The integration of China into the world trading system has been a challenge, and there are some difficult issues that must be dealt with. The key questions for U.S. policymakers are: Is the United States better off with China inside or outside the WTO? And if China is in the WTO, how can its trade policy practices be disciplined?
The problem with not having China in the WTO is that its trade barriers would likely be much higher. China began negotiating its accession to the WTO’s predecessor organization, the GATT, in 1986, and the negotiations continued at the WTO with its creation in 1995. It was a long process that culminated in an agreement on accession terms with the United States in 1999, and entry into the WTO in 2001. As part of this accession negotiation, China agreed to lower its tariffs considerably (by one measure, China’s average tariffs came down from 43.7 percent in 1988 to 15.3 percent in 2001, and then further to 9.8 percent in 2010). In addition, China was now subject to the full range of WTO obligations, as well as many additional obligations in the Accession Protocol that only apply to China.
Did China live up to all of its promises? No, but no government ever does. Importantly, however, when other governments filed WTO complaints against China, China did a reasonably good job of complying, or as good a job as other governments anyway—there are no saints here. That may seem odd for an authoritarian country, but knowing that other governments had doubts about its membership, China probably wanted to signal that it would behave appropriately.
However, for whatever reason (perhaps because they believed it would be difficult to gather the necessary evidence), governments did not challenge many Chinese government actions that appear to be covered by the accession agreement, such as the behavior of China’s state‐owned enterprises. That has left big holes in the application of WTO rules to China.
Rather than try to fill those holes, the Trump administration has imposed unilateral tariffs on imports from China, mostly ignoring the WTO’s possible role in disciplining China. China responded predictably, by imposing tariffs of its own on U.S. products.
That brings us back to our choices: China inside or outside the system; and if China is inside, how to respond to its trade practices. If China is outside the system, we almost certainly end up with higher Chinese tariffs, fewer disciplines on regulatory trade barriers, and less stringent intellectual property protection. It’s hard to see how that is a win for Americans.
But if China is inside the system, how do we get better compliance? Since 2001, China has become much wealthier, and it is reasonable to demand that China liberalize more. But unilateralism doesn’t work here. The right way for the United States to make that demand would be as part of a joint effort with other major trading nations who are also affected by Chinese trade practices. Instead, however, the Trump administration has waged trade wars with most of those governments. Hawley talks about working “in concert with other free nations.” That would be great, but that is the opposite of the Trump administration’s approach, as it continues to threaten tariffs against our close allies.
Hawley’s resolution for WTO withdrawal may be designed to make a political point. He probably does not expect an actual withdrawal. But if his larger goal is to press China to liberalize, there are ways to do it. However, leaving the WTO is likely to have the opposite effect.