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Friday, January 27, 2023

How The West Invited China to Take Its Business

Two incidents occurred in late 2001 that rocked the world’s axis.

The early aftermath of 9/11 absorbed the world’s attention. Three months later, on December 11th, the World Trade Organization (WTO) was at the center of an event that would have a far greater impact on the twenty-first century, affecting more people’s lives and livelihoods throughout the world than the 9/11 attacks.

Few people even know it happened, let alone when it happened. The admittance of China to the World Trade Organization altered the game for the United States, Europe, and much of Asia, as well as any country with industrially significant resources like oil and metals.

It was a major geopolitical and economic event that went mostly unrecognized. It was the underlying cause of the global financial crisis. The political reaction against outsourcing industrial jobs to China has rippled throughout the western G7 countries.

Former US President Bill Clinton said that “importing one of democracy’s most prized virtues, economic freedom,” would allow the world’s most populous country to pursue the road of political liberty as well.

“When people have the capacity to not just dream, but also to make their aspirations a reality,” he continued, “they will demand a bigger say.”

However, such method did not work. China began its ascension to its present position as the world’s second largest economy, and it appears to be on a seemingly unstoppable road to becoming the world’s largest.

Indeed, Charlene Barshefsky, the US trade representative in charge of China’s WTO negotiations, said last week at a Washington International Trade Association panel that China’s economic model “partially discredited” the Western idea that “you can’t have a creative society and political control.”

“This isn’t to imply that China’s economic approach boosts its inventive ability,” she continued. “However, what the West considered incompatible systems may not always be incompatible systems.”

China’s worldwide economic position has been mostly as one of the world’s largest makers of plastic gubbins and low-cost tat until the year 2000. Yes, it’s significant, but it’s neither world-changing nor world-beating.

China’s ascension to the top of the global trading table signaled a significant worldwide shift. China’s willing labor, super-high-tech manufacturing, and the special partnership between the Chinese government and Western multinational businesses transformed the world’s face.

As China smoothly injected itself into the supply chains of the world’s largest firms, an army of cheap Chinese labor began to generate the items that underlie Western living standards. It was dubbed a “supply shock” by economists, and its impact was undoubtedly startling. Its ramifications are still being felt across the world.

China’s integration into the global economy has resulted in tremendous economic gains, notably the eradication of severe poverty, which peaked at 500 million people before WTO membership and is now almost non-existent as the economy’s worth has expanded 12-fold in dollar terms. As the world’s purchases from China’s factories were financed by the Chinese state, foreign exchange reserves surged 16-fold to $2.3 trillion.

China was the world’s seventh-largest goods exporter in 2000, but it swiftly rose to number one. China’s yearly growth rate, which was already at 8%, skyrocketed during the global boom, reaching at 14 percent, before stabilizing around 15% last year.

Container ships are the behemoths of global commerce. The number of containers on ships moving in and out of China more than quadrupled in the five years after China joined the WTO, from 40 million to more than 80 million. By 2011, a decade after China joined the WTO, the number of containers entering and leaving the nation had more than tripled to 129 million.

It was 245 million last year, and while roughly half of the containers entering China were empty, virtually all of those leaving China were packed with goods.

China’s highway network has also grown dramatically, from 4,700 kilometers in 1997 to 161,000 kilometers by 2020, making it the world’s biggest network, linking 99 percent of cities with populations of over 200,000 people.

China need commodities such as metals, minerals, and fossil fuels to maintain its industrial growth, in addition to its cutting-edge freight infrastructure. Steel is an important component of China’s developing automobile and electrical appliance sectors. China became the world’s largest steel exporter after becoming a net exporter for the first time in 2005.

China’s steel output peaked in the 1990s at over 100 million tonnes per year. It surged to over 700 million tonnes by 2012 after joining the WTO, and will surpass one billion tonnes by 2020.

China now produces 57 percent of the world’s steel and produces substantially more steel on its own than the rest of the world combined in 2001. The same can be said for ceramic tiles and a variety of other industrial components.

China became the primary source of supply in electronics, apparel, toys, and furniture, driving down export costs throughout the world. Following China’s admission into the WTO, economists saw a “once-and-for-all” shock in world pricing. Between 2000 and 2005, China’s apparel exports quadrupled, and its proportion of world trade value increased from one fifth to one third.

Manufacturing limitations in the textile sector were also abolished after 2005, resulting in an even larger migration of production to China. However, since clothing manufacture in China has become more expensive, production has relocated to developing nations such as Bangladesh and Vietnam, and this percentage has dropped to 32% last year.

Long Yongtu, the Chinese minister in charge of WTO entry, made an admission that reflected on the previous two decades. “I don’t believe China’s WTO membership was a historic job-killing blunder [for the United States and the rest of the world],” he added. “However, I recognize that the benefit or allocation is unequal. The overall picture is that while China achieved its own growth, it also opened up a massive export market for the rest of the globe.”

However, there was a catch: US politics had failed to account for the inevitable impact of Chinese competition in several areas. “When there is an unequal distribution of wealth, a government should take efforts to modify that distribution through domestic policies, but this is difficult to achieve,” Long Yongtu said.

“It may be easy to blame others, but I do not believe that blaming others will assist to address the situation. In the absence of China, the manufacturing industry in the United States would shift to Mexico.”

He then told a story about a Chinese glass maker who attempted to build a factory in the United States: “It’s really difficult for him to locate people who are competitive there. He said that the stomachs of American employees are larger than his “The minister stated.

So now we’ve completed the circle. Within the WTO, China has experienced great economic success. Currently, the Biden administration does not appear to be in any haste to reverse his predecessor’s obstructive actions. The skepticism of the trade is really genuine. China has taken advantage of its WTO membership to move well beyond its intended position as a workshop for the West.

It has formed strategic agreements, for example, to gain access to huge quantities of rare earth elements, which are expected to fuel the net zero climate change economic revolution. It has put the state in charge of global industrial expansion. The United States is seeking partners in Europe and Asia to help limit China politically and economically.

China, according to former US trade envoy Barshefsky, has been “For a long time, we’ve been on this very different path. What exactly does that imply? The re-emergence of China as a major power and the leader of what it calls the Fourth Industrial Revolution… the strengthening of a state-centric economic model driven by large subsidies to designated industries. There’s a lot to deal with here. It’s too much for the WTO to manage.”

So, 20 years later, the world has been changed by a seemingly little decision. For China, it’s been a big success. The West’s desired geopolitical approach failed. Indeed, rather than China becoming more like the West politically, the West is becoming more like China economically as a result of this choice.

Cedric Blackwater
Cedric Blackwater
Cedric is a journalist with over a decade of experience reporting on local US news, and touching on many global topics. He is currently the lead writer for Bulletin News.

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