Policy Paper 41: Institutional Implications of WTO Accession for China

For fifty years, the General Agreement on Tariffs and Trade (GATT) system has fostered the development of liberal multilateralism. Originally a short, fifty-page set of rules that governed trade between just twenty-three Contracting Parties, and applying only provisionally because of the failure of several countries to ratify it, the GATT system has evolved into one of the world's most well-developed international organizations. The GATT’s organizational successor, the World Trade Organization (WTO), boasts over 130 members that have ratified its founding charter and thousands of pages of substantive rules. Perhaps most significantly, the Uruguay Round negotiations bestowed upon the GATT/WTO system revised rules of government, which some have predicted will vastly improve the regime's institutional strength. With new dispute settlement rules, clarified rules of procedure for decision-making by the Members, and the formal establishment of a genuine secretariat, many claim that the world's preeminent trade institution is stronger than ever. Their hope is that this revitalized institution can govern itself effectively, advancing international political order and rules-based liberal multilateralism. This paper considers the possible effects of China’s accession to the WTO on the WTO’s institutional strength—how China’s accession could affect WTO governmental processes and the extent of political support for the organization from leading Western trading countries. During the past ten years, in which China has (of course) not been a GATT Contracting Party or a WTO Member, there has been substantial “systems friction” between China and some Western trading countries. The term “systems friction,” coined by Sylvia Ostry , is usually thought of as political tension between countries attributable to their economic interaction in the context of fundamental differences in the organization and operating principles of their respective political-economic structures. There may be different forms of systems friction, depending on whether the interacting political-economic structures can change, how willing countries are to change political-economic structures in order to accommodate other players, and whether the structures simply have not yet been subject to negotia-tion. The systems friction now associated with China-trade embodies elements of all three forms. This raises the question of whether WTO accession for China is likely to reduce and contain the systems friction, or weaken the WTO as an institution, or both.