Chinese Legal Scholar Speaks at Webinar on "Two Decades of China in the WTO: The View from China"

In a webinar hosted by the U.S.-Asia Law Institute on "Two Decades of China in the WTO: The View from China," Manjiao Chi, professor and founding director of the Center for International Economic Law and Policy at the Law School of the University of International Business and Economics, offered his thoughts on a wide range of issues related to China's trade policy and trade relations. University of Miami law professor Kathleen Claussen moderated the event.

Chi started the webinar off with some opening remarks and then responded to questions from Claussen and the audience. Some of the topics covered were: China's attitude towards the WTO and WTO reform; the possibility of China and/or the U.S. joining the CPTPP; the application of rules from China's WTO Accession Protocol in WTO dispute settlement; China's developing country status at the WTO; and the status of the U.S.-China "trade war." We provide some highlights and excerpts below.

Chi began by noting that "this year marks the 20th anniversary of China's WTO membership" and the WTO is now "under fire," and China "is deemed by many countries as a major reason for the WTO crisis." He then posed the question, "How do you assess China's accession to the WTO, and then its role in the WTO, and its position in the WTO reform?" He said he would offer his observations on these issues from a Chinese perspective. He noted that many of the challenges "actually deal with some of the technical issues, but also some of the more fundamental issues, like non market economy, or state intervention into economic regulation and development, such as the regulation of state owned enterprises, and subsidy issues and public body, often in relation with SOEs."

Getting more specific, he explained that he would categorize China's attitude towards the WTO and WTO reform into three "sets":

I believe there is a need to have a closer look at China's attitude towards WTO and WTO reform. So my observation, I would like to categorize these kinds of attitudes into three sets. The first set is that I see China's attitudes toward WTO and WTO reform is more responsive than proactive. ... It is more like a response to the criticisms of China and the reforms, a call for reforming of the WTO, including the WTO dispute settlement mechanism, the trade policy review and the rulemaking issue, ...

So another observation of China's attitude towards WTO and WTO reform, my observation is that China is trying to draw a reconciliation, or reconcile between, multilateralism and regionalism.

So a final observation is that I believe that China actually adopted an attitude of combination of flexibility and defensiveness. So we see from time to time, China's attitude is a bit confusing, at least to me, to a certain extent. On some issues, China takes a very hardline. For example, on non market economy issue, China would would repeatedly claim and defend that the the WTO is not a forum of dealing this kind of issue, and WTO does not address the issue of non market economy or market economy. ... But in the same time, China also demonstrates certain kinds of flexibility, as I've already mentioned, for example, when showing interest in acceding to the CPTPP, China would have to make compromise with regard to SOEs ...

He concluded his opening remarks as follows:

So in the final one or two minutes, let me try to provide my perspective on the future WTO, and the world trading system in the eyes of China. ... To reform the WTO or to reform China? This is the question. Or both. I think this is the question to not only China, not only the US, it's to the whole international community. ...

I believe that the ultimate answer to this question, ... whether the WTO remains the center, depends on whether the WTO could afford losing China or US, or Japan and the EU together with the US. So like it or not, I believe that China [is] already a leading market player and the leading producer in the world, so it's important in the global supply chain. So there is no way, I believe, there is no reasonable way, to ignore China completely, given the interdependence of the economy between China, US and the rest of the world. I believe that the only way is to forge a strong consensus on reforming the WTO, but in the same time to press China to conduct more timely domestic regulation reforms.

The webinar then proceeded to the question and answer portion. Claussen asked the following question about China's "performance" in the WTO:

As I was thinking through the performance analysis for myself, I tend to hear to two competing conversations. On the one hand, this championing of China's role that you identified, its moments when it chooses to comply and to highlight the rules for others, and certainly more recently, many have said it is filling the gap, as you mentioned, left by perhaps the US and EU stepping back from their prior leadership roles. But it also participates in what we might call inconsistent behavior or even bad behavior, some might say, ...

Chi responded as follows:

... there are different ways, or different perspectives, to approach it or to understand it, but I would simply say that this is just being pragmatic. China's been pragmatic in this regard, because China wants to make the best of the rules. And under which kind of rules, what is the best result you could have without violating that rule? So that is the way. But of course, that would create a kind of inconsistency. ...  sometimes it happens that a certain policy area, China takes this policy and that it seems that it gets the best from taking this policy without violating that rule, the rules in that area. But this could be, let's say, it could be a suggestion or could be a hint, or even a message to the international community that China's taking this, and then they get the same or similar issue or policy is taken in another policy area that could be very harmful. ... I actually don't tend to think China would intentionally do this from a bad faith perspective, because I believe that the WTO to China means much more than the WTO to the US.

Chi also talked a bit about the possibility of China joining the CPTPP:

But then China decided to join the CPTPP. And that makes sense. I would say rather clear, China wants to show a certain message, send a message, to the international community, and in the same time, try to test whether or not it could sustain, even subject itself to, SOE regulations, or some other rules like you have said, environmental, sustainable development and these kinds of issues.

...

So CPTPP would provide a way, or at least a certain kind of help. And also economically speaking, CPTPP is important, no one would deny that, and economically it also makes sense to China. And, of course, China would think this ... geopolitically, this is also kind of smart, a smart move, because the United States is not in there. So the negotiations potentially would be easier compared with a situation if the US were in the camp.

...

But of course, joining the CPTPP is not an easy job because it's not a unilateral thing. So China would have to go through the negotiations with the other members there. So I believe that it would be very difficult, if you consider that ... let's say Mexico, for example, the United States-Mexico-Canada treaty has this kind of market economy clause, if I could call it, so if, let's say, if Mexico signed that agreement with China, and that Mexico would would risk, and Canada also would risk, being excluded from the USMCA. So I believe that, ... at least for the time being, I don't think I know a way to get around that. It's just kind of mission impossible. I mean, so I'm really, to be frank, I think it's more like a gesture, it's a good gesture, but I think it's still a long way for China to be admitted into that camp of CPTPP.

Claussen then asked about the possibility of invoking the rules on SOEs set out in China's Accession Protocol in a WTO dispute settlement complaint:

I want to get some of the questions from the audience. We've already had a few, and one of them speaks to the issue that you raised a moment ago about SOEs and disciplines within the WTO. And this questioner raises that there are special rules in China's accession agreement that at least on paper would provide some disciplines on the behavior of SOEs in China. And so far, ... as you know, and many of our listeners know, no WTO member has brought a dispute settlement complaint under those rules. And so the questioner asks, do you think that invoking these rules as a part of a WTO complaint could have an impact on Chinese SOE practices, or is this just too sensitive an area, and China would resist compliance to an adverse dispute settlement decision in this area?

Chi responded as follows:

I think it's possible to ... initiate WTO disputes against China on these kinds of issues. I mean, this is a way to ... push China to take certain measures, to amend it's, at least the obvious, incompliance with the WTO. It's quite possible. To China, there is a saying that joining the WTO and enforcing the WTO rules is a kind of importing external pressure to force the reform within China. But of course, ... people may have different perspectives on that, whether or not that is really effective, that's another thing. But at least from from the paper, we see that it is in place, so I would say yes, it can do that.

Claussen then asked about China's status at the WTO as a developing country:

How important is it for [China] to continue to be given developing country status? And so this questioner asks, some think that the real benefits China gets are insignificant, and this is something that China's willing to give up on if it gets something in return, so a leverage opportunity. But others think that China regards the status as important to the extent that it helps it to maintain leadership among developing country members. And so, he asks, which is it?

Chi answered as follows:

Well, if I have to make a choice, I would say I would prefer the second point, the leadership role. Because I mean ... I see just a few weeks ago, even the Chinese media, I think has said, that being a developing country member of the WTO itself for China, China does not really harvest too much benefits from those kinds of special treatment or differential treatment, especially after China in recent years have already grown into ... the second biggest economy in the world. So those kinds of interests through the S & D treatment would be marginal.

Next, Claussen asked about the status of the U.S.-China trade war:

... we've kind of been tiptoeing around the trade war, although you mentioned it, but I feel it's sort of lingering in the background. So let's just take it on. I wanted to ask you who won? Who won the trade war? Is it over?

...

I'm coming back to my question of where do we stand in the so called [trade war], and are we now in a moment of recoupling, reengagement? Or are we more still in a boxing out adversarial moment?

Chi answered this way:

I would say ... neither wins. ... Both sides by initiating and engaging in, either voluntarily or involuntarily, this trade war is a violation of WTO rules, because it's unilateral way, I mean, without the authorization of the WTO. So that's an erosion of, very sadly, that's an erosion of the leadership role of both the United States and China, in this world, the two biggest economy. This is something that should not happen in the first place.

...

... in the phase one deal, in the deal between China and US, these important issues are not sufficiently addressed. I mean, nobody's caring about these more fundamental and more systematic issues, and just pursuing these immediate harvest, I think it's not really a smart thing. ... I think it's really no winner. On the side of China, what China is getting, has to get ready in order to counter this kind of retaliation and we see China's very quickly within its, let's say, adopting both sanction laws and these kinds of things that has never, never happened in China. And in the same time, we see that nationalism, nationalistic sentiments have been repeatedly stirred up in China. These are something beyond trade, but I believe this is harmful. This is harmful to China and also to the world.

Finally, Claussen asked for advice for the Biden administration on the issue of U.S.-China trade relations:

I would ask, what advice would you give the US administration on its ongoing trade conversation with China? ...

Chi responded as follows:

If I have to give the China advice, I would say, probably the way that is already there, is for US to go back to CPTPP, to take the leadership role in CPTPP, and negotiate with China. So by getting China on board and getting China committed to the higher level agreement, the CPTPP, that would be a very important and also a sensible, I think it's a sensible solution.