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Yi Xiaozhun, who stepped down as deputy director general of the World Trade Organization last month, speaking at a seminar in Beijing on Friday. Photo: Centre for China and Globalisation

China’s WTO reform aspirations take centre stage at globalisation seminar

  • The future of multilateral trade is at a crossroads, and the World Trade Organization’s new chief says changes are coming to the trade body
  • Former highly placed trade authorities say China must be wary of ‘a small circle with geopolitical considerations’, while guarding against protectionism

China should seize the window of opportunity to rebuild the World Trade Organization’s authority in the global trade system while also being mindful of “a small circle” of nations pursuing unilateralism and protectionism, a senior trade adviser said on Friday.

“The direction should be trade liberalisation and facilitation,” said Yi Xiaozhun, elaborating on the Chinese principle of reforming the WTO after stepping down as deputy director general of the trade body last month.

“But we should stay alert to the intention [of some countries] to spread trade protectionism, and [we must] prevent globalisation from being driven backward,” he said at a seminar hosted by the Centre for China and Globalisation, a Beijing-based think tank.

He did not mention the United States or other countries by name, but the China-US trade war has largely paralysed the WTO’s multilateral trade endeavours since 2018.

The comments come as the 164-member organisation has been operating without its Appellate Body, which arbitrates global trade disputes, since former US president Donald Trump blocked the appointment of new judges in 2019.
The future of multilateral trade is now at a crossroads, and reforming the WTO is high on the agenda for Ngozi Okonjo-Iweala, who was sworn in as the trade body’s new chief in March. Her four deputy director-generals, including Chinese national Zhang Xiangchen and American Angela Ellard, were announced last week.

Yi also addressed China’s priorities and concerns in the face of various reform proposals.

“Will these proposals facilitate trade or raise barriers,” he asked. “Will they strengthen the most favoured nation, the core of multilateral trade mechanisms, or introduce more discriminative factors? Will they strengthen the authority of the WTO, or weaken it by forming a small circle with geopolitical considerations?”

China has been keen on upholding trade liberalisation and defending the role of the WTO. The country is widely regarded as a major beneficiary of globalisation. Its accession to the WTO in 2001 sparked China’s economic resurgence, effectively turning it into the world’s factory and eventually its second-largest economy.

But China has also been criticised by the US and other developed nations for its subsidies and preferential treatment of domestic industries, creating an uneven playing field for foreign firms trying to do business there.

China’s joining of the WTO indeed changed global trade. As a matter of fact, [China’s involvement] is good for the whole world, including developed countries like the United States
Long Yongtu, former Chinese vice-minister of foreign trade

Long Yongtu, a former vice-minister of foreign trade and the point man during China’s 15-year talks to join the WTO two decades ago, expanded on the impact of China’s role in the trade body.

“China’s joining of the WTO indeed changed global trade,” he said at Friday’s seminar. “As a matter of fact, [China’s involvement] is good for the whole world, including developed countries like the United States.”

He added that China’s involvement in the WTO offers Beijing an opportunity to open up and advance economic reforms domestically.

Yi similarly suggested that China make “constructive use” of its status and play a “more aggressive” role in WTO reform.

He also called for China to make more progress in advancing the protection of intellectual property rights, in reforming state-owned enterprises, and in opening up its services sector.

Additionally, Yi suggested the use of plurilateral negotiations, in which WTO member countries would be given the choice on whether to voluntarily agree to new rules. He said this would help advance the discussion of important issues, as the consensus-based mechanism – multilateral WTO agreements – has failed to make any breakthroughs in the past two decades.

Doubts remain within Beijing’s policy circle on whether the Geneva-based organisation can prove its effectiveness and restore its authority against the backdrop of China’s fast-deteriorating relations with major economies.

The administration of US President Joe Biden has vowed to enhance “strategic competition” with China, and the ratification of a comprehensive agreement on investment, signed with the European Union in December, could be suspended by the European Parliament this month after China imposed retaliatory sanctions on elected officials in March following rows over Hong Kong’s national security law and human rights in Xinjiang. Meanwhile, relations with Australia have deteriorated sharply over the past 13 months.

However, Hong Xiaodong, former head of the WTO Affairs Department under the Ministry of Commerce, was optimistic that the upcoming 12th WTO Ministerial Conference in November will be a touchstone for multilateral cooperation.

Fishing subsidies, Covid-19 response, grain security and the resumption of the appeals body are all high on the WTO’s work agenda.

“The new US trade representative, Katherine Tai, previously mentioned a return to the making of multilateral rules. Meanwhile, her conversation with the new WTO director general touched on issues such as Covid-19 vaccines and the 12th ministerial meeting,” Hong said at the seminar.

The WTO remains at the core of China’s efforts to implement a multilateral trading system, but it also pursues regional trade deals.

Last month, Beijing ratified the Regional Comprehensive Economic Partnership (RCEP), a trade agreement whose 15 members account for one-third of the global population. Meanwhile, Beijing said in November that it was “actively considering” joining the Comprehensive and Progressive Trans-Pacific Partnership agreement, a higher-standard trade block that the US helped draft but pulled out of in 2017.
This article appeared in the South China Morning Post print edition as: Chance for China to set direction of WTO, adviser says