WTO-SPECIAL: China Sits Out Its Own Party

By IPS Correspondents Reprint | | Print |

Antoaneta Bezlova

BEIJING, Dec 2 2005 (IPS) - If United States’ trade officials are critical of China’s aloof attitude towards the upcoming global trade talks, held in the Chinese territory of Hong Kong, they have a point.

China, a developing country, sharing the West’s desire for broad trade liberalisation but perceiving itself as a champion of the developing world, could play a central role in the World Trade Organisation (WTO) negotiations.

“I believe that China, being a major player now in the global trading system, and a major beneficiary of the multilateral trading system, has a responsibility to be more engaged in the talks,” Rob Portman, U.S. trade representative, said in Beijing in November.

Instead, China has remained on the sidelines of the big debate between the developed and developing countries about agricultural tariffs and subsidies.

Chinese President Hu Jintao did join the chiefs of the Pacific Rim economies at the Asia-Pacific Economic Cooperation (APEC) meeting in South Korea, last month, in calling for an end to the tariff impasse that has brought the global trade talks to a standstill.

But with only days before the trade ministers from 148 countries converge in Hong Kong for the Dec. 13-18 WTO talks, China has been nearly silent on what stance it would take during the negotiations.

Poorer nations want to expand their exports of agricultural products and want wealthier countries to lower tariffs on farm goods and to slash subsidies they give domestic producers. Developed countries, on the other hand, are more interested in opening markets further for their manufactured goods and services.

The reason for the loud silence is not only that China, one of the newest members of the World Trade Organization that joined the body only in 2001,has little experience in leading international negotiations.

Far more significant is China’s controversial position as the globe’s most competitive exporter but seeking to reassure the world that its economic juggernaut doesn’t pose a threat to any country or industry and its surging exports of textiles, steel and other basic materials present a challenge but no threat to the global market.

While China, a major agricultural country with 800 million peasants, supports the lifting of agricultural subsidies demanded by the developing world, its main priority remains the facilitation of exports for manufactured products.

Exports of agricultural products only account for four percent of the total overseas sales made by China each year, much lower compared to the 13 percent and 17 percent recorded by India and Brazil, respectively.

By contrast, overseas sales of manufactured goods have become an important engine of growth for China’s overall economy. They represent some 92 percent of China’s non-agricultural exports and Beijing has aggressively sought new overseas markets for their expansion.

“China is a supporter of free trade”, says Ren Yifeng, a researcher at the China Society for WTO Studies. “Over the past twenty years of economic reforms and opening up, the country has benefited enormously from the trade liberalisation process. Today, external trade is still very important to China.”

Indeed, China’s export juggernaut has been blamed for a variety of global ills, particularly for creating unemployment in the U.S. manufacturers and their representatives in the U.S. Congress have pressed the Bush administration to condemn Beijing’s economic policies. They assert China is a trade predator whose fixed currency is so artificially weak, it renders U.S. companies uncompetitive.

In fact, China is in a class of its own on the WTO’s list of nations subject to anti-dumping investigations and charges. Of the roughly 2,500 anti-dumping cases brought between the establishment of the WTO in 1995 and June 2004, some 386 were against China, with measures imposed in 272 cases.

Beijing argues that the country is the victim of protectionism. When China joined the WTO in 2001, it agreed to be treated as a non-market economy (NME) until 2015. The NME status was part of concessions negotiated by Washington and Beijing to facilitate the country’s entry -other concessions include special safeguards on Chinese imports that the U.S. may deem are causing market disruption.

But with the U.S. and the European Union berating China over its soaring exports of everything from textiles to steel, Beijing has protested that China’s NME status is being exploited to ensure the easy imposition of anti-dumping penalties.

When a WTO member attempts to determine the normal price of an NME export, it is allowed to use another country as a “surrogate”. If the Chinese export price is found to be lower than the surrogate, then China can be found to be dumping.

But with China’s price bound to be lower, dumping is easily proved. Chinese officials insist that, were its home market to be used for comparison, it would win most dumping cases.

Over the last few years, the Chinese government has been busily negotiating bilateral agreements with a number of nations granting it market economy status. Brazil, Malaysia, New Zealand and Singapore are among the major countries that have granted China recognition as a market economy.

But with the U.S. and the E.U. rejecting such requests, China remains vulnerable to anti-dumping accusations from its main trade partners, prompting experts to charge that WTO rules are now being used by rich nations to victimise the country and contain its emergence as a new world power.

“Most of the time, developed countries turn to double standards in economic affairs and apply their theories of ‘economic integration outweighing sovereignty’ to force weak nations into conceding some of their inherent privileges,” Pang Zhongying, a professor of international relations and trade at Tianjin Nankai University wrote in the English language ‘China Daily’.

“The dispute about economic sovereignty is essentially a hidden power struggle on the world stage. Under the current context of ‘economic openness’, outside economic influences upon individual nations are distributed in an unbalanced manner,” Pang concluded.

Under such circumstances, China is understandably keen to ease international concerns about its increasing volume of exports and try to avoid damaging accusations of dumping.

During a speech made on the sidelines of the Asia-Pacific Economic Cooperation Summit in November, Chinese President Hu Jintao appealed for his country’s high-powered economy to be perceived as an opportunity rather than as a threat to the world.

“China’s development will not stand in the way of anyone, nor will it pose threat to anyone,” Hu told business executives in Busan, South Korea.

Should China’s ballooning trade surpluses with major partners like the U.S. and the E.U. lead to more protectionist measures, China is likely to emerge as a fervent global advocate of free trade.

Still, there is considerable anxiety among developed countries that China might align itself firmly with the developing countries as it did during the acrimonious WTO talks in Cancun, Mexico in 2003. These concerns stem, not the least, from President Hu’s professed agenda to put poor people first and to redistribute economic wealth in the country so as to benefit China’s farmers.

Raising income levels in China’s depressed rural areas has become a priority for the current government and increasing farm exports could help achieve this aim. This however, will be difficult if rich countries continue to impose restrictions on agricultural imports.

China has already had spats with Japan, South Korea and the E.U. over the limits of agricultural exports but new stricter environment requirements for farm product trade could lead to more trade conflicts in coming years.

But China experts dismiss the possibility of internal policies influencing Beijing’s stance at the WTO talks.

“We are in the process of building a ‘harmonious society’, which means equalising the uneven economic growth of the country. But this process is far more likely to be helped by the facilitation of free trade than by the collapse of it,” asserts Ren Yifeng.