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Not all WTO members are equal

(Shanghai Daily)

09:02, August 11, 2011

Chinese exporters' mood swung from low to high on July 15, when the World Trade Organization supported China's case against the European Union's anti-dumping duties on Chinese-made steel fasteners.

This unprecedented victory over the Europeans came 10 days after the WTO ruling that China's restrictions on raw materials exports were illegal. The rulings under the same WTO framework have mirrored to some extent the conflicting interests and unequal status of WTO members.

In theory, the establishment of the General Agreement on Tariffs and Trade, the WTO's precursor, is aimed at fostering global free trade, growth and citizens' well-being. Its preamble starts with the pledge that all members will be treated as equals. In fact, there is a disparity between the privileges enjoyed by old and new members.

This reality owes much to the fact that a candidate must obtain the approval of all 153 members to join the WTO, although there is an article stipulating that a two-thirds majority vote is enough for the admission of new members. This arrangement enables existing members to dictate terms on the accession of new members, which previously centered on trade but now increasingly extends to their domestic economic systems. They seek to curb the rights of new members, leading to de facto inequality in the WTO.

It took nearly 15 years for China to join the WTO in 2001, with then Premier Zhu Rongji quipping that Chinese negotiators' hair had turned white due to the prolonged membership talks. Likewise, Russia, after initiating its WTO bid 18 years ago, remains outside the WTO amid the tussle over attempted curbs on its rights.

The Articles 15, 16 and 17 in the protocol of China's entry into the WTO are typical "unequal treaties," allowing other members to not recognize its market economy status and employ Transitional Safeguard Mechanism, a punitive trade practice, against specific Made-in-China products.

China lost the raw material case precisely because Article 11 in its WTO accession protocol demands that the nation abandon all tariffs imposed on exports.

However, Article 20 in the GATT's charter spells out that it is a sovereign right to limit raw material exports to ensure supply for domestic industry. But the WTO protocol has stripped China of this prerogative.

These conflicts of interest amongst WTO members, old and new, can be partially attributed to the rivalry between the developed and developing world. The 23 countries that formed the GATT were all developed countries and have dominated the evolution of world trade rules ever since. To preserve their predominance and preempt emerging economies from catching up, they've conspired to curtail new members' rights by all means.

Even if the parties involved in trade frictions are both from the developing world, they don't necessarily share common interests. Rather, some may be antagonistic contenders for export market share and foreign capital inflows.

A prerequisite Mexico demanded as quid pro quo for its acceptance of China's entry into the WTO was that China must permit Mexico to levy special tariffs on its goods until 2008. This is a "diktat" that even the EU cannot tolerate. In early October 2002, Karl Falkenberg, trade representative of the European Commission, called for Mexico to remove the punitive duties on Chinese products and bring its measures into conformity with its WTO obligations.

Under the Western democratic system, elected politicians are poised to find foreign scapegoats for their own countries' woes.

Furthermore, the unilateralism of Western economic giants like the US has intensified trade rivalries. GATT's Articles 22 and 23 mandate that trade spats must be settled through bilateral dialogue or multilateral mediation.

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no man at 2011-08-1158.136.119.*
Poor poor China.

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