GLAS and U.S. China Institute Workshop

Workshop Abstracts

Ljiljana Biukovic

This article examines the principle of good governance and the rules of transparency by analyzing new institutions for economic development cooperation initiated by developing countries. Since 2014, new financial institutions have emerged: The New Development Bank (the NDB) was established under an agreement concluded in July 2014 by Brazil, Russia, India, China, and South Africa, also known as the BRICS bloc and was placed in Shanghai.  In October, the representatives of twenty one developed and developing countries signed onto a Chinese initiative to establish the Asian Infrastructure Investment Bank (the AIIB) with its headquarters in Beijing.  China has so far already committed $50 billion dollars to the AIIB. In November 2014, China invested $40 billion dollars to establish another infrastructure fund, the Silk Road Fund, earmarked primarily for cooperation projects in Central and South Asia related to China’s One Belt One Road Initiative.  These three initiatives have already been seen as “Beijing’s challenge to the global financial architecture”. 

To date, scholars and politicians have spent considerable time discussing impact of China’s trade, investment and financial relations with developing countries on the future of global economic governance. The article aims to contribute to the ongoing debate by analyzing China as new agent of global governance reform. Following a brief overview of the academic debates about models of economic integration and transnational governance reform initiatives, this article proceeds to elaborate on emerging Chinese leadership in formulating key development policy issues and shaping international institutions of financial governance. In particular, it examines the impact of China on NDB governance and transparency rules. Transparency has been incorporated as a component of good governance by almost all major international financial institutions, including development banks. The scholarship on global governance focuses on transparency as one possible measure of the quality of governance and as a means to enhance the legitimacy and accountability of both banks themselves and their internal and external administrative policies. 

This article argues that China’s perception of good governance and transparency deviates from international standards. Indeed, the international standard performance is mediated by local political imperatives. For example, the principle of non-interference in internal affairs of other countries has a significant impact on China’s philosophy of development financing and it informs China’s view on good governance policy as well as China’s choice of measures that safeguard the efficiency of financed projects. In closing, the article concludes that China’s current domestic political and economic resources can hasten that country’s impact on not only the NDB’s governance rules and practice but also on the domestic policies of the recipients of NDB funds.

Jacques deLisle

Official and orthodox Chinese sources frequently—and plausibly—assert that no one has benefited more than Reform-Era China from the established institutions and rules of the international economic order.  For decades after China launched its policy of “reform and opening to the outside world,” the principal theme of China’s engagement with those legal and law-related institutions was one of accession and assimilation to the established order, with criticisms of China’s behavior focusing mostly on problems of implementation or “cheating.”  While that pro-status-quo narrative persists, recent developments—most notably China’s role in creating the Asian Infrastructure Investment Bank, the New Development Bank, and the Regional Comprehensive Economic Partnership, China’s regional trade agreement policies more generally, some facets of China’s “One Belt, One Road” policy, and China’s drive for renminbi internationalization—have raised concerns that China is becoming a revisionist power in the international economic legal order.  China’s moves—coupled with intractable features of international law and institutions and problematic policy choices by the United States and others—have combined to give China an “option” of being or becoming revisionist.  China is, thus, able to credibly claim to be supportive of the existing order while also enhancing its ability—its option—to reshape key institutions and rules to suit its interests and preferences.

Wei Liang

The world today faces two deficits in global economic governance of insufficient institutions and inconsistent leadership. The WTO is at a turning point. This paper examines China’s participation in the World Trade Organization in the past 16 years and the role it has played to shape and transform the global trade governance. China’s accession commitment compliance, its participation in the current Doha Round negotiation and its institutional behavior in Geneva have received increasing scholarly attention. What can best describe China’s interaction with the WTO, as a rule follower, a rule maker, a free rider or a mixed role of all three? To what extent China’s Market Economy Status debate and the changing US trade policy towards China will bring new challenge to this weakened institution? The evidence presented in this paper, mainly through interviews with Chinese trade officials in Beijing and American trade officials in DC, suggests that China is far from a revisionist. Rather, for the most part China has become a system maintainer. In the meantime, contrary to its early stage of participation, China has demonstrated its emerging ambition to reform rules on issues where it does not find the existing rules or established procedures as agreeable to its interests or those of a broader developing country and/or new WTO members grouping. China is also more eager to show leadership constructively in ways that serve the world’s general needs.

Margaret M. Pearson, Scott L. Kastner & Chad Rector

China has played an inconsistent role in multilateral governance, sometimes contributing to the creation and maintenance of international regimes, but sometimes free riding or even threatening to undermine multilateral regimes to improve its position. We show that the strategic context of a particular issue of international concern affects China's approach to multilateralism, and argue that our approach adds additional leverage to existing theories that rely on assumptions about its inherent disposition or socialization processes. An emerging global power will be willing to invest more in supporting a regime when its outside options are relatively poor (“invest”). When its outside options are good, it will take an acceptant position on the efforts of more established states if it is not a necessary player in maintaining regimes (“accept”), and if it is seen as indispensable it will threaten to hold-up regime support as a way to win concessions (“hold-up)”. We suggest that outside options and indispensability can help explain changes in China’s strategy with respect to the issue of regulation of international finance, specifically vote shares and inclusion of the renminbi in SDRs. This case illustrates movement from an “accept” position to one of “hold up.”

Gregory Shaffer and Henry Gao

This article analyzes what lies behind China’s successful use of international trade law and the broader implications for the international trade legal order. The World Trade Organization (WTO) is unique in China’s international relations as it is the only forum where China has resolved its disputes through law and the use of third party dispute settlement. After China acceded to the WTO in 2001, it invested significant resources in building trade law capacity in order to comply with WTO rules and defend itself externally. Through these investments in trade law capacity and its increase in market power, China became an equal of the U.S. in the WTO. In short, China took on the U.S. through investing in law. The article explains the relationship between international and national law and practice in China in terms of processes of transnational legal ordering. It first evaluates the impact of the WTO and China’s WTO legal capacity building efforts in government, academia, law firms, and the business sector in China. It then assesses the U.S. response and lays out the broader implications for the international trade legal order. The article builds from original research involving over a decade of fieldwork and interviews with over sixty Chinese officials, Chinese academics, Chinese lawyers, U.S. and European lawyers who have worked for and against China, members of Chinese think tanks, and Chinese company and industry association representatives. We combined our interviews and participant observation with a review of primary and secondary sources in Chinese and English.

Mark Wu

For the past decade, U.S. trade policy has emphasized mega-regional trade agreements, such as the Trans-Pacific Partnership (TPP), as the cornerstone of its strategy to update global trade rules. But in the wake of the 2016 elections, the strategy now stands in ruin. Just how costly was its demise, and what ought to be the proper U.S. policy response in its wake?

This Article argues that the strategy was premised on a faulty assumption that by excluding China from the TPP, the U.S. and its allies could exert sufficient pressure to compel China eventually to adopt new trade rules addressing Western concerns. Instead, the Article contends that the era when the U.S. could successfully employ this tactic to update trade governance has ended. It explains why policymakers missed this important point. To date, scholars have failed to update trade-related analytical tools sufficiently to take account of key changes in treaty substance and trade dynamics. Consequently, TPP proponents incorrectly stressed a misplaced geostrategic rationale while failing to address domestic concerns.

The proper response to the anti-globalization, populist impulses in the West is not to resurrect the TPP and other mega-RTAs in an altered form. Nor is it to retreat inward. Instead, the Article argues that U.S. trade policy requires a major reset. For the coming era, the U.S. would be better served by focusing on negotiating issue-specific plurilateral trade agreements alongside smaller-scale bilateral deals. However, to implement this strategy effectively, the U.S. will also need to undertake a number of reforms at home in order to regain public support for trade agreements.