Does China Belong in the WTO?
In December 2001, China officially became the World Trade Organization’s (WTO) 143rd member. This was a hard-won victory for the country after fifteen years of agonizing and grueling negotiations that “turned black hair white,” as Zhu Rongji, China’s former prime minister, famously stated. Since its WTO debut, China has made tremendous strides on the world stage that have benefited both the Chinese people and numerous trading partners. Yet over a decade later, many remain critical of China’s unwillingness to play by all of the rules set up by the other leaders of the international economy.
The successes of WTO accession are easy to tabulate. For example, when China entered the WTO, its economy accounted for less than 4 percent of global trade. Today, the country is the world’s largest exporter, accounting for just over 10 percent of international commerce. During the tenth anniversary of China’s WTO entry last year, President Hu Jintao called it a milestone in the reform and opening up process begun by Deng Xiaoping back in the 1970s. Hu was correct. China agreed to lower its tariffs to levels below many other developing countries, opening itself up to the world and allowing it to become the world’s second-largest economy.
At the same time, the number of critics of China’s trade practices has continued to increase with each successive year. Part of this is because China’s tariff levels, though lower than many developing countries, are considerably higher than most industrialized ones. And while China continues to see itself as a developing country (and depending on what metrics one uses, it technically still is), it is becoming more difficult to rationalize how an economy its size, which may soon surpass the United States, is still “just developing.”
To be sure, some of these criticisms may just be sour grapes. On one hand, we cannot ignore the fact that China’s exports have swamped many markets with cheap goods; that China continues to undervalue its currency; that it protects its own companies while putting foreign firms at a competitive disadvantage; and that intellectual property infringement often leads to outright corporate and cyber espionage. On the other hand, we also cannot forget the fact that China’s economic development has made all of us richer. Consumers around the world have benefited from cheap Chinese goods and Chinese growth has created a huge and growing market for the exports of other countries.
Many countries worry about China’s unfair trade practices, and some grumble about the merits of China becoming a member of the “WTO club.” But would we really prefer the alternative?
Yes, China needs to continue to develop the rule of law at home. Yes, it needs to liberalize its exchange rate further. And yes, it needs to foster a culture of innovation within its borders that allows it to take risks to develop its own “next big thing,” instead of attempting to take the ideas of others and pass them off as its own. But most would agree that even with these problems, a strong, stable, and peaceful China is preferable to one that remains outside the system.
After all, when China doesn’t play fair (at least from an economic perspective), the WTO still remains the best recourse for curbing its worst infractions. And the United States has a pretty good winning percentage in that organization over the past several years.
Confronting New Challenges
China’s seemingly “unfair” trade practices and WTO infringements may be indicative of broader trends. A recent National Interest article about China’s diplomacy discussed how China’s recent spate of provocative actions and assertiveness has, in a sense, backfired by creating a “coalition of the willing”—a group of countries that are growing increasingly wary of China and its intentions.
China has risen economically, diplomatically and militarily at speeds few could have imagined. And with that rise, new challenges have cropped up that many were not prepared for. China is a force to be reckoned with on nearly every front, and the economic gap that separated the United States and China has been narrowing while, according to one researcher, “the gap between China and other new economies, such as [the other] BRIC nations, is widening.”
Now that China has arrived as a global trading powerhouse, it must take on more responsibility for maintaining the system from which it benefits.
First, it needs to play by the rules. The current international order was created by Western powers, but China has profited from these rules more than any other country and thus should abide by them.
Second, China can’t afford to play the “developing country” card forever. It’s true that China’s GDP per capita is only around $5,500 and that it is still working to lift millions of people out of poverty. But at the same time, some of its economic practices are proving to be counterproductive and are stoking protectionist impulses abroad, a dynamic that is certainly not in China’s own best interests.