The Made in China 2025 (MC2025) initiative is aimed at making China self-sufficient in a wide array of products, military infrastructure and technology. Beating the United States at technology would mean becoming the most imperious economy in the world, and trade regulations wouldn’t really be a priority for Xi Jinping.
If flouting those regulations gets China to the top, then the priorities are well set out. China cannot work both with MC2025 and a policy of non-discrimination for foreign goods, which means that China and the World Trade Organisation — which is responsible for eliminating trade distortions between countries, trimming down tariff and non-tariff barriers, removing quotas and abolishing subsidies — are set to collide. But, this is not the first time. Whether it’s low-interest loans from the state treasury or assistance to the Chinese investors in overtaking global technological firms, China is breaching World Trade Organisation (WTO) regulations left, right and centre.
That makes China a renegade for the world trade system. But when the renegade is as strong as China, it can just strong arm the system into collapsing. There’s yet more controversy involved. According to its opponent, China has not only acted illegally but also criminally through cyber thefts. China is not only challenging other economies, but it is also challenging the global trade regulatory system.
The United States has had its concerns. Trump has publicly alleged that China receives special treatment from the WTO and it is unfair to the US. A truculent Trump is not always right, but this time he is.
China has never played by the rules. The US has won every case at the WTO in the last 14 years against China, yet China continues to be the outlaw in the world’s rule-based trade system. This is especially because of the fundamental flaw in how the WTO works: no penalties unless a case is finally decided and the breach continues. In the meantime, the violating countries continue to benefit.
If the Chinese economy grows as a result of defying the rules of the WTO, Pakistan is to benefit. It is regions that prosper, never individual countries
The US has realised this and now plans on bypassing the WTO by imposing sanctions on its motion. Since two of the world’s biggest economies can’t sort it out the WTO way, it means a moral death for the WTO, which would inevitably lead to a practical death, sooner or later.
Pakistan joined the WTO in 1995. As a member, Pakistan has time and again been demanded to provide a Most Favoured Nation (MFN) status to all trading partners, including India. Yet if Pakistan goes down that route they wouldn’t be able to impose any qualitative or quantities restriction on Indian products. With a GDP of only $297.5 billion, if India can subsidise all its imports of an equal amount, they will annihilate our economy. This is a national security risk, an argument that the WTO is not capable of understanding.
In any case, developing countries like Pakistan can’t really use the WTO’s dispute resolution mechanism. They are trapped into paying disproportionate costs to enforce their rights. If the US can’t use it to its benefit, what can make one think that Pakistan, Nigeria or Somalia could? Pakistan produces more than 3 million tons of Basmati rice, yet it cannot use the name without metamorphosing it. Patented by a US firm, India challenged the term and won the case. Now the only way Pakistani exporters can use the name is if they pay the Indians to use it.
Yet not all cases have been lost. Pakistan did win a case against the United States when the latter tried to impose quantitative restrictions on Pakistani textile exports. It went through all the WTO dispute resolution stages and cost Pakistan millions, yet when the decision finally came out in Pakistan’s favour, there was still an uphill battle left.
The quota was rescinded just three months before the expiry of the quantitative restrictions by the measures. Pakistan lost revenue all along. There was no enforcement guarantee either. Pakistan could only impose its own restrictions after WTO’s approval. An economy like Pakistan against an economy like the US, no point for guessing which would win. In any event, if Pakistan had to get back on its own, why even waste millions at the WTO?
Maybe this is the reason why of the 400 cases initiated at the WTO, not one has come from an African country.
The agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPs) limits developing countries from utilising technology developed by the first world. China has now made an all-out assault at this, but the developing countries cannot. In terms of medicines, this means that the poorest in the world cannot afford medicines whose intellectual property rights are held by the developed world. The protection of intellectual property rights of the rich countries has trumped the public health rights of the poor.
When in 2010 severe flooding hit Pakistan and caused large-scale human displacement and US$10 billion damage, the WTO took two years in agreeing to temporary trade concessions. While Pakistani people and economy were suffering, the WTO executives were still considering what to do about it for more than 730 days.
It’s clear that the US and China bypassing the WTO means that its end as a major player is near. Pakistan needs to throw its weight behind China and make the WTO’s end smooth and quick, which would be poetic justice. If the Chinese economy grows as a result of defying the rules of the WTO, Pakistan is to benefit. It is regions that prosper, never individual countries.
The writer is a barrister, who has an interest in current Pakistani affairs, economy, constitutional developments, foreign policy and international law
Published in Daily Times, June 22nd 2018.