Global Policy Forum

By David Murphy

Even as global trade talks collapsed in a heap of acrimony, Beijing managed to gain praise both for its activism and restraint. How did that happen?

For China the collapse of the World Trade Organization (WTO) talks in Cancun, Mexico, was a triumph of failure. Beijing attracted praise from both sides of the Cancun fence--developed as well as developing countries--despite having played only a discreet role in the talks, which broke down amid acrimony on September 14.

And while Beijing and its regional rival, India, supported the Brazilian-led agenda of the so-called "Group of 22" developing countries in Cancun, it is not yet clear that China has committed itself to permanent membership of this new grouping. China is still learning how to operate in multilateral forums and is still clearly feeling its way. "China played a constructive role [in the Group of 22], not a leadership role," says Robin Bordie, a Shanghai-based trade consultant.

The WTO talks collapsed after developing countries became angry that their long-standing grievances over rich countries' farm subsidies were being ignored, and some of the primary supporters of those subsidies tried to shift attention to the so-called "Singapore issues." These are measures related to investment, competition, transparency in government procurement and trade facilitation favoured by the European Union and Japan. China and other developing countries are leery of bringing in these unrelated issues to the farm debate.

In its first big outing as a fully fledged member of the WTO, Beijing was clearly a heavyweight in the ad hoc group of developing countries that faced down the United States and the EU. In many parts of the developing world, commentators and politicians opposed to the way the talks were shaping up lauded the failure of Cancun as a demonstration of the developing world's new political muscle. And China received ample praise for its role in humbling the Western powers.

That included praise from its own media: "China was very clear that rights and obligations must be balanced when it joined WTO," wrote the International Business Daily, China's Ministry of Commerce newspaper, shortly after the talks ended. "How right that looks today." The paper said that "developed countries should undertake more obligations. Multilateral WTO talks dominated by a handful of developed countries including the U.S. and Europe won't last long."

So much for rhetoric. In fact, China was not leading the charge of the developing countries. U.S. Trade Representative Robert Zoellick, a fierce critic of the tactics of the Group of 22, praised China's Commerce Minister Lu Fuyuan as a "good partner" at Cancun. "Frankly, in the [Group of 22] meetings at least that I attended, China was represented by a vice-minister. So while I know they participated, my sense is their participation was . . . well, others were the leaders of the process," Zoellick told reporters after the conference ended. A Beijing-based trade diplomat puts it more bluntly: "The Brazilians are mentioned all over the cables from our delegates coming out of Cancun, but the Chinese are invisible."

China's reticence is partly explained by the fact that it is still learning the ropes and lacks experience in dealing with sophisticated multilateral mechanisms, say analysts. More importantly, agricultural products make up only a small part of China's international trade and there is no vocal farm lobby in China like those that exist elsewhere. This means that while farming groups in Japan or South Korea have a disproportionate influence on trade policies, the interests of China's hundreds of millions of farmers are subservient to the national, urban-dominated, trade agenda. Although growing rapidly, China's farm exports account for only a small amount of the country's exports. In the first half of this year, according to the government, farm products accounted for just over 5% of China's exports, with a value roughly equivalent to that of agricultural imports.

Beijing is also wary of stirring up trade conflict with Washington in a U.S. election year, when politicians traditionally pay more attention to farm, trade-union and domestic-manufacturing lobbies. Another reason that China may want to keep its head down concerns its performance in meeting its WTO-entry commitments--including market opening to agricultural goods. The U.S. might focus more on that performance as the perception grows that Beijing's "honeymoon" period of adapting to WTO membership is ending.

"The question of the implications of the Cancun collapse is perhaps less salient than the question of whether China realizes its obligations in the area of agriculture in full and on time," says Bob Kapp, president of the U.S.-China Business Council. "The record to date is not definitive."

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