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This is Punch and Judy politics on a global scale. The US and the European Union accuse China of warping export markets for bauxite and phosphorus; China hits back with chicken. Whether Beijing has a case to answer is beside the point. The World Trade Organisation has heard hundreds of hard-luck stories since its formation 14 years ago, all of them essentially about broken promises. Defendants mostly lose. What’s significant is China’s growing engagement with the most important international tribunal.
This relationship was always going to be uneasy: 97 WTO members recognise China as a market economy but its main trading partners – the EU, US, Japan and India – do not. Since joining it in 2001, China has mostly been a wallflower, responding to more than three times as many dispute cases as it has brought. Among nations with active private interest groups and supportive governments, that ratio is roughly equal. China’s four complaints – all against the US, the last lodged in April on poultry imports – are dwarfed by India’s 18 since 1995 and Brazil’s 24.
In its first five years, whenever China was sued or threatened with action, it meekly settled, associating public conflict with diplomatic breakdown. Since then, it has wised up.
December’s defeat after appeal in a car parts case – brought by the US, EU and Canada in 2006 – marked the first time China had let proceedings run their full course. A new generation of lawyers experienced in gaming the WTO is now encouraging China’s state-owned enterprises to assert themselves more forcefully.
This is good news. An effective WTO needs spirited participation from the world’s third largest economy. And the more China goes head to head with its trading partners in Geneva, the more likely that talk will turn to the most effective subsidy to local production: an undervalued currency. Instead of pussyfooting around with coking coal, the west may one day address the most egregious imbalance of all.
Lex is the FT’s agenda-setting column, giving an authoritative view on corporate and financial matters. It is also one of the few parts of FT.com available only to Premium subscribers. This article is provided for free as an example. A Premium subscription gives you unlimited access to all FT content, including all Lex articles and the FT mobile Newsreader.
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