China's WTO Bench Honed Over 15 Years Girds for U.S. Trade FightBloomberg News
Chinese trade officials, diplomats respected in WTO circles
China has gotten practice as third party to many WTO cases
China is emerging as the World Trade Organization’s unlikely champion amid Donald Trump’s threats to weaken it, backed by an army of negotiators who have spent 15 years quietly learning the ropes on trade disputes.
With the U.S. president calling into question the global bodies that have provided a framework for capitalism since World War II, the WTO is shaping up as a proving ground for how far Trump will go to rewrite the rules.
And while its powers of enforcement are limited -- larger countries have shown themselves less beholden to its rulings -- China has amassed a strong bench at the WTO and is keen to keep using it. Officials now hail the WTO as a bulwark against globalization’s reversal in an era when the U.S., a founding member, argues it is no longer fit for purpose.
"Only trade that complies with WTO rules can be considered fair trade,” Commerce Ministry spokesman Sun Jiwen said on March 9. Foreign Ministry spokesman Geng Shuang answered a question about Trump’s trade policy by saying “China supports the rules-based, fair and open multilateral trade regime with the WTO as its core.”
The officials were responding to the Trump administration’s "2017 Trade Policy Agenda," which warned the U.S. isn’t necessarily bound by WTO decisions. As a candidate, Trump threatened to withdraw from the organization, describing it as a “disaster.”
China’s rush to defend the WTO speaks to its comfort with an organization where it started off as an outsider. Since its entry, China has developed a network of diplomats and lawyers capable of using WTO rules to its advantage. Its total trade increased almost six fold between 2001 and 2015 to $3.9 trillion, according to International Monetary Fund data.
"The Chinese have gone from being outside the system to providing greater leadership inside the system," said Scott Kennedy, director of the Project on Chinese Business and Political Economy at the Center for Strategic and International Studies in Washington. "China has been a huge beneficiary of the WTO and a big supporter of it. They see it as essential to China’s economic success.”
Things haven’t always been this way. Officials viewed the U.S. cases against it at the WTO as a "diplomatic affront" during the George W. Bush administration and even the early Obama years, according to Evan Medeiros, Asia managing director at the Eurasia Group and former senior director for Asian affairs at the National Security Council.
After the U.S. filed complaints about China’s piracy of movies, music and software in 2007, China’s then-top trade official, Wu Yi, pledged to "fight until the end.” In 2005, then-commerce minister Bo Xilai accused U.S. lawmakers of "wanting a trade war" over suggestions the U.S. complain to the WTO about Chinese currency manipulation.
Now, China treats U.S. filings as standard trade practice and brings its own cases, said Medeiros. China has filed 15 complaints at the WTO and been a defendant nearly 40 times, WTO figures show, more than any other developing country. It is using the organization to push the U.S. and Europe to recognize its "market economy status," a move that would make it harder to bring anti-dumping measures against it.
Trade officials in Geneva say the Chinese are good students of the WTO’s dispute settlement system. China’s well networked diplomats often hold elaborate dinners for trade attorneys, visiting diplomats and other officials. Dinner attendees describe China’s diplomats as good listeners who ask guests to be frank about issues that matter to China.
“You now have the emergence of a class of Chinese officials who are experts in global trade affairs; these are people that have spent a decade or more working within the WTO,” said Medeiros. “In practical terms, it means they’ve been largely socialized to the norms and rules of WTO practices.”
But engagement with global trade has been a steep learning curve. Wang Junfeng, chairman of the All China Lawyers Association, remembers working on a deal for a Chinese state-owned company in Germany in 1986. One of a handful of Chinese trade lawyers at the time and a student of English for just two months, Wang recalls that "during the first two months of negotiations, I had to check dictionaries every day to understand all the trade terms."
"China had very few experts on international trade, but that has changed," said Wang, who estimates some 60,000 lawyers in China are qualified to practice on international trade.
China has sent lawyers to make third-party submissions on cases which are often of marginal interest to it “to learn how to deal with cases,” according to Tu Xinquan, a professor at the China Institute for WTO Studies at the University of International Business and Economics in Beijing. China has acted as a third party in 136 cases, just one less than the U.S.
There are strong connections between officials in Geneva and the commerce ministry in Beijing. WTO Deputy Director-General Yi Xiaozhun is a former vice minister. China’s outgoing permanent representative to the WTO, Yu Jianhua, was recently named a vice minister. Fellow vice minister Wang Shouwen and assistant minister Li Chenggang have WTO exposure.
China has at times made use of the slow-moving wheels at the WTO.
The U.S. brought a case against China on its electronic payment services market in September 2010. A WTO panel ruled against China in July 2012, and 12 months later China reported it had fully implemented the decision. The U.S. told the WTO it was "not in a position to agree." China issued new industry guidelines in April 2015 which it said would clear the way for the likes of MasterCard Inc. and Visa Inc. to gain a foothold in the China market.
Still, the U.S. also has skilled international trade litigators. Trump’s pick for trade chief Robert Lighthizer has years of experience as a lawyer working on WTO cases. He said at his Senate confirmation hearing in Washington on Tuesday the WTO is one route to resolving disputes but the U.S also needs to think about more "imaginative" remedies.
And the protracted WTO process could limit the appeal for China in using it to challenge Trump on trade matters. That raises the prospect of it taking tit-for-tat actions outside the WTO.
China has been preparing potential punitive measures since before Trump’s inauguration, including antitrust investigations and tax probes of U.S. companies.
“That’s a world in which the Chinese flourish far more than we do," said Medeiros. "It allows China to claim the moral high ground while using all the tools at their disposal to constrain American companies. It’s a lose-lose for the U.S.”
— With assistance by Peter Martin, Keith Zhai, Miao Han, and Bryce Baschuk