December 11, 2021 marks the 20^th anniversary of China’s accession to the World Trade Organization (WTO). The world has changed dramatically since then, and U.S.-China relations are increasingly marked by tension. Over the years, Cato scholars have weighed in on China’s entry into the rules based international trading system, and this post provides a summary of many of those contributions and reflects on the lessons learned from this momentous policy.

One of the challenges to having a frank discussion about China’s entry into the WTO, is that there are pervasive myths surrounding China’s WTO accession and integration into the global economy, the impact of the “China shock,” and fears surrounding China’s economic growth.

In “U.S. Trade Policy toward China: Learning the Right Lessons,” Scott Lincicome explains that the United States did not simply rubber-stamp China’s WTO accession, and instead made a hard bargain, pushing China to accept the most stringent entry rules of any WTO member, which are still considered some of the deepest commitments ever made. Nor, he says, did the United States see China’s accession to the world trade body as a precursor to China’s democratization.

In “Testing the ‘China Shock’: Was Normalizing Trade with China a Mistake?” Scott Lincicome argues that the “China shock” is overstated, and that “it is a mistake to pretend that there was a better trade policy choice in 2000 than Permanent Normal Trade Relations and engagement with China more broadly.”

In fact, in April 2000, Mark Groombridge made the case for establishing Permanent Normal Trade Relations (PNTR) with China, ahead of its WTO accession in “China’s Long March to a Market Economy: The Case for Permanent Normal Trade Relations with the People’s Republic of China,” where he argued that it was in the U.S. national interest for China to liberalize and reform its economy.

In subsequent years, Cato scholars have covered a wide range of issues in U.S.-China trade relations. A topic that has generated a large body of work is the use of trade remedies against China. Here, Cato scholars have called for both restraining their use and reforming aspects of the system that are subject to regulatory capture and not compliant with WTO rules.

For example, writing about the global steel overcapacity problem, Daniel Pearson explained how the “Trade Remedy ‘Cure’ Is Worse than the ‘Disease.’”

Taking a deep dive into U.S. antidumping policy toward China after 2016, K. William Watson lays out why China’s treatment as a non-market economy “serves as an excuse for lawless protectionism,” and argued that it should be ended in order to “bring U.S. trade policy into compliance with WTO rules while reducing the distorting effect of antidumping measures on the U.S. economy.” Today, the United States still treats China as a non-market economy in its antidumping methodology

Addressing growing tensions that could disrupt U.S.-China trade relations in 2010, Daniel J. Ikenson argued that “a more aggressive U.S. policy tack is unnecessary and unwanted. Much more can be done to cultivate our areas of agreement using carrots before seriously considering the use of sticks.”

Cato scholars have also addressed concerns around accommodating China’s state-capitalist economic model. Their solutions have favored multilateralism over unilateral trade sanctions, even when a U.S.-China trade war has felt inevitable.

James Bacchus, Simon Lester and Huan Zhu have explained “How WTO Complaints Can Help Make China More Market‐​Oriented” and urged the United States to discipline China’s unfair trade practices at the WTO instead of going it alone.

As Inu Manak and James Bacchus explain, China has a fairly good record of complying with WTO rulings, and that “the problem with disciplining China has generally not been a lack of WTO rules that can be employed to hold China to account, but rather that more cases have not been brought against China to test existing rules that could be used for this purpose.”

And when the Trump administration adopted a more aggressive stance against China, culminating in a trade war, Cato scholars pointed out the costs of these policies for Americans and suggested alternative means for resolving existing grievances.

Looking at the issue of U.S. access to the Chinese beef market, Simon Lester and Huan Zhu explain how this and other trade frictions with China could be better addressed by negotiating a comprehensive trade agreement.

And, as the trade war heated up, Scott Lincicome explained the high costs of a China policy “heavy on tariffs and unilateralism, and dismissive of trade agreements and the WTO.”

In a research brief for the Cato Institute, economist Michael E. Waugh analyzes the changes in household consumption that resulted from the trade war, and finds that Chinese retaliation led to welfare losses in the United States.

As the Biden administration got ready to take office, Simon Lester urged the incoming administration to manage the bilateral relationship with China through more engagement at the WTO, including through addressing the systemic issues that China has raised and reviving the Appellate Body to bring more complaints against China’s unfair trade practices under existing rules.

In “Democrats and Trade 2021: A Pro‐​Trade Policy for the Democratic Party” James Bacchus called on Democrats to “seek mutually beneficial trade relations with China under the rule of law,” and to uphold multilateralism over Trump’s unilateral approach.

The Biden administration’s China policy is still unfolding, but some signs are encouraging, such as the United States reconvening talks with the EU and Japan, possibly with the intent of later engaging at the WTO, as Inu Manak writes in “On China’s Trade Practices, the United States Is Ramping Up Efforts with Allies.”

Others actions however, are problematic, including Biden’s refusal to remove Trump’s tariffs and doubling down on the “Phase One” deal, where Scott Lincicome laments that “The Tariff Beatings Will Continue Until Morale Improves.”

In addition, economic and security concerns about China have also led to a convergence in views between Democrats and Republicans on industrial policy, where Scott Lincicome warns that “A Bad Idea Is Back.”

As we wait to see what the future holds for U.S.-China trade relations and the multilateral trading system more broadly, what lessons can we learn from China’s WTO accession and what should U.S. policy towards China look like moving forward?

First, as Scott Lincicome explains, engagement with China produced real economic benefits for most Americans while bolstering the multilateral trading system and removing historical inequities from protectionism.

We must also not lose sight of the fact that trade and global economic integration have been key to lifting millions of Chinese citizens from absolute poverty since 1990, as our colleagues at Human Progress have detailed.

Second, a policy towards China that relies heavily on unilateral sanctions while dismissing international engagement imposes high costs on Americans, undermines our alliances and the WTO, and generates political dysfunction.

Moreover, the mandated purchase commitments included in the “Phase One” deal are not a solution for expanding trade opportunities for U.S. businesses. Gabriella Beaumont-Smith argues that only liberalization can do that.

Third, in “Questioning Industrial Policy” Scott Lincicome and Huan Zhu warn that China’s technological advances might make industrial policy seem like an appealing way forward, but copying China’s top-down economic planning is not the solution.

In “The China Threat Meets the China Reality” Scott Lincicome suggests policymakers in Washington must learn to appreciate the real “threat” that China poses, and explains why reality does not warrant a rejection of our own successful economic model.

In fact, many of China’s industrial policies are not as efficient as they seem to be, as empirical evidence from China’s shipbuilding industry shows.

Fourth, WTO rules need updating to address some of China’s problematic practices. But China also has legitimate grievances against the United States, and reform will only be possible if both countries’ concerns are on the table, as James Bacchus explains in “Rescuing the World Trade Organization.”

Furthermore, as James Bacchus lays out in “Appeals to the Abyss Are Letting China Off the Hook on Trade Violations,” the absence of a functioning WTO dispute settlement system is allowing China to leverage its economic power over other countries.

Finally, other Cato scholars have noted that China’s trade and economic policies are and will remain intertwined with concerns about geopolitics, human rights, and illiberalism. It is not clear for how long China’s Communist Party can remain in power, but, as David Boaz writes, “it is trying to defy the lesson of the past two centuries, that liberal countries are more prosperous and more secure.”

Twenty years after China’s WTO accession, doubts have been expressed by some, including the Trump administration, that the decision to integrate China into the global economy was a mistake, and that the only way to address the negative outcomes from that policy choice would be through a combination of unilateral trade sanctions and industrial policy.

Yet, as the writings of Cato scholars have shown, engagement with China brought substantial benefits to the United States, and there remain opportunities to discipline some of China’s trade practices at the WTO. While future co-existence with China in the trading system may not always be easy, the United States can harness the lessons from the last twenty years and build upon the real benefits of engaging with China, while also addressing real trade concerns. But to do so, the United States must step back and see the value of China’s inclusion in the rules based trading system, and work with our trading partners to find solutions to our shared challenges.