Inside Out | Trade war an opportunity for China to address concerns of mainland-based foreign firms and open up further
Beijing has complied with the letter of its WTO commitments, but it must look at behind-the-border regulations, licences and other barriers
The Japanese call it gaiatsu. The Chinese call it wai ya. It is the positive use of foreign pressure to drive domestic reforms that might otherwise be difficult or impossible. Nowhere has it been used more helpfully than in driving trade liberalisation in the face of entrenched domestic lobbies and vested interests.
The Japanese government used the power of gaiatsu to help open up the domestic farm sector, in particular, fiercely protected rice farms. China exploited wai ya more comprehensively when it joined the World Trade Organisation in 2001, using WTO treaty obligations to force the liberalisation of large parts of its tightly controlled state-owned enterprises network. Tariffs were cut and barriers to the entry of foreign companies and their goods were brought down.
Whatever the distastefulness – or inappropriate focus – of Donald Trump’s tariff war with China (and with most of the US’s allies and trading partners), wai ya is being put to powerful use again today. Hence the publication in Beijing late last week by the State Council Information Office of an 18-page audit of “China and the World Trade Organisation”.
Look at the report’s four chapter headings – “China has Faithfully Fulfilled its WTO Accession Commitments”, “China Firmly Supports the Multilateral Trading System”, “China’s Significant Contribution to the World after Accession to the WTO” and “China is Actively Advancing Opening-up to a Higher Level” (the capital letters are the State Council’s, not mine).
Propaganda, yes. But also a calm and meticulous factual response to US government allegations that China conned its trading partners by signing up to a wide range of WTO reforms, used WTO membership to its own advantage, and then systematically failed to reform as promised.