China is com­mit­ted to mul­ti­lat­er­al­ism

The Korea Times - - OPINION - By Xizhou Zhou Xizhou Zhou is a manag­ing direc­tor of IHS Markit and heads the firm’s global power and re­new­ables prac­tice. Copy­right be­longs to Project Syn­di­cate (www.project-syn­di­cate.org).

BEI­JING — In re­cent years, China’s lead role in es­tab­lish­ing new mul­ti­lat­eral in­sti­tu­tions — in­clud­ing the Shang­hai Co­op­er­a­tion Or­ga­ni­za­tion, the Asian In­fra­struc­ture In­vest­ment Bank (AIIB), and the New De­vel­op­ment Bank — has raised fears that the gov­ern­ment aims to top­ple the ex­ist­ing world or­der.

This in­ter­pre­ta­tion misses a cru­cial point: China has ben­e­fited im­mensely from and continues to par­tic­i­pate ac­tively in — and even ar­dently de­fend — that very or­der.

China had no say in the for­mu­la­tion of today’s pre­vail­ing mul­ti­lat­eral rules and struc­tures, but it has gen­er­ally ad­hered to them. To gain entry to the World Trade Or­ga­ni­za­tion in De­cem­ber 2001, for ex­am­ple, China ac­ceded to a mul­ti­tude of rules and eased or elim­i­nated more than 7,000 tar­iffs, quo­tas, and other trade bar­ri­ers.

The sacri­fice was worth it. Mem­ber­ship in the WTO not only pro­tected China’s in­ter­ests in in­ter­na­tional trade relations; it also created com­mer­cial op­por­tu­ni­ties and new mar­kets, and helped raise stan­dards of liv­ing significan­tly for hun­dreds of mil­lions of peo­ple. With­out the rules-based global trade sys­tem, China would not have be­come the su­per­power it is today.

The gov­ern­ment is well aware of this. That is why it par­tic­i­pated in ne­go­ti­a­tions to pro­tect the WTO Ap­pel­late Body, fol­low­ing U.S. President Don­ald Trump’s ad­min­is­tra­tion’s in­sis­tence on block­ing the ap­point­ment of ap­peals judges. (Trump claims that the body’s dis­pute-set­tle­ment mech­a­nism places the United States at a dis­ad­van­tage, even though its record is bet­ter than most other coun­tries that have used the mech­a­nism.)

China’s eco­nomic rise raised the need for co­op­er­a­tion in many other ar­eas, in­clud­ing energy. The energy sector was un­pre­pared for the boom that fol­lowed WTO ac­ces­sion in the early 2000s, so there were too few power sta­tions to meet the in­crease in de­mand from new fac­to­ries. Many com­pa­nies were forced to op­er­ate their own gen­er­a­tors fu­eled by im­ported diesel, which con­trib­uted to ris­ing global oil prices.

China’s new­found in­flu­ence in global energy mar­kets at­tracted the at­ten­tion of the In­ter­na­tional Energy Agency, which emerged af­ter the 1973 oil cri­sis to pre­vent sup­ply dis­rup­tions. The IEA, created by the in­dus­tri­al­ized coun­tries un­der the aus­pices of the OECD, didn’t ac­tu­ally have in­flu­ence over China, which is not an OECD mem­ber. But, rec­og­niz­ing the im­por­tance of sta­ble global energy mar­kets, China be­gan to com­mu­ni­cate reg­u­larly with the Paris-based or­ga­ni­za­tion.

In 2015, just a cou­ple of months af­ter IEA Ex­ec­u­tive Direc­tor Fatih Birol vis­ited China on his first of­fi­cial trip, the coun­try be­came one of the first to activate “as­so­ci­a­tion” status with the agency, in or­der to fa­cil­i­tate deeper co­op­er­a­tion. The next year, the IEA ap­pointed a Chi­nese energy of­fi­cial as a spe­cial ad­viser to Birol.

As China’s energy use ex­panded, so did its car­bon foot­print — and its role in global cli­mate gov­er­nance. China had al­ready signed on to the 1992 Rio Con­ven­tions on bio­di­ver­sity, de­ser­ti­fi­ca­tion, and cli­mate change, and the 1997 Ky­oto Pro­to­col, which set bind­ing emis­sions-re­duc­tion tar­gets. But it stepped up its cli­mate leadership in 2014, col­lab­o­rat­ing with U.S. President Barack Obama’s ad­min­is­tra­tion to pro­duce a joint state­ment on cli­mate change.

That state­ment by the world’s two largest economies gave much-needed im­pe­tus to the ne­go­ti­a­tions that cul­mi­nated in the 2015 Paris cli­mate agree­ment. When Trump announced his in­ten­tion to with­draw the U.S. from the agree­ment, Chi­nese President Xi Jin­ping vowed to pro­tect it. Today, China is one of the few ma­jor economies on track to meet its emis­sions-re­duc­tion tar­gets. Yet, even as China has es­tab­lished it­self as a ris­ing global power and en­thu­si­as­tic de­fender of mul­ti­lat­er­al­ism, ex­ist­ing in­sti­tu­tions have of­ten failed to give it its due. At the In­ter­na­tional Mone­tary Fund, for ex­am­ple, re­forms aimed at en­sur­ing that quo­tas and vot­ing power bet­ter re­flected the grow­ing in­flu­ence of emerg­ing economies like China were ap­proved in 2010, but went into ef­fect only in 2016. And they still aren’t enough.

In China’s view, fail­ure to ad­just to the grow­ing clout of emerg­ing and developing economies un­der­mines in­ter­na­tional in­sti­tu­tions’ le­git­i­macy. To level the play­ing field, in 2014 it launched the AIIB, a mul­ti­lat­eral lender where China holds much more sway than it does at the IMF or the World Bank.

But even that move was not about aban­don­ing, let alone up­end­ing, the global or­der. The AIIB’s man­age­ment and gov­er­nance sys­tems closely mir­ror those of ex­ist­ing in­sti­tu­tions, as do its in­vest­ment poli­cies. That is not sur­pris­ing, given that many of its se­nior of­fi­cials have held high-level po­si­tions at other de­vel­op­ment banks, in­clud­ing the World Bank. In some ar­eas, such as coal, the AIIB’s rules are even more strin­gent.

More­over, far from an­tag­o­niz­ing ex­ist­ing mul­ti­lat­eral in­sti­tu­tions, the AIIB has co­op­er­ated with them. In 2016, the World Bank and the AIIB signed a co-fi­nanc­ing frame­work agree­ment for in­vest­ment projects; a year later, they signed a mem­o­ran­dum of un­der­stand­ing to strengthen co­op­er­a­tion and knowl­edge-shar­ing. The IMF has also ex­pressed its will­ing­ness to col­lab­o­rate with the AIIB.

This is not to say that China will never chal­lenge mul­ti­lat­eral rules or struc­tures. On the con­trary, when it comes to China’s “core in­ter­ests” — in other words, ter­ri­to­rial integrity — its lead­ers have proved un­yield­ing. Nowhere was this more ap­par­ent than in China’s re­jec­tion of a 2016 rul­ing by the Per­ma­nent Court of Ar­bi­tra­tion in The Hague, which de­nied the coun­try’s le­gal ba­sis for claim­ing his­toric rights to the South China Sea.

But such in­stances are the ex­cep­tion, not the rule. Af­ter all, even the U.S. has ignored an in­ter­na­tional court’s ver­dict. In 1986, the Hague-based In­ter­na­tional Court of Jus­tice ruled that the U.S. had bro­ken in­ter­na­tional law and vi­o­lated Nicaragua’s sovereignt­y by aid­ing the anti-gov­ern­ment Con­tra rebels. The U.S. re­jected the ver­dict, declar­ing that it would dis­re­gard any further pro­ceed­ings.

As Ambassador He Yafei, China’s for­mer deputy for­eign min­is­ter, wrote in 2017, China has “nei­ther de­sire nor in­ter­est in ‘turn­ing the ta­bles’ on the ex­ist­ing global gov­er­nance sys­tem.” Ul­ti­mately, par­tic­i­pat­ing in that sys­tem is in China’s in­ter­est — and its lead­ers know it.

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