Column: Chinas silence at WTO

Written by Amitendu Palit | Updated: Aug 6 2014, 07:06am hrs
The last time when the WTO talks failed in 2008, India and China were jointly held responsible for the outcome. It is not coincidental that, since then, the US has refrained from providing leadership to the WTO and has preferred concentrating on regional trade agreements (RTAs). The six years of the Obama administration has hardly seen the US being active at the WTO except for making the right noises.

The latest stalling of talks at the WTO has had India taking the entire blame. China is no more a co-conspirator; nor are any other major emerging markets willing to lend their voice to Indias cause.

Are China and India then, no more the buddies they were when they opposed the West repeatedly on major global economic issues, including world trade, climate change and the international financial system

It certainly seems so on trade and at the WTO. Like most other emerging markets, China has shown little appetite for buying Indias ardent plea on linking food security to the trade facilitation programme. Indeed, while it has not come out against India, there is little doubt that it would have been almost as disappointed as the US and EU at Indias stubborn resistance.

For quite some time now, China has been rather quiet at the WTO. At Bali too, the Chinese silence was noteworthy. This could have been due to Balis limited agenda comprising only trade facilitation, food security and the work programme for the LDCs. Nonetheless, its silence is in sharp contrast to the not-too-distant past when it was vocal in articulating its views at the WTO; and by doing which it donned the mantle of representing the global South, along with India.

China is unlikely to adopt an obstructionist posture at the WTO in future. There are several reasons for this.

China realises the importance of being the largest player in global trade. Its future economic prospects depend significantly upon its ability to maintain its lead over other countries in world trade, particularly in merchandise trade. The proposed trade facilitation agreement (TFA) would have been useful for China in this regard. Given its strong trade links with almost every WTO member, a multilateral trade facilitation framework ensuring harmonisation of customs procedures and border measures can bring considerable benefits to China. Hence, it is keen on seeing the TFA through.

At the same time, unlike the US and the EU, China does not wish to get portrayed as a country immune to global concerns over food security. It aims to balance its status of being the worlds largest player in merchandise trade with that of being the largest developing country. The worldviews of these two entities are expectedly disparate and distant. China has been struggling to balance both. The developing country imperative encourages it to continue to be a part of the G33 group at the WTO. This coalition of developing countries has historically been opposed to the developed world getting greater leverage in maintaining domestic subsidies on their farm sectors. And this was also the coalition that moved the food security agenda at Bali.

By virtue of being a member of the G33, China is party to demands of revision in the WTOs formula for calculating the aggregate measure of domestic support to farmers that continues to employ prices prevailing in the 1980s. However, while not giving up on the G33, China is unlikely to make a fuss over food security. It does not have the gargantuan procurement ambition that India has courtesy its food security legislation. On the contrary, China, like several other major grain exporters, is worried over the fallout (likely) of the Food Corporation of India (FCI) offloading its inventories in the global grain market. It is a different matter that the FCI might never succumb to such temptation. But its stockpile is good enough to create concerns, even for the mighty China.

So China finds itself saddled with vexing priorities at the WTO; and what better strategy in such a situation than keeping silent For China, the WTO is a useful vehicle for maintaining its lead in world trade through the Most-Favoured-Nation (MFN) mechanism. Additionally, it is using the WTO for reducing its gap with the OECD country trade frameworks. Its efforts to annex to the Government Procurement Agreement (GPA) of the WTO are the best examples. These efforts, along with Chinas willingness to negotiate WTO-plus issues in all of its ongoing bilateral and regional negotiations, have sent positive signals to the US and other OECD countries about its commitment to play ball in institutionalising 21st century trade rules wherever possible.

There is no reason why China would want to damage its increasing acceptance in the OECD trade community by backing India on food security and blocking movement at the WTO. It does not want to be seen as the villain in world trade any more. This is one distinction it is happy to pass on to India.

The author is Head (Partnerships & Programme) and Senior Research Fellow with the Institute of South Asian Studies in the National University of Singapore. He can be reached at isasap@nus.edu.sg. Views are personal