Global trading system poised for a new normal

As US strives to strike a beneficial bilateral deal with China, it’s paving the way for ‘managed’ trade among countries

- D RAVI KANTH

The tale of two events at two different points of time demonstrate unusual commonalities. One occurred in 2001, and another is about to take place on January 15. While the first event happened against the backdrop of the 9/11 terrorist attacks and the impending Iraq war, the second is about to unfold amidst escalating US-Iran tensions. In both events, the dramatis personae are the same: the US and China, the world’s two largest economies.

Unsurprisingly, protracted negotiations preceded the final outcomes in the two events. The US paved the way for China to join the World Trade Organisation (WTO) in 2001, after extracting a significant price by forcing Beijing to slash its tariffs on industrial and agricultural products to levels that industrialised countries took more than 200 years to bring down. China had also committed to reduce subsidies and other trade-promoting measures for industry and agriculture.

Beijing had agreed to reduce its de minimis support for agriculture producers below what was allowed for developing countries. For almost 15 years, anti-dumping investigations against Chinese products were punitively high as they were treated as products originating from nonmarket economy. China chose to pay the price to establish its presence in the global trading system.

Ironically, after almost 19 years, China again decided pay another price because of its exalted status, as it transformed into the world’s industrial hub.