China's White Paper offers hope for multilateralism | The Daily Star
12:00 AM, October 02, 2018 / LAST MODIFIED: 12:47 PM, October 02, 2018

China's White Paper offers hope for multilateralism

China's White Paper on the China-US trade friction makes a reasoned argument based on the mutual interests of China and the US as well as the global community. By providing facts and figures to draw out longer-term trends to show reciprocal benefits and underline the importance of the China-US economic relationship, it responds to President Donald Trump's concerns about the trade deficit in goods by detailing a growing deficit in trade in services in favour of the US and the fruitful investment by the US in China. It observes the considerable holdings of US Treasury Bonds by China (USD 1.18 trillion).

The economic relationship between China and the US is complex, yet President Trump's analysis in his United Nations General Assembly address on September 25 was crisply simple, stating that countries do not grant the US fair and reciprocal access to their markets in exchange for the US allowing foreign goods from all over the world to flow freely across its borders. He deplores the USD 800 billion trade deficit that is a result. The president states a fact when quoting the deficit.

The title of China's White Paper is “The Facts […] on China-US Trade Friction”. This is where the understanding breaks down as facts can lead to different analyses and conclusions depending on their selection and perspective. The White Paper rejects the claims of some Americans that the US is “losing” in the China-US economic relationship but President Trump draws a different conclusion.

How should we interpret these conflicting conclusions when both are based on facts? The White Paper appeals to our sense of reason by offering a contextual analysis of a broad range of relevant facts, rejecting the US' position based on a single parameter (trade deficit). Most trade economists will agree with China's analysis but this fight is not about facts. President Trump's argument is no less rational—only its rationality lies not in arguing for the long-term interests of the US and the world but in speaking to his electorate and their justified concerns, fears and frustrations. This is what his declaration at the UN General Assembly that the US “rejects the ideology of globalism and accepts the doctrine of patriotism” is all about. China's White Paper's recollection of the principles we have all agreed on as the basis for a world community working together for mutual benefit, is not a relevant appeal for this president. His goals are more focused in scope and in time.

The current multilateral trading order was a creation of the US at the dying days of the Second World War. The treaty that was drafted to organise trade after the war was done to a large extent under the leadership of the US and the wording reflects this influence, often literally drawing on the US foreign trade law. However, the US Senate itself rejected the Havana Charter for the establishment of the International Trade Organization (ITO). The skeleton agreement that was left, the General Agreement on Tariffs and Trade (GATT 1947), served as the basis for trade by largely Western trading nations until 1995 when the World Trade Organization (WTO) was established with the ambition of becoming a global organisation with a universal membership and explicitly proclaiming its aim to reach reciprocal and mutually advantageous arrangements. This declaration is the embodiment of dynamic multilateralism based on the principle of unconditional most-favoured-nation (MFN) treatment.

The White Paper points out the contradictions between this principle and President Trump's “fair trade” and “America first” policies. This policy is not unfamiliar to the US trade circle but it has been overlooked since 1934 when President Franklin D. Roosevelt signed the Reciprocal Trade Agreements Act into law. The Reciprocal Trade Act was a confident move aimed at countering the trade protectionism that was contributing to a deteriorating economic outlook for the US and officially changed the US trade policy that it had steadfastly held on to since its very first trade agreement, the Franco-American Treaty of Amity and Commerce (1778). The principle of US foreign trade policy from 1778 to 1934 was conditional MFN. President Trump has returned the US to this early era where the trade policy of a then young and comparatively weak country that was cautiously suspicious of experienced negotiators and “somewhat suspicious of their manoeuvres and intents” (Taussig, 1928). No such justification could be reasonably proffered today by the US for its protectionist stance.

“America first” is a strategy of personal interest for the US president but it is neither legal in WTO terms, nor a legitimate stance for the founder of a multilateral trade order created in its own image and interest.

The White Paper makes an argument that will blow away in the Autumn wind with little or no impact on the trade stance of the American president who is pursuing a policy that has its distinct rationality rooted in a wholly different context. This Autumn wind is gathering force as a storm that we will have to ride out for at least two years.

Nevertheless, China's explicit commitment to the multilateral trade order is important in itself and has great value as an invitation to other countries to join the defence of multilateralism and the rule of law. The commitment to build a community with a shared future for mankind is a just cause shared by many countries, too often tacitly. These are days to reaffirm the commitment publicly while pursuing it discreetly and diplomatically. Justice, peace, global development and upholding the international (legal) order are shared values with, amongst others, the European Union which already reached out to find partners to reform the WTO. A constructive dialogue with countries committed to multilateralism would be beneficial to all.

Kim Van Der Borght is a professor of international economic law and diplomacy at the Vrije Universiteit Brussel (VUB) in Brussels, Belgium. He holds the Research Chair Asia-Pacific Studies.

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