Saturday, April 13, 2024
 
 

How China took over the WTO behind the West’s back

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Last year marked the 20th anniversary of China’s entry into the World Trade Organization, a result that followed 15 arduous years of negotiations. Many believed then—and some still do now—that China’s accession to the world’s trading forum was the concluding salvo in a long journey launched by Deng Xiaoping’s liberalizing domestic reforms of the 1970s.

Today, however, we should lament that accession for three particularly important reasons that were highlighted in a recent report by the Fundación Disenso, Spain’s leading conservative think-tank, and our Uruguayan partner CESCOS. 

First, China’s membership in the WTO ought to be viewed as a policy mistake because the hopes that informed the West’s support for that membership—that welcoming China would create some sort of “path dependence” to political openness and transparent trade relations—have clearly failed to materialize. In addition to being opaque, China’s track record as a WTO member is one of consistent maneuvering against the WTO’s very rules and the interests of fellow member states. This is not to mention China’s self-proclaimed “state-capitalist” system, which by design alienates trading partners by always placing China’s narrow interests ahead of global free trade.

Meanwhile, the goal of moulding China into the West’s standards and values has reaped the opposite result. The WTO has ended up importing some of China’s protectionist rulemaking, which has severely undermined the institution’s core mission to advance open trade. No wonder the trust on which the WTO functions has markedly faded as a result. In practical terms, the institution has functioned as an “institutional umbrella” that whitewashes China’s practices vis-à-vis the international community.

Lastly—and most importantly—, China’s hijacking of international institutions threatens to plunge the world order into a structural crisis. According to British historian Niall Ferguson, that world order was never truly global in the first place, but was instead regional and not very orderly. Was it even liberal? There’s a good case that it wasn’t since the institutions that form the system’s backbone have often deployed rather illiberal means to achieve liberal ends. That these institutions have been hijacked by illiberal members is why they shouldn’t be trusted to deliver on their mission. How far they’ve strayed from the purpose for which they were founded reveals either incompetence or malice—both to be handled with care. The World Health Organization’s role in covering up for China during the Covid-19 pandemic is the most recent example.

Whether it came to trust China out of naïveté or stupidity, the West is also to blame, especially since putting an end to this infiltration of critical international institutions is still well within grasp. Are two decades of unfair trade not enough? How many feckless warnings will the West issue before China comes to completely take over the system? We have been blinded to—or chosen not to see—how Beijing has seized upon the growth and prosperity flowing from unprecedentedly open economic relations with the West to build the most technologically sophisticated and repressive regime in human history. This is the most important geopolitical development of the past 20 years. During that time, the Chinese Communist Party has had the ability to co-opt the resources of the post-Cold War liberal world order and has been met with feckless indifference and neutrality from most of the Democratic world’s key players.

And who has benefited? American tech giants, along with the billionaires in Wall Street and Silicon Valley who invest in them, have consistently pressured into a pliant posture successive US administrations that were otherwise committed to containing the Chinese regime. The reason why is obvious: China has made them immensely rich.

The WTO bureaucracy claims the solution resides in enforcing the “rules of the game”. Yet China was welcomed in 2001 under those very rules, so that approach seems insufficient. No matter how many boxes China ticks to appease the WTO’s qualms, the institution will remain hijacked unless and until Beijing renounces its autocratic regime. If it does not, no amount of boxes ticked will stand in the way of an increasingly more totalitarian China emerging victorious.

There are other options. The long game is to demand that China abandons its current political regime, with all the economic implications that this may pose. The larger idea that the WTO can accommodate a variety of economic and political systems ought to be outright discarded. China’s case should precisely instruct against that idea. But since the WTO itself needs to put its own house in order, consider one final avenue of reform – the WTO’s implicit legal customs and practices should be translated into explicit treaty language that binds China. This should merely work as a temporary fix whilst China transforms its political system. This, by no means, would be considered a final compromise between the West and China, or any other non-democratic political regime. In other words, ‘democratizing’ should be imperative.

The WTO and the Bretton Woods institutions, meanwhile, should stay vigilant, raise the bar for new applicant countries and enforce their directives and regulations. What is at stake is not only the displacement of Western hegemony by China, but the very survival of the liberal international order, however imperfect it may be. In addition, a stricter set of rules is required on multinational tech companies that have cashed in on the Chinese model with no repercussions at home, fiscally or otherwise.

It is high time the West wakes up, learns from its mistakes and commits to putting an end to China’s abuses within the WTO. If we fail to act quickly and keep on letting China rig global trade, we shouldn’t then hypocritically fault those countries that worry about the survival of their economies in the face of China’s neo-colonialism.

In today’s world, we can either have free markets or free trade—but not both. Especially not when the second isn’t free at all. Not while China stays in it without any repentance or penance.

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