Zhang Jianping is Deputy Director and Research Fellow of Academic Committee of the Academy of International Trade and Economic Cooperation, Ministry of Commerce 26-09-2024

Under the impact of unilateralism and protectionism, trade disputes among countries have increased in recent years, bringing uncertainty to global trade and jeopardizing the multilateral trading system. The World Trade Organization (WTO) plays a crucial role in the development of the global economy and trade. It also plays a key role in maintaining a fair, open and sustainable international trade environment, and provides a solid foundation for the development of global economy and trade. As the Global South has played an important role in promoting WTO reform and safeguarding the rights and interests of developing countries, it’s important to further strengthen its solidarity, actively participate in the reform of the global trade governance system and promote the building of a more open, fair and balanced global trade environment.

The WTO Has Greatly Boosted the Development of the Global South

The Global South mainly refers to developing countries and emerging economies. They are called “countries of the Global South” because most of them are located in the southern hemisphere and the southern part of the northern hemisphere, and are in a relatively weak position in the world economy and politics. Closely following the situation of the developing countries, the WTO has worked proactively to promote the development of the Global South.

 In the Uruguay Round negotiations, the WTO established principles such as tariff concessions and liberalization of trade in services, laying the foundation for developing countries’ participation in international trade. In the Doha Round negotiations, the WTO put forward agendas that would benefit developing countries, such as the reduction and elimination of agricultural subsidies. In addition, the WTO has included more developing countries as its members, and has carried out training on trade policies to enhance the trade negotiation capacity of developing countries and strengthen the voice of developing countries within the framework of the WTO.

1 WTO Trade Rules Help Developing Countries Expand Foreign Trade

The WTO-centered multilateral trading system helps developing countries to obtain more export opportunities. The establishment of the principle of most-favored-nation treatment and national treatment reduces the trade discrimination of developed countries against developing ones.

In order to promote the trade development of developing countries, the WTO has formulated differential treatment provisions to reduce the import tariffs of developing countries through tariff concessions and the liberalization of trade in services, granting them more lenient tariff concession commitments and preferential tariffs for special products than those of developed countries, and allowing them to claim a longer period of time for the implementation of tariff agreements.

Within the WTO framework, tariffs, non-tariff measures and market access arrangements for developing countries are mainly reached through negotiations. In tariff negotiations, developing countries can make smaller tariff concessions than developed countries. For non-tariff measures, in negotiations on trade in services, standards, etc., developing countries could be more flexible in their liberalization level and implementation timetable. In addition, developed countries need to substantially reduce agricultural subsidies, while developing countries can maintain higher agricultural subsidies. Developing countries could also designate more flexible tariff quotas for relevant sensitive agricultural products and adopt temporary safeguard measures in the event of a surge in agricultural imports.

2 Promoting the Integration of the Global South into the International Division of Labor System

The international division of labor is becoming increasingly refined. The intra-industry trade and the intra-product trade are intertwined, and specialization based on global value chains is more prevalent. The Global South is participating in vertical production networks through various forms of processing trade. The WTO has continued to improve the terms of trade in various ways to help the Global South better integrate into the international division of labor in terms of the inter-industry division of labor, the intra-industry division of labor and the intra-product division of labor.

With regard to the inter-industry division of labor, the WTO has supported the conclusion of South-South regional trade agreements and promoted the formation of a larger free trade area for developing countries, so as to allow member countries to develop different industries and select target links in global value chains according to their comparative advantages. It has carried out South-South cooperation projects, selecting competitive countries to serve as regional production bases and realizing industrial agglomeration in specific industries.

With regard to the intra-industry division of labor, the WTO encourages transnational corporations to participate in Global South investment through trade and investment facilitation, and promotes the formation of industrial chain division of labor in different regions. For industrial support, it also carries out capacity building projects, selecting regions with the conditions for the construction of industrial parks or specialized towns.

With regard to the intra-product division of labor, i.e. the vertical specialization division of labor, the WTO has actively promoted South-South regional trade agreement negotiations, such as supporting the Regional Comprehensive Economic Partnership (RCEP), to lower South-South trade barriers, and play an active role in South-South investment cooperation. In addition, the WTO actively organizes economic and trade cooperation forums and symposiums among developing countries, and builds cooperation platforms to achieve vertical specialization in industrial division of labor.

3 Promoting the Development Momentum of the Global South by Undertaking International Industrial Transfers

With the transfer of manufacturing industries from developed countries, the Global South has taken on some of the industrial transfers from developed countries by giving full play to their comparative advantages in resources and labor. On the whole, most of the industries undertaken by the Global South are at the low end of the value chain, while high-end industries and core technologies are still being controlled by developed countries.

Most developing countries have taken over labor-intensive industries, and some have taken over technology-intensive industries. Southeast Asian countries have taken over technology-intensive manufacturing industries such as electronic products and automobiles. India has undertaken a certain amount of knowledge process outsourcing.

 Mexico has become an important processing base for the United States, with a concentration of automobile and electronics manufacturing plants. Some resource countries have taken advantage of their resources to develop resource extraction and primary processing industry, such as minerals and oil, thus becoming the production bases of energy and mineral products. The Global South can make better use of its own comparative advantages to undertake low-cost industrial transfer and promote the process of industrialization.

By undertaking industrial transfer, the Global South has, to a certain extent, promoted its own economic development and accomplished the task of poverty alleviation. But at the same time, the Global South also faces the negative impacts of industrial transfer. Problems such as environmental pollution, labor exploitation, over-reliance on a single market for exports, imbalance in industrial structure, and serious hollowing out of the manufacturing industry need to be addressed. On the whole, countries of the Global South have achieved some success in utilizing industrial transfer to promote economic development, but they also face many problems and need to further upgrade their industrial chain status.

WTO Reform and Differences on It

As the main platform for international trade governance, the WTO has formulated a series of trade rules to regulate international trade and ensure fair competition in trade and investment, and to promote global trade stability. The U.S. and the West continue to prioritize self-interest, and interfere with and obstruct the WTO dispute settlement mechanism, which has seriously undermined the authority and effectiveness of the WTO. In order to maintain the multilateral trading system and the international economic order, and to promote the development of the global economy and trade, WTO reform is urgent.

1 China’s Reform Program Reflects the Interests and Demands of the Global South

China’s WTO reform program actively supports the status and rights and interests of countries of the Global South in international trade, so as to make the multilateral trading system more inclusive and sustainable, and reflect the interests and demands of the Global South in the multilateral trading system. China’s Position Paper on WTO Reform stated three basic principles: WTO reform should safeguard the core values of the multilateral trading system, protect the development interests of developing members and follow a consensus-based decision-making mechanism.

First, non-discrimination and openness are the basic criteria for members to deal with their trade relations under the WTO framework. Non-discrimination and openness require that members refrain from adopting discriminatory measures against specific members in international trade, and provide for binding levels of import tariffs as well as quantitative restrictions on members. Second, the promotion of economy and trade development is at the core of the WTO work.

Developing members enjoy special and differential treatment under the WTO framework, and WTO reform should focus on addressing the difficulties and challenges faced by developing members in the process of economic globalization and providing policy flexibility and space for those members to help them achieve their economic development goals and narrow the gap with developed countries. Third, rule-making under the WTO framework should be accomplished by consensus on the basis of equal dialogue and mutual respect among member countries, while guaranteeing the joint participation of all members, especially developing members.

2 The Reform Program of the U.S. Reflects the Interests and Demands of Developed Countries

The U.S. program has the following contents: First, it emphasizes the need for the WTO to adapt to the new economic situation and respond to the challenges posed by non-market economies. Second, it requires that the WTO dispute settlement mechanism must fully respect the sovereign policy choices of its members. Third, it requires WTO members to comply with notification obligations. Fourth, it questions the application of the principle of special and differential treatment in the WTO and calls for the clarification of development issues, the elimination of self-identification of developing members, and the re-identification of developing members according to certain criteria.

The U.S. program represents the self-interest of developed countries. In fact, the U.S. recognized non-market economies on the basis of a memorandum issued by its Department of Commerce rather than WTO rules. Thus, the U.S. appeals to the WTO dispute settlement mechanism actually reinforces the fact that it “settles” trade disputes on the basis of its domestic legislation rather than WTO rules. The U.S. has publicly accused other members of not notifying WTO of incomplete and untimely industrial subsidies and of failing to comply with WTO transparency requirements.

 However, the U.S. itself has granted tax incentives, direct grants and other forms of industrial subsidies to high-tech industries, and a large number of these industrial subsidy policies have not been notified in accordance with the relevant WTO provisions.

 The U.S. assertion of the principle of special and differential treatment and its demand for clarification of development issues are actually means of safeguarding its own economic and trade hegemony and interests, driven by the concept of “US first”, and its so-called fallacies such as “undue advantage” and “market distortion” are all based on the criterion of whether they are beneficial to the U.S. or not. In addition, although the WTO reform programs of the European Union and Japan differ in detail from that of the U.S., they are still essentially a joint effort with the U.S. to safeguard their dominant position and economic and trade interests in the international economic and trade system.

 3 Consensus and Differences Between the Global South and Developed Countries on WTO Reform

The Global South and developed countries have shown certain consensus and differences in the WTO reform process: on the one hand, both sides emphasize the importance of the multilateral trading system, advocate free trade and open markets, and agree that the WTO dispute settlement mechanism needs to be reformed in order to improve its efficiency and transparency; on the other hand, the two sides have different views on some key issues, such as the recognition of “market economy status”.

 Developed countries advocate recognition through domestic law, while countries of the Global South articulate their position through the joint submission of The Continued Relevance of Special and Differential Treatment in Favor of Developing Members to Promote Development and Ensure Inclusiveness and Statement on Special and Differential Treatment to Promote Development to the WTO. In addition, the Global South generally emphasizes that the WTO safeguarded the development interests of developing members in support of their economic development and integration into the economic globalization process, while developed countries question the principle of special and differential treatment under the WTO framework as bringing advantages to developing countries. Last but not least, there are also differences in the approach to the reform of the dispute settlement mechanism.

The Global South emphasizes equal dispute settlement procedures, while developed countries pay greater attention to the efficiency and transparency of the dispute settlement mechanism. Resolving these differences will require consultation and cooperation in order to balance the concerns and interests of both sides and ensure the effectiveness and sustainability of the multilateral trading system.

Pathways for the Global South to Promote WTO Reform

In order to safeguard the WTO-centered multilateral trading system and promote WTO reform towards greater fairness and justice, countries of the Global South need to work in solidarity to maintain the WTO’s existing preferential treatment for developing countries, while at the same time taking initiative in emerging trade areas.

1 The Global South Must Work in Solidarity to Enhance Its Discourse Power in Negotiations

The Global South reflects two major features of the current evolution of the world landscape: “global” highlights the increasing interconnectedness of countries in the context of globalization, and the rise of developing countries as a whole. However, the developed countries continue to dominate the world economy and politics and seek to maintain and consolidate their dominance by imposing various constraints on the Global South.

Hence, the Global South must work together to strengthen communication and coordination in WTO reform, and speak with one voice so as to enhance its discourse power in negotiations. The Global South must adhere to the principles of multilateralism and consensus, resolutely oppose unilateralism, protectionism and “us first” advocated by developed countries with an aim to safeguard their own interests.

 It’s important for the Global South to maintain the authority and effectiveness of the WTO, in particular, promote the normal functioning of the WTO dispute settlement mechanism as soon as possible and advocate the settlement of international trade disputes under the WTO framework. In addition, the Global South should unify its position and, while urging developed countries to abide by the rules, fulfill their commitments and play an exemplary role, work with them to promote a greater role of the multilateral trading system in global governance.

2 The Global South Must Resolutely Safeguard WTO’s Preferential Treatment for Developing Countries

The purpose of the WTO is to promote free, fair and open international trade, but its operation faces various challenges and crises from both inside and outside, the most prominence of which is the conflict of interest and contradiction between the Global South and developed countries. Under the WTO framework, negotiations and disputes between the Global South and the developed countries are inevitable, centering on special and differential treatment in favor of developing members.

As the dominant players in the WTO, the developed countries often act in their own interests and try to maintain and expand their advantages through the WTO rules and mechanisms. Although the Global South accounts for the vast majority of WTO members, its overall strength is relatively weak, and it often lacks effective negotiating capacity and voice, making it difficult to secure reasonable benefits and development space in the WTO.

The Global South must resolutely safeguard the special and differential treatment that benefits developing members, adhere to genuine multilateralism, actively promote the restoration of the Appellate Body, firmly safeguard the legitimate rights and interests of all members, make good use of the WTO’s deliberative and supervisory functions, and safeguard the authority of the dispute settlement mechanism, in order to promote the WTO reform towards a more just, reasonable and coordinated direction. The Global South should actively participate in multilateral negotiations and discussions on new issues, such as e-commerce, investment facilitation, environment and climate change, and strive to reach more consensus and agreements within the WTO framework, while ensuring the openness of plurilateral negotiations and the applicability of most-favored-nation treatment.

3 The Global South Must Strive for Initiatives in Digital and Green Trade

Digital trade and green trade are new trends and opportunities in global trade, and are of great significance in promoting global sustainable development and common prosperity. The Global South should seize the opportunity, use the WTO as a platform to take initiative in the area of digital trade and green trade and create more favorable conditions for its own development and progress.

Digital trade can reduce the trade costs, improve the trade efficiency, expand the scale of trade, promote the trade innovation and increase the value of trade, but it also faces cyber-security risks and personal data security risks brought about by cross-border data flows. Green trade can reduce the negative impact of trade on the environment, improve trade quality and efficiency, enhance trade competitiveness and sustainability, promote trade transformation and upgrading, and contribute to the public interest, but it also faces threats such as climate change, biodiversity loss and environmental pollution.

 Therefore, the Global South should promote formulation of WTO rules for advancing the development and settling the disputes on digital and green trade, so as to address the security risks and threats at the same time preserving its openness and inclusiveness. The global development digital trade and green trade cannot be possible without the joint efforts of the Global South and developed countries. It is therefore important for the Global South to cooperate with developed countries as much as possible under the framework of the WTO, and, with full consideration of the situation and interests of all parties, jointly promote the development of digital trade and green trade in a fairer and more reasonable direction with an open mind, a cooperative spirit and an innovative approach.