Fayyad on Wu, “China, Inc. and the Paradox of Blurred Lines”

On Friday, March 2, 2018, Professor Mark Wu of Harvard Law School joined the Sawyer Seminar to discuss his article, The “China Inc.” Challenge to Global Trade Governance. Wu, whose research focuses on international trade law, began his talk by challenging the audience to think through some of the hypothetical scenarios he had previously shared about the adequacy of the law’s response to complex informal corporate structures. In doing so, he illustrated the challenge of applying international legal rules to the sui generis economic model that he calls “China, Inc.” His opening questions paved the way for a wide-ranging discussion about the history and development of China, Inc., and how the interaction of this idiosyncratic economic structure with cold-war era international legal rules has allowed China to “reap fast economic growth and amass growing political power.”

Wu’s thought experiment was intended to leave the audience feeling uneasy about the rules of the game. However, it could be argued that the rules of the game are clear, and that some are simply in a better position than others when it comes to playing. As Wu pointed out, the same logic applies to the context of China’s alleged “gaming” of the WTO: China’s justification for its actions is that it is simply playing the global economic game more shrewdly than its trading partners. “If we can’t come up with rules in the abstract to deal with these scenarios, Wu argued, “then it feels like we’re only going after China simply because we don’t like them.” Instead of getting China to play by the rules, “maybe the rulebook itself needs to change,” he added.

But, changing the rulebook is no easy task. As Wu explained in his remarks, perhaps the reason international law cannot resolve the tension between China, Inc. and the WTO is that current international legal rules are still heavily influenced by a cold war mentality that delineates between public and private interests. “When we think of state owned enterprises, we think of them in very formalist means,” Wu said. The China Inc. structure challenges this presumption because it is a “hybrid” that seems to work just fine. With that in mind, Wu said “it’s worth asking ourselves whether the Chinese have gotten it right.” After all, how is it that China, Inc. came about? “It’s not so much that a smart technocrat sat down and figured out how to game the system,” Wu said jokingly. He urged us to view China, Inc. as a product of a pragmatic approach taken by the Chinese after the revolution to “keep people fed and clothed.” In effect, Wu shifted the focus from China’s “gaming” of the WTO to how China’s integration into the world economy has exposed gaps in the post-cold war international law regime.

Following his opening remarks, Wu took several questions from the audience: how do we think about China exporting institutional models in ideological terms? Can the WTO and multilateral trade survive, or will China’s rise contribute to their gradual weakening and eventual demise? Wu opined that one way to view China’s rise is through the lens of international relations history: either China will get it right and reshape the world order, or its economy will collapse and give way to a new form of democracy. He also said that while the Bretton Woods system will likely survive for at least the next ten years, its efficacy is quickly diminishing. In the meantime, Wu cautioned, we should be thinking about what outcome we desire if the China, Inc. challenge persists. Proponents of trade multilateralism should ask themselves whether they are prepared to embrace a new legal world order. If not, they need to pursue serious structural reforms that equip apparatuses like the WTO to deal with China’s rise.

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