Video: The WTO’s China Challenge

May 4, 2020

Video: The WTO’s China Challenge

When China joined the WTO in 2001, people believed that the accession would be good for both China and the world. It would be good for China because they would enjoy lower tariff rates. It would be good for the world because, in theory, the accession would bring more economic and political freedoms to the Chinese people and help transform China from communism to capitalism. In the two decades since, China has harnessed the opportunities that came from its WTO membership and achieved phenomenal growth in both its trade and economy. 

In this video, Henry Gao explains why Western governments are concerned that China — in an effort to achieve incredible growth — employed problematic practices and market manipulations. To help mitigate these concerns, Gao believes that the WTO must create a system that is fair to both China and the rest of the world.

Transcript

When China joined the WTO in 2001, people believed that the accession would be good for both China and the world as a whole. It would be good for China, because China can now enjoy lower tariff rates. It would also be good for the world because people thought that the accession would bring more freedom to the Chinese people, both economically and politically, and help transform China from communism to capitalism.

In the two decades since then, China was able to harness the opportunities brought by the accession to achieve phenomenal growth in both its trade and economy.

China’s rise is mostly attributed to its state-led development model, which aims to move China up the value chain by promoting the development of high-tech sectors, using various tactics such as direct government intervention, massive subsidies, investments and acquisitions in foreign markets by state-owned enterprises, and forced technology transfers.

The governments in the West are upset because the plan employs problematic practices, disrupting the operation of the market economy. The plan could create distortions in the market, undermine market competition and lead to significant excess capacity in key sectors in the long run.

The WTO can help create a system that both China and the West will view as fair and balanced in two ways. First, existing rules in the WTO agreements can be used to challenge China’s problematic practices through WTO dispute settlement. Second, WTO members can craft new rules that deal with the China challenge and craft them in a way that is fair for everyone.

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