Is China's rise the wto's demise?

• Author: Kevin J. Fandl
• Position: MA/JD (American University), Ph.D. (George Mason University), was the Irvin Gross Research Fellow and Associate Professor of Business Law at the Temple University Fox School of Business
• Pages: 575-637

ARTICLES

IS CHINA’S RISE THE WTO’S DEMISE?

KEVIN J. FANDL*

ABSTRACT

Is the World Trade Organization (WTO) big enough for two economic super-

powers? China’s explosion onto the world economic stage has allowed new and

unexpected challenges to emerge, most significantly, which path globalization

should be guided down. For seventy years, the western world has approached

globalization from a liberalist perspective, seeing it as a corollary to democracy

and rules-based economic growth. Yet China, which benefited enormously from

globalization, has excelled in the absence of democracy, and has challenged the

idea that the liberal world order is necessary or even desirable.

With the WTO teetering on irrelevance, this is a moment to lift the hood and

examine the engine of economic growth we have relied upon for decades.

Though both China and the United States have the economic power to unilater-

ally pursue trade advantages (think NAFTA or the Belt and Road Initiative),

it is not in the interest of either party to abandon the constraints imposed by the

rules-based WTO system. The WTO provides an avenue to resolve disputes

peacefully without the need for unilateral actions, which tend to escalate rather

than resolve trade disputes. The WTO also enshrines the ideals of liberal trade

by denouncing trade barriers of all kinds and pursuing open exchange. The

WTO also establishes, by consensus, the rules of the road that allow countries

large and small to compete in a mostly fair and equitable environment. This is

a necessary and effective system that neither China nor the United States could

or should abandon.

I. INTRODUCTION .................................... 576

II. FOUNDATIONS OF THE WORLD TRADE SYSTEM ............... 578

* Kevin J. Fandl, MA/JD (American University), Ph.D. (George Mason University), was the

Irvin Gross Research Fellow and Associate Professor of Business Law at the Temple University Fox

School of Business. He was the former Chief of Staff for International Trade and Intellectual

Property at the U.S. Department of Homeland Security National Intellectual Property Rights

Center. Special thanks to the guidance and advice of Simon Lester, Associate Director of the Cato

Institute Herbert A. Stiefel Center for Trade Policy Studies, in the research for this article. Dr.

Fandl unfortunately passed away in June 2021 before the publication of this article. Many thanks

to James M. Lammendola, MA/JD, Associate Professor of Practice at the Temple University Fox

School of Business, for his final review of this article on behalf of Dr. Fandl. V

C2021, Kevin J.

Fandl.

575

A. The Demise of Mercantilism ....................... 579

B. Trade and the Liberal World Order .................. 582

C. Giving Trade a Home ........................... 584

D. Threat #1: The United States....................... 588

E. Threat #2: China .............................. 591

III. THE U.S.-CHINA TRADE WAR .......................... 596

A. Introduction .................................. 596

B. The Trump Administration’s Trade Platform ........... 597

IV. U.S.-CHINA RELATIONS BACKGROUND:FROM OPIUM TO PING

PONG ........................................... 601

A. A Concise History of U.S.-China Relations ............. 603

1. The Century of Humiliation (1839 – 1949)...... 604

2. Nixon Goes to China ....................... 608

V. ANALYSIS:WILL U.S.-CHINA TENSIONS BRING THE WTO TO AN

END?........................................... 613

A. China Joins the Game............................ 614

B. Areas of Significant Disruption ..................... 619

1. China’s Growing Economic Footprint.......... 620

2. China’s Status as a Developing Country ........ 622

3. Pandemic Fallout.......................... 627

VI. A PATH FORWARD:CONCLUDING REMARKS ................. 631

I. INTRODUCTION

The global economic system as we know it is a relic; it requires

reform, top to bottom. We should begin with one of its leading institu-

tions, the World Trade Organization. We should abolish it.

1

These are the words of a freshman Republican Senator from

Missouri, Josh Hawley, who initially made the case that the United

States should unilaterally abolish the World Trade Organization

(WTO), seeing it as a tool to benefit China.

2

After being informed that

the United States lacked the legal authority to abolish an international

organization, Hawley introduced a joint resolution to withdraw from it

instead.

3

Eventually, Hawley’s proposal was shot down by the Senate

1. Josh Hawley, Opinion, The W.T.O. Should Be Abolished, N.Y. TIMES (May 5, 2020), https://

www.nytimes.com/2020/05/05/opinion/hawley-abolish-wto-china.html (making the case to

withdraw from the World Trade Organization).

2. Id.;but see Simon Lester, Senator Hawley’s Many Misunderstandings of the WTO, CATO INST.

(May 5, 2020), https://www.cato.org/blog/senator-hawleys-many-misunderstandings-wto (providing

a reasoned critique of Senator Hawley’smistake-laden proposal).

3. See Josh Hawley, Senator Hawley Introduces Joint Resolution to Withdraw from WTO, (May 7,

2020), https://www.hawley.senate.gov/senator-hawley-introduces-joint-resolution-withdraw-wto.

GEORGETOWN JOURNAL OF INTERNATIONAL LAW

576 [Vol. 52

Finance Committee;

4

however, the cat was out of the bag—the WTO

was in the crosshairs of Congress, and China was the reason. But

Hawley was not the first to criticize the WTO during the Trump

Administration. President Trump has personally railed on the WTO

with strong rhetoric and actions meant to undermine the institution.

5

The WTO was not initially an institution that the U.S. Congress

actively sought or defended. In fact, the precursor organization—the

International Trade Organization—was stillborn in 1948 after

Congress voted not to support it.

6

This left the system of rules govern-

ing international trade, the General Agreement on Tariffs and Trade

(GATT), to operate in the absence of a coordinating body.

7

When an

international body was again proposed during trade negotiations in

1990, congressional support was tepid.

8

Yet, despite some vocal opposition to the institution, the WTO sur-

vived congressional approval in 1994 and quickly became a guidepost

for enforcing rules-based liberal trade policies, as well as the most influ-

ential and widely used body to resolve trade disputes.

9

Since 1995,

nearly 600 disputes have been filed with the WTO’s dispute settlement

body. The United States has been one of the most active participants in

those disputes, both as a complainant and as a respondent. However,

despite its success, after twenty-five years the WTO has collected ample

dust and is in need of reform.

4. See Doug Palmer, New Ruling Quashes Hawley’s Hope for Senate WTO Withdrawal Vote,POLITICO

(July 1, 2020), https://www.politico.com/news/2020/07/01/ruling-quashes-hawley-hope-senate-

wto-withdrawal-347732 (explaining that the Senate Finance Committee decided not to vote on

the resolution this session, effectively killing the bill).

5. See Rachel Brewster, The Trump Administration and the Future of the WTO,44YALE J. INT’LL.

ONLINE 6, 8 (2018) (describing President Trump’s position on the WTO since taking office); see

also Jonathan Swan, Scoop: Trump’s Private Threat to Upend Global Trade, AXIOS (June 29, 2018),

https://perma.cc/M7WD-3MWZ.

6. See generally Ayse Kaya, Designing the Multilateral Trading System: Voting Equality at the

International Trade Organization,15WORLD TRADE REV. 25 (2016) (providing a thorough overview

of the politics surrounding the vote for the International Trade Organization).

7. See Nicholas Lamp, The Club Approach to Multilateral Trade Lawmaking,49VAND.J.

TRANSNAT’LL. 107, 127–28 (2016) (describing the protocols from the ITO that remained active

within the GATT once the ITO failed to come into existence).

8. See Ralph Nader, The World Trade Organization’s Sharp Teeth,ST.LOUIS POST-DISPATCH, Aug.

17, 1994, at 7B (making the case to proceed with approval of the WTO with caution, suggesting

that it would be the first international organization that does not give Americans veto power or

weighted authority).

9. Uruguay Round Agreements Act (URAA), Pub. L. No. 103-465, 108 Stat. 4809 (1994)

(implementing into domestic law the GATT and WTO rules crafted during the Uruguay Round

of GATT negotiations).

IS CHINA’S RISE THE WTO’S DEMISE?

2021] 577