due to the opposition by the united states, the general council today failed to adopt the draft decision on improving the functioning of the appellate body, which is expected to be the outcome of consultations among members led by ambassador david walker. today's failure makes it happen that the appellate body, an important component of effective wto dispute settlement mechanism, will temporarily go lights out. this is no doubt the most severe blow to the multilateral trading system since its establishment.
i foresaw this result and therefore chose to wear a black tie today. this tie was prepared by my wife for me to attend funerals. nevertheless, i do not want to show even the slightest frustration, since the setback could help us to stay cool, stay reflective, and push us move forward.
over the past 25 years since the establishment of the wto, the dispute settlement system has played an outstanding role. panels and appellate body have rendered decisions in almost 200 disputes and most have been settled smoothly and effectively. we still remembered those disputes regarding bananas, cotton, airplanes, beef, tuna, trade remedies, gambling, etc., just like it happened yesterday. been regarded as the crown jewel, the appellate body had seized the limelight for quite a while.
however, the current backlash experienced by the globalization would inevitably spread to the multilateral trading system. unilateralism and protectionism are on the sharp rise. it is therefore not surprising that someone attempts to use its might rather than wto adjudications to change trade polices of other members. what does surprise me is that one member's persistence to go on its own way could finally lead to paralyzing the whole appellate body. this reveals the fragility of the multilateral trading system.
what is the appellate body worth? for those who uphold the multilateralism, it is invaluable asset. for those who prefer the laws of jungle, it is worthless. for the world trade order, the paralysis of the appellate body may bring irreparable damages and unintended consequences. the security and predictability we have enjoyed cannot be taken for granted.
the international community cannot afford to lose justice. we have the very confidence that the appellate body will restore its functioning sooner or later. even if the jewel falls from the crown into wild grass, its brilliance cannot be missed. we note that 117 members have called on the immediate launch of selection process which is a strong testimony of the majority membership's political will to restore the appellate body. we therefore renew our supports to ambassador walker to continue the informal process. more importantly, when reflecting on the improvement of the appellate body, we have to consider how to protect it from future systemic sabotages.
in future dispute settlements, besides the panel proceedings, members are still entitled to use the arbitration under article 25 of the dsu, regardless of whether a member is happy or not. yes, arbitration is not the same as the appellate review. it nevertheless could be utilized to preserve the two-tier dispute settlement system before the restoration of the appellate body, and the essentials of the current system could be reserved in spite of formality differences.
the burning of notre-dame de paris is a tragedy, fortunately most of its cultural relics were salvaged from the fire, and the french people will restore it. to preserve the institutional memory is vitally important. regarding appellate body members, and experts within the appellate body secretariat, from its director to each and every staff attorney, their knowledge, expertise and experience are of exceptional value which constitute the common treasure of the multilateral trading system.
we should be truly grateful to their excellent work, outstanding performance and prominent contributions. at the same time, we wish them to take good care of themselves and encourage them to further contribute to enhance and improve the multilateral trading system.
thank you, madam chair.
what is "non-market policies and practices" anyway? for me, it is the ban of foreign products and companies from normal trade under the disguise of national security without any substantive proof. we've also heard "distortion of trade". what is exactly "distortion of trade"? for me, it is the blatant disregard of the wto rules and one's own commitments, and the unilateral raise of tariffs.
every wto member has its unique economic system, and no one should have a monopoly on what is a market economy and what is not. and i don't think any member would allow others to dictate how we should run our own economies or our own models, not because it is good for us, but because it is good for them.
china's market economy system is evolving and improving constantly. we welcome comments, suggestions and even criticisms from the international community on how to deepen our reforms. we will adopt those suggestions that could contribute to our economic growth, and we'll say "thank you but no thank you" to those that will undermine it. for what is within the jurisdiction of the wto, we shall adhere to those rules, as we have done in the past. for what is outside of the scope of the wto, members have full right to make their own decisions. of course, as a large trading nation, china will responsibly consider the externalities of our economic policies.
as such, we have amended the foreign investment law to explicitly prohibit forced technology transfer, although our government has never implemented such policies whatsoever. we have fully complied with the rulings and recommendations of the dsb in all disputes, despite our disagreement to some decisions. we have hosted china international import expo to spur imports for two consecutive years, regardless of the accusation that we are mercantilists.
fun facts by the way: the exhibition space taken up by american companies this year has reached 47,500 square meters, ranking first among all participating countries. we have voluntarily lifted restrictions on foreign equity cap of securities companies, securities investment fund companies, futures companies, and life insurance companies beyond our wto commitments, although some blame that our services sectors are not open. although it is not true that our industrial policies distort market competition claimed by some, we still explicitly requested that greater progress be made in creating a market-based, rule-based, and internationalized business environment when preparing the fourteenth five-year plan. although the notion that all our state-owned enterprises are "public bodies" contradicts both the facts and the rules, we are still stepping up the formulation of a three-year action plan for the market-oriented reform of state-owned enterprises.
in today's world, being loud doesn't make you right. we've heard so much about subsidies. who is the main supplier of subsidies in this world? china? wrong! it may be natural that china pops up in someone's mind because we have been bombarded with the rhetoric about china's massive subsidies. but is that the truth?
let us look at the numbers. according to the "global trade alert" database of the university of saint gallen, in may 2019, of all non-agricultural imports into the us, 45 percent have to compete with products produced by companies receiving subsidies from the us government. these subsidies include financial aid, state loans, and reduction or waiver of taxation or social insurance. even that 45% does not represent the full picture of the us subsidies, because it only takes into account domestic subsidies to the manufacturing companies, but does not include agricultural subsidies and export incentives. you might wonder what is the percentage for china? it is 23.9 percent, roughly half of that of the us. so who is the largest subsidizer in this world?
that being said, it does not necessarily prevent us from reaching possible agreements in the process of wto reform. for example, should we and can we improve rules on subsidies? of course we can. the massive agricultural subsidies provided by developed countries including the us have been distorting trade in agricultural products for decades, which should have been eliminated long ago. what else is urgently needed is putting a stop to the abuse of trade remedies, and restore article 8 of the scm agreement to allow non-actionable subsidies to the disadvantaged regions and for education, research and environmental purposes. we will, however, firmly oppose any proposal of new subsidies rules that are discriminatory in nature.
we want to be open-minded about all trade related issues. but we need to be clear that the wto's mandate is to regulate international trade, not to dictate any member's model for development. the only linkage between trade policies and economic models is that if a member's economic system is coordinated and adapted to its international trade obligations, it may better facilitate its economic development. china's accession into the wto is a good example. on its accession, china adopted extensive reforms to align its trade laws and regulations with the multilateral trade rules that embody some general requirements of the market economy, such as non-discrimination, transparency and national treatment. at the same time, china also adopted a series of market-oriented initiatives in many other areas autonomously to promote the overall economic reform. these reforms have put china onto a path of rapid and sustained economic growth, which also contributed significantly to the development of the global economy.
someone might ask: on its course of further reforms, shouldn't china continue to take reference of the international rules and norms? the answer is certainly yes. however, what we heard today is nothing like that. what it aims to advance is not international rules representing the general interest of the wto members, but rather a set of biased and discriminatory requirements based on the self-interest of a small group of members. it goes against the principles and purposes of the wto, and will lead to nothing but discrimination and disruption.
i think the difference between ambassador shea and i is not in whether we should update the rules on subsidies, but rather in the underlying assumption that is fundamentally flawed. the assumption the us is trying to establish here is that the cause of today's tension in international trade is the so-called "non-market economy" of china and the so-called "trade distortive industrial subsidies". hence there is a need to target china with a set of tailored multilateral rules to constrain these subsidies.
looking back at the past decades, it is true that developing members, including china, have increased their share in global trade. two factors played fundamental roles in this process: innovation and dissemination of technologies and development of global value chains of the multinational companies. the two factors combined have enabled developing members to participate in the economic globalization and become part of the supply chain of the multinational companies. the significance of developing their own development strategy and implementing relevant industrial policies for developing members is to seize the opportunity of integration into the global value chain and create necessary conditions for such integration.
however, we should also see that developing members are at the lower end of the value chains. what they can gain and how they can impact are limited. developing members have legitimate rights and tools to support their domestic economic growth, but compared with the developed ones, their capacity to provide support to domestic industries and effectiveness of these supports are simply dwarfed. china is no exception.
in my view, the root of the social tension in some developed members today is that the governments failed to adjust domestic policies to keep up with the pace of economic globalization. corporations are gaining tremendous profits from globalization, while the costs of globalization are borne by the working class, and governments are not providing sufficient redress to those negatively impacted by globalization.
this domestic tension makes its way into the multilateral system and is threatening to collapse it. therefore, the greatest risk we face today is not subsidies, not insufficiency of rules, but rather "trade-bashing" by some members to ease their domestic tensions. therefore, the first and foremost objective of the reform of the wto should be fighting against trade protectionism and upholding the basic principles and core values of the wto, and we should not waste our time on scapegoating, trade-bashing and fence-building.
people in this room are not the only ones in the world concerned about the reform of the wto, and we are certainly not the only ones who know about the reform. with regard to china's economic model and the wto, i've had a thorough debate with ambassador shea in july last year. i don't like repeating myself, and i don't think others like to repeat themselves. so perhaps let's hear what experts say about this subject.
professor danny rodrick from harvard university is a prominent development economist well known in the trade circle. i've had the pleasure of meeting him in 2002. last year, he published an article in the financial times, titled the wto has become dysfunctional: trade rules must acknowledge the benefits of divergent economic models such as china's. in the article, he provided an insight worth contemplating in our efforts to improve the wto system. he said, "a fair world trade regime would recognize the value of diversity in economic models. it should seek a modus vivendi among these models, rather than tighter rules." on 18 october this year, danny rodrick along with 35 prominent chinese and us economists, including five nobel prize winners, released a joint statement of the us-china trade policy working group. they argued that neither decoupling nor forced convergence are options to address the differences in the economic policies and economic models. only by respecting the differences, consultation on the equal ground and coexistence with competition can we find a way out. on our path to reform the wto, before we spar ourselves to the edge of the cliff, we should remember his advice, "if the wto has become dysfunctional, it is because our trade rules have over-reached".
thank you, madame chair.
i have no intention to take up more of our time. we do have a long list to cover in today's agenda after all.
to be frank, i know that the purpose behind this agenda item is to set the scene for a future proposal on industrial subsidies, like the thunder before a storm. although everything takes its time to ripe, i was a bit curious that after two whole years why the proposal still hasn't been unveiled yet. i haven't been slept well lately, maybe because the wait for the other shoe to drop is simply too long.
i have prepared myself for a civilized debate, and if the proponent is convincing enough, even to be persuaded. don't leave me hanging.
thank you, madame chair.
i would like to thank ambassador shea for his introduction and the united states for its efforts for revising its proposal. by doing so, the united states at least met the procedural requirements of the general council, which is not discussing the same document repeatedly.
with regard to substance, direction is more important than effort.
2018年，加拿大拍了一部很好看的电影《蜂鸟项目》（the hummingbird project）。蜂鸟挥动一次翅膀的时间大约是16毫秒，而如果降低金融交易所的网络延迟16毫秒，就可以赚大钱。于是两个操作员开始挖沟开路，修建光缆。但由于技术方向不对，当他们实现预期的降低延时目标时，市场早已采取了更先进的技术，他们的努力付诸东流。
in 2018, canada made a good movie named the hummingbird project. it takes the hummingbirds about 16 milliseconds to wave their wings once. if you reduce the network delay of the financial exchange by 16 milliseconds, you can make a lot of money. so two operators began to dig trenches and build fiber optic cables. but due to the wrong technology direction, the market already adopted more advanced technology when they achieved the expected reduction in delay. their efforts were in vein.
coming back to the revised us proposal, the world bank's "high income" standards are not necessarily linked with a country's stage of development. for example, antigua and barbuda has only 100,000 people. if there are one or two billionaires on the island, this country can be counted as a "high-income one" even if everyone else is poor. but it is by no means a developed country. some middle eastern countries mainly rely on the single product of oil. due to climate issues and the fact that almost all agricultural products need to be imported, fluctuations in international markets will have a huge impact on the single-structured and vulnerable economy. it's hard to label them all as "developed". in addition, the g20 is not a measurement of a country's level of development, but only a platform for developed and developing members to jointly cope with the global crisis.
to sum up, some artificially formulated standards cannot solve the numerous challenges and problems facing the developing members. the right direction is to respect each country's right of self-declaration based on their own development situation and encourage them to make international contributions within their capabilities.
recently, china has submitted its indicative draft schedule of specific commitments in the dr jsi negotiation, which covers all the committed sectors. we did not claim any special and differential treatment, including the transition period, although we believe that s&dt is an integral part of domestic regulation negotiations and is vital to some other developing members. in other wto negotiations in the future, china will continue to deal with sdt in a pragmatic and responsible manner, without pursuing flexibility it does not need. but china will not give up its due institutional rights in advance.
thank you, madam chair.
the tabled budget proposal is the worst one i ever worked on. it unfortunately came into being a political tool, which has reversed the relation between policy implementation and fiscal guarantee, affected the appellate body's functions and undermined the independent administrative authority of the wto secretariat.
we have every reason to say no to this budget proposal; however, we have no reason to punish those diligent staffs of the wto secretariat, making them empty-handed and down-hearted for the christmas holiday. if we could dock the pay of those who have been sabotaging the multilateral trading system, i would be all for it.
my only wish is that the ugly truth behind this budget proposal could raise sufficient alarm and strong aversion, so as to avoid falling into the same old trap again.
thank you, madam chair.
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