China’s War Horse Hunkers Down for Epic Trade Battles in Geneva

(Bloomberg) --

Most people would view reading the 34,000-word General Agreement on Tariffs and Trade, the legal backbone of the World Trade Organization, as a tedious chore. Zhang Xiangchen proudly claims to have memorized it.

China’s representative at the World Trade Organization since 2017 worked in the early 1990s at a textile company in Henan Province, alongside migrants who produced t-shirts shipped to the U.S. and Europe. Zhang paced around the factory studying the WTO’s core legal document so thoroughly that he says he could recite all the principles of international trade.

China’s War Horse Hunkers Down for Epic Trade Battles in Geneva

“It’s not light reading,” said Wendy Cutler, a former U.S. trade negotiator who is now the managing director of the Asia Society Policy Institute in Washington. “He knows the WTO and the GATT inside and out.”

But Zhang will need more than a strong legal memory to succeed in his latest balancing act: protecting China’s national interests while embracing a global system that U.S. President Donald Trump accuses Beijing of gaming for nearly two decades.

Trump holds a particular disdain for the WTO, which China joined in 2001 with Zhang as part of the negotiating team. The president has also pledged to pull out of the WTO and has long argued that America made a mistake letting China join the organization.

“We have to be allowed to make up some of the tremendous ground we have lost to China on Trade since the ridiculous one-sided formation of the WTO,” Trump tweeted on May 14, just days after he more than doubled tariffs on $200 billion worth of Chinese imports.

Trump’s “America First” trade agenda has already roiled the Geneva-based trade body and threatened the stability of an organization that the U.S. helped build after World War II.

For China, there are few people as experienced as the 54-year-old Zhang to confront the current crisis. As a young trade deputy Zhang was intimately involved in China’s WTO negotiations and in 2001, he handed the pen to his minister, Shi Guangsheng, to sign China’s agreement to join the club.

“He did a lot of homework about the WTO and the details of negotiation,” said Long Yongtu, the chief negotiator for the resumption of China’s GATT contracting party status. “I believe in negotiations, that those who make the right judgment are those who know the nitty-gritty details of the agreements.”

Important Moment

There has never been a more important time for China to exert its influence at the WTO.

Trump hasn’t just criticized the WTO. He has bypassed the organization in his disputes with China, the European Union and others by triggering tariffs that the U.S. says are exempt from WTO oversight.

In addition, the U.S. is blocking new appointments to a WTO panel that has the final say on global trade disputes, called the appellate body. The move could fundamentally disrupt the WTO’s ability to settle disputes that affect some of the world’s biggest companies.

Even the WTO’s normally staid, procedural general council meetings have become epic rhetorical showdowns where Zhang and U.S. Ambassador Dennis Shea spar over which country poses the greatest threat.

During Zhang’s tenure in Geneva, China has sought to reinforce its commitment to the WTO while defending it against America’s broadsides on the organization, saying it’s important to see the WTO as an international public good.

Easy Break

“It is easy to break it but to repair it and maintain its function is not easy,” he said. “We can improve it and make it better.”

In May China introduced a proposal aimed at revising the WTO’s core rules and bolstering it from Trump‘s most aggressive trade policies. China is also a co-sponsor of a separate measure that aims to resolve the Trump administration’s allegation that the WTO appeals process has overstepped its mission.

The U.S. has already rejected both, and concern is growing that the appellate body will be paralyzed by year end.

Zhang understands the challenges ahead and is skeptical that any concrete WTO reforms can succeed while Trump wages his trade wars.

“I am not expecting that we can have fundamental change or make a fundamental difference because of the pressure of unilateralism,” he said. “To unilateralism we have to demonstrate resilience and strength.”

To underscore that message, he points to the skyline along the western shore of Switzerland’s Lake Geneva, where a yellow crane rises above China’s permanent mission to the WTO. There, China is building an underground conference center that’s set to open in 2020, ahead of the 20th anniversary of the country’s membership in the WTO.

“Some people say that it reflects China’s different views on the WTO,” Zhang said in an interview. “The United States is threatening to withdraw from the WTO but China is making an investment to its mission.”

©2019 Bloomberg L.P.

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