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China in the WTO: The Next 20 Years Must be Defined by Actions not Words

China celebrates the 20th anniversary of its accession to the World Trade Organization. Given the increasingly politicised global business environment, making good on its WTO accession agreement would send a powerful signal to the rest of the world.

Jörg Wuttke
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On 11th December 2021, China will celebrate the 20th anniversary of its accession to the World Trade Organization (WTO). This will be extremely significant for the European Union Chamber of Commerce in China, given that one of the main reasons for its establishment was to monitor China’s adherence to its WTO commitments.

Over the past two decades, China has integrated substantially into the global economy, unlocking tremendous growth. President Bill Clinton stated in 2000 – on the acceptance of China’s bid to join the WTO – that its accession would equate to an economic «one-way street», with benefits flowing straight to the US.

Instead, China has since grown to become the world’s second largest economy, its exports of goods have increased more than sevenfold and it is consistently among the world’s largest recipients of foreign direct investment (FDI).

Inadequate enforcement of intellectual property rights

Despite these phenomenal achievements having largely resulted from the economic reforms and opening that were both required and catalysed by China’s WTO accession, the country has for some time been selectively applying the brakes on its reform programme.

Speaking on the 10th anniversary of China’s WTO accession, my European Chamber predecessor, Davide Cucino, remarked that «momentum towards liberalisation has slowed and ownership restrictions as well as compulsory technology transfer remain in place in key industries, including in sectors where China has now emerged as a global market leader.»

Ten years on, his words are still relevant.

Take intellectual property rights (IPR), for example. While China has slowly improved both written IPR laws and related judicial processes, a significant 50 per cent of respondents to the Chamber’s Business Confidence Survey 2021 stated that enforcement of IPR laws remains inadequate, a poor assessment by any objective standard.

Similarly in standards, while China has made great progress in reforming its standardisation system, the country still falls short of its reporting duties to the WTO’s Technical Barriers to Trade Committee.

Moving backwards in terms of SOE reform?

Even more troubling is the area of SOE reform, where China appears to be moving backwards. Prior to its WTO accession, a major concern for other members was China’s favourable treatment of its state-owned enterprises (SOEs). While this remains the case today – with the provision of subsidies to these companies often resulting in market distortions, both domestically and globally – there are signs in the 14th five-year Plan that this trend will actually accelerate.

This is concerning for many reasons. Not only would pursuing bold economic reforms boost business confidence in China, leading to increased FDI flows, data also indicates there would be substantial gains for China’s overall growth trajectory. World Bank projections show that should China pursue comprehensive reform and opening between now and 2050, its GDP per capita would be 65 per cent higher by the middle of this century compared to if it only implements limited reforms.

That equates to a GDP per capita of around USD 55’000, or roughly USD 10’000 more than the current GDP per capita of my own county, Germany – quite the statement for a country looking to build a modern, socialist country by 2049.

Will China choose the right path?

Second, it would go a long way towards securing China’s image as a true guardian of multilateralism. In January 2017, when many other countries were starting to look inward, China’s leadership extolled the virtues of openness and globalisation during the Davos World Economic Forum (WEF).

This year, speaking again at the WEF, President Xi described multilateralism as «the torch» that will illuminate «humanity’s way forward». But in lieu of meaningful market opening and deeper regulatory reform, European businesses operating in China remain unconvinced by such rhetoric and have become immune to repeated promises.

As we look towards the next two decades, China is at a critical juncture. As the global business environment becomes increasingly politicised, and some states become even more insular, the multilateral trading system can only be secured through actions, not words. That is why making good on its WTO accession agreement, by addressing such issues as SOE reform, IPR and standards reporting, as well as making a meaningful offer to join the WTO Global Procurement Agreement, would make such a powerful statement to the rest of the world.

As a staunch supporter of globalisation, and a first-hand witness to China’s miraculous growth over the past 20 years in the WTO, the European Chamber is confident China will choose the correct path.

Jörg Wuttke

Jörg Wuttke is President of the European Chamber of Commerce in China, the institution recognised as the official voice of European business in China by the European Union and the Chinese government.
Jörg Wuttke is President of the European Chamber of Commerce in China, the institution recognised as the official voice of European business in China by the European Union and the Chinese government.