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China and US trade war ;

Back to the future: The 20th anniversary of China's membership of the World Trade Organisation

Dr Zeno Leoni

Teaching Fellow, Defence Studies Department

10 December 2021

The People’s Republic of China (PRC) promotes industrial policies that ‘skew the playing field,’ claimed the United States, while Canada, the UK, and EU called for further liberalisation of China’s market. These statements are not from the late 1990s or even December 2001, when the most populous country was about to join the World Trade Organisation (WTO) and integrate in the global economy. The attack came as the WTO itself was conducting the eighth review of the PRC’s economy in October 2021.

While WTO’s members after the review commended China for many improvements it has demonstrated so far, they also ‘urged it to assume more responsibility commensurate to its trade weight to uphold and defend WTO principles’, especially with regard to a ‘lack of transparency’ over the role of the Chinese state in the economy. Like in the film ‘Back to the Future’, in the West a feeling remains that political and economic progress in China have constantly been catapulted into the past.

Since the 1990s, the West and China had an interest in integrating the PRC into the WTO. The United States was at the forefront of this effort, especially amidst the neoliberal ‘hangover’ of the post-Cold War years. Indeed, at that time many advocated for expanding the globalisation agenda since all the enemies had been defeated – the so-called "strategic pause". In this historical context, the Clinton Administration was committed to bringing China into the global economy, in the hope that economic and political liberalisation would go hand in hand. For this to happen, Clinton delivered a passionate speech to convince the US Congress to support the bill for China’s accession into WTO. The conclusive line was unequivocable:


if you believe in a future of greater openness and freedom for the people of China … If you believe in a future of greater prosperity for the American people, you certainly should be for this agreement. … I’ll do all I can to convince Congress and the American people to support it."– Former President Clinton

Eventually, the PRC joined WTO on 11 December 2001 and the benefits for China were extraordinary. In order to enter, China had to relax ‘over 7,000 tariffs, quotas and other trade barriers’, but this paid off as scholar Steven Rolf reported. The amount of ‘foreign-invested enterprises almost doubled from 20002008 to 434,937,’ meanwhile, its ‘export volume (in current US$) exploded from $249bn in 2000 to $1.4tn in 2008’. This, Rolf added, ‘[o]n every conceivable conventional growth metric, … proved a success’. For the United States, there were also lavish profits, as American foreign direct investment reaped returns of 13.5 per cent in China, compared with 9.7 per cent worldwide.

Political change in the PRC however, has never seen the light, partly because thee United States and other countries in the West misunderstood what China meant by modernisation.

Economic interests played a major role in feeding this misunderstanding. PRC’s leaders have never promised to democratise. This was clear since the Resolution on certain questions in the history of our party since the founding of the People’s Republic of China (27 June 1981) – a kind of political assessment of the Maoist era conducted by the Chinese Communist Party (CCP) after the death of the comrade. In the Resolution, the CCP blamed Chairman Mao for his mistakes during the Cultural Revolution, but praised him for having bequeathed his successors with a sovereign country and a strong party – China’s greatest asset. It was this legacy that made it possible for China to develop whilst ‘insulat[ing] the central state against the “internationalisation” of its institutions.’

Twenty years later, not only has China been unwilling to fully embrace the WTO’s prescriptions; it has also contributed to eroding its effectiveness as an institution. The WTO itself is in a worse shape and as explained in a report from Chatham House, it ‘faces a make-or-break moment.’ On the one hand, the changing global balance of power has increased polarisation to the extent that its struggles to implement its agenda - even agreeing on the terms of a reform seems unlikely. On the other hand, there is still no agreed definition of what constitutes a developed or developing country and states can self-determine their status.

China, despite being the second biggest economy in the world, continues to define itself as ‘developing’ and has taken advantage of this status. In April 2019, when the United States was attempting to restrict the number of ‘developing’ countries that receive preferential treatment, China backfired. Commerce ministry’s spokesman Gao Feng stated that while ‘[w]e do not shy away from our international responsibilities’, the PRC will ‘assume obligations in the WTO that are compatible with our own economic development level and capabilities.’

In this way, China has confirmed its cherry-picking approach to integration into the global order. Yet, there are two unreconcilable truths about China’s attitude towards the Liberal International Order (LIO) and how the United States and its allies within WTO see this.

On the one hand, the US is right to demand that China complies with WTO rules because in every game or relationship there cannot be trust without mutual respect. China, with its selective globalism, has taken advantage of this. On the other hand, China is right in noting that the LIO is based on an international regime of rules, values, and standards that have been imposed in the interest of the United States inasmuch as it was the winner of world hegemony since the end of WW2.

Both positions are valid, but there is a risk that military power or economic forms of coercion will be the only way to determine who is right and who is wrong – as is often the way throughout history.

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