WTO must balance unequal treaties

14:28, July 20, 2011      

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China's attempts to deal with trade disputes through the World Trade Organization have met with varying degrees of success, ranging from the preliminary judgment against China in a dispute concerning restriction of raw material exports to China's successful challenge of the European Union’s anti-dumping measures for steel fastener pieces. It could reflect the conflicts of interests between WTO members and the actual unequal treatment received by the members.

Both the current WTO and the former General Agreement on Tariffs and Trade clearly take non-discriminatory treatments as a fundamental principle, and every member should absolutely enjoy equal rights under the WTO. But that is not the case, and the old and new members are actually treated differently.

The reason for this fact is that if a country or region wants to join the GATT or WTO, it must obtain the approval of the old members. Related articles say that if a country or region wants to join the WTO, it must obtain more than two-thirds of the affirmative votes of the 153 WTO members. However, up to now, the WTO has been using the measure of all members discussing together.

In this way, when a country or region is negotiating with old members for joining the WTO, the old members usually will have a series of requirements and high prices that not only cover the area of foreign trade but also increasingly cover the area of traditional domestic economic system. These requirements also usually set limitations for the new members to enjoy the rights of the GATT or WTO, and so lead to actual inequality between old and new members.

From 1986 to the end of 2001, China's negotiation for joining the WTO lasted such a long period of 15 years because the game played between enjoying rights and limiting rights was very intense.

Provisions of the "Protocol on China's Accession to the WTO" such as the No. 15 provision, which refers to determining the price comparability of subsidies and dumping; the No.16 provision, regarding transitional product-specific safeguard mechanism, and the No. 17 provision, referring to reservations by WTO members, are relatively typical unequal provisions.

China's first failure in the battle of raw material disputes is mainly because the No. 11 provision regarding taxes of import and export products formulates that China should abolish taxes related to export products in principle. Although the No. 20 provision of the GATT clearly formulates that the contracting party can restrict raw material exports to ensure domestic supply, the No. 11 provision of the "Protocol on China's Accession to the WTO" deprives China of this right.

Such conflicts of interests between the old and new WTO members can be partly attributed to the conflicts between developed countries and developing countries because most developing countries and regions were established one after another during several decades after the World War II while the GATT was established shortly after the World War II.

Most of the 23 original contracting parties are developed countries and developed countries always hold the dominant right of the development and evolution of WTO rules. Developed countries exert various restrictions to new WTO members to consolidate their economic supremacy. However, even if all the old and new members are developing countries, old members will always strive to ensure their competitive advantage because their interests could not be completely the same, and there will be still competition in aspects such as domestic market, export market and source of foreign investment.

As major Western economies, particularly the United States, embrace unilateralism, they have intensified the issue. The WTO paid particular attention to trade dispute settlement during the early period after the GATT was signed. The 22nd and 23rd clauses of the agreement stipulate the basic principle of settling disputes through bilateral or multilateral negotiations among the members involved, which were gradually developed into a set of dispute settlement system later.

Nevertheless, the United States failed to adhere to the basic principle in its first complaint filed to the GATT. During the second convention of the GATT on Sept. 9, 1948, the United States refused to conduct negotiations with Cuba, firmly required Cuba to unconditionally correct new regulations concerning textile import restrictions and asked the convention to allow it to take retaliatory measures. Fortunately, the convention rejected the irrational complaint from the United States and decided to set up a working panel to settle disputes. Thereafter, the working pane/expert panel pattern was established and has been adopted by the dispute settlement mechanism of the World Trade Organization.

New WTO member states are generally not familiar with international trade rules and urgently need external markets. In order to create more stable and reliable environment for their economic development, they have no choice but to accept a few unequal conditions and to endure a few restrictions on their rights as WTO members for some time on the basis of overall equality and mutual benefit. Something is better than nothing, after all. However, a country cannot endure unequal conditions and restrictions forever. After joining the WTO, new members should actively participate in new multilateral, regional and bilateral trade negotiations, and gradually get rid of the unequal conditions and restrictions by promoting the establishment of fairer and more reasonable rules.

By Mei Xinyu from People's Daily, translated by People's Daily Online

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