Global Trade: “Everyone’s Afraid of China”

Two recent articles describe different points of friction between China and the global trade system: Beijing’s foot-dragging in complying with current agreements, and the possible effects of China’s rise on the future shape of international trade.

At China Real Time Report, Stanley Lubman looks at China’s failure to relax restrictions on foreign media imports in accordance a WTO ruling, a month after the deadline passed.

How the Chinese government plans to adjust importation and distribution rights and content review — and whether the U.S. will find the eventual Chinese response adequate — remains to be seen. Even if China were to comply fully with the WTO’s decision, it’s not clear how that compliance would affect the foreign film quota, which was not specifically addressed in the dispute.

China isn’t the only country to struggle with the conflict between supposedly non-economic domestic concerns and the obligation to abide by global standards on market access.. In 2004, the United States tried to ban Americans from betting on online gambling made available from Antigua by invoking language on “public morals” in the General Agreement on Trade in Services (GATS) identical to the clause in the GATT on which China relied; the U.S. lost (PDF).

Given the current political atmosphere in China, which has seen intensified repression of activists who are deemed to express politically unacceptable views, no relaxation of what may be deemed to be “public morals” can be expected. In the meantime, despite the quota and censorship, foreign films on pirated CDs remain readily available in China.

At Foreign Policy, Clyde Prestowitz recounts a conversation about the possible breakdown of the multilateral global trade system due to pervasive fear of China’s growing economic power. The participants, he explains, “had mostly championed China’s entry into the WTO and the granting of permanent Most Favored Nation treatment to China by the United States” on the basis that these concessions might help “tame” the rising power.

But now some important people in this group were saying it wasn’t working. That had already been somewhat indicated by the global trade figures and the chronic and enormous surpluses that China has long been accumulating in contradiction of forecasts to the contrary by many in the room. But until last night I had not heard such direct admissions of concern. Indeed, another key thinker emphasized deep fear of China’s vacuuming up of intellectual property around the world without regard to patent and copyright protections. Several people agreed that the China phenomenon is seen as a threat by countries around the world.

The conclusion was that for the foreseeable future new trade deals will have to be bi-lateral, regional, or sectoral in scope rather than global and comprehensive. At one level, that seems logical and correct. But it is actually a frightening admission of a much larger and more dangerous failure. It means that rather than having one trade regime covering all countries and administered by one WTO, globalization is leading to a proliferation of Preferential Trade agreements (we call them Free Trade Agreements (FTAs) but they are really PTAs) administered by a congeries of different bodies and governments.

But that is exactly what we had prior to the Great Depression and World War II. The whole point of the post war creation of the General Agreement on Tariffs and Trade and eventually of the WTO was to obviate and avoid this discriminatory system of preferential and special bi-lateral or multi-lateral deals that contributed so much to the breakdown of the global economy and the outbreak of war in the 1930s.

For another perspective on the foreign media imports case, read about the Chinese film industry’s fears of “colonisation” if Hollywood movies flood in.


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