It takes Bob Davis about 30 paragraphs to get to the meat of his assessment of the results of admitting China to the WTO in the Wall Street Journal:
China never fully followed through on its WTO pledge to allow foreign banks to operate in its local currency. It also pledged not to force foreign firms to transfer their technology, but today about one in five companies—many in aerospace and chemical industries—say that they’ve been pressured to do just that in order to do business in China, according to a July survey by the American Chamber of Commerce in Shanghai.
At a WTO session this month, China’s vice minister of commerce, Wang Shouwen, denied that China twists arms to gain technology. Arrangements on technology are “absolutely contractual behavior based on voluntary business deals,†Mr. Wang said in July, according to a Geneva trade official.
China has also maneuvered to its advantage within the WTO. In one case it blocked exports of scarce raw materials needed by high-tech industries, hurting foreign firms. When the WTO ruled against Beijing on one set of restrictions, it removed the barriers—but then blocked another set of raw materials. “The core issue isn’t whether China lived up to the vast number of obligations, but whether it lived up to the spirit†of the deal, says Prof. Wu.
Other Chinese efforts to win an advantage in trade have happened outside the WTO’s purview. For years after joining the international trade regime, Beijing kept its currency undervalued by 30%, boosting Chinese exports by making them cheaper abroad, says Brad Setser, a currency expert at the Council on Foreign Relations. Former U.S. officials say that China and other WTO members wouldn’t have agreed to a provision punishing countries for such measures.
Professor Wu’s characterization is nonsense. China hasn’t lived up to the letter of its agreements let alone their spirit. It is not in compliance full stop.
Completely omitted from the analysis: the enormous growth in wealth of party officials and their families, China’s enormous corruption, the tremendous growth in air, water, and soil pollution not to mention carbon emissions, deadweight loss as a result of bad decisions by the Chinese government, and China’s modernization of its military and saber rattling against its neighbors. He also fails to consider the possibility that the Chinese people might have prospered without eviscerating the U. S. manufacturing sector if a more gradualist and evidence-based approach had been taken. Bill Clinton should forever be known as the president who kneecapped America’s middle class.
China’s political reforms have largely been reversed; there are few signs of hope there. What’s to be done now? The WTO is too timorous to enforce its judgments against China. Don’t expect relief there.
A point on the title of the post.
I harbor no sympathies for the CCP and think US policy vis a vis China was misguided for a long time – but it isn’t to say the past 50 years didn’t accomplish a thing.
There’s not many people in China who prefer 1970 to 2018; things ARE better there; economically, in terms of freedom, and that’s even after the stagnation of the last 10 years.
The US got a lot from it’s China policy too – how the Cold War ended, that it was won was in large part due to working with China. The fact that there has not been a war in Asia Pacific (remember the Korean and Vietnam wars) is also a result.
The problem is the existing approach was kept on autopilot as evidence it had reached its expiry date in the last 10 years.
In my opinion absolutely nothing has been accomplished in the last 20 years that would not also have been accomplished with a much more gradualist approach to integrating China into the world economy. At least not anything benign.
I agree with that.
A lot of it I think was hubris from winning the Cold War. A similar approach was taken to advising Russia on reforming the Russian economy (shock therapy instead of a gradual approach); it also worked out poorly; a big factor in Russia’s turn to authorianism.
Doug Mataconis has posted a piece on trade (I think only as a vehicle to take a cheap shot at Trump) that fails to tell both sides of the story, or to acknowledge a number of the issues described in this piece or the one on education.
I guess the bottom line is that advocacy of free trade juxtaposed against all of the dislocations implicit in the reality of managed trade, and certain behavioral realities of world players, is like chasing the great white whale. Unwinding this is not going to happen overnight or be clean and neat.
And I complained about that bitterly at the time. It was so ignorant of the realities of Russia.