30 years on, WTO continues to drive growth

Long-term, gradual reform of global trade body needed for multilateral cooperation, experts say

When Hexagon AB, a Swedish company for metrology and geo-analytics, first entered the Chinese market in 1993, all its coordinate measuring machines — devices used to gauge the precise geometrical characteristics of objects — had to be imported from Europe.

More than 30 years on, the company sees 90 percent of its machines manufactured locally in China. The Stockholm-based company currently operates its globally largest CMM production facility in terms of output in Qingdao, Shandong province.

While providing products and equipment for business clients in China, the production base also serves as a key source of supply for overseas markets such as Southeast Asia, said Josh Weiss, president of Hexagon's manufacturing intelligence division.

"We have built a local supply chain to gain access to higher-quality products at lower costs. Through this process, Chinese suppliers are incorporated into our global supply chain to support other factories," Weiss said.

This is one of many examples of how global trade and investment have driven growth of the corporate sector and the economy of host countries, and the World Trade Organization has played a significant role in that process since its establishment on Jan 1, 1995.

Bridging the gap

With 166 members, the global trade body has made major contributions to the strength and stability of global trade and economy over the past 30 years, helping drive trade and investment growth, resolving trade disputes, and facilitating the integration of developing economies into the global trading system, said Tu Xinquan, dean of the China Institute for WTO Studies at the University of International Business and Economics in Beijing.

A WTO report released in September noted that trade has contributed to reducing the gap between developed and developing economies. From 1995 to 2023, for example, the global per capita income increased around 65 percent — from $7,050 to $11,570 — while in low-and middle-income economies, it almost tripled — from $1,835 to $5,337.

About one-third of the income convergence can be attributed to the openness of trade in low- and middle-income economies, the report said.

After joining the WTO as its 143rd member on Dec 11, 2001, China has grown into the world's second-largest economy, with about 800 million people lifted out of poverty thanks to a large extent to the indispensable role of trade, which facilitated the flow of a wide range of products the country manufactures, from clothing and furniture to bullet trains and liquefied natural gas carriers.

Other developing economies have benefited from the WTO, too. For example, WTO members have implemented a broad range of agreements, decisions and technical assistance programs to foster the economic transformation of Africa.

Since the launch of the Aid for Trade initiative in 2005, donors have disbursed $451 billion in official development assistance to help developing economies build trade capacity and infrastructure, and $163 billion has gone to African countries, the report said.

Crucial role

As a responsible member of the WTO, China has, together with other members, actively participated in the reform of the organization.

During a study session of the country's senior officials in September 2023, President Xi Jinping said the WTO is an important pillar of multilateralism and an important stage for global economic governance, and that it is a common consensus and a general trend to implement necessary reforms of the WTO.

"We should press ahead with reforming the WTO, oppose unilateralism and protectionism, and restore the normal functioning of the dispute settlement mechanism as soon as possible," Xi said, while attending the G20 Summit in Rio de Janeiro, Brazil, on Nov 18.

Challenges the WTO faces include interlinked agricultural and nonagricultural issues, divergent interests among developing economies, the rise of unilateralism and protectionism, the diminishing role of multilateral negotiation mechanisms, and the lack of strong leadership in reform. The US' long-standing blockages of the WTO's appeal body have also substantially damaged the organization's operational efficiency, analysts said.

While the WTO has made notable progress in areas such as investment facilitation and e-commerce, it has yet to achieve significant breakthroughs in reform, according to experts.

Li Rulin, vice-president of Beijing-based China Law Society, said it is urgent for developed, developing and least-developed economies to make breakthroughs in WTO reforms to ensure multilateral cooperation, fair and free trade, and the normalization of dispute settlement mechanisms, in order to give full play to the WTO's role.

The WTO reform is expected to be a long-term, gradual process that demands broad participation from its members. A recent study released by the University of International Business and Economics noted that major differences of WTO members include disagreements between the US and the European Union over the dispute settlement mechanism, as well as differing stances between developed and developing economies on the creation of new rules and the application of differential treatment.

Given the current complex and rapidly evolving international landscape, Su Qingyi, a senior fellow at the Chinese Academy of Social Sciences' Institute of World Economics and Politics, said that while efforts are needed to solve those problems, the WTO remains a crucial anchor for global trade development and the stability of trade rules and order.

For example, the trade-led economic growth of the past 30 years has made significant contributions to reducing extreme poverty, as the percentage of individuals living in extreme poverty in low- and middle-income countries decreased to less than 11 percent in 2022 from 40 percent in 1995, according to the WTO report.

"What we can do is to continue pushing for negotiations and ensure the effective operation of alternative mechanisms. At the same time, we need to seek more innovative solutions in order to break the current deadlock," said Zhang Xiangchen, deputy director-general of the WTO.

Though the WTO's 13th Ministerial Conference, held in Abu Dhabi, the United Arab Emirates, in March, adopted a ministerial declaration setting out a forward-looking reform agenda for the organization, Zhang said that China needs to persuade other countries to resolve issues through negotiations to advance the WTO reform.

"As the reform progresses into a more challenging phase, it requires us to move forward with patience, gradually tackling the complex and difficult issues that lie ahead," he added.

Rebeca Grynspan, secretary-general of the United Nations Conference on Trade and Development, said she believes in the contribution of open trade and investment to global development and noted that China has set an admirable example of such practices in recent years.

zhongnan@chinadaily.com.cn