AS the world’s largest trader of goods and largest developing economy, China is poised to actively participate in and advance reform of the World Trade Organization (WTO) to enable the organization to better meet the needs of global economic and trade development, thus driving global economic growth.

 

An Urgent Task

 

Since its birth in 1995, the WTO has played an irreplaceable role in maintaining free and fair world trade, bolstering trade growth, and fueling emerging and developing countries’ development. According to the organization’s data, as of the end of 2017, the WTO members had filed lawsuits on 308 trade disputes, and with expert panels, they ensured that 156 cases saw the release of arbitration reports. The proportion of the lawsuits initiated by developed economies to those by the developing economies was 3:2.

 

Ministers depart after taking a group photo during the Ottawa ministerial meeting for WTO reform in Ottawa, Canada, on October 25, 2018.

Data also show the evident role of the organization in promoting trade growth. During the period of 1994-2017, the global trade in goods grew 3.1-fold, faster than the growth speed of the world economy at 1.9-fold. What’s noteworthy is the impressive growth of emerging and developing economies in trade with their export share of the global total rising to 47.8 percent from 27.3 percent.

 

Despite its positive roles, the rule-based WTO with multilateralism as its tenet is facing unprecedented challenges posed by rising unilateralism and trade protectionism in the world.

 

The WTO Appellate Body verges on paralyzation. The organization’s major functions include dispute settlement, trade negotiations, implementation, and monitoring. The WTO’s procedure for resolving trade disputes is often likened to a jewel in a crown since the rule-based mechanism has ensured a fair environment for trade. However, since 2017, its appeal and dispute settlement mechanism has faced the most serious crisis since its birth. Immediate correction is needed, or it will be in danger of being paralyzed.

 

According to the WTO rule, the Appellate Body is composed of seven members who are appointed by the Dispute Settlement Body to serve four-year terms. Each appeal is heard by three members of a permanent seven-member Appellate Body. However, thwarted by the United States, the body has not been able to start the selection of new members, leading to only three members remaining, two of which are reaching the end of their tenures in December 2019. If the situation does not turn around, the Appellate Body will inevitably face suspension.

 

Multilateral trade negotiations have been delayed. The WTO grew out of the General Agreement on Tariffs and Trade (GATT), which was an international body whose early members were almost all developed economies. The bulk of the WTO’s current work comes from the 1986–94 negotiations called the Uruguay Round and earlier negotiations under the GATT. Since the Uruguay Round and then the birth of the WTO, developing economies have increased their voice and presence in the trade body. However, due to factors such as increased membership, diversified demands of different economies, and the WTO principle of unanimous agreement, the Doha Round negotiations did not make any headway, thus severely impairing the organization’s function of trade negotiations.

 

Rising unilateralism and trade protectionism is becoming the jarring note in the world. After the last global financial crisis, the recovery of the world economy has been faltering. The sluggish economy set the breeding ground for trade protectionism. This was followed by trade liberalization and economic globalization giving rise to more suspicions in developed countries with those upholding economic nationalism and national security gaining more popularity. Against this backdrop, after taking office, Donald Trump has advocated “America First,” and withdrawn from multiple international organizations and multilateral agreements such as the Paris Climate Agreement and the Universal Postal Union.

 

Meanwhile, the Trump administration has also taken unilateral moves to slap tariffs on imports on the grounds of national security, provoking trade wars. By threatening to abolish the North American Free Trade Agreement, the U.S. signed a new tripartite agreement with Canada and Mexico. It has even not hesitated to harm the interests of its traditional allies including the EU, Japan, and South Korea by declaring its intention to impose tariffs on imported cars. The Trump administration’s unilateral moves in trade, despite its pretext to protect national interests, are precipitating the collapse of global multilateral trade.

 

China’s Development Needs Free Trade

 

China’s development needs an inclusive and open international trade environment. The period between 2017 and 2020 is decisive in finishing the building of a moderately prosperous society in all respects. From 2020 to the middle of this century, China will basically realize socialist modernization and then further develop itself into a great modern socialist country that is prosperous, strong, democratic, culturally advanced, harmonious, and beautiful.

 

China’s economy has been transitioning from a phase of rapid growth to one of high-quality development. The country has not only faced the task of building a modern economic system, but has to take tough steps to forestall and defuse major risks, carry out targeted poverty alleviation, and prevent and control pollution. Although China’s domestic demand has contributed to 91 percent of its economic growth, steady trade growth still means a lot for the country.

 

The EU and the U.S. are both major trade partners of China with their combined imports from China taking up 35.4 percent of the country’s total exports. Different from the U.S. unilateral and trade protectionism stance, most economies, including the EU, still espouse free trade and the rule-based multilateral trading system. Amid the trade frictions with the U.S., it will be in China’s own interests to push forward reform of the WTO and maintain the legitimacy and validity of the organization, thus ensuring a fair and open trade environment for the country.

 

China needs a broad international platform to build itself into a trade power. Since President Xi Jinping proposed the Belt and Road Initiative (BRI) in 2013, guided by the principle of consultation, collaboration, and benefit for all, China has actively promoted policy coordination, facility connectivity, unimpeded trade, financial integration, and people-to-people bonds with countries along the routes across Asia, Europe, and Africa. The initiative has been warmly received by those countries.

 

With the establishment of the Asian Infrastructure Investment Bank and the Silk Road Fund, the BRI has developed into an important platform for international cooperation. Along the routes, six economic corridors are under construction, and the concerned countries have strengthened their strategic alignment. With more countries joining in, the BRI is transcending the trade and investment field and extending to cultural, social, and environmental-protection sectors, promoting win-win cooperation and inclusive development.

 

As part of China’s plan to promote world economic development, the BRI has enhanced mutually beneficial cooperation between China and countries along the routes. Reform of the WTO with openness, inclusiveness, and non-discrimination as its core value will lay the foundation for a new round of global trade growth in a broader, multilateral sense, which will undoubtedly help to spur China’s development.

 

YAO LING is deputy chief and research fellow of the Chinese Academy of International Trade and Economic Cooperation under the Ministry of Commerce.