China not cut out to be a free-trade advocate: experts

By Benjamin Carlson  /  AFP, BEIJING

Sun, Jan 15, 2017 - Page 15

As the biggest beneficiary of globalization, China stands ready to proclaim itself the champion of free trade in the face of a more protectionist US, but analysts say Beijing’s attitude is much more one of pick and choose.

Since US president-elect Donald Trump was elected on a platform of tearing up trade pacts that he says have drained US jobs, China has embraced its role as a defender of globalization and multilateral economic arrangements.

At next week’s World Economic Forum in Davos, Switzerland — to many the unparalleled symbol of globalization — Chinese President Xi Jinping (習近平) is to make a keynote speech to “contribute China’s wisdom” and “encourage all parties to put economic globalization in the right perspective,” according to Chinese Vice Minister of Foreign Affairs Li Baodong (李保東).

China always seeks to “advance the well-being of mankind,” he added.

However, the idea that Beijing could fill the vacancy and lead international trade if the US gives up the job, is a non-starter, analysts say.

The global trade regime has been built around US demand and its large deficits with trade partners; China consistently runs huge trade surpluses with the US and other countries as the workshop of the world — a mainstay of the decades-long boom that has propelled it to become the world’s second-largest economy.


It would be “virtually impossible” for China to lead a global trade regime, Peking University professor Michael Pettis said in a recent analysis, adding that its partners would be hit by lower demand if it did.

“The consequence of a US withdrawal from global governance, in other words, is unlikely to be an orderly, rules-based global trading system in which leadership has shifted from Washington to Beijing,” he said.

Rather, it will be a return to the pre-Bretton Woods days of “trade conflict and beggar-thy-neighbor policies,” he said.

Since its accession to the WTO in 2001, China’s share of world GDP and merchandise exports has skyrocketed.

As anti-globalization sentiment has surged with the shock Brexit vote and Trump’s election, Chinese media outlets have spoken out in its defense.

On Wednesday last week a commentary in the Global Times newspaper argued in favor of globalization’s benefits, saying it allowed developed countries to “buy more products with excellent quality and at reasonable prices,” while noting the disruptions created by unemployment.

However, China’s putative position as free-trade champion contrasts with Beijing’s restrictions that prevent foreign companies from competing in a variety of sectors, often forcing them to partner with local competitors and share vital technology.

Li said accusations of protectionism against China are “unjustified.”

Beijing has also shown its willingness to use trade as a cudgel, with Norwegian salmon exports plummeting after jailed Chinese dissident Liu Xiaobo (劉曉波) was awarded the Nobel Peace Prize, and South Korean entertainers effectively barred from performing in China over Seoul’s planned deployment of the US’ Terminal High Altitude Area Defense missile defense system.

“What China has shown is an extreme prowess at using global institutions to its own end in its own way,” said Andrew Polk of Medley Global Advisors. “They’re very clever in using the letter of global institutions versus the spirit of global institutions.”

Unlike the Trans-Pacific Partnership, arduously negotiated under US President Barack Obama — which calls for imposing high environmental, labor and intellectual property standards on its members — analysts say a Chinese-led trade regime would feature limited preconditions to tariff-free trade.

“China has shown that if an agreement is expected to bolster profits, partner countries are willing to hold their noses,” Brian Jackson of IHS said.

China is the world’s biggest trader in goods and its performance affects partners from Australia to Zambia, which have been battered as its expansion has slowed to levels not seen in a quarter of a century.


Under Xi, the Chinese government has moved away from liberalization on several fronts, with strengthened state-owned enterprises, increased capital controls, and heightened restrictions on free exchange of information and ideas online.

Authorities hope to open foreign markets to soak up Chinese overcapacity through Xi’s signature “One Belt, One Road” policy, which calls for constructing vast rail and infrastructure links connecting Chinese exporters to markets across Eurasia.

However, Polk said the aim was less to provide investment for foreign companies, but rather “developing export markets so China can send its goods abroad, so the near abroad can be more and more reliant on China.”