In retrospect, the last month of 2001 was a turning point in history. Five days before China’s accession to the WTO on December 11, the U.S. and its allies defeated the Taliban in Kandahar’s last hit, which sounded the beginning of a 20-year military adventure in the Middle East, which caused the superpowers to pay their blood. , The national treasury and its reserves of goodwill in the international community are numerous.

These two events are turning points in the global geopolitical landscape. China's accession to the WTO has also changed the global economy.

Over the past two decades, more than 500 million Chinese people have been lifted out of poverty. China is now the largest economy in terms of purchasing power parity, the second largest economy in terms of market exchange rates, and the world's largest trading nation. China is the largest trading partner of 120 countries, including the United States. The development of China's manufacturing industry means that consumers in other parts of the world can enjoy a better standard of living. As the world's factory, China absorbs resources to promote production, including intermediate inputs, energy and raw materials from other countries.

Large-scale structural adjustments in China and the global economy are destructive. Countries with flexible markets, strong social safety nets, or high-growth countries that promote change and spread the benefits to the entire society perform well. The uneven distribution of US trade gains, the stagnant middle class income, and the lack of an effective social safety net mean that it has suffered a "Chinese shock" in a way that many other countries do not.

Considering similar income levels and manufacturing ambitions, Southeast Asian countries that are worried about direct competition with China have actually deepened their economic integration with China through supply chain specialization, and have seen continuous improvements in living standards.

China is transforming from a world factory to a major consumer market with a growing middle class, and its scale is causing more damage to the global economy.

While bringing huge benefits, the adjustment pressure and cost of China's trade and economic weight growth have also brought tremendous pressure on the global system. Global institutions have failed to keep up with changes. China has 6.08% of the voting rights in the International Monetary Fund—one-third of the U.S.—and it accounts for more than 18% of the global economy at purchasing power parity and 13% at market exchange rates.

The inability to keep up with changes is most obvious in the WTO. The WTO is still a scaffold to maintain global trade, but its rule-making has not kept up with the nature of modern commerce and is under pressure. The United States and many Western countries accuse China of different political systems and violations of the spirit of the rules.

As Tom Westland said in this week's feature article, "China's record in the WTO is much better than the Western narrative." China "implements its WTO accession protocols not only because it agrees to these protocols, but also because they promote the domestic reforms that the leadership wants to implement."

Westland explained that the failure of trade rules to keep up is "a problem that is not entirely China's fault." China is not the only major country that abuses rules, because "the United States has chosen to withdraw from the old WTO rules and formulate new rules."

The US trade coercion against China has led to retaliation and trade wars, leading to a managed trade agreement that goes against the rules and spirit of the WTO. Japan, the European Union and many other US allies have also been threatened by the United States' tariffs and tariffs under the guise of national security. When the United States itself is destroying the global system, the United States calls on China to become a responsible stakeholder in the global system. This sounds hollow.

Since 2020, China's trade coercion against Australia and the recent trade coercion against Lithuania have been more blatant use of economic coercion for political purposes.

The global trading system is being threatened by two major trading nations and political powers. Their zero-sum strategic competition needs to be transformed into a positive economic competition through multilateral rules that protect the global trading system and the interests of other countries.

This will mean setting new multilateral rules—not just rules between like-minded partners—and restricting economic integration that abuses economic power for political purposes. As exporters find alternative markets, open competitive markets have weakened the impact of Chinese trade restrictions on Australia. Therefore, the multilateral system is the source of trade resilience.

China can no longer conceal its status as a developing country in the WTO, and needs to acknowledge that some of its domestic distortions and economic practices are actively harming other countries.

China seems willing to make some changes. Its participation in the Trans-Pacific Partnership Comprehensive Progress Agreement (CPTPP) will mean important disciplines in industrial subsidies for its state-owned enterprises, the liberalization of data and network barriers, and the improvement of labor and environmental standards. Like joining the WTO 20 years ago, China's reform agenda is consistent with CPTPP rules. In order to be accepted by the CPTPP, China also needs to lift its mandatory trade restrictions on Australia and restrict itself to avoid such arbitrary measures in the future.

Of course, it is ironic that Washington abandoned the agreement itself, just as it refused to allow appointments, and abandoned the opportunity to make any substantial investment in China's accession to the CPTPP and the market-driven liberalization that this will require. The reduction in the number of new judges in the WTO dispute settlement mechanism prevents it from making meaningful defenses against China's trade coercion.

The world now needs the United States to play a leading role, resolve domestic problems and renew its commitment to strengthening the multilateral system. This includes investing in domestic institutions that help to share the benefits of trade and technological development across society. The leadership needed by other emerging market economies and developing countries is not so much to stop China as to make themselves better.

While the United States seeks to reach economic agreements with "like-minded" countries, while undermining the WTO's strategy, China has failed to wrap China in more rules and restrict its presence in the international market. Opportunities exist. Concerns about China’s abuse of rules and its use of raw economic power for political purposes are opportunities for the United States to lead multilateral institutions and rule reforms, rather than retreating from its global role to an exclusive bloc.

There are signs that China may be willing to give up its "special and differential treatment" for developing countries in the WTO, and these countries can request unilateral exemptions from certain agreements-including Singapore and South Korea, which were not so developed until recently. This will increase people's confidence in China's readiness to assume the responsibility of leading trade policy.

The expectations of the Chinese leadership are now even higher: clearly and comprehensively accept the WTO reform agenda; refuse to use economic coercion as a tool of international political control; withdraw from managed trade with the United States; and participate in the establishment of a multilateral digital trading system. Commitments and positive progress in all four areas will rebuild confidence in China’s own reform agenda and lay a new foundation of trust for its economic leadership in the international community.

The EAF editorial board is based in the Crawford School of Public Policy, School of Asia and the Pacific, Australian National University.

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