Caixin
Jun 01, 2019 07:40 PM
ECONOMY

Former PBOC Head Expects Progress on WTO reforms at G-20

Zhou Xiaochuan. Photo: Caixin
Zhou Xiaochuan. Photo: Caixin

(Tokyo) — Former China central bank chief Zhou Xiaochuan said he expects the upcoming Group of 20 (G-20) summit in Japan to advance discussions about reforms of the World Trade Organization (WTO) and hopefully reach a preliminary consensus on a reform plan.

Although WTO reforms will be difficult to achieve and some are not optimistic that they can happen, changes to the way the organization works are urgently needed, Zhou said Monday at a closed-door workshop on WTO reforms in Tokyo, hosted by the research institute of the Boao Forum for Asia and co-organized by Caixin.

The WTO, which sets and enforces rules for a global trading system, faces multiple challenges, including the adequate functioning of its appeal mechanism, a key part of its trade dispute settlement system. The Appellate Body, which hears appeals of trade dispute decisions, should have seven members under WTO rules, but now has only three because U.S. President Donald Trump has blocked appointments to it.

Unless there is a change in the U.S. attitude, this appeals mechanism will probably stop functioning properly around the end of this year for lack of sufficient panel members, according to Zhou.

In addition, there are several new issues in global trade that need to be addressed in a timely manner, such as rules for cross-border online commerce. But it is obvious that it would be extremely difficult for WTO members to agree on appropriate rules under the current rulemaking process, Zhou said.

Leaders of the world’s 20 major economies are scheduled to review progress on WTO reforms at the G-20 summit in Japan’s port city of Osaka later this month.

Protectionism and unilateralism have threatened the normal operation of the WTO in recent years amid a rising tide of confrontation over trade issues.

While it’s necessary to advance WTO reforms at the G-20 summit, it’s also necessary to make other preparations to ensure that those countries that wish to support current global trading rules can do so, Zhou said.

If reforms fail to move forward, weakening the WTO’s status or preventing it from functioning properly, it’s possible that some countries will push forward with “plurilateralism,” under which like-minded countries agree to advance rules to allow for the continuation of free trade and investment in particular regions, Zhou said. This is an alternative way to promote multilateralism, yet in the end it’s still necessary to push forward to reach agreement on a multilateral trade framework for the entire world, he added.

China has faced criticisms that some areas of its domestic market are not open enough to the outside world and that some of its trade practices fail to meet international standards, Zhou noted. Related issues include transparency of government subsidies, government support for state-owned enterprises, cyberspace governance, forced technology transfer and protection of intellectual property rights.

In the face of such criticisms, China has enacted reforms in multiple areas, Zhou said, adding that the country is determined to meet “internationally accepted standards” for technology transfer and protection of intellectual property rights.

Even if other countries take protectionist measures against it, China will continue to open its market to the outside world rather than “closing the door,” he said.

Zhou is China’s longest-serving central bank chief, having been governor of the People’s Bank of China from December 2002 to March 2018. Since last April, he has worked as a vice chairman of the Boao Forum for Asia, a nonprofit international organization headquartered in China’s southern island province of Hainan. It hosts an annual summit known as “Asia’s Davos,” a reference to the annual World Economic Forum held in Davos, Switzerland.

Contact reporter Lin Jinbing (jinbinglin@caixin.com)

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