What's Next for China After a 20-Year Engagement with the WTO?

China’s accession to the World Trade Organization (WTO) in 2001 ushered the integration of the world’s largest transitional economy into the rules-based trading order. In a new book titled China and the WTO: A Twenty-Year Assessment, Hinrich Foundation advisor Henry Gao and co-editors Damian Raess and Ka Zeng assess the impact of China’s entry to the WTO on the power dynamics within the multilateral system and the country’s domestic development. The Association of Foreign Press Correspondents (AFPC-USA) conducted an interview with Gao to learn more about this topic.

Gao is Professor of Law at Singapore Management University and Dongfang Scholar Chair Professor at the Shanghai Institute of Foreign Trade. With law degrees from three continents, he started his career as the first Chinese lawyer at the WTO Secretariat. Before moving to Singapore in late 2007, he taught law at the University of Hong Kong, where he was also deputy director of the East Asian International Economic Law and Policy Program. He has taught at the International Economic Law and Policy Program in Barcelona and the Academy of International Trade Law in Macau, and was the academic coordinator of the first Asia-Pacific regional trade policy course officially sponsored by the WTO.

Henry Gao

Widely published on issues relating to China and the WTO, Professor Gao has provided advice on trade issues to many national governments, as well as the WTO, the World Bank, the Asian Development Bank, the Asia- Pacific Economic Cooperation and the Association of Southeast Asian Nations. His research has been featured in CNN, BBC, The Economist, Wall Street Journal and Financial Times.

He sits on the advisory board of the WTO Chairs Program, which was established by the WTO Secretariat in 2009 to promote research and teaching on WTO issues in leading universities around the world. He is also a member of the editorial board of the Journal of Financial Regulation, which was launched by Oxford University Press in 2014. He is currently working on issues relating to digital trade, WTO reform and the Belt and Road Initiative. He also holds multiple advisory positions with trade and development organizations and sits on a number of editorial boards.

Professor Gao graduated as a Juris Doctor from Vanderbilt University in 2002, has an LLM from University College London and an LLB (summa cum laude) from China Youth Politics Institute.

The following interview has been condensed and edited for clarity.

In your book, you suggest that China’s WTO accession has had a profound effect on the Chinese economy and society. Could you describe the main effects in Chinese society after this accession in the long and short term?

The short-term effect is the phenomenal export growth, which also helped to boost China’s GDP growth to double-digits. The long-term effect was to help to shift the Chinese economy towards more market-oriented, but that didn’t happen as China failed to engage in the necessary structural reform. 

China’s economic ascent has also had an impact on the way the public and governments of major trading partners have responded. What are the most evident cases regarding this matter?

The U.S.-China trade war is the most obvious example, as the ever-growing trade deficit with China led to concerns in the U.S. that the U.S. is losing out in the competition with China. 

How has China’s perspective on the WTO evolved and what are China’s “strategic intentions”? 

Before China's accession to the WTO, it viewed the WTO favorably and was eager to join the organization. After its accession, it tried to assimilate into the WTO by adopting various reforms to make sure that its economic and legal systems comply with WTO rules. However, as time went by and major WTO Members continued their discriminatory practices against China, China felt that it was treated unfairly and started to explore alternatives to the system, such as the BRI and various free trade zones.  

Let’s talk about the changes in China’s domestic regulatory framework after the WTO accession. What are the most evident and recent changes in areas of trade, for example?

China has continued to dismantle trade and investment barriers. For example, in 2018, China reduced the tariffs on cars from 25% to 15%. Recently, China also removed entry barriers for all manufacturing sectors except publications and traditional Chinese medicine. Both demonstrated China's strong determination to pursue trade and investment liberalization. 

What are the reasons behind China’s changing perspective?

Hinrich Foundation

Part of the reason is that China felt that it was unfairly treated. One example is the non-market economy status methodology for antidumping, which was supposed to expire 15 years after China's accession, i.e., by the end of 2016. However, the U.S. and E.U. continue to use similar methodologies despite the expiration. Another reason is that China has gained more say due to its growing economic clout, which makes it easier for it to pursue its initiatives such as the Belt and Road Initative (BRI). 

You and your co-authors suggest that the question of how China should be classified and treated under global trade rules has become an acute source of conflict in the trade regime. How does this happen and who are the main actors in this scenario?

When China joined the WTO in 2001, it was only the sixth-largest trader in the world. Today, China is the world's largest trader and second-largest economy. This raised questions on whether China should still be classified as a developing country and receive special and differential treatment for developing countries. The U.S., especially under the Trump administration, has questioned this and proposed to remove China's developing country designation. However, China strongly opposes this and the issue remains resolved in the WTO. 

How have Chinese firms responded to the U.S.-China Trade War? In the field of greenfield investment, how is Russia placed in this trade war?

Many Chinese firms tried to evade the trade war by shifting their production out of China or shifting their sales away from the U.S.. These are all facilitated in a way by the BRI. China's trade with Russia has increased greatly in recent years, but its investment in Russia has not increased as much. 

Geopolitical tensions are rising among China and the West. Can we say that, however, there are areas of shared interests that persist internationally? Should the WTO have a specific agenda for those areas of common interest?

Indeed, WTO Members share concerns about the need to address global issues such as climate change, environmental protection, supply chain resilience, etc. The WTO should incorporate these issues into its framework to ensure its relevance. 

How do you see the future of China at the WTO?

I think China will continue to play a very active role in the WTO, or even a leading role, especially as the U.S. has relinquished its leadership role in recent years.