world. Nonetheless, the process has not been smooth. In recent years, problems like sluggish global growth, imbalanced development and growing inequality have become increasingly prominent. Particularly, the rapid increase of regional trade agreements (RTAs) as well as rising protectionism and inward-looking trends have cast a pall over world trade.

 

RTA’s challenges to WTO
Under the WTO framework, the principles of non-discrimination, fair competition and transparency seem to be integrated, but the enormous apparatus, complex coordination procedures and low efficiency of multilateral negotiations have seriously affected trade openness.

For example, the WTO has either not yet begun multilateral negotiations or failed to reach an agreement on trade and investment facilitation, government procurement, environment and labor standard, intellectual property protection and competition policy.

Therefore, many countries tend to seek regional trade partners, preferring bilateral negotiations that are more efficient. This is the institutional reason why RTAs have gained ground. In the past decade, more RTAs have been signed than in the preceding 30 years.

Although the WTO admits that RTAs can benefit contracting states by making trade more convenient, it unequivocally points out that they will violate the non-discrimination rule and jeopardize the interests of other countries.

In practice, RTAs outside of the WTO framework are mostly based on a philosophy of regionalism, attending solely to the strategic interests of the region and disregarding the principle of non-discrimination. The Trans-Pacific Partnership Agreement (TPP) is a case in point.

The double-standard TPP advocates high openness among a small group of countries while imposing strict restrictions on others. It obviously goes against the WTO’s Trade Facilitation Agreement.

In this context, China is actively participating in reshaping international rules not to implement regionalism or challenge the multilateral international economic and trade order. Instead, it considers both the domestic and the international situations and consistently pursues mutual benefit.

The BRICS nations account for 50 percent of the world’s economic growth, and the BRICS summit has put forward practical approaches for the economic cooperation and joint development of developing countries.

Against the backdrop of a prolonged global economic downturn, China proposed building the Asia Infrastructure Investment Bank together with countries and regions within and outside Asia to open up new prospects for infrastructure construction on the continent.

Adhering to a spirit of open regional cooperation, the “Belt and Road” initiative is committed to upholding a free global trading system and an open world economy.

All these are major achievements China has made in the building of an open economic system and actively participating in global governance.

 

Protectionism, self-interest
According to the World Integrated Trade Solution (WITS) database, in light of the latest UN classification of non-tariff measures released in 2012, 14 out of the 16 chapters of specific measures were used a total of 592 times from 2012 to 2016.

Among others, technical measures—including Sanitary and Phytosanitary Measures of Chapter A, Technical Barriers to Trade of Chapter B and Pre-Shipment Inspection and Other Formalities of Chapter C—were employed 238 times, more than 40 percent of the total frequency.

In another notable change, there was a steep increase in the adoption of Export-Related Measures of Chapter P, Price-Control Measures, Including Additional Taxes and Charges of Chapter F, and Non-Automatic Licensing, Quotas, Prohibitions and Quantity-Control Measures Other Than for SPS or TBT Reasons of Chapter E, which were used more frequently than the traditional anti-dumping and anti-subsidy measures of Chapter D.

This suggests that many countries have been carrying out reinforced, detailed and complicated new trade protection measures for the sake of self-interest.

It is also worth noting that inward-looking trends have disrupted the world economic order. Since taking office, US President Donald Trump has advocated a series of “America First” economic policies. From threatening to quit the WTO and NAFTA, to withdrawing from the TPP, Paris Agreement and UNESCO—there is a palpable inclination toward isolationism.

According to Section 122 of the Trade Act of 1974, the president shall proclaim, for a period of 150 days, a temporary import subcharge, not exceeding 15 percent ad valorem when facing fundamental international payment problems. Hence it was claimed that the plan to impose a 45 percent tariff on imports from China is impractical. However, when the Trump administration announced it intended to levy a 5 percent tariff on all imports, it angered many US allies and trade partners.

In November 2017, the European Union passed a tougher anti-dumping law, requiring the third-country trade partner to comply with international social and environmental standards, which is the world’s first rule of this kind.

According to the new rule, when applying for anti-dumping investigations, each member state should consider whether the exporting country complies with international labor and environmental standards, adopts potentially discriminatory measures against foreign investments and effectively enforces corporate, property and bankruptcy laws.

The European Union always professes its adherence to free trade, but the new rule unilaterally imposes additional conditions on pure anti-dumping investigations, sending strong signals of selfish trade protectionism.

As the second-largest trade partner of the European Union, China would suffer more from the restrictions on industrial and export structure and the “market distortion” rule than from the previous “surrogate country” approach. Emerging market economies have also pursued trade protectionism, targeting other developing economies when fighting traditional trade protective countries. According to the Global Trade Alert, China has faced 4,509 discriminatory trade interventions since 2008.

From 1980 to 2015, China contributed more than 13 percent of global GDP growth and the rate was above 30 percent over the past five years. The country has made huge contributions to promoting sustained progress of human industrial civilization and maintaining global economic structural balance in the post-crisis era, but the inward-looking egoists have totally ignored the nation’s role as a stabilizing force in the world economy.

 

Requirements for China
The thriving and stable Chinese economy is inseparable from complementary reform and opening up. As socialism with Chinese characteristics enters a new era, China faces domestic and global transformations. Externally, the world is undergoing major developments, reforms and adjustments, while the domestic economy is in the critical stage of transforming the development mode, optimizing the economic structure and updating driving forces.

Under such circumstances, it needs to take part in reshaping international rules and make new ground in pursuing opening up on all fronts with new strategic thinking, accurate strategic judgment and firm strategic measures.

For its part, it should adhere to the primary task of supply-side structural reform and push for improvements in growth quality, efficiency and momentum, thereby boosting its economic innovation capacities and competitiveness.

Externally, it is necessary to actively engage in the reform and construction of global governance system, support multilateral trade mechanisms, advance the building of free trade zones, and contribute to the building of an open world economy. Despite various challenges, the WTO framework remains the most important institutional guarantee for economic globalization.

In addition, efforts should be made to take care of both domestic and global situations to effectively regularize the behavior of international market entities and cope with various trade interference measures from trade partners.

Due to historical and practical reasons, Chinese enterprises have a weak rule consciousness and legal awareness, which may be exacerbated amid the rapid expansion of “made in China” and damage their overall image. Related departments should adopt strict measures to regularize them.

Meanwhile, “discriminatory” trade interventions from trade partners are also unfair to Chinese enterprises and have brought them great losses. Facing groundless accusations and intentional disruption, they should be vigilant and brave to deal with them.

Looking to the future, China should become integrated into the international economic community, participate in global economic governance and share growth fruits more vigorously, while calling for a fairer, more just and mutually beneficial international economic order.

 

Liang Junwei is from the Department of International Economy and Trade at the Business School of Shandong University, Weihai Campus.

(edited by CHEN MIRONG)