China isn’t gaming global trade through its industrial polices or ‘unique’ economic model – the problem is out-of-date WTO rules

There’s a myth that says China got a pass into the WTO, and has used state-owned enterprises to break the rules ever since. But those rules were written before the digital age, and perhaps the state role in the market needs to be reconsidered

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US Trade Representative Robert Lighthizer and Chinese Vice-Premier Liu He chat at the Diaoyutai State Guesthouse in Beijing. Lighthizer, a lawyer with decades of experience in both international trade law and Republican politics, has long been a critic of Chinese trade practices. Photo: AFP

Published: 3:00am, 25 Nov 2019Updated: 3:04am, 25 Nov 2019

I want to look at the tiresome myths at the heart of the “Washington consensus” – that the Western market economies must “get tough” on China because it represents an existential threat to the global trading system, the global economy even.

The elements of the myth trip glibly off the tongue of even thoughtful trade commentators, and many that should know better.

First is the claim that China has a unique market model that is fundamentally incompatible with trade rules as practised by the world’s market economies since the Bretton Woods institutions were created half a century ago.

Second is the myth that China was given an unacceptably easy pass into the World Trade Organisation in 2001, and has since then been enriching itself at everyone else’s expense by playing fast and loose with the WTO’s fundamental trade rule book.

Third is that China exploits the market power of its state-owned enterprises, showering them with subsidies and preferential funding, frustrating competition through the use of an array of obscure behind-the-border barriers. It also steals intellectual property and forces the transfer of technology.

Champions of these general mythical theses are the likes of Michael Pillsbury, who argues in his book The Hundred-Year Marathon: China's Secret Strategy to Replace America as the Global Superpower that “China … regularly hacks into foreign commercial entities … making [it] the world’s largest perpetrator of IP theft. This allows the Chinese to cheat their way up the technology ladder.”