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Stan Abrams of China Hearsay – A Case of Pathological Bias?

I usually prefer to keep my posts on general, important issues – and not nit-pick on other bloggers.  However, just as once in a while one is permitted to get drunk, I will indulge in a very short post here on Stan Abrams of China Hearsay.

A few weeks ago, when China lost the WTO Appellate Body dealt China a blow in ruling that its practices on restricting exports of certain minerals / raw materials violated WTO rules, I had written a post on how unfair the decision was.  An agreement that categorically prohibits a nation of 1.3 billion from making any sort of export restrictions to protect its citizens and their environment is unfair. An agree that does so by discrimination – taking away such basic rights from China while preserving such them for other WTO members cannot be conscionable and cannot stand the test of time. I openly sided with an op-ed in the Global Times calling out the injustice and calling for China to renegotiate the grossly unfair terms under which it acceded to the WTO.

At the time, Stan wrote a post that mocked the Global Times op-ed, in effect pontificating that China must follow strictly the letters of its accession, fairness be damned.

Is China Having Regrets About WTO Accession?  Posted by Stan on 2/06/12 • Categorized as International Trade  I’ve been on the lookout for more reaction to last week’s WTO appellate decision on the raw materials case, which China lost (for the most part). …

I expected to find the usual parsing of the ruling by academics sympathetic to China’s arguments. There were also the usual formal statements issued by the affected government agencies. And although I was not surprised to see an editorial in the Global Times (often dismissed by some Western commentators as a bit too close to the government) expressing outrage at the ruling, the broad-based attack on the WTO in that Op/Ed went much further than I expected. If the position laid out in the editorial reflects even a significant minority opinion within the government, it worries me.

Countries always complain about multilateral organizations, particularly when they are on the losing end of a dispute. …

But let’s move on from this case to the main issue: the WTO itself and China’s relationship with that body. This area of criticism is the main subject of the article.

China has generally been following WTO regulations and rulings. But it should find the best balance between applying WTO rules and protecting its national interests. Getting approval from the West is not our top concern.

It sounds quite reasonable to assert that nations must balance the application of WTO rules and national interests. But wait. Isn’t that just another way of saying that a nation should only follow the rules it promised to abide by when it joined the organization when it suits them? That’s a serious problem. If everyone did that, the organization would be a joke. (Although I disagree, some critics believe the WTO is indeed a joke because of its enforcement system.)

The balance between giving up a bit of national sovereignty and obtaining trade benefits was a calculation that China made when it joined WTO. Such a discussion has no place with subsequent policy making, except perhaps in extremely rare instances (and WTO law usually provides sufficient exceptions for those eventualities).

Even more troubling is the final sentence of that paragraph, suggesting that WTO compliance is tantamount to seeking approval from the West. Yikes. This is a scary frame of mind.

On one level, complaints about WTO and accession promises are common with both China and other WTO member states. …. So some of this is par for the course, simple sour grapes in the wake of an unfavorable decision:

Admittedly, joining the WTO has boosted China’s rise. However, entry was granted at the cost of China accepting some unfair terms, from which the aftereffects have gradually emerged, including this ruling.

Many would say that China has benefited more from WTO/GATT in recent years than anyone. But nothing’s perfect, and the basic complaints are understandable, just not reasonable. Of course China had to negotiate and accept certain unfavorable terms to get into WTO. That’s what a negotiation is all about. And if China’s economy had been limping along for the past decade along with a trade deficit, then this entire argument might make some sense. But really, it doesn’t help, after a decade of annual double-digit growth, to whine about the process.

But back to the scary part. Is the WTO a binding contract or isn’t it? Here’s more language suggesting the latter:

Due to unfamiliarity with the WTO system, and worries of Western media censure, China has often opted to follow WTO rules.

Wow. Are you seeing what I’m reading? The suggestion here is that China wasn’t following the rules because it had promised to do so, but because of unfamiliarity with the system and fear of a backlash!

Unfortunately, you can see where this argument leads. If those two things were the only things holding China back from WTO violations, then an increasing familiarity with the system, which China no doubt now has after a decade, should lead to more and more trade violations, which the author(s) apparently believes is perfectly acceptable.

It’s simply bizarre that anyone would call for even more illegal behavior (i.e. putting up market barriers) in the face of a negative WTO ruling. But the rest of the paragraph is much more troubling. China doesn’t need to be a “model member”? As every nation is the world breaks trade laws now and again, I’m not sure who qualifies as a model member. Flouting the rules should be a rare exception, though, and not something to be proud of.

It’s nice to see that Stan, when convenient, is able to see things in such black and white terms – to lecture how China’s WTO obligations are spelled clearly under terms of China’s accession.  Yet when it comes to now Apple – an American company – getting into some legal tussle in China regarding the iPad trademark, how he now turns around and want to see the big picture, calling out for what is fair, what is equitable – notions that are backed up with a stick and warning that China better do right for Apple, lest this private commercial transaction becomes politicized.

From a recent interview (transcription is rough, since I only have limited time to transcribe),

Stan: At the core of this case, this is really about an asset transfer between Proview and Apple that went wrong….with Apple claiming that Proview breached its agreementand hence it owns the rights to the trademark and Proview arguing on technical grounds – which it won in the intermediate court – that part of the company – the part that was sold – didn’t actually have the right to the trademark under contest.

….

Interviewer: So how do you think the case will pan out?

Stan: The intermediate court took a technical approach – a narrow view.  It took into account whether one part of the company is an agent for the other and other factors … but it didn’t look at the overall agree, at what is fair and equitable.  When we move to the high court, it’d be interesting to see if they take a narrow approach or a broader approach that take into account many of these other factors.  If that court takes into a fairness court, that would certainly be in the best interest of Apple. Certain Apple has a lot going. It employs a lot in this country, pays taxes, and makes products that Chinese consumers want. All of that can only help Apple.

See how Stan sets things up: in the cast of WTO, he presumes / frames the WTO agreement as fair and equitable and must be enforced to the letter. In Apple’s case, mysteriously, he frames things very differently by starting out that this is a case of a business transaction that went wrong…. and one must look to broader issues of fairness and equity.

So if we are talking about the welfare of 1.3 billion – we should take the technical, narrow approach to the enforcement of laws and agreements.  However, when it comes to the bottom line of an American, for-profit company – we must now take the broader perspective, taking into account what is fair, what is equitable. Further, one must take into account of what is fair and equitable in such a way that is palatable to the U.S. – because there is always the implicit threat in the background that things will become politicized fast.

This strikes as ass-backward especially because one usually appeals to notions of fairness and equity when one party is clearly less powerful and/or sophisticated than the other and had been taken advantaged of  in a way that calls out for justice and attention.  Does Apple – one of the biggest companies in the world – a repeat player in the field of commercial transactions – deserve such attention?  Why should China – which was by all accounts was unskilled in trade negotiations and had gotten a rotten deal in acceding to the WTO – not?

I don’t want to make this a bigger issue than it is, but recently, while hosting Xi’s visit to the U.S., Biden gave a list of grievances and in summary said that America is only seeking fairness in trade.  I will do another post addressing his grievances soon, but I wonder what sort of “fairness” Biden had in mind?  Is he truly interested in fairness and equity or only in a some corrupt, discriminant sense of fairness and equity that pushes for American interests?

I am constantly amazed to see how often the more things change, the more things stay the same. Ever since the West pried China’s door open for “trade” – starting from the Opium War to now the WTO – the West has dictated to China how it is to trade – in terms of what the West deems “fair” – terms that include China giving up sovereignty, paying unjust indemnity and reparation, and agreeing to allow a wide swath of its populace to be hooked on drugs – and now China’s unfair accession terms to the WTO.  As China gains more economic and political muscle, I certain hope things will finally change in the 21st century….  1.3 billion deserve at least that much.

  1. pug_ster
    February 29th, 2012 at 17:14 | #1

    Allen,

    Ummm, I am afraid that maybe you are talking about 3 things here which are unrelated… First is about WTO ruling on rare earths, then about the ‘Slave’ labor from Apple, then about the opium trade.

    On the thing about Stan’s opinion about WTO’s rare earth decision, I do agree with him. The WTO doesn’t represent China, but as someone mentions about the WTO. A decision to join the WTO is like a marriage, you get the good and the bad. In most part, China has largely benefited as a result of joining the WTO.

    I do think the China has largely got what they wanted when they announced that they want to restrict exporting earths. Many other countries like US, Vietnam, and Australia decides to open up their mines again. WTO does allow trade limit on trade based on health or environmental grounds, but China was ‘unable to demonstrate’ on those grounds. Perhaps China was unprepared to do that. I do think that China should enforce some kind of ‘environmental tax’ on rare earths and force Chinese Rare Earth Companies to clean up the environment around the mining sites and have Chinese companies cleaning up the environment around there.

  2. jxie
    February 29th, 2012 at 17:37 | #2

    When China was accepted into WTO in 2001, a pound of flesh was taken away — there were some clauses only applicable to China. For example, the failed attempt of CNOOC to acquire Unocal. It was argued by some that the bank loan received by CNOOC was not on a commercial basis, which violated China’s WTO agreement. The so called non-commercial basis loan, is not unlike the loan Solyndra received, which is a common practice by many countries. China didn’t take the case to WTO, because in all likelihood it would lose. Some of Huawei’s expansions in the US that were denied, are harder to tell.

    In the grand scheme of things though, China has done fantastically well. Not too long before China’s WTO entry, the late Gerald Segal penned a piece in Foreign Affairs called Does China matter? China’s trade volume then (1997 stats) was lower than Netherlands’, yet today it is the largest trader in the world.

    So if we are talking about the welfare of 1.3 billion – we should take the technical, narrow approach to the enforcement of laws and agreements.

    If Apple loses the case, the ones that will benefit the most will be Proview Shenzhen’s owners — since at this point Proview Shenzhen is in a bankruptcy court, the owners are Proview Shenzhen’s creditors. The case to my untrained eyes, is fairly cut and dry. Since none of the emails and contracts Apple can demonstrate so far have shown that Proview Shenzhen as the owner of “IPAD” trademark in PRC, and as a legal entity sold the right directly or indirectly to Apple. Methinks the longer it goes, the more Apple will have to pony up. This case is less ambiguous than NTP vs RIM, and Apple vs HTC. Pay in up and get it over with.

  3. jxie
    February 29th, 2012 at 17:46 | #3

    Why should China – which was by all accounts was unskilled in trade negotiations and had gotten a rotten deal in acceding to the WTO – not?

    Long Yongtu, the chief China WTO negotiator, is arguably the greatest negotiator ever. Sure some clauses were rotten, but the cards he was dealt with in those days, he played very well.

    One of the main reasons why the Obama administration tries to leverage a small trade group TPP, and blow up to another international trade bloc — good luck to that for a host of reasons, BTW — is seller’s remorse of having China in WTO. One pound of flesh was far from enough…

  4. jxie
    February 29th, 2012 at 18:02 | #4

    pug_ster :

    I do think that China should enforce some kind of ‘environmental tax’ on rare earths and force Chinese Rare Earth Companies to clean up the environment around the mining sites and have Chinese companies cleaning up the environment around there.

    Or something like Australia’s mining tax, i.e. “windfall” tax. The main difference is both the domestic buyers and the international buyers will pay higher prices for rare earth materials. In theory the Chinese government then can turn around and use the mining tax in various forms, such as tax credit/holiday, government grants, to compensate some of the domestic buyers such as electric vehicle makers. If it’s done that way, it should be WTO-compliant.

    Hayekists will so totally hate it.

  5. February 29th, 2012 at 19:33 | #5

    Like I have said before. It is all on technicality. The complaint was that the export tax was not levied on domestic companies thus “unfairly” benefiting them.

    I also read about complaints from foreign car makers and govn’t officials that China’s new ruling on only purchasing Chinese brand as official vehicles is unfair.

    Tell me which German, French or US government body uses anything other than domestic branded vehicles?

  6. February 29th, 2012 at 21:25 | #6

    I’d like to quote Allen from his article and I agree whole-heartedly that the problem is this:

    So if we are talking about the welfare of 1.3 billion – we should take the technical, narrow approach to the enforcement of laws and agreements. However, when it comes to the bottom line of an American, for-profit company – we must now take the broader perspective, taking into account what is fair, what is equitable. Further, one must take into account of what is fair and equitable in such a way that is palatable to the U.S. – because there is always the implicit threat in the background that things will become politicized fast.

  7. LOLZ
    February 29th, 2012 at 23:02 | #7

    I follow China Hearsay and I would say that Stan Abrams is definitely not a China basher.

  8. February 29th, 2012 at 23:56 | #8

    I don’t think he qualifies as a China basher. Though I think he has his shares of pathological bias. My previous contention with China Hearsay:

    http://blog.hiddenharmonies.org/2011/03/china-industrial-espionage-when-will-it-end-a-wrong-mindset/

  9. March 1st, 2012 at 07:49 | #9

    First attacking Dan Harris, and now burning on Stan Abrams? Jeez, who’s next?

    Comparing Stan’s take on the Apple/Proview affair (where, like me, he seems to think that Apple is largely suffering from it’s own ineptitude) to Stan’s take on a GT editorial (which explicitly says that the Chinese government need not follow the terms of an agreement except where it follows their interests) is not comparing like with like. One is a dispute on which different interpretations of what happened lead to different conclusions, the other is straight-up stating that terms of an agreement should not be complied with.

    I cannot see any reason to believe that Stan’s take on Proview/Apple would have been different had the dispute been between two US companies or two Chinese companies, Stan’s take on the WTO also appears even-handed.

  10. pug_ster
    March 1st, 2012 at 12:15 | #10

    @jxie

    I think WTO want to ‘liberalize’ the Chinese banks compared to Western Standards. China didn’t, because of that, they are not swimming the toxic derivatives from the West.

    @FOARP

    Who’s burning Stan Abrams? Gees, some people here disagree with him. You’re overreacting.

  11. March 1st, 2012 at 13:07 | #11

    @FOARP

    FOARP, perhaps I need to clarify. I don’t think I “attacked” either Dan Harris or Stan Abrams – I am using them as pawns for discussion. In the case of Dan, I have serious problems with how his post comes across although I made very clear that I was not interested in Dan’s private beliefs. As for Stan, I am merely using his recent words as grounds for discussion. I see a lot of “double standards” in his writing – “double standards” that I see reflected in the broader discussion about China.

    In any case, the tone of my post speaks for itself. You can disagree or agree with me. Either is fine. No need making it more personal than that – as you may like to.

    Personally I think Stan should feel good that I actually used his writing as springboard for discussion. As you know, I rarely don’t pay other bloggers that much attention…

  12. March 1st, 2012 at 15:06 | #12

    @Allen
    Well, I guess what I was trying to suggest is that Stan and Dan are actually pretty fair guys and it seems a bit unfair not to extend a little bit of the benefit of the doubt to them.

    I didn’t comment on the post about Dan Harris because I was sure people would just see me as helping out Dan because he’s a guy I get on with, and because there was a lot of critical sock-puppeting going on on that thread by someone with a familiar writing style, but Dan in particular comes under attack quite regularly for what certain people (not me) perceive as insufficiently critical attitude towards the Chinese government. Same goes for Stan.

    Unlike me, I don’t think either of them will post critically just because the subject of the post particularly annoys them.

    Stan’s written a lot about the Proview/Apple case, including some pretty unsympathetic stuff about Apple – describing their handling of the agreement as an “epic fail”. These aren’t the acts of someone who is pathologically biased towards one side.

  13. raventhorn
    March 1st, 2012 at 17:38 | #13

    @FOARP

    “Well, I guess what I was trying to suggest is that Stan and Dan are actually pretty fair guys and it seems a bit unfair not to extend a little bit of the benefit of the doubt to them.”

    That’s a lot of relative terms without ever defining them in 1 sentence. “Fair”? “Unfair”? “A little bit”?

    I suggest it’s impossible to know what you mean.

  14. raventhorn
    March 1st, 2012 at 18:21 | #14

    @FOARP

    “Stan: The intermediate court took a technical approach – a narrow view. It took into account whether one part of the company is an agent for the other and other factors … but it didn’t look at the overall agree, at what is fair and equitable. When we move to the high court, it’d be interesting to see if they take a narrow approach or a broader approach that take into account many of these other factors. If that court takes into a fairness court, that would certainly be in the best interest of Apple. Certain Apple has a lot going. It employs a lot in this country, pays taxes, and makes products that Chinese consumers want. All of that can only help Apple.”

    “that would certainly be in the best interest of Apple”?

    That certainly sounds pretty biased to one side.

    Since when does “fairness” go toward the best interest of only 1 party in a litigation??

    Er, Stan, I think the general tag line from the courts is “in the best interest” of the PUBLIC, even in the US!!

  15. Marsupial Joe
    March 6th, 2012 at 04:32 | #15

    With all disrespect, you guys are idiots and I am sure that is why Mr. Abrams, who frequently comments on other blogs, is not going to taint himself by coming on here to set the record straight. And though I know you are going to ban me from here like you ban everyone else who disagrees with you, I think my calling you idiots is giving you the benefit of the doubt because most would just call you dishonest. Mr. Abrams never called on a Chinese court to rule one way or the other on the Apple case. He merely pointed out that if the court were to rule technically it would likely rule one way and if it were to rule on the public interest, it would rule another. He never said how he thought it should rule. You were either too dumb or too dishonest to pick up the nuance. You really should just stick to the bullshit “everyone hates us” shit and stay away from anything resembling analysis because when you try to analyze you show how dumb you really are.

    Mr. Abrams did not display any bias and he certainly did not display “pathological” bias. You demean yourselves with your hatreds.

  16. pug_ster
    March 6th, 2012 at 07:51 | #16

    @Marsupial Joe

    I don’t think people should be banned for disagreeing with you, as what FOARP does. However, I think you should be banned for making childish comments about others by calling people here “idiots.”

  17. March 6th, 2012 at 12:44 | #17

    @Marsupial Joe

    Stan begins his assertion that we have a transaction gone wrong

    The rest of his bias shows through.

    Sure, he doesn’t dictate what the court should do (does he even have standing to do that?), but he does frame the issues in terms of “narrowness” ” technicality” and “fairness” and “equity” that shows his true color – no?

    Contrast that with his so-called ‘analysis’ of the WTO case focusing only on technicality – that’s what this post is all about.

    By the way, the purpose of this post is not to “solicit” a “response” or “clarification” from Stan. It’s merely to use a concrete example of pathological bias. Even if Stan were to reform and heal himself today completely, there are many more out there with the disease – the problem is still not solved. So to clarify, it’s not about Stan per se – but the use of a tangible case study to press a point forward.

    This post is nothing personal. Just a conversation where Stan became a convenient subject. (If this were only an issue about Stan, I’d not have taken the time to write this post.)

    @pug_ster

    We don’t ban occasional childish comments (since they may not know it’s childish). For the sanctity of the forum though, if an individual keeps trashing the forum with childish comments, that’s when we edit their comments.

  18. raventhorn
    March 6th, 2012 at 17:49 | #18

    @Stan and Dan’s 50 Cent Joe

    I’m sure Stan and Dan are happy that they got their money’s worth out of you.

  19. March 6th, 2012 at 18:47 | #19

    @Marsupial Joe
    The only idiots are those that incriminated themselves with biased writings not back up with facts.

  20. Hafez
    March 10th, 2012 at 04:52 | #20

    So Allen you ban “childish comments” because you feel they trash the forum. Do you not think that racist, sexist, posts and those which advocate violence against a group of people don’t also trash the forum?
    What are your rules on these types of comments, are they acceptable or not?

  21. raventhorn
    March 10th, 2012 at 09:18 | #21

    @Hafez

    “Do you not think that racist, sexist, posts and those which advocate violence against a group of people don’t also trash the forum?”

    I think we have been over this before. If you have specific complaints, you can raise them. Otherwise, no one knows what you are talking about.

  22. March 10th, 2012 at 09:49 | #22

    @Hafez

    In addition to Raventhorn2000’s comment above, childish comments for me mean those that attack this forum – saying people here are stupid, or idiots, that it’s a waste of time here (if it is, don’t come).

    I also delete comments when people repeat the same thing over and over again that are irrelevant – such as asking why I live in the U.S. and not China if I have all these good thing to say about China (this is not a psycho-analysis board). Or if they repeat the same things over and over again in a way that distracts from conversation.

    We don’t delete comments because we don’t agree with them. But we do demand people not be disrespectful of the forum.

    Ultimately, the problem with defining “childish” or not is similar to the problems we have in articulating obscenity. As Justice Potter Stewart of the U.S. Supreme Court has remarked once,

    I shall not today attempt further to define the kinds of material I understand to be embraced within that shorthand description [i.e. obscenity or pornography]; and perhaps I could never succeed in intelligibly doing so. But I know it when I see it, and the motion picture involved in this case is not that.

    We try our best to enforce (we don’t have enough resources to be consistent; so lots of crap do slip through) – but even if we have unlimited resources – it’s still going to be elusive to pin down in words what is exactly “childish” – disrespectful of the forum.

    Sorry – that’s the nature of the beast here.

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