Last updated on March 23rd, 2022
Over the weekend, China celebrated the 20th anniversary of its accession to the World Trade Organization (WTO).
At a high-level forum to mark the anniversary – ‘20 Years of China’s WTO Membership: Integration & Development’ – WTO Director-General Ngozi Okonjo-Iweala was joined by Chenggang Li, China’s permanent representative to the WTO.
Joining the WTO as its 143rd member on December 11, 2001, China’s accession to the WTO marked a momentous shift in the dynamics of world trade.
“The structural transformation triggered by accession-related reforms contributed to China’s dynamic growth and modernisation,” said Konjo-Iweala.
“For the WTO, welcoming China marked a significant step towards becoming a truly world organisation.”
The entry of the world’s most populous nation – comprising 1.3 billion people at the time, or a fifth of the world’s population – was a historic event that has defined the course and pace of globalisation over the last two decades.
China’s ‘economic miracle’
In many ways, China’s accession marked the culmination of its opening up to the rest of the world – a long process that had begun with the death of Chairman Mao Zedong in 1976, followed by the rise to power of the economic reformist Deng Xiaoping in 1978.
In the 43 years since Deng launched his “socialism with Chinese characteristics”, or “socialist market economy” agenda, China has transformed itself from an agrarian backwater to the world’s largest exporter and an upper-middle-income country.
And perhaps most impressive of all, in so doing, it has succeeded in lifting hundreds of millions of people out of poverty – not just in China, but around the globe, as noted by Okonjo-Iweala.
“China has secured a complete victory in the battle against extreme poverty, eliminating it for the first time in a history of thousands of years,” China’s ambassador Li added.
Moreover, China’s accession to the WTO helped turbo-charge the growth-oriented reforms that Deng Xiaoping had put in place during the 1980s, resulting in what Blackstone CEO Steve Schwarzman has dubbed the “greatest economic miracle in world history”.
Studies by the World Bank, for example, have shown that since 1978, China’s GDP growth has averaged almost 10% a year, lifting more than 800 million people out of poverty.
But even though the global economy has also prospered from China’s rise as a manufacturing and exporting hub, that rise is nonetheless not without its critics.
A double-edged sword
In 1976, according to China NBS National data, China had a GDP of $153 billion.
By 1991 this had risen to $413 billion, by 2001 to $1.3 trillion, and by 2020 it was just shy of $15 trillion.
In other words, over a period of 20 years, China’s economy grew 11 times over, catapulting it from the world’s sixth largest economy to the second, with a GDP only $6 trillion short of the US’s.
Speaking at the high-level forum, Li was quick to point out that China’s meteoric rise is the result of not only opening up to the rest of the world as an exporter, but also of reducing tariffs on other countries’ goods and services coming into China.
“With its accession to the WTO, China substantively opened its market of goods and services,” said Li.
“The average current tariff rates of manufactured goods have been lowered from 14.8% to the current 7.4% – 2.8% lower than the accession commitments.
“For trade in services, nearly 120 sectors have been opened up – 20 more than what was agreed upon accession.
“The continued opening up and reform fundamentally promoted China’s development.”
However, other speakers at the high-level forum struck a more cautious tone.
Former Deputy US Trade Representative (USTR) Wendy Cutler, for example, underlined the historical importance of China’s WTO accession, but also noted that more time will be needed to fully assess its impact.
“When we look back on trade history, this is going to be one of the major milestones on trade,” she said.
“But I don’t think the story is written in stone yet. I think it’s still a fluid situation.”
Cutler said there are still significant issues affecting the US-China trade relationship, particularly with regard to the treatment of US companies that would like to operate in China, or that are already established there.
Further venues are needed for both countries to flesh out these differences and improve that relationship, she said, both bilaterally and via the WTO.
“Issues such as the so-called non-market economy, industrial subsidies, the behaviour of state-owned enterprises, and other related practices really need to be addressed,” said Cutler.
Other US lawmakers, as quoted by Politico, likewise see few reasons to celebrate.
Rep. Kevin Brady (R-Texas), who supported China’s WTO accession in a House of Representatives vote in 2000, said he now has buyer’s remorse.
“I was convinced at the time that China needs to be part of the rules-based trading system in that it would accrue to the benefit of the US in a significant way over time,” said Brady.
“Now it’s clear China had no intention of living within a rules-based trading system.”
Sen. Chuck Grassley (R-Iowa) said that, while China’s accession helped lift its people out of poverty and opened up a new market for US agriculture, “clearly the arrangement hasn’t lived up to our hopes of 20 years ago.”
China – free trade for me but not for thee
While not naming any specific companies, Cutler, Brady, and Grassley each alluded to the protectionism that China extends to its own homegrown industries and companies, at the expense of US companies that find themselves shut out of the Chinese market.
To the average consumer, nowhere is this more obvious than in tech, where Chinese apps such as TikTok, WeChat, and AliPay are free to operate in the US, while their equivalents – Facebook, YouTube, Whatsapp, Google, Twitter, etc. – are banned from China.
Such treatment is rarely reciprocated by the US towards Chinese companies, except in cases where national security, fraud, or espionage concerns come into play.
In 2019, for example, Chinese telecoms manufacturer Huawei was blacklisted by the Trump administration due to national security concerns.
In 2020, China’s homegrown ‘Starbucks rival’ Luckin Coffee was delisted from the NASDAQ and ordered to pay a $180 million fine by the US Securities and Exchange Commission (SEC) for accounting fraud.
And this year, US Senators Marco Rubio (R-FL) and Ted Cruz (R-TX) have drawn attention to Chinese espionage and intellectual property theft by introducing the Protecting America from Spies Act.
“We know that the Chinese Communist Party will spare no effort to steal from, and exploit, American companies and universities,” Rubio said in a statement.
“This legislation prevents repeat offenders from gaining access to our country.”
Cruz added: “The Chinese Communist Party takes a whole-of-state approach to espionage and intellectual property theft, and relentlessly seeks to infiltrate and steal from America and American institutions.
“People who try to spy on the US and their family members should not be granted access to our country.”
Counting the cost
To put Rubio and Cruz’s claims into perspective, in 2020, the US Federal Bureau of Investigation (FBI) estimated that Chinese theft of US trade secrets costs American companies anywhere from $300 billion to $600 billion a year.
And in 2017, a study by The Commission on the Theft of American Intellectual Property, an arm of The National Bureau of Asian Research, put the figure at $225 billion to $600 billion a year.
Nevertheless, some US companies are still happy to do business with their Chinese counterparts, even in sectors where American companies are locked out of the equivalent Chinese market.
Regrets, who’s had a few?
Despite these challenges, Cutler nonetheless challenged those Americans who believe that China’s accession was a mistake.
“I think it was the right decision at the right time. That said, I don’t feel like it’s an anniversary that necessarily just lends itself to celebration,” she said.
“I think there is angst about what the future holds, not only for China’s role in the WTO and US-China relations, but also for the WTO itself.”
After the US-China trade deficit hit a record high of $621 billion in September this year, it certainly will be interesting to see how the two countries attempt to work through their differences going forward.