What is China’s trade governance failure?

by

Susan Aaronson accuses China of poor governance to the degree that its behavior is a threat to the global trading system. I do not understand her argument, so I will quote her at length before I complain that she hasn’t explained her case:

But China’s competitive advantage is to some degree based on its inadequate governance; its failure to enforce its own laws in a transparent, even-handed manner. As part of its accession to the WTO, however, China was required to enforce the rule of law throughout all of its territories…
Inadequate Chinese governance is a trade problem because of the country’s dominance in global markets. Its failure to enforce the rule of law threatens the concept of mutual benefit that underpins the trade regime. China is broken, and a broken China could break the WTO…
it has yet to meet many of the obligations delineated in its protocol of accession. European and American business groups investing in China believe that the country is becoming more interventionist and protectionist (European Business in China 2009 and US China Business Council 2009)…
The rule of law was a key element of China’s accession agreement because trade policymakers understood that how China was governed could distort trade.
In recent years, China has become infamous for its failure to enforce its own laws, whether those laws related to intellectual property, product or food safety, human rights, or employment.
In both its 2006 and 2008 Trade Policy Review at the WTO, member states lauded Chinese trade diplomats for their export prowess but also complained that China was not transparent, accountable, or sufficiently even-handed (WTO 2006, 2008). Nor could they trust Chinese statistics or assertions on enforcement related to key trade issues such as product and food safety or intellectual property protection. Meanwhile, Chinese leaders argued that they are a developing country and thus deserve patience as they learn to govern effectively.
What can the WTO do?
WTO members have the ability to encourage China to address its inadequate governance. They could begin by using the trade policy process more effectively to discuss the rule of law and how it distorts trade. And they could threaten a trade dispute on some aspect of inadequate governance. Under GATT Article XXIII, any country in the WTO is entitled to a “right of redress” for changes in domestic policy that systematically erode market access commitments even if no explicit GATT rule has been violated.

I am familiar with complaints that weak intellectual property enforcement hurts sales of American and European IP products in China. But how does that undermine the world trading system? And while Mattel had to recall toys tainted with lead paint, is there a systematic problem with product safety for Chinese exports? No one is suggesting that Japan’s rule of law is inadequate after a few safety problems with one of its most notable exporters. I understand complaints about China’s rule of law, but how could China “break the WTO”?

Advertisements