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  • Mya Raithatha

The Time Has Come For WTO Reform

The World Trade Organisation (WTO) is an intergovernmental body that oversees international trade and protectionism. It is used by governments to establish, revise and enforce the rules which govern international trade. The recent G20 summit in Italy saw the US reopen their dispute settlement concerning Chinese anti-competitive practice.

The US reopened its settlement towards China due to the fall of the Appellate Body. This was a court of sorts, in which they hear disputes and appeals raised by member countries to decide who is in the right. The Trump administration blocked entry of new members in the past 2 years, due to concerns of judicial activism, which means that its power to resolve trade disputes has halted, as there are no members- leading to the risk of countries taking matters into their own hands (most likely resulting in trade wars). There is speculation surrounding wider motives for this, and many say that the US govt took these actions because of the WTO’s lack of restriction on China’s exports from CCP subsidised businesses. This is because there were discrepancies in the WTO’s definitions of ‘public bodies’: China’s ‘strategic sector’ businesses were not flagged because the aid they receive from the CCP is integrated within their production and activity (because China is a Communist country, so the state is intertwined with business). This means that aid is not formally vested within the businesses (aid such as tax breaks and discounted loans from ‘govt-led’ private equity firms). This provides the rationale for WTO reform, as without reform China will continue to dominate the global export market whilst not adhering to rules regarding international trade such as the zero-tolerance dumping policy; therefore disadvantaging the domestic markets of both developed and developing countries. WTO reform would allow the rest of the world to impose protectionist policy on China without risks of retaliation- as it would deem current Chinese activity to be anti-competitive.

This argument has failed to consider that like all international economic bodies, the WTO has become a tool of the economic superpowers to benefit their domestic markets and economies. There is a reason why most news you see on the WTO concerns the US and China, because they crowd out services such as the Appellate Body with concerns over their already strong trade balances- making them dysfunctional for smaller, less politically powerful countries- worsening global inequality. The WTO was initially created after GATT, and had the aim of reducing high global tariffs. This aim was then changed when tariffs consistently remained in the single digits, to focus on safety, environmental, taxation and investment governance. Any being with a knowledge of business or economics can see that this automatically disadvantages developing countries. A business, industry or nation that is trying to develop their economic activity can almost never achieve economies of scale or competitiveness when valuing environmentally sustainable production to start with (as an example). To justify this, if we look at the early economic activity of countries such as China and Taiwan, the conditions and wages received by the workers are generally perceived by the current world population to be exploitative and unethical- but this occurred because the country was starting out. Now in Taiwan, after stable economic prosperity was achieved, the Taiwanese administration responded to these problems (such as by legally limiting workers to a 48-hour week including overtime), and on top of this, many Taiwanese people are now reluctant to accept labour-heavy jobs. The point made is that because the developed world sees these methods of achieving rapid growth to be unethical now, does not mean that developed countries should be subjected to the same legislation and regulation as the developed. To please the developed world, a more considerate strategy would be to require developed countries to have a sustainability strategy. We saw from India’s 2070 carbon neutral target at COP-26 that it is socially acceptable for countries that are still developing and catching up to the West to have altered targets: many news articles highlighted the disappointment that India’s target was not 2050, but they did not express disapproval or a need for sanctions.

Coming back to the reforms wanted by the US to the WTO, it is important to ask whether tariffs on Chinese exports will help or worsen the industries of developing countries. If we are looking at imported raw materials, it would disadvantage them, as countries such as Malawi tend to import technology from China, which helps their manufacturing sector to grow as well as providing value added- promoting exports out of the respective country. The question lingers as to whether it will physically increase the sale of exports out of developing countries- Chinese exports are widespread due to their low cost. Developing countries do not have the infrastructure or knowledge of economic efficiency to be able to do the same. This all assumes that action is able to be taken against China- many news sources have a Western bias, and there are always political undertones regardless of what is read: yes, China’s activity is generally regarded as anti-competitive- but how much of their intervention is due to their political ideology? They are a nation which prides themselves on state intervention, so therefore their business operates differently to the Western world.

The US has a hostile mentality against developing countries when it comes to the WTO: it claims many of them are ‘self-declared’ and take advantage of the aid they receive. Therefore, reforms should be surrounding creating solid and quantitative methods to differentiate political differences and unfair practice, as well as criteria, definitions and measurements of public bodies and developing countries to name a few. China is not going to stop state involvement in their businesses, as this is part of their political/national ideology, but the issues of dumping and distortion of other domestic markers cannot be solved by liberalising China’s industries and turning them into the capitalistic models we see in our own Western world. In conclusion, it seems that the US have dominated headlines for economic reasons, but which have political undertones, like with its trade war and China’s aid in Africa: leaving developing countries out of the equation whilst furthering their wealth and reinforcing the perpetual cycle of inequality.



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