Deeper integration into the multilateral trading system

By Qiao Ailian, Zhao Xinhua

The year 2022 marked the 20th anniversary of China’s accession to the WTO.In view of the great achievements made in China’s textile industry and the great changes that have taken place in the global textile industry in the 20 years since China’s accession to the WTO, China Textile interviewed Gu Qingliang, professor of Donghua University, to review the extraordinary course of China’s textile industry in the past 20 years.

Gu Qingliang

• Professor of Business School, Director of Textile Economics Research Institute, Donghua University

• Contract Consultant of ITC/WTO(2004～2016)

• Textile Expert of National Development and Reform Commission

China Textile:Two decades ago,China’s accession to the World Trade Organization (WTO) became a major event for China and the world.What is the significance of commemorating China’s accession to WTO today?

Prof.GU:It has been 20 years since China joined the WTO and 28 years since the WTO was founded.In the past two decades, the world economy has developed rapidly under the multilateral free trade framework of WTO.China’s textile industry has experienced a wave of high growth due to its integration into the Global Production Networks (GPN), which also promotes the common development of the world textile trade.

The world is undergoing profound changes unseen in a century.On the one hand, the Fourth Industrial Revolution, the revolution of scientific and technological innovation, is driving social progress and changing times.On the other hand, the Industrial Waves have combined the cyclical financial crisis that rippled negative effects such as anti-globalization, trade protectionism,illegal san ctions on prevail, decoupled economy, supply chain cut that undermines international cooperation, challenging the WTO's architecture and trade rules.The pandemic and the Ukraine crisis have exacerbated global difficulties and development uncertainties, and mankind has come to a crossroads in history.What is the future of the world textile industry and what is the development of Chinese textile industry? Therefore, to commemorate the 20th anniversary of China’s accession to the WTO, we should take stock of not only the achievements and experience of China’s textile industry, but also the sustainable development of China’s textile industry, extending another 20 years of prosperity of the world’s textile industry.

China Textile:You have been studying textile economy for a long time.What do you think of the relationship between the WTO and its multilateral free trade system and the world textile industry?

Prof.GU:WTO is a global trade organization based on multilateral framework and free trade rules.WTO is not only for textile trade, but textile trade is a major part of global trade.The world textile has special significance to the WTO and its rules.

Textiles were the springboard for industrialization.Textiles have been a major part of industrial production and trade since the beginning of the Industrial Revolution, and they still are.Du Yuzhou, former president of the China National Textile and Apparel Council, said in a report: In the past half century, the global population has increased by less than three times, the total volume of fiber production has increased by less than ten times,and the trade of fiber and products has increased by more than 120 times.

The WTO was the predecessor of the General Agreement on Tariffs and Trade (GATT), which was replaced by the WTO in 1994, so China’s fifteen years of accession includes a decade of China’s re-admission to the GATT.

In 1994, I studied the globalization of the apparel market as a visiting scholar in the Department of Textile Economics & Consumer Affairs of Auburn University.Agreement on Textiles and Clothing (ATC) was the first agreement signed after the establishment of WTO.The agreement provides for the gradual reduction of textile and garment trade tariffs and the abolition of quotas over a period of ten years starting in 1995, culminating in the termination of the Multifibre Arrangement (MFA).

The MFA is a distortion regime dominated by developed countries.Therefore, the ATC embodies its multilateral framework and free trade rules, and has achieved great results.Despite the ups and downs,from 1995 to the end of 2004, with the implementation of ATC, the world textile trade appeared unprecedented prosperity.“The Travels of a T-Shirt in the Global Economy” describes a wonderful scenario in which countries and regions give full play to their respective industrial and market advantages under the principle of global free trade.

Almost all Chinese textiles and clothing are subject to quota or tariff restrictions and unfair treatment in the MFA.In the process of ATC implementation, Chinese textile gradually released its potential and advantages.Take garment export as an example, before entering WTO, China’s garment export accounted for 1/3 of the world’s share.It is worth noting that the phased out of MFA has also promoted the growth of textile and apparel worldwide, including developed and less developed countries (LDCs), rather than “China is the only winner and everyone else is the loser,” as some people said.

Therefore, the first five years of China’s accession to the WTO is not only the initial stage of the multilateral framework and free trade system of WTO, but also the prelude and rehearsal of China’s accession to the WTO.After entering the WTO, the WTO member has further enjoyed its due rights and interests, and has further integrated into the global trading system.

China Textile:The establishment of the WTO, especially China’s accession to the WTO, was of great significance to the construction of the world multilateral framework and free trade system and contributed significantly to the development of the global economy, including the textile industry.Why is the process of China’s accession to WTO so arduous? Especially regarding the negotiations in the sector of textile and garment, what contribution has Chinese textile made to promoting China’s accession to the WTO?

Prof.GU:China’s accession to the WTO is not only about a country, an industry, nor is it just about the market and trade.For China, market opening, national treatment, service trade, protection of emerging and infant industries, national economy, people’s livelihood and national security should be taken into account, and necessary safeguard measures should be taken to reduce the possible impact.

Twenty years ago, at the turn of the century, many events took place in the world, including the Southeast Asian financial crisis before that.These changes have more or less affected the process of China’s accession to the WTO.

Textile and garment is the important content of China’s accession to the WTO negotiation.China’s textile industry is the best prepared of all economic and industrial sectors - the first to transfer industries and attract foreign investment, the first to invest abroad, the first to open up the market, the first to realize privatization and marketization, and the first to integrate into the Global Production Networks.With its complete industrial system, rich products and huge market demand,Chinese textile has become an indispensable role in the global supply chain, fashion commodity chain and market value chain.Therefore, the exclusion of Chinese textile from WTO cannot constitute a complete multilateral trading system, let alone meet the interests of most WTO members.

In 2002, the United States International Trade Commission (USITC) declassified the evaluation report on China’s accession to the WTO, among which the textile and garment trade was the most important chapter, which analyzed the impact of China’s accession to the WTO on the American economy in detail.The results suggested that China’s accession to the WTO has benefited almost all American industries-except a few labour-intensive ones; all sectors of American consumption would grow; agriculture, food processing, capital and technology and manufacturing would all benefit.The model simulation results showed that the impact of China’s accession to the WTO and the complete abolition of textile and garment quota on the U.S.economy was positive, and the overall GDP of the U.S.has increased significantly.The gains came from “optimized market allocation of factors and low-cost imports from China such as textile and apparel products”.

This report and subsequent facts prove that China’s accession to the WTO in 2001 and the abolition of the MFA consumption quota in 2005 resulted in a win-win outcome for both countries, rather than a gift from U.S.or a loss for the U.S.,as some U.S.politicians still advocate.

The paranoia of zero-sum game of western politicians not only adds to the resistance to negotiations, but also leads to their own biased and even misleading policy making.For example,American consumers benefit from high-quality and affordable Chinese products, and the current inflation in the United States is partly caused by the tariff war against China.

China Textile:Since China’s accession to WTO, the world has undergone great changes.China and Chinese textile have also created remarkable achievements.Would you like to summarize the changes that China has brought to the global and Chinese textile in the past 20 years?

Prof.GU:Twenty years ago, China entered the WTO, which became a major event for mankind to enter the millennium.Over the past 20 years, China has been deeply integrated into the global economy and achieved rapid economic development, becoming the world’s second largest economy in 2014.China’s accession to the WTO has accelerated the process of reform and opening up, promoted the improvement of the market system,investment and business environment, and made China the country that attracts the most foreign investment and exports.Balanced trade policies not only ensured stable exchange rate and trade growth, but also kept healthy trade relationship and inclusive development of world.Chinese enterprises are becoming more confident and mature, and the high-tech industry is also rising strongly under high pressure.

From 2005 to 2016, I chaired four studies by the International Trade Center (ITC) of the WTO.The topics are all about inclusive growth of textiles in the world, especially how the textile industry in less developed countries can benefit from China’s development, and how China can help LDCs textile industry development.The projects also cover specific industries and markets such as cashmere and digitalization in the textile trade.

Studies have shown that China’s tariff exemption for textile imports from less developed countries such as Bangladesh, Cambodia and Myanmar has greatly promoted these countries’ garment exports to China,not only increasing their imports of textiles and textile equipment from China, but also enhancing their global competitiveness and export proportion.

This is one of the examples of China’s accession to the WTO promoting the development of world textile: China has fulfilled all the commitments of China’s accession to the WTO,promoted the construction of the multilateral framework of WTO free trade system, promoted the development of global textile trade,and made great contributions to the world economic prosperity.

In August 2022, China further implemented zero tariffs on 98 percent of imported goods from LDCs countries, fully demonstrating its responsibility as a major country.With China’s accession to the WTO, the world has given China space for development,and China has also given the world impetus for development.

China Textile:The world is in turmoil, with anti-globalization trend,rampant protectionism and unilateralist.Economic decoupling and supply chain crises have hit the multilateral framework of the WTO, and China's textile industry is facing difficulties and challenges.Some people think that the world has no chance to return to the high point of WTO more than 20 years ago.How do you comment on this view?

Prof.GU:The WTO has made remarkable achievements in the 28 years since its establishment.However, due to various factors, especially the hegemonic constraints and low negotiation and decision efficiency,few new actions have been made after the implementation of the ATC.In this sense, the WTO itself needs reform and cannot go back to the past.It must be stressed, however, that there should be no retreat to a unipolar world where hegemony does whatever it wants.

China’s accession to the WTO has made remarkable achievements,but its journey has been tortuous and the future will be equally difficult.However, this cannot stop the historical process.

Today, mankind is undergoing profound changes unseen in a century, and the scientific and technological revolution has brought about great changes in social relations.

In 2009, the United States joined and led TPP and added the “yarn forward” exclusion clause, which made TPP a part of the strategy on China.The U.S.withdrew from the TPP at the beginning of the Trump administration, but did not change course.When revising the North American Free Trade Agreement, the U.S.added an adverse clause also aimed at Chinese textiles, and launched a technological, trade and financial war against China.Western politicians even have no bottom line to slander China by spreading rumors about “Xinjiang cotton issue”,undermine social stability and peaceful development in China, sever the supply chain and value chain of the global textile and garment industry, and seriously distort the global textile trade relations.The sudden and prolonged pandemic and the Ukraine crisis have added insult to injury to the social and economic turmoil in the world.Meanwhile, such a major disturbance is a test and choice for all mankind at the crossroads.

The emergence of a large number of paradoxes and contradictions is a signal of the change of the times: More than 200 years of zero-sum game, the law of the jungle,big fish eats small fish and other survival principles and value systems based on “absolute rationality” have come to an end in industrial society.

What is the future of the world? What will China do in the future? This is the question of the times.

China Textile:“What is the future?” This is the question of the times in front of people in China’s textile industry.What is the enlightenment of 20 years of China’s accession to the WTO to the future textile development?

Prof.GU:The experience of China’s accession to the WTO for more than 20 years tells us: The growth of the textile and garment industry, which meets the most basic needs of mankind, is irrepressible, and the modes of production, economic relations and trade that meet the common and diversified needs of mankind must be mutually beneficial, mutually complementary and winwin, and the future of the world’s textile industry must be a community with a shared future.The aspiration of people of all countries for genuine multilateralism and free development featuring common prosperity, diverse development, cooperation and competition and inclusive growth is unstoppable.

In the last three years, the textile trade of countries and regions along the “Belt and Road” leads the world in growth.In 2021, China’s textile and garment export reached a new high; the launch of the Regional Comprehensive Economic Partnership (RCEP) in 2022 has given a strong boost to the world’s textile industry.The “dual circulation” brings new ideas and space into Chinese textile industry, and shows the tenacity to overcome difficulties.The innovation makes the business performance of a large number of textile enterprises rise against the headwind, which proves the wisdom and strength of Chinese textile people.

A series of national policies are being pursued: the Belt and Road Initiative is aligned with the United Nations 2030 Agenda for Sustainable Development, building and implementing RCEP and other free trade agreements and free trade areas, holding the China International import Expo, China International Consumer Products Expo, accelerating the “dual circulation” of domestic and foreign resources and markets, accelerating the construction of a unified national market, and the reduction or exemption of tariffs on exports to China from less developed countries and regions, have demonstrated China’s responsibility as a major country.We are on the right track to further integrate into the world, improve a genuine multilateral free trade system and build a global textile community with a shared future.These national policies are also the basis and strategic fulcrum of high-quality sustainable development of Chinese textiles.

There will be hesitation, pause and even regression at the crossroads, but the trend of the times is irreversible!