Former WTO Deputy D-G Calls on China to Lead at WTO

Alan Wolff, a former deputy director-general at the World Trade Organization, called on China to join the WTO Pharmaceutical Agreement, play a constructive role in the fisheries negotiations, and lead in restarting the Environmental Goods Agreement.

Any of these might be a heavy lift -- after all, the WTO members have not been able to agree on subsidized overfishing for 20 years -- but Wolff also said that the WTO cannot return to efficacy without China acknowledging the system requires a market orientation, and participating in discussions on new rules to curb state-owned enterprises' distortions and on forced technology transfer. He said there will be no new appellate body without new rules.

"China needs to be a full party to the discussion and any negotiation of new rules in these substantive areas. Simply calling for the appointment of additional Appellate Body members will continue to have no practical effect," Wolff said in a speech at the Peterson Institute for International Economics Oct 14.

He said that if China does not negotiate on these issues, and instead thinks the other countries in the WTO are targeting Chinese practices, the other countries will react to the distortions outside the WTO. "It should be in China’s interest to seek resolutions where it has a seat at the table," he said.

He noted that at the time of China's accession to the WTO, China said it "would ensure that all state-owned and state-invested enterprises would make purchases and sales based solely on commercial considerations," He said that countries that favor domestic goods, services or intellectual property are violating WTO non-discrimination rules, but that proving that the government influenced companies is difficult.

"The golden rule of the multilateral trading system is that competitive outcomes should be determined by market forces and not state intervention. Without this rule, the system cannot function as intended," he said. "Were this precept not accepted and applied, there would [be] no effective alternative but to adopt additional interface mechanisms, far beyond the transitional antidumping and safeguard flexibilities applied to China in the first 12-15 years of its WTO membership under the terms of its accession."

He said that either the WTO will find a way to move toward more convergence of economic approaches among major trading nations, or there will be more antidumping or other safeguard measures taken by countries that believe other countries' practices are harmful to their companies. Wolff said those tariffs are another form of distortion.

"There is no middle ground if the WTO is to be effective. What we do not know is how long the multilateral trading system can endure if convergence is not going to take place," he said.

"Britain and the United States, at the pinnacle of their economic prominence, were ardent free traders. This should be China’s stance as well now," Wolff said. "China should be in the lead in an effort to preserve, strengthen and modernize the world trading system. It has done so only very selectively."

Wolff said he is also concerned about how the WTO will deal with the trade-related aspects of climate change: "Either there will be extensive consultations and agreements reached on how to deal with border adjustments for carbon measures, or there will likely be a level of trade hostilities that will make recent trade measures of the prior U.S. administration seem pale by comparison."