China may land outside the world trade system

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

They also must prepare for a “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. 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 countries and manufacturing from rich economies, though long-term gains would have much outweighed temporary disruptions.

Short-term problems were exacerbated by China’s 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 labour, 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 misbehaviour under Xi Jinping, including vicious internal suppression, external imperialism, hyped-up nationalism, interference with countries 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 Square massacre, it would likely have been expelled—and China is up to far worse by its own admission in the international arena (unlike Tiananmen, a domestic horror).

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

Taiwan has no appetite join authoritarian China, given that it’s inconceivable China could guarantee the continuation of Taiwan’s liberal democracy. China constantly threatens invasion of Taiwan. It 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 of the popular election of the legislature and created a puppet body, kidnapped dissidents in Hong Kong (and other countries), 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 Hong Kongers will persist in pushing back.

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 unravelling 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 it. If it does step over, a weakened WTO and distracted West might limit its response to nasty words and sanctions.

Yet only violence will enable China to achieve its publically 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.