China’s evolving role in the WTO DSU, by Sven Van Kerckhoven and Adriaan Luyten

China has achieved remarkable economic progress over the last decades, managing nearly double-digit growth rates since the start of its economic reforms in 1978. Thanks to this economic growth and its vast size, China quickly became one of the major actors in the international trade system. As a result, China could no longer remain at the sidelines of the World Trade Organization (WTO), the main international organization and rule-setting body in international trade. After a prolonged negotiation process, China finally joined the WTO on 11 December 2001. Its accession looked beneficial for many WTO members and China itself. Existing members saw China’s accession as an effective means to discourage the aggressive export-oriented trade policy interventions of the Chinese government. As a major exporter, China had a lot to gain from WTO accession as well. First of all, accession provides Chinese firms with increased access to the markets of its major trade partners. Secondly, China could benefit from the stability of the trade regime provided by the WTO. As a WTO member, China could challenge the trade policies of other members, and therefore would be less vulnerable to demand shocks induced by these policy changes. Finally, membership would increase China’s influence on the international trade agenda. In spite of these mutual benefits, some observers opposed the Chinese accession to the WTO. They feared a Trojan Horse scenario, in which China could paralyze the WTO once its accession was approved. One of their main concerns was that the WTO’s dispute settlement mechanism (DSU) could have ended up being flooded and obstructed after the Chinese accession.

The paper focuses on the Chinese commitments in its accession terms and their implementation afterwards, as observed by China’s participation in the WTO’s DSU. This is important since China had to agree upon relatively stringent accession requirements, which were much more demanding than those for other ‘developing’ WTO entrants. In the Chinese accession protocol, additional measures such as a Transitional Product-Specific Safeguard Mechanism, and a Transition Review Mechanism were included. The paper also looks into the Chinese use of the WTO DSU in order to remove WTO inconsistent trade barriers on Chinese exports.

After becoming a WTO member, China slowly but increasingly got involved with the WTO’s dispute settlement mechanism. China has so far filed 11 complaints at the WTO, and has been targeted 31 times. It is also one of the most active third parties, whereby it joins the consultation but neither acts as the complainant or the defendant (102 cases). Immediately after joining the WTO, China embarked on its first dispute, following the lead of other WTO members such as the European Community (EC), Japan and Brazil. The dispute called into question the United States’ (US) safeguard measures on the import of steel. Only from 2007 onwards, China started to file complaints more regularly. The early Chinese complaints generally revolve around primary products. China has so far only targeted the US and the EC, and has stayed away from filing complaints against other WTO members. In the paper, we argue that the increase of China’s reliance on the WTO dispute settlement took place in response to the complaints filed against China by the US and the EU. Initially, China preferred to settle the disputes in which it was targeted bilaterally, without the involvement of WTO panels. This can be explained from the Chinese culture where litigation has been perceived as a sign of bad faith. However, China’s efforts to solve disputes bilaterally often turned out to be in vain. When China was the complainant, all but one case resulted in the establishment of WTO panels. The more aggressive take of the US and the EU who refuse to settle Chinese complaints bilaterally has caused a change in the Chinese strategy. China increasingly uses a tit-for-tat approach towards the EC and the US, but still refrains from filing a complaint against other WTO members.

The initial fear that China would disrupt the functioning of the WTO so far bears only very little empirical evidence. Even though China had to implement far-reaching commitments, it looks so far that it did a good job in doing so. Moreover, when other countries have questioned the Chinese trade policy, China has generally quickly reversed its policies. Now that China has gained a certain expertise in dealing with the WTO DSU, and that it has noted the more aggressive usage of the WTO DSU by other countries, it might be the case that China takes up a more aggressive approach as well, by more often going through the panel stages.

Contact

Sven Van Kerckhoven, University of Leuven, Faculty of Economics and Business, Leuven, Belgium (sven.vankerckhoven@ggs.kuleuven.be)

Adriaan Luyten, University of Leuven, Faculty of Economics and Business, Leuven, Belgium (adriaan.luyten@kuleuven.be)

Read the article:

KERCKHOVEN, Sven Van; LUYTEN, Adriaan. The tale of a Trojan horse or the quest for market access? China and the World Trade Organization. Rev. bras. polít. int.,  Brasília ,  v. 57, n. spe,   2014 .   Available from <http://www.scielo.br/article_plus.php?pid=S0034-73292014000300193&tlng=en&lng=en>. access on  19  Oct.  2014.  http://dx.doi.org/10.1590/0034-7329201400212.

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