Opinion | China broke the rules of global trade – but for good reason
Daniel Poon says the global trade regime that now exists has become an example of institutional overreach: backed by its developed-country members, the WTO has effectively reduced the policy space of developing countries to become rich themselves
It is widely acknowledged that the state played a substantial strategic role in these cases.
For those wishing to replicate their success, however, some argue that the relevance of their experience is limited because the global trading system has changed. Policy instruments like “performance requirements” that were once permitted were banned when the World Trade Organisation came into force in 1995. Other practices, like technology licensing agreements, were discouraged in favour of foreign direct investment flows, which allowed foreign investors greater control over technology transfers.
Under the new rules, the trading system became much less permissive. Rules that focused on reducing tariff barriers were expanded to the service sector, intellectual property rights and domestic subsidies, among other areas. Efforts to extend multilateral rules to the areas of investment, government procurement, antitrust, and trade facilitation were resisted, but inroads were made via the proliferation of regional and bilateral free trade agreements.
In establishing discipline in these new policy areas, some flexibility was allowed, though such exceptions were generally limited in scale, scope and time.