If you follow the link below, you will see that last Friday’s joint statement from Cotton Australia and the Australian Cotton Shippers Association is restrained, cautious, indeed, one might say tentative. That is hardly surprising. Some 64 percent of Australia’s cotton crop regularly goes to China, and that trade is worth about $611 million a year, according to the Daily Mail Australia. Now it is being threatened. Clearly, there is something wrong here. The South China Morning Post, in its report on these developments, suggested China’s actions against coal and cotton may violate both the China-Australia Free Trade Agreement and the rules of the WTO. Regarding the latter, the reporter wrote:
“The moves against coal and cotton, which both emerged in quick succession last week, could also breach China’s WTO commitment which stipulates that it can only implement trade measures on another country after they have been made public and also made available to its trading partners,” albeit with some allowance for emergencies.
Such actions certainly violate the spirit of Article I of the GATT, which commits the members to a policy of non-discrimination. It does so, however, by talking about duties, charges, rules and formalities. It is not clear, for example, how the system would deal with, say, a telephone call.
In any event, our understanding is that no case has been brought and quite possibly never will be. Leaving aside the current problems with the WTO dispute settlement system, collective action against China is hard, given the larger number of countries that depend on China as a market for their exports.
We’ll end this with an old memory and one or two thoughts, and for those, we’ll abandon the editorial we. My first trip to the WTO, then the GATT, was sometime in 1981, when I was working for the National Association of Manufacturers. My most memorable meeting during that Geneva visit was with the GATT Deputy Director-General who said “the purpose of the GATT is to get governments out of trade.” That, clearly, was before the time when everything seemed to be about global governance.
And more clearly still, it was before there was anything like today’s China, a country’s whose key trading characteristics upend earlier ways of thinking about trade. It is the world’s largest trading nation. Critically, it is the world’s largest importer, and large swathes of decisions about what to import and from whom are made by Chinese government officials and/or executives of state-owned enterprises. We would add to these facts our impression that China sees its buying (and sometimes selling) power as just that, power. And power unused is power wasted; so it is used for whatever advances the interests of the state.
If that last assessment is too harsh, well, then soften it with a question mark. But let us not ignore it, especially when it comes to China’s acquisition and or use of commodities, whether those acquisitions be a boon to sellers, as is the case for Australian cotton, Chilean copper, and American soybeans, or a concern to other consumers. Think fish and rare earths.