China Government Paper Touts Country’s WTO Performance, Domestic Reforms

5 July 2018

China’s State Council published a “white paper” last week outlining how Beijing’s involvement in the WTO has facilitated domestic economic reforms while also contributing to multilateralism and the performance of the global economy. The paper’s release comes shortly before a biennial WTO review of the Asian economic giant’s trading practices, and also in the midst of escalating trade tensions between the US and China. 

The white paper, entitled “China and the World Trade Organization,” numbers over 20 pages, and covers the opening up of the Chinese economy since 1978, with a particular focus on the post-WTO accession period from December 2001 onwards. 

“To grow its economy, China must have the courage to swim in the vast ocean of the global market. If one is always afraid of bracing the storm and exploring the new world, he will sooner or later get drowned in the ocean,” said Chinese Minister of Commerce Zhong Shan in a People’s Daily article published on 2 July, explaining Beijing’s approach to global integration. “China will stick to an open and win-win path in the new era.” 

Recurring topics throughout the white paper are China’s involvement in supporting or implementing WTO processes and negotiations; its record in upholding the commitments made when joining the organisation; its efforts at improving the enforcement of intellectual property rights; its role in negotiating regional trade agreements with interested partners; and its future plans in terms of its Belt and Road Initiative and WTO participation. 

“Accession to the WTO has boosted China’s development and benefitted the rest of the world,” the paper says. Looking ahead, it pledges that Beijing’s “door of opening-up will not be closed and will only open even wider.” 

Supporting multilateralism, shirking unilateralism

The white paper devotes a full section to China’s “firm support” of the global trading system, particularly within the aegis of the World Trade Organization. Along with highlighting various initiatives or steps where China has led or participated in at the WTO, it also warns of risks to the system, including from the use of unilateral measures and from the current impasse in nominating new judges to the organisation’s Appellate Body. 

“Since its accession to the WTO, China has firmly supported the multilateral trading system, participated in all aspects of WTO work,” the paper says. 

The white paper refers to China’s efforts in multiple international forums to support the negotiation, ratification, and implementation of the WTO’s Trade Facilitation Agreement (TFA). That accord was adopted in late 2013 and has been in effect since early 2017. It aims to reduce red tape at the border and make customs procedures significantly easier, with the goal of lowering the costs and time involved in trade. 

Additionally, the paper highlights China’s participation in “plurilateral” tariff-cutting initiatives with interested countries under the WTO framework, such as the Information Technology Agreement (ITA) and its subsequent expansion to cover new products. It also notes that China was involved in talks to craft an Environmental Goods Agreement (EGA), though that process has been on hold since late 2016.

It also refers to Beijing’s interest in so-called new issues, such as electronic commerce, investment facilitation, and small and medium-sized enterprises (MSMEs). At last year’s WTO ministerial conference in Buenos Aires, Argentina, different subgroups of the organisation’s membership signed on to joint statements pledging to conduct more structured work in these areas, which in some cases may lead to more formal negotiations. (See Bridges Daily Update, 14 December 2017

However, China warned that challenges remain for the full WTO membership, highlighting the current Appellate Body situation, which emerged after the US moved to block the start of selection processes to fill vacancies on the global trade court. The Appellate Body now has three of its seven seats vacant, and a fourth one could be open in September if a current judge’s term is not renewed. (See Bridges Weekly, 28 June 2018

“Despite the attempt of certain WTO member to obstruct the appointment of members of the Appellate Body, China joined more than 60 members in submitting a proposal on starting the selection process at the earliest possible date,” the white paper says. 

The paper also refers to the value of supporting other developing economies as they seek to integrate into global value chains or move up within these, including through providing duty-free, quota-free support to least developed countries (LDCs). 

Furthermore, it devotes a subsection to the risks of unilateralism and protectionism, saying that “the multilateral system is a historic choice that follows the trend of global economic development.” 

“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 paper says, without referring to any particular country or countries’ actions in particular. It also flagged the value of using other international platforms in fighting such tendencies. 

Intellectual property rights in focus

The white paper also devotes several paragraphs to intellectual property rights (IPRs) enforcement, noting both the steps taken to date and forthcoming initiatives. 

China’s efforts in IPR enforcement have drawn intense scrutiny in recent months, particularly in light of the US’ announcement that it will be imposing Section 301 measures to address allegedly unfair practices, such as forced technology transfers and discriminatory licensing practices. Both the US and EU have filed WTO cases regarding the latter, though they differ slightly in scope. (See Bridges Weekly, 7 June 2018

Section 301, in US trade law, refers to a provision in the Trade Act of 1974 that allows the country’s executive branch to take responsive measures after findings of unfair trading practices by another country. 

The white paper does not make specific reference to the Section 301 investigation or associated actions, even though US tariffs on billions of dollars worth of Chinese goods are due to take effect on Friday 6 July, with China preparing to impose its own tariffs in kind. The white paper does, however, outline various reforms that China has made to date in IPR enforcement, with more to come. 

“China has enhanced the dominant role of the judiciary in IPR protection to significantly raise the cost for offenders and fully unlock the deterrent effect of relevant laws,” the white paper says. It refers, for example, to the establishment of new or improved IPR courts, the restructuring of administrative agencies or laws, and taking other steps to improve these protections, including for foreign companies with interests in China.

“China encourages technological exchanges and cooperation between Chinese and foreign enterprises, and protects the lawful IPR owned by foreign enterprises in China. At the same time, we hope foreign governments will also improve protection of Chinese IPR,” the paper says. 

Crafting new partnerships

While the paper is primarily WTO-focused, the government document also highlights efforts at developing deeper economic partnerships with select countries, either through regional trade agreements (RTAs) or through infrastructure investment projects under the China-led Belt and Road Initiative (BRI), known also as One Belt, One Road (OBOR). 

For example, the paper highlights China’s role in the negotiations for a Regional Comprehensive Economic Partnership (RCEP), a 16-country coalition that aims to establish a free trade area in the Asia-Pacific. The planned accord’s members would include the 10-country Association of Southeast Asian Nations (ASEAN) and their six FTA partners, which are Australia, China, India, Japan, South Korea, and New Zealand. 

Those talks have been underway for the better part of six years, and RCEP ministers said this weekend that they hope to wrap up the negotiations, at least in principle, by year’s end. (For more on RCEP, see related story, this edition) 

The planned RCEP could also support an effort among the Asia-Pacific Economic Cooperation (APEC) countries, a wider coalition that includes economies such as the US and Russia, as well as various Latin American countries, to negotiate a Free Trade Area of the Asia-Pacific (FTAAP). 

“With all these efforts, China will build a high standard network of free trade areas, focusing on the neighbouring areas, radiating across the Belt and Road and open to the world,” the white paper says. 

Last year, the section on FTAAP in the APEC leaders’ communiqué called for the group’s members to craft “work programmes to enhance APEC economies’ ability to participate in high quality, comprehensive free trade agreement negotiations in the future.” 

APEC  trade ministers earlier this year, in reference to FTAAP, pressed “economies to make further progress in a comprehensive and systematic manner to develop and implement work programmes” that would facilitate the “ability to participate in high quality, comprehensive” future accords. They made the statement during a meeting in Port Moresby, Papua New Guinea, in preparation for a leaders’ meet planned for November. 

WTO review coming up

Next week, trade officials will gather at WTO headquarters in Geneva for China’s “Trade Policy Review,” or TPR in trade shorthand, an exercise that all members of the organisation go through on a regular basis. 

As one of the world’s four largest traders, China undergoes this review every two years. The other three members subject to the same timeframe are the EU, Japan, and the US. Starting next year, those reviews will be held triennially. Other WTO members are subject to different timeframes, which are set based on a member’s economic weight. (See Bridges Weekly, 27 July 2017

ICTSD reporting; “Full text of Chinese commerce minister's signed article on People's Daily,” XINHUA, 2 July 2018.

China, WTO
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