“This is a game we can win”.
China’s 2001 accession to the WTO required her to accept humiliating conditions: open the economy to competition; eliminate state monopolies on imports and exports; overhaul domestic laws, regulations, procedures, and administrative and judicial institutions across all levels of government; make deep tariff commitments for imports; liberalize services; make all trade regulations nondiscriminatory; make government standard-setting transparent and base them on international norms; submit to stringent IP protection; allow independent review of all trade-related administrative actions by foreign judicial and administrative tribunals; reduce tariffs on trade goods to ten percent (rich Brazil was thirty-one percent and India, forty-eight percent); make broader, deeper commitments than any comparable economy on financial, telecommunication, professional, and distribution services; and grant other members greater rights against herself than she had against them–thus violating the WTO’s own nondiscrimination law.
The terms outraged popular sentiment echoing, as they did, the Unequal Treaties but when I warned a Chinese banker friend that membership would retard the PRC’s development, he reflected for a moment and replied, “I disagree. It’s a game we can win”. He was right.
By 2010, China was the world’s largest economy. By 2013, it was the largest trader in goods and, by 2020, American officials were complaining that US membership in the WTO was a bad bargain. They blamed China for falling manufacturing jobs when the record shows that China’s WTO accession did not affect American manufacturing.
But how did an anti-legalist Marxist Confucian country, historically averse to international trade, fare so well in a Western multilateral organization based on aliens legal assumptions, and where English is the governing language?
Governance in action
Once accession was approved, hundreds of Chinese officials, judges, and scholars began visiting the US for WTO law seminars and foreign experts began traveling to China to teach it. Beijing sponsored provincial WTO centers, staged hundreds of seminars and published more books on WTO law than the WTO itself, invited five million people to enter the WTO Knowledge Contest and, after broadcasting the final round on national TV, flew the winner to WTO headquarters in Geneva.
By 2009, China was the object of forty percent of all WTO anti-dumping investigations and seventy-five percent of countervailing duties, so Beijing sent observers to every WTO panel, studied the example of the US and the EU, and learned to use–or bypass–the dispute process. When China required Internet companies to use local servers, the US objected but found WTO rules unavailing. Beijing became an active litigant and her litigation strategy was so aggressive that the US and the EU lost cases involving billions of dollars. Yet, as a percentage of GDP, China remained a below-average trader.
Since WTO accession required her to participate in the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), Chinese law firms developed strong IP practices and domestic courts began applying TRIPS rules in local cases. Domestic courts interpreted Chinese law to comply with WTO requirements and frequently referenced them in important decisions. Huawei, with two hundred in-house counsel, hired famed trade lawyer James Lockett from the US Department of Commerce. Lockett, deeply familiar with US and EU regulatory systems, even filed briefs for Huawei that were at odds with the PRC’s stated positions.
Today, China is a critical player in, and the strongest supporter of the WTO, and a formidable, tenacious opponent that does not hesitate to threaten litigation.When the EU put tariffs on Chinese solar panels in 2013, Beijing opened an inquiry into European winemakers dumping cheap, improperly subsidized bottles onto the Chinese market and ended the investigation when Europe agreed to train Chinese winemakers–whose products now compete on the world market.
Since the founding of the WTO in 1995, legal action has been taken against the US 147 times, the highest number for any member. Since China joined in 2001, it has seen 42 cases, less than half of the 91 that the US faced in the same period. Of the seven cases in which the WTO has authorized reprisals by the winning party, six were due to the US refusing to comply with the ruling. Particularly concerning is the US government’s malicious blocking of WTO Appellate Body appointments because it has ruled against it in multiple lawsuits. The US has not only repudiated its debts from those cases, it has also ousted the judges and is attempting to shut down the court entirely
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