The WTO and China: A Strategic Lesson for the West
- Gabriele Iuvinale
- 26 mag
- Tempo di lettura: 5 min
KEY POINTS
China's Entry into the WTO:
In 2001, China's economic weight was comparable to that of France; today, it surpasses the entire Eurozone and is the world's largest exporter.
Its share of the global economy rose from 11.4% in 2012 to over 18% in 2021, contributing 30% to global economic growth.
China's Economic Strategies:
Exploitation of low-cost labor, economies of scale, and aggressive industrial policies.
Restrictions on foreign market access and protectionist policies.
Abandonment of Economic Reforms:
After initially complying with WTO obligations, China abandoned economic reforms, reverting to a state-driven model under Xi Jinping's leadership.
China's state-controlled economic system fundamentally clashes with the WTO's free-market principles.
Global Distortions Caused by China:
Massive state subsidies and mandatory industrial plans.
Overproduction and dumping in foreign markets.
Intellectual property theft and forced technology transfers.
Impact on Trade Relations:
China's policies have caused tensions with the United States and the European Union.
The WTO is seen as unable to address the distortions created by a state-driven economy of China's scale.
Economic Power as the CCP's Weapon: China uses economic dependency to co-opt and influence other states.
Long-Term Strategy: The CCP adopts a "whole-nation" approach to gain economic and geopolitical advantages, even through illicit means.
Main Tactics:
State-controlled economy.
Forced acquisition of technology and intellectual property.
Control of global supply chains.
Dominance in critical high-tech sectors.
Economic expansion through the Belt and Road Initiative (BRI).
Access to Western capital markets.
Exploitation of liberal democracies.
China's State-Controlled Economy: China became a manufacturing superpower due to the shift of global value chains and its accession to the WTO in 2001.
Hidden Costs of Globalization: The "China shock" led to job losses and economic dependency on Beijing.
Global Impact: China's economic practices aim to weaken Western economies and make them dependent.
State Control Over Enterprises: In China, even private enterprises can be compelled to operate in the government's interest.
Conclusion: China's economic practices represent a predatory strategy for global dominance, requiring a strategic response to protect global democracies and economies.
When China joined the WTO in 2001, its economic weight was comparable to that of France. Today, its economy surpasses that of the entire Eurozone and has become the world's largest exporter. China's share of the global economy rose from 11.4% in 2012 to over 18% in 2021, solidifying its status as the world's second-largest economy and contributing approximately 30% to global economic growth in recent years.
However, WTO membership allowed Beijing to exploit low-cost labor, economies of scale, and aggressive industrial policies to become a manufacturing and trade powerhouse. This often involved restricting access to its domestic market and adopting protectionist policies, causing tensions with the United States and the European Union.
Despite initial efforts to comply with WTO obligations, China abandoned economic reforms over the past decade, reverting to a state-driven model. Its state-controlled economic system fundamentally clashes with the free-market principles of the WTO, creating significant global distortions. These include:
Massive state subsidies and mandatory industrial plans.
Restrictions on foreign market access.
Intellectual property theft and forced technology transfers.
Dumping in foreign markets caused by overproduction.
China's industrial policies, mandatory for domestic companies, receive unprecedented financial support, distorting global markets and harming foreign competition. This approach has raised growing concerns among WTO members and foreign businesses, particularly under Xi Jinping's leadership, which has strengthened state control over the economy.
China's entry into the WTO, initially seen as an opportunity to integrate Beijing into the global economic system, has proven to be a strategic mistake for the United States and its allies, highlighting the WTO's inability to address the distortions created by a state-driven economy of China's scale.
Economic power is a guiding element of the Chinese Communist Party (CCP) in its pursuit of global dominance. Economic dependency is the primary weapon used to co-opt states. Before its modernization, Beijing often gained influence over its neighbors by creating trade dependencies. With globalization, China has expanded its spheres of influence globally, leveraging trade ties and the desire of open economies to access low-cost labor and vast consumer markets.
CCP's Economic Strategies
To build one of the world's largest economies, Beijing has developed economic programs as part of a long-term strategy. This "whole-nation" approach aims to gain advantages over advanced industrialized nations, even through deceptive, corrupt, and illicit means. As noted by Matt Pottinger, a visiting fellow at the Hoover Institution, China uses its economy as a lever to achieve geopolitical objectives.
Tactics Employed
China's economic strategy is implemented through various techniques, including:
State-controlled economy.
Acquisition of technology and intellectual property through coercive means.
Control of vital international supply chains.
Industrial dominance in critical high-tech sectors.
Economic expansion through the Belt and Road Initiative (BRI).
Access to Western capital markets.
Exploitation of liberal democracies' openness.
Overcapacity in production.
Disinformation campaigns.
Economic coercion.
Asymmetric practices.
The State-Controlled Economy
China's rise as a manufacturing superpower stems from the shift of global value chains to Asia in the 1970s and later to China in the 2000s. After joining the WTO in 2001, Western multinationals increasingly relied on China's low-cost labor to produce cheaper goods, especially in advanced manufacturing and high-tech sectors. While this shift brought benefits like lower consumer prices and higher corporate profits, globalization also introduced "hidden costs," referred to in the U.S. as the "China shock," including significant job losses and dependency on supply chains controlled by Beijing.
Global Impact
These dramatic effects are not accidental but the result of a deliberate strategy by Beijing to achieve global hegemony. Over the past two decades, China has waged a "Liminal Warfare" in trade, eroding significant portions of Western economies to weaken them and make them economically dependent. Practices include massive subsidies, currency manipulation, and restricting market access for foreign companies in digital industries.
State Control and Enterprises
The Chinese government has developed numerous initiatives to control the domestic economy, monitor corporate affairs, and direct resources and enterprises, including private ones, to fulfill CCP priorities. In this pervasive public control framework, traditional definitions of state control do not apply, as any enterprise in China can be compelled to act on behalf of the government, regardless of its formal ownership.
Conclusion
China's economic practices represent a predatory strategy for global dominance. Understanding and addressing these dynamics is essential to protect global economies and democracies.
Final Recommendations
Secure Vital Supply Chains:It is crucial for the West to reduce dependency on supply chains controlled by China, especially in strategic sectors such as high technology, semiconductors, critical materials, and essential goods. This requires:
Diversifying sources of supply.
Investing in local and regional production.
Collaborating with allies to create resilient supply networks.
Promote Technological Decoupling:China uses technological control as a geopolitical lever. To protect economic and national security, it is necessary to:
Limit China's access to advanced Western technologies.
Strengthen intellectual property protection.
Develop and support independent technological ecosystems in democratic countries.
Strengthen Cooperation Among Democracies:Western states must join forces to counter China's predatory economic practices. This includes:
Creating economic and technological alliances.
Coordinating trade and investment policies to avoid common vulnerabilities.
Promoting global standards that limit unfair practices.
Increase Public and Political Awareness:It is essential to educate citizens and political leaders about the risks associated with economic dependency on China. Greater awareness can lead to more informed strategic decisions.
Invest in Innovation and Research:To compete with China, the West must increase investments in research and development, fostering innovation in key sectors such as artificial intelligence, renewable energy, and emerging technologies.
Conclusion
The economic and technological security of the West depends on its ability to reduce dependency on China and build a resilient and independent economic system. Acting now is essential to protect democracies and ensure a future of global prosperity and security.
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