On Jan. 1, 2002, Taiwan became the 144th member of the WTO — even if it was under the name of the “Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu” — after more than a decade of negotiations from the time of its first application.
Twenty days earlier, China had also formally joined the WTO, whose predecessor was the “General Agreement on Tariffs and Trade.” Taiwan’s peculiar title seems to indicate the behind-the-scenes turmoil and secret workings of big countries.
Taiwan, which has been a member of this organization for overseeing the rules of trade between nations and resolving disputes — an “economic UN” — for two decades, has so far been playing by the book.
When China joined the WTO and jumped on the bandwagon of “globalization,” it became integrated into supply chains tied to multinational corporations and turned into the “world’s factory.” Foreign-exchange controls and currency manipulation helped it become the world’s largest exporter, an economic powerhouse and, in time, the second-largest economy. The international community is only just beginning to understand the extent of the fallout from this.
China has fallen woefully short of the commitments of its WTO membership: its responsibility to operate an open market economy and undertake reforms leading to economic liberalization.
Embracing crony capitalism, China heavily subsidizes state-owned enterprises and government-backed businesses, compels technology transfers from multinational corporations and pirates intellectual property, while balking at opening its market.
In October, China’s trade practices came under fire in a WTO review, in which 40 countries bombarded it with 1,600 concerns, condemning it for not meeting the expectations of membership and even using its economic clout to coerce other countries.
US Trade Representative Katherine Tai (戴琪) said: “It [China] did not change the underlying policies, and meaningful reforms by China remained elusive.”
Ironically, China boasts a GDP of US$12,000 per capita, nearly what the World Bank would define as a high-income economy, but the international community continues to afford China the special privileges of a developing country.
Always one to go back on a promise, China’s integrity has only suffered since Chinese President Xi Jinping (習近平) rose to power. Hesitant on economic reform, China’s economic liberalization efforts have clearly backslidden. It has never been one to match actions with words and has repeatedly ignored external pressure.
Using its size and power, China has promoted its state-controlled economic system and debt-trap diplomacy. It has leveraged its technological edge on internal surveillance and proven to be a menace to international security.
In March 2000, then-US president Bill Clinton said in a speech on the China Trade Bill: “China is not simply agreeing to import more of our products; it is agreeing to import one of democracy’s most cherished values: economic freedom.”
Clinton might have assumed that political freedom would follow economic freedom, but this has so far turned out to be wishful thinking. Ever since former US president Richard Nixon, former US secretary of state Henry Kissinger and former US president Jimmy Carter, the US has never given up the hope of transforming China’s political regime through economics and trade. Nevertheless, this has proven to be a naive fiasco, even in terms of economics. The US has only succeeded in waking a sleeping dragon.
In terms of geopolitics, the sad truth is that the US cannot change China, but has only taken major blows for trying. For example, the trade deficit between the US and China is ever widening, with then-US president Donald Trump accusing China of “trade rape.” Trump tried to reduce the overall deficit by imposing a new series of tariffs, but to no avail.
Job losses have been an even bigger issue. Academics have estimated that China’s WTO membership has cost the US 3.7 million jobs, with labor-intensive industries having been the hardest hit. When COVID-19 emerged, the US realized that it lacked the labor to produce masks, because the industry had been relocated to China and was under its control.
The biggest victim has been the WTO, whose role has been greatly marginalized. China’s economy — its growing size and power — its takeover of WTO settlement mechanisms and the WTO’s own systemic failings have pushed the organization to the margins.
China’s state-controlled economy under Xi has been the “straw that broke the back” of the WTO. The Doha Development Round, proposed two decades ago by the WTO, has ended in failure, and given way to bilateral and multilateral free-trade agreements, such as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the Regional Comprehensive Economic Partnership (RCEP).
For example, the CPTPP and the RCEP not only cover broader issues, but also have a higher bar for membership, which in turn has undermined the WTO’s importance in global economics.
The tactics that led to the rise of communist China and their negative effects were just the tip of the iceberg.
On Sunday, the G7 summit of foreign ministers and development ministers voiced its concern over China’s “coercive” economic policies. Although the summit’s joint communique did not venture into specifics, Lithuania, an EU member, has suffered at the hands of China for supporting Taiwan on diplomatic issues. China has told multinationals to sever ties with Lithuania, or face being shut out of the Chinese market.
Lithuania has not been the sole victim of China’s “coercive” economic policies. China has threatened the commercial interests of corporations, the entertainment industry, airlines, boutique firms and sports organizations for its political agendas, such as the oppression of Taiwan.
However, following the disappearance of Chinese tennis star Peng Shuai (彭帥), the Women’s Tennis Association suspended its tournaments in China. A handful of Western sports organizations have realized that business with China is not as lucrative as they once believed — that doing business with “the dragon” is problematic, to say the least.
Joining the WTO was part of China’s “100-year marathon” and its secret strategy of replacing the US as a global superpower, but as Xi shows his true colors, the international community is rethinking things and taking countermeasures.
Now that China’s economy has taken a downturn, its problems are surfacing. Although the international community made a major blunder two decades ago, it seems that China is racing to its own downfall.
Translated by Rita Wang
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