Crisis in the WTO is currently a topic of hot debates between diplomats, academics and politicians around the world. China is of no less interest whether it is because of the trade war with the US, coronavirus epidemic or its economy. However, the two subjects are very closely interlinked. In this essay, I am going to analyse the variables that shape China’s negotiating position on the Dispute Settlement System (DSS) aspect of the WTO reform debate. I will start by setting up the scene or briefly outlining the crisis of the “Jewel” of the WTO, I will then present China’s position paper on the DSS reform. Next, I will analyse factors like ideas, norms, stage of development and developmental model with the help of constructivist theory and their influence on the WTO DSS reform. I will conclude by briefly summarising the main points and propose questions for further discussion and research.
Dispute Settlement System is seen as a fundamental pillar in the operation of the WTO. It is supposed to provide security, fairness, credibility, efficiency and stability for member countries in the multilateral trading system (Bahri, 2019). However, recent trends of unilateralist and protectionist practices but also the blocking of the Appellate Body not only weakened but paralysed the system. Moreover, the abuse of national security threat argument has undermined the rules-based international trade order, forcing a transition to a more power-based approach where US’s market size and economic power have more weight than rules and laws established (Bahri, 2019). Such practices adversely affected the interests of other WTO members, in particular developing countries. As a result, the WTO system is facing an existential crisis and multilateral trading system is on the verge of a breakdown.
In order to resolve the crisis and keep the trading system up and running several countries individually as well as forming alliances have made reform proposals. One of the member countries actively supporting efforts for necessary reform to the WTO is China.
Being the second biggest economy in the world now, China’s wasn’t always that influential.
China became a WTO member on 11 December 2001 (WTO.org, 2020), meaning that China would engage in international trade based on the rules it did not make. China was forced to considerably liberalise its markets and deal with concerns of transparency and intellectual property. Since then it became arguably one of the most controversial and powerful members of the WTO.
China recognises the importance of the WTO and open trade. It is crucial to briefly outline China’s negotiating position, even though this part is descriptive it is vital for further analysis. Country’s 2018 proposal broadly covered 3 basic principles, where concerns for the role, interests and capacity of developing members were very evident. (which I will touch upon further in my essay)
Values of the multilateral trading system such as, non-discrimination and openness were highlighted as core values of the WTO that shall be preserved by the reform. Safeguarding the development interests of developing members, in particular, the S&D (Special and differential) treatment constituted the second principle, while decision-making by consensus, not dictated by a few but based on mutual respect and dialogues on equal footing, was stressed to be the third (Ministry of Commerce of China, 2018).
China, moreover, believes the WTO reform should cover 5 problem areas. The first is resolving crucial and urgent issues such as the appointment of the AB members (Rule 15: Transition) and 90- day timeframe, unilateralist measures and imposition of tariffs as a measure against national security threat (MCC, 2018). The second one is on WTO relevance in global economic governance or AMS – aggregate measurement support – for developing countries and E-commerce issues of cyber and data security concerning developing countries and the challenges they face. Improving the operational efficiency, in particular issues of transparency is the third problem area, while the need for enhancing the inclusiveness of the multilateral trading system, with respect to the rights of S&D for developing countries is the fourth. Last but not least is China’s demand for respect of members’ development models, in particular the existence of SOEs (state-owned enterprise) and industrial subsidies (MCC, 2018).
These proposals seem reasonable and logical, however, what factors influence these demands?
Several variables can shape country’s political demands and a negotiating position. They can be political, such as the political regime that the country is under, current government and their beliefs but also recent domestic policies. Economic factors like different development models of various states, the level of a country’s development, access to resources and your market size and market power need to be taken into consideration. There are other elements that at first don’t seem to be influential, like culture or history of a country, however, these are the factors that shape the minds of people who then regulate politics and thus our lives.
I will now consider a few of the above-mentioned variables and try to analyse them with the help of one of the economic diplomacy theories: constructivist theory.
Some of the most important factors in shaping the negotiating positions and strategies are ideas, norms and values that stem from history, traditions and culture of a country. This is especially the case for China, whose negotiation style is rooted and informed by the Confucian concepts of morality, compassion and generosity (Graham, Lam, 2003). Traditions, history and deeply entrenched respect for their culture are what shapes not just the minds and interests of economists and politicians but also their views, aspirations, policy decisions and demands.
Throughout history, China was heavily reliant on cultivating primarily rice and wheat. This style of living- agrarianism- therefore, also influenced the values, norms and thus political positions of Chinese politicians (Graham, Lam, 2003). Unlike other modern countries, 40.85% of the Chinese population still live in rural areas as of 2018. That figure was over 50% in the early 2000s and even bigger in the 1990s (worldbank.org, 2020). The nature of agrarian lifestyle is not individualistic but rather very communal and dependent on cooperation, harmony, trust and loyalty. People who were born and raised that way, whether they ended up being politicians, economic experts or land workers, have retained these values and likely formed their world view based on them.
These traditions not only shape the domestic level of Chinese politics but also foreign. According to economic diplomacy academics, rather than being concerned with the end of the negotiating process, Chinese negotiators seem to put a lot of emphasis on the means- the actual process of thorough and factual negotiation (Graham, Lam, 2003). Their tactic is not finding a quick solution by bargaining but rather persuasion and reasonable flexibility (Chin, 2013).
To analyse the Chinese position and where it is coming from it is useful to draw on the constructivist theory that not only addresses but also explains how norms and values develop and influence politics. It is, nonetheless, important to mention that no theory can provide answers to how states act under certain circumstance; it will just, hopefully, help us understand their actions better. Constructivists argue that interests and values are determined socially, by people with different expertise, different backgrounds and cultures coming together to address a certain issue, whose decision later frame policies and negotiating positions (Woolcock, 2017). Constructivist approach, moreover, allows for the negotiators to develop a relationship built on trust and thus establish credibility and integrity through the socialization process during negotiations (Woolcock, 2017). This seems to be ideal to explain a country like China and its position through the prism of their values. China’s position on DSS reform is imbued with Chinese values in relation to other countries, especially when it comes to demands of enhancing the inclusiveness of the multilateral trading system but also its principles of mutual respect and non-discrimination.
This notion of societal influence on politics that is evident in constructivist theory can be followed through with other variables that affect the negotiating position.