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.