Disaggregating “China, Inc.”: The Hierarchical Politics of WTO Entry

• Author: Yeling Tan
• Published date: 01 November 2020
• Date: 01 November 2020
• DOI: http://doi.org/10.1177/0010414020912267
• Subject Matter: Articles

https://doi.org/10.1177/0010414020912267

Comparative Political Studies

2020, Vol. 53(13) 2118 –2152

© The Author(s) 2020

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DOI: 10.1177/0010414020912267

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Article

Disaggregating “China,

Inc.”: The Hierarchical

Politics of WTO Entry

Yeling Tan1

Abstract

How does state structure affect responses to globalization? This article

examines why some parts of the Chinese state enacted more liberalizing

policies than others in response to World Trade Organization (WTO) entry.

It shows that, despite single-party rule, China’s WTO-era policy trajectories

were neither top-down nor monolithic. Instead, central and subnational

governments diverged in their policy responses. The study identifies three

competing economic strategies from which these responses are drawn:

market-replacing (directive), market-shaping (developmental), and market-

enhancing (regulatory). The analysis uses an original dataset of Chinese

industry regulations from 1978 to 2014 and employs machine learning

methods in text analysis to identify words associated with each strategy.

Combining tariff, industry, and textual data, the article demonstrates that

the divergent strategies adopted by central and subnational governments

are driven by each unit’s differential accountability to the WTO and by the

diversity of that unit’s industrial base.

Keywords

China, globalization, decentralization, subnational politics, World Trade

Organization

1University of Oregon, Eugene, OR, USA

Corresponding Author:

Yeling Tan, University of Oregon, 1284 University of Oregon, Eugene, OR 97403, USA.

Email: yelingt@uoregon.edu

912267CPSXXX10.1177/0010414020912267Comparative Political StudiesTan

research-article2020

Tan 2119

China’s entry into the World Trade Organization (WTO) in 2001 was a major

turning point in the evolution of the global trading system, representing a

critical test of the ability of international organizations to alter the domestic

governance of authoritarian regimes. As major developed countries saw

WTO entry both as an economic opportunity to access China’s domestic mar-

ket and as a political means to integrate China into a rules-based international

order, China’s terms of accession entailed not just substantial tariff reductions

but also wide-ranging reform commitments relating to the rule of law, non-

discrimination, nonintervention, and regulatory transparency (WTO, 2001).

These terms represented an example of the “deeper integration” agenda com-

monly found in today’s trade agreements, which increasingly require states to

undergo a “fundamental and intrusive restructuring” of domestic institutions

(Goldstein, 2012, p. 79). How the Chinese state would respond to these new

pressures was by no means certain; WTO rules reflect a set of norms influ-

enced by orthodox market liberalism, whereas China’s economic governance

at the point of entry was marked by measures that were heterodox when

judged by liberal market standards, and driven by a single party that owned

major segments of the economy.

To what extent did the Chinese state respond to WTO membership by

shifting toward market-liberal policies reflective of WTO norms? Although

rising trade tensions between China and its major economic partners have

raised doubts about the efficacy of altering domestic policies through institu-

tions such as the WTO (Swanson, 2017; U.S. Trade Representative, 2018),

there is little scholarly consensus on the impact of WTO entry on Chinese

economic governance. Research suggests that membership in international

organizations enables nondemocracies to credibly signal their commitment to

economic liberalization, and that compliance by single-party regimes such as

China would be high (Chyzh, 2014; Fang & Owen, 2011). However, although

some scholars have pointed to substantial liberalization, the establishment of

new regulatory institutions, and the rise of the private sector in China after

WTO entry (Lardy, 2014; Pearson, 2004; Qin, 2007), others have highlighted

the selective nature of this liberalization (Hsueh, 2011), the “rise of industrial

policy” (Heilmann & Shih, 2013), and a new “state activism” (Naughton,

2011). What explains these varied responses to WTO entry, in a single-party

regime? As global trade rules increasingly focus on altering domestic gover-

nance and encompass a growing diversity of nation-states, questions about

the manner in which states such as China respond to this rules-driven liberal-

ization have come to hold broad theoretical and practical significance.

This article argues that states do not face a binary choice of acceding to or

resisting the demands of global rules and domestic interests (Garrett, 1998).

Rather, they actively engage with external and internal conditions to further

2120 Comparative Political Studies 53(13)

their interests, choosing from a “great variety of instruments and adaptation

strategies” that are available in formulating a response to economic integra-

tion (Clift & Woll, 2012, p. 311). Specifically, I propose that states can choose

from three competing strategies of economic governance, characterized as

market-enhancing (regulatory), market-shaping (developmental), and market-

replacing (directive). By conceptualizing a broader range of potential

responses to WTO entry, this framework stands in contrast to standard treat-

ments of the state as a supplier of protectionism responding to domestic inter-

est groups (Gawande et al., 2009; Grossman & Helpman, 1994). Likewise,

the analysis is distinct from studies focused on the factors affecting state

compliance versus defiance (Davis, 2012; Fearon, 1997; Simmons, 2000), or

debates around whether or not WTO rules constrain the policy space of

developing countries (Amsden & Hikino, 2000; Rodrik, 2011; Wade, 2003).

Economic integration requires states to grapple with choosing between quali-

tatively different policy responses—differences which are otherwise obscured

by broad categories such as protection or noncompliance.

Another shortcoming of examining outcomes in dichotomous terms is that

it overlooks the possibility for more than one response to emerge simultane-

ously within the state, given the multitude of actors and interests which com-

prise the bureaucracy. These bureaucratic politics are particularly salient in

China, for which the governance structure, while authoritarian, is nonetheless

highly decentralized, giving subnational authorities significant autonomy in

pursuing their own interests in defiance of central guidelines (Lieberthal &

Oksenberg, 1988). Although China’s leaders sought to use WTO membership

as a credible commitment to reform (Fewsmith, 2001; Pearson, 2001), the

depth and breadth of these commitments could therefore be resisted by parts of

the bureaucracy whose interests diverged from the leadership. Accordingly,

this article disaggregates China’s hierarchical state into its central, provincial,

and local governments and examines the interests and constraints faced by each

authority in responding to WTO entry. For each government, the choice of

strategy turns on how accountable each unit is to the WTO and the diversity of

that unit’s industrial base. Stronger accountability provokes more regulatory

responses in line with WTO rules due to the direct and indirect threats of sanc-

tion from the WTO’s enforcement and surveillance mechanisms. However, this

accountability weakens at lower administrative levels. Although the central

government is most directly accountable to the WTO due to its responsibilities

over international economic diplomacy, subnational governments are relatively

shielded from the threat of WTO sanction due to incomplete monitoring and

enforcement by higher-level authorities. This weaker accountability grants

subnational governments more scope to pursue developmental or directive

responses that are less consistent with WTO norms of governance.