China this year celebrated a variety of anniversaries, including the 100th anniversary of the 1911 Xinhai Revolution and the 90th anniversary of the founding of the Communist Party. Also deserving of celebration is the 10th anniversary of China's entry into the World Trade Organization. China's application was formally approved on November 10, 2001, and it officially became a member on December 11, 2001.
I don't know if folks in the Ministry of Commerce are having a cake with candles, or if Jiang Zemin and Zhu Rongji, the leaders most responsible for China's entry, are popping bottles of champaign, but the rest of us should.
Many of the Westerners attending the festivities have decidedly been party-poopers, focusing primarily on those areas China has not come into compliance or the ways China has figured out how to bend the WTO rules so that it gets what it wants without being subject to harsh penalties. One day after the anniverary, the U.S. Trade Representative issued their annual assessment of Chinese compliance, which was decidedly mixed. And on Tuesday, the Congressional-Executive Commission on China held a hearing, and the atmosphere was hardly celebratory.
I'll leave the dicing of the report and the hearing testimony to others, but here's my five big takeaways from China's membership:
1. The economic benefits to China and the rest of the world have been massive, and far more important than the negatives. Chinese trade and investment have expanded dramatically, and this has created millions of jobs in China and elsewhere. Although a significant amount of manufacturing jobs have shifted from to China, in part from the US, but mainly from around China's neighbors, the integration of China into global production networks has allowed companies elsewhere to stay in markets they otherwise would have exited and move up the value-added chain; and consumers everywhere have benefitted from the reduced prices and increased quality that global production and innovation networks have facilitated. Some may want to partly blame China's unbalanced economic growth for contributing to American unemployment or the financial crisis, but my view is that the problems of the American economy are largely self-inflicted. Send your thank-you notes to Alan Greenspan, the toothless Securities & Exchange Commission, and a Congress that is uanble to fundamentally reform health care and education or sufficiently invest in America's infrastructure.
2. Joining the WTO has led China to not only reform its trade regime, but also adopt a slew of beyond-the-border reforms governing just about every corner of the economy, society, and policy process. Ed Steinfeld marks many of these changes in his Playing Our Game (2010); he associates these changes strictly with Chinese integration into global production networks, but that trend accelerated massively because of China's WTO entry. China is far from a liberal, free-market economy, and many of its economic policies are wrong-headed and will generate lots of waste, but the distance between China and others has narrowed by a wide margin. It's perfectly reasonable to discuss China in the context of capitalist economies writ large.
3. The process by which trade conflicts with China are addressed has improved dramatically. Long gone are the two-seconds-before-midnight negotations in which failure means the implementation of rigid sanctions and the imperilment of the entire relationship. Late-night bargaining is now reserved for more mundane, incremental bilateral issues.You don't like how conflicts are addressed in the WTO? Perhaps you'd like to be an iron ore trader and play by the hard knuckle rules of commodity pricing. In 2009, deep in the middle of negotiations over annual iron ore prices, fretting over a likely loss, the Chinese arrested the folks on the other side of the table, four Rio Tinto employees. (Rio Tinto and the other iron ore providers were so spooked by the experience, they cancelled the negotiating ritual, and now prices are set according to a standard index.) At least in antidumping cases or WTO disputes, the chances of anyone doing time in a Chinese jail or having something worse befall them have been essentially eliminated.
4. China's compliance record is just about as good -- or bad -- as any other major WTO member. China has lost just 8 WTO cases during the last decade, and it has reformed its domestic laws to come into compliance in 7 of these cases. That record is just as good as that of the US and EU, both of whom have lost a lot more cases and in several instances have not come into compliance. Think American cotton. Think Airbus subsidies. Of course, the big worry about China isn't the official win-loss record, but whether its economic system simply doesn't fit the spirit of the WTO. If you think the WTO is about promoting one type of economic system, then you may be right. But if you think the WTO is about permitting some substantial variation and creating a system for adjudicating among these differences, then China is far from destroying the system. And we should be realistic, the WTO is not immune to power politics; wealthier and stronger members will always be able to get away with more than the weaker members. That may not be fair, but even with these imbalances, the WTO is fairer than almost any other international organization out there.
By the way, anyone who thought China joining the WTO would mean China would be perfectly liberal obviously don't know much about China; they know even less about the rules of the WTO, which provide -- intentionally -- dozens of legitimate excuses for members to protect domestic industry. China's continued limits on market access in part reflect simply avoiding explicit commitments; but this also reflects its ability to skillfully use the rules the US and EU wrote. Changing Chinese behavior not only requires pressuring China, it requires reforming the WTO. The United States is opposed to some of these reforms, for example regarding the use of antidumping measures.
5. In a show of staged choreography, Taiwan joined a few weeks after China, and so will celebrate its 10th anniversary at the end of this month. It's a shame no one is lighting candles for the "Separate Customs Territory of Taiwan, Penghu, Kinmen nad Matsu." Have you noticed the state of cross-strait relations of late? Not too darn bad. The economic relationship expanded dramatically even as Mainland expressed clear distaste for Chen Shui-bian. And last year the two sides signed a wide-ranging deal, the Economic Cooperation Framework Agreement (ECFA), that ought to expand ties even further. ECFA would have been impossible without both sides' membership in the WTO. Is long-term peace across the Taiwan Strait assured because of such economic ties? Of course, not. But the extent of share interests has made such a turn appear far less likely than was the case during the 1995-96 Straits crisis, let alone during the 1950s and 1960s.
Am I polyanish? No. I think China, the US, and the WTO all have serious problems they need to address, and if they don't, that spells real trouble for everyone. But if a straightforward thumbs up, thumbs down vote for Chinese membership in the WTO were held today (in the US in 1999, the vote was over whether China should receive permanent MFN), and we already knew what this last decade would be like, the decision would be simple: a big, big thumbs up!