Abstract
China’s economy has grown steadily despite the rise and fall of globalism and anti-globalism in the past two decades. Its Western trading partners often criticize its manipulation of trade practices through the so-called state capitalism model. As the United States and others claim, China has successfully emerged as the largest trader in the world. ‘Yet, having the right elements can only guarantee a nice story, not the correct answer’ (p. 2). This book sets out to investigate the relationship between China’s state capitalism and WTO rules, offering recommendations for further promoting world trade rules and practices.
The book consists of eight chapters. Chapter 1 presents the background of the book by providing definitions of some key concepts such as state capitalism and state-owned enterprises (SOEs) and introducing the challenges posed by SOEs to the global trading system. Chapter 2 reveals how the Chinese government has enhanced its influence over SOEs.
Chapter 3 debunks the myth of China’s state capitalism. WTO members have been well aware of the clashes between WTO rules and China’s state capitalism since the very beginning. Bearing these problems in mind, WTO members have carefully crafted practical solutions to reinforce a category of WTO rules in order to discipline ‘market-distortive behaviours of SOEs and subsidies that enhance their competitive advantages’ (p. 10).
These solutions are discussed in Chapters 4 and 5. Recent rulings by the Appellate Body have contributed to the ‘softness’ of WTO rules, because of which the crafted solutions as discussed in Chapter 4 are all of limited utility. To rebut the claim that all WTO rules are useless, the analysis in Chapter 5 underlines the promising potential of some China-specific rules in the original Agreement on Subsidies and Countervailing Measures and the China’s WTO Accession Protocol. The authors Henry Gao and Weihuan Zhou believe that ‘the best way to tackle China’s state capitalism is through WTO litigation based on existing rules discussed in this chapter’ (p. 11).
However, some WTO members prefer new rules on SOEs and intend to develop them in international trade and investment agreements. These new rules are fully examined in Chapter 6 and can be divided into two categories: the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and post-CPTPP Free Trade Agreements (FTAs). While the CPTPP is generally praised as a ‘twenty-first century high-standard trade agreement’, this book holds the contrary view. The narrower scope of the covered entities, the extended exemptions and exceptions, and the limited contribution made by the CPTPP to the existing rules ‘on commercial considerations, non-discrimination, and subsidies’ in the China’s WTO Accession Protocol, all demonstrate the limited progress of the CPTPP. It is regrettable that all the post-CPTPP FTAs have failed to advance international regulation of SOEs in significant ways (p. 153).
Chapter 7 focuses on how to address issues related to China’s state capitalism. The chapter offers two options. One is to bring cases against China based on the existing WTO rules. Chapter 7 puts forward concrete and practical suggestions ranging from ‘the types of cases that should be brought’ to ‘how the evidentiary burden could be met’ (p. 12). The other option is trade negotiations. In light of the failure of bilateral negotiations such as the US–China Phase One Deal, multilateral negotiations have greater potential (p. 183). Further, this chapter suggests the principles of engagement to boost fruitful negotiations, namely the principles of non-discrimination, reciprocity, and China’s own priorities (pp. 179–80).
Chapter 8 concludes with a to-do list for major players in the WTO: utilize existing rules in the WTO framework, restore the proper functioning of the WTO dispute settlement system, and engage China in reform discussions (p. 189).
Through solid analyses, this book serves as a valuable source to understand the challenges faced by the WTO system as a result of China’s state capitalism. This book is recommended to researchers, lawyers, policymakers, and negotiators who are looking to tackle these challenges. On 23 April 2023, senior Chinese government official Zhang Hongpei announced, ‘We believe that China is capable of fulfilling its obligations under the CPTPP’ (Zhang Hongpei, China has willingness, capability to join CPTPP: Senior trade official, Global Times, 23 April 2023, https://www.globaltimes.cn/page/202304/1289617.shtml, accessed 29 April 2023). The process of China’s application to join the CPTPP is a good case to test the utility of this book.