SINCE 2018, the need of World Trade Organization (WTO) reform has become more urgent, because the appointment of members of its Appellate Body faces a dilemma. Both developed and developing economies have proposed reforms and hope to accelerate the reform of the WTO. For instance, the EU issued the WTO modernization proposal, and China presented three basic principles and five suggestions for WTO reform. However, due to the large differences in reform programs, goals, and paths between the parties, WTO reform has a long way to go.
A booth showcasing Schneider’s smart, high-end equipment in the first China International Import Expo in Shanghai on November 6, 2018.
Support and Actively Participate in WTO Reform
China supports economic globalization and trade liberalization, and advocates a rule-based multilateral trading system with WTO as the core. In November 2018, in the opening speech of the first China International Import Expo, President Xi Jinping highlighted China’s position on WTO reform. At the 26th APEC Informal Leaders’ Meeting, also in November, and the 2018 Central Economic Work Conference in December, President Xi again made important elaborations, stressing that China supports necessary reforms of the WTO and defends the multilateral trading system; WTO reform needs to adhere to the core values and basic principles of the multilateral trading system, and China actively participates in WTO reforms and promotes trade and investment liberalization and facilitation.
Although China’s position on WTO reform was released following that of developed economies such as the European Union, its position on the issue is clear, reflecting China’s consistent attitude of safeguarding WTO authority and its core appeal as a developing economy. China has clarified to all WTO members that it shoulders its responsibility and actively participates in and promotes WTO reform.
Adhering to the Core Values
In late November 2018, the Ministry of Commerce issued China’s Position Paper on WTO Reform, expounding China’s three basic principles and five propositions on WTO reform, which has received wide attention. It has played a corrective role in the WTO reform issues that have been dominated by developed economies such as the U.S. and Europe, and has also played a leading role in safeguarding the interests of developing economies. Its main features are as follows:
First, it emphasizes the promotion of reform within the framework of the multilateral trading system. This includes maintaining WTO’s core values and functions, as well as decision-making mechanisms. In this regard, China advocates that the WTO reform should adhere to three principles, including maintaining the “non-discrimination and openness” core value of the multilateral trading system, safeguarding the development interests of developing members, and following the practice of consensus-based decision-making.
Among them, “non-discrimination and openness” is the foundation of the WTO’s survival, and is central to the approach of WTO members in handling their economic and trade relations with other members within the framework of multilateral rules. Safeguarding the development interests of developing members is the core of the working of the WTO, clearly granting special and differential treatment to developing members. The consensus-based decision-making mechanism ensures that WTO reform is not determined by a small number of members.
Second, China maintains that WTO reform should give priority to addressing key issues that threaten the survival of the WTO, while addressing the issue of fairness in trade rules. Specifically, it covers three aspects: First, the appointment of members of the Appellate Body, which is related to the survival of the WTO; second, the overuse of agricultural subsidies in developed economies and the abuse of “substitute countries” by trade remedy measures, which have been a major concern of developing economies for long; third, the issue of investment facilitation and other needs reflecting the realities of the 21st century economy.
The above-mentioned propositions stem from China’s in-depth thinking on the goals and path of WTO reform, and reflect China’s responsible attitude of safeguarding the effectiveness and authority of the WTO.
Third, the position paper corrects the WTO reform plans by developed economies that serve their own interests. The core of these reform plans, including the EU’s WTO reform modernization proposal, is to maintain the traditional advantages of developed economies in the multilateral trading system. Therefore, the relevant reform measures are directed against the growing competitiveness of developing economies, such as questioning the development model and industrial policy of state-owned enterprises in developing countries. As the world’s largest developing country, China has put forward WTO reform principles and propositions that express different opinions, such as stressing that reform should guarantee the special and differential treatment of developing members and respect members’ respective development models, which can effectively safeguard the interests of developing members.
Cooperation to Reform Dispute Settlement Mechanism
China and the EU are both major economies in the world. They are the beneficiaries of free trade and the multilateral trading system, and occupy a pivotal position in global trade. Both see the need to maintain the multilateral trading system. Considering the increasing urgency of WTO reform since 2018, China actively cooperates with the EU at the bilateral and multilateral levels to jointly promote WTO reform.
At the bilateral level, the Seventh China-EU High-Level Economic and Trade Dialogue reached consensus on strengthening cooperation on WTO reform. During the 20th China-EU Summit, the two sides committed to cooperate on WTO reform and establish a vice-ministerial-level joint working group on this issue. By the end of December 2018, China and the EU had held two formal meetings and two informal meetings under the joint working group to reach consensus on issues such as the appointment of members of the Appellate Body. At the multilateral level, in late November 2018, 12 WTO members including China, the EU, Mexico, and India submitted joint proposals on the reform of the dispute settlement procedure to the WTO, and a joint statement was issued at the WTO General Council meeting on December 12.
At present, many WTO members have signed onto the joint proposals. In addition to the solution of the appointment of members of the Appellate Body, the proposals also made recommendations on how to improve the efficiency of the dispute settlement mechanism, including the transitional rules for the outgoing Appellate Body members, the 90-day time-limit of appeal, the ultra vires issue of the Appellate Body, and whether the Appellate Body’s report can be treated as precedent, etc.
There are similarities as well as differences between China and the EU on the propositions and appeals of WTO reform, but cooperation should be the only way to move forward. In the next step, it is hoped that the two sides will use the joint working group as a platform to further resolve differences and increase consensus, and strive to achieve more results on other issues of WTO reform, such as on development issues and transparency issues, so as to play an active role in maintaining the multilateral trading system, promoting economic globalization, and trade liberalization.
YAO LING is vice director of the Institute of European Studies at the Chinese Academy of International Trade and Economic Cooperation under the Ministry of Commerce.