Will China Be Expelled From the WTO?

August 27, 2019 Updated: August 27, 2019


Companies globally are developing contingency plans in case China’s appalling behavior—international aggression, violation of treaties, holding foreigners hostage (including two Canadians), and violent internal suppression—affects operations there and the firms need to withdraw or reduce their presence.

They also need to prepare for the “worst-case scenario”—China expelled from the global trade system. International trade was doing nicely before China joined the World Trade Organization (WTO) in 2001. Global support for free trade was at historic highs, and trade and prosperity were growing at unprecedented rates.

Global trade can do just fine without China.

A number of things slammed into the rolling good news of the late 20th century. One of them was the great mass of China crashing into the world trading system.

China would have been hard to swallow even had it acted in good faith. China’s huge, well-disciplined, well-educated workforce was bound to cause painful global adjustments, pulling low-skill jobs from poor nations and manufacturing from rich economies, although long-term gains would have much outweighed temporary disruptions.

However, the disruptions were exacerbated by China’s stunning bad faith: theft of intellectual property, subsidized industries, predatory loans to impoverished nations to build projects to benefit China’s imperialistic dreams, use of slave labor, currency manipulation, barriers to foreign ownership, and use of the “rule of law”—or rather “rule by law”—as a weapon to punish or evict foreign companies, among other abuses.

Now, add to the economic mix the escalating political misbehavior under dictator-for-life Xi Jinping, including vicious internal suppression, external imperialism, hyped-up nationalism, interference with nations around the globe (most notably Canada, Australia, and New Zealand, though with ramped-up interference elsewhere, including the United States), and use of the Chinese diaspora and students as a weapon against dissent abroad.

It’s China’s political misdeeds that could lead to a boot from the WTO. Had China been part of the global trading system at the time of the 1989 Tiananmen massacre, it would likely have been expelled—and China is up to far worse by its own admission; and in the international arena, unlike Tiananmen, which was a domestic horror.

China has publicly committed to subjugating Hong Kong, Taiwan, and the South China Sea. The Taiwanese, Hongkongers, and nations with real legal claims to the sea reject the advances of this unwanted suitor.

Taiwan has no appetite to join authoritarian China, given that it’s inconceivable that China could guarantee the continuation of Taiwan’s liberal democracy. China constantly threatens invasion of Taiwan, which would be bloody. Taiwan is an ocean-bound fortress with a powerful military and committed population.

Hong Kong is much in the news today. China has consistently violated the “one country, two systems” treaty it made for the 1997 handover of Hong Kong. It dashed its pledge to popular elections and created a puppet legislature and executive, kidnapped dissidents in Hong Kong (and other nations), interfered in academic freedom, and moved to extend mainland legal power to Hong Kong, including the extradition treaty that sparked the most recent protests.

Even if the current crisis is resolved, China will continue to attack the “two systems” agreement and Hongkongers will persist in pushing back. If China waits until 2047, when the “one country, two systems” treaty expires to impose its will, it will face an energized and angry population, so it is hard to see China waiting.

China’s leadership faces an internal devil of its own creation, a vicious nationalism that it no longer controls. Rather than braking imperialism, popular sentiment would be an accelerant—one the leadership could find particularly appealing to rally popular support if the economy weakens, which is already happening.

China has exhausted all the goodwill that greeted its entry to the world economy. Global reaction to an invasion of Hong Kong or Taiwan would be intense, as would escalating military enforcement of its claims to the South China Sea, perhaps strong enough to lead to an expulsion from the WTO.

Such a series of unraveling catastrophes remains a worst-case scenario. China’s leadership is arrogant and aggressive but not dumb, and so will try to go right up to the line but not over. If it does step over, a weakened WTO and distracted West might limit its response to nasty words and some sanctions.

Yet, only violence will enable China to achieve its publicly stated goals of subjugating Hong Kong and Taiwan, and taking the South China Sea, among other imperial ambitions. This creates massive uncertainty, including the possibility of a world trade system without China.

Fred McMahon manages the Fraser Institute’s Economic Freedom of the World Project and is resident fellow, Dr. Michael A. Walker Chair in Economic Freedom.

Views expressed in this article are the opinions of the author and do not necessarily reflect the views of The Epoch Times.

Fred McMahon
Fred McMahon
Fred McMahon is the Dr. Michael A. Walker Chair of Economic Freedom Research at the Fraser Institute.