Faisal Islam Economics Editor @faisalislamon Twitter

At the end of 2001, two events shook the axis of the world.

The whole world is paying attention to the direct consequences of 9/11. But just three months later, on December 11, the World Trade Organization (WTO) became the center of an event that cast an equally strong shadow on the 21st century and changed the lives and livelihoods of people all over the world. , Instead of attacking the United States.

However, few people know that it even happened, let alone its date. China's accession to the World Trade Organization has changed the rules of the game in the United States, Europe, and most parts of Asia. In fact, it has also changed the rules of the game in any country that possesses industrially valuable resources such as oil and metals.

This is an event of epic geopolitical and economic importance that has been largely ignored. This is the root imbalance behind the global financial crisis. The domestic political backlash against outsourcing manufacturing jobs to China has caused repercussions in Western G7 countries.

The promise made by former US President Bill Clinton and others is that "introducing one of the most precious values ​​of democracy, economic freedom" will enable the world's most populous country to embark on the path of political freedom.

"When individuals are not only capable of dreaming, but also capable of achieving dreams, they will demand a greater voice," he said.

But this strategy failed. China has begun to rise to its current status as the world's second largest economy-and it seems to be the only way to become the world's largest economy.

In fact, Charlene Barshefsky, the U.S. trade representative responsible for negotiating China’s WTO agreement, said in a panel at the Washington International Trade Association this week that China’s economic model “to a certain extent refutes” Western The view that "you cannot have an innovative social and political control"

"This is not to say that China's ability to innovate is enhanced by its economic model," she added. "But that means that a system that the West considers incompatible is not necessarily an incompatible system."

Until 2000, China's role in the global economy was mainly as one of the world's largest manufacturers of plastic bags and cheap textiles. Very important, yes, but it can neither defeat the world nor change the world.

China's entry to the top of the world trade list heralds a large-scale global transformation. The powerful combination of China's voluntary labor force, super high-tech factories, and the special relationship between the Chinese government and Western multinational corporations has changed the face of the planet.

As China seamlessly integrates into the supply chains of the world's major companies, the cheap Chinese labor force begins to produce goods that support the standard of living in the West. Economists call this a "supply shock," and its impact is certainly shocking. Its influence is still reverberating around the world.

China's integration into the world economy has made remarkable economic achievements, including the elimination of extreme poverty. Before joining the WTO, the number of poor people was 500 million. Now it is basically zero, and its economic value in U.S. dollars has increased by 12 times. Foreign exchange reserves have increased 16 times to reach 2.3 trillion US dollars, because the world's goods purchased from Chinese factories are deposited in banks by the Chinese government.

In 2000, China was the world's seventh largest exporter of commodities, but it quickly jumped to number one. China’s annual growth rate has reached 8%, peaking at the peak of the world’s economic prosperity, reaching 14%, and stabilizing at 15% last year.

Container ships are the masters of global trade. Five years after China joined the WTO, the number of shipping containers entering and leaving China has doubled from 40 million to more than 80 million. By 2011, ten years after China joined the WTO, the number of containers entering and leaving China more than tripled to 129 million.

Last year it was 245 million. Although about half of the containers entering China were empty, almost all the containers leaving China were full for export.

China's road network has also been expanded on a large scale, from 4,700 kilometers in 1997 to 161,000 kilometers in 2020, becoming the world's largest road network, connecting 99% of cities with a population of more than 200,000.

In addition to the most advanced freight infrastructure, China also needs materials such as metals, minerals and fossil fuels to support its manufacturing boom. For China's booming automobile and electrical appliances industries, an indispensable material is steel. In 2005, China became a net exporter of steel for the first time and became the world's largest exporter.

By the 1990s, China's steel production was hovering at around 100 million tons per year. After joining the WTO, it surged to approximately 700 million tons in 2012 and exceeded 1 billion tons in 2020.

China now accounts for 57% of world output, and China’s own steel production is much more than the total output of the rest of the world in 2001. The same is true for tiles and many other industrial ingredients.

In electronics, clothing, toys, and furniture, China has become the main source of supply, forcing export prices around the world to fall. Economists have noticed that after China's accession to the WTO, global prices have experienced a "one-time-for-all" shock. From 2000 to 2005, China’s clothing exports doubled, and its share of global trade rose from one-fifth to one-third.

After 2005, production quotas in the textile industry were also cancelled, resulting in a larger production shift to China. However, as China's production costs are getting higher and higher, and production is shifted to developing countries such as Bangladesh and Vietnam, this proportion has fallen to 32% of last year's clothing.

Long Yongtu, the Chinese Minister in charge of joining the WTO, acknowledged the past two decades. "I don't think China's accession to the WTO is a historic work-killing error [for the United States and the West]," he said. "But I admit that the distribution or income is not balanced. The overall situation is that when China gains its own development, it also provides a huge export market for the rest of the world."

But there is a problem that American politics does not take into account the inevitable impact of Chinese competition on certain industries. "When wealth is unevenly distributed, the government should take measures to adjust the distribution through domestic policies, but it is not easy," Long Yongtu said.

"Maybe it's easier to blame others, but I don't think it will help solve the problem. Without China, American manufacturing will move to Mexico."

Later, he recounted the difficulties a Chinese glass manufacturer encountered when opening a factory in the United States: “It is difficult for him to find competitive workers there. He told me that American workers have bigger belly than his,” the minister said. .

So now we are back to square one. China has achieved great economic success in the WTO. At present, the Biden administration does not seem to be eager to change the obstruction policy of its predecessor there. The trade suspicion is very real. China's use of WTO membership goes far beyond its designated role as a Western factory.

For example, it has strategically planned alliances to obtain large amounts of rare earth materials that should power the net-zero climate change economic revolution. It deployed countries behind the global industrial expansion. The United States is seeking to contain China diplomatically and economically, and is seeking allies in this effort in Europe and Asia.

As the former U.S. Trade Representative Barshevsky said, China “has been on this very different path for some time. What does this mean? Strengthen a state-centered economy through large-scale subsidies to designated industries. Model... China’s re-emergence as a major country and the leader of its so-called fourth industrial revolution. There are many things to deal with. The WTO cannot deal with it.”

So 20 years later-the world is changed by a little-known decision. This is a huge success for China. The geopolitical strategy expected by the West has failed. In fact, as a result of this decision, China has not become more like the West politically, but has become more like China economically.

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