US-China conflict in global trade governance: the new politics of agricultural subsidies at the WTO

Abstract

This article shows how China's rise has radically altered the politics of one of the most prominent and controversial issues in the global trading system: agriculture subsidies. Agriculture subsidies depress global prices and undermine the competitiveness and livelihoods of poor farmers, and therefore have been long seen as a symbol of the injustice of the trading system. The issue has traditionally been understood in North-South terms, with developed countries seen as the perpetrators of harm and developing countries as innocent victims. In this article, however, I challenge this prevailing conception of the agricultural subsidies issue, arguing that it is now out of date and no longer corresponds with the emerging reality. A momentous but underappreciated change has taken place, largely beneath the radar of IPE scholarship: China has emerged as the world's largest subsidizer, profoundly transforming the global politics of agricultural subsidies. From a North-South battle, WTO negotiations on agricultural subsidies are now primarily centered on a conflict between the US and China. While reducing subsidies remains a pressing concern for developing countries, efforts to negotiate new and strengthened disciplines at the WTO have been thwarted by an impasse between the two dominant powers. KEYWORDS China; US; agricultural subsidies; World Trade Organization (WTO); trade; global economic governance; trade negotiations The US has long been the dominant state in the global economy and its governance. Yet, after four decades of rapid and sustained economic growth, China has now emerged as the world's leading trading state and second largest economy. Understanding the implications of a rising China has become a central preoccupation of scholars and policymakers alike. Fueled by its growing economic might, China is demanding a greater role in global economic governance. The US and China are competing not only for economic primacy but also for power in the institutions that set the rules of the global economy (Quark, 2013). A key question is how China's rise will affect the existing system of global economic governance constructed under American hegemony (Gray & Murphy, 2015; Lesage & Van de Graaf, 2015). This article contributes to our understanding of the implications of China's rise by analyzing its impact on one of the most high-profile and contentious issues in the multilateral trading system: agricultural subsidies.

Varieties of contestation: China’s rise and the liberal trade order

“…Nevertheless, China's behavior will certainly shift the lowest common denominator regarding the kind of liberal compromise that the WTO stands for. This influence of course does not preclude the fact that the future trajectory of the WTO will also depend on the direction in which other major trading nations move as well as the emergence of new conflict lines that cut across the North-South divide (Hopewell, 2019).…”

“…Traditionally, developing countries have put pressure on Western nations to further liberalize their agricultural sector, and to revise existing rules on agricultural subsidies accordingly (Narlikar, 2010). Since the beginning of the round, however, North-South conflict lines have become blurrier as emerging countries, most notably China, introduced their own subsidy schemes (Hopewell, 2019). Chinese subsidies, including seed subsidies, direct payments and agricultural input subsidies, increased from RMB 14.5 billion in 2004 to RMB 167.5 billion in 2014 (Li, 2017).…”

“…The existing literature mentions the competing interests of China and established powers in agriculture (Hopewell, 2017;Singh & Gupta, 2016) and how they affect negotiation dynamics (Hopewell, 2019), but it does not assess their implications for the WTO's liberal trade order. As we show in the following, the conflict exemplifies processes of claim contestation through which China, as a latecomer among today's major trading powers, wants to bend the application of existing WTO rules in its favor without substantially questioning the weak 'liberal' compromise upon which rules on subsidies rely.…”

Influence of the US and China on the Trade between Developing Country Dyads: Panel Quantile Gravity Model

“…They found that US-China tariff escalation could reduce global exports by up to 3% and global income by up to 1.7%. Hopewell (2019) studied the new politics of agricultural subsidies at the WTO, explaining how they evolve around the conflict between the US and China. The study claims that the trade conflict between these two dominant powers has thwarted the efforts of establishing a better set of disciplines on agricultural subsidies, thus had negative effects on the developing economies.…”

Why is China a Reluctant Leader of the World Trade Organization?

“…The other issue is that this is influenced Ð for better or worse Ð by ChinaÕs own ongoing development. On the one hand, the competitive dislocations wrought by the countryÕs sheer scale creates acute challenges for other developing countries in just about every economic sector, and especially agriculture (Hopewell 2019). Yet on the other hand, now that it is so wealthy, Chinese policymakers stress their responsibility to pull other developing countries up too, particularly given that many of them recognised the sovereignty of the PRC when it was difficult to do so.…”