Since the beginning of this year, the U.S.-China friction has been escalating. Although there is news that at the G20 summit, the Chinese and American leaders will reach a trade agreement to ease the current trade friction, yet there are still a lot of uncertainties. While the world pays attention to the prospect of trade friction between the United States and China, China is facing another important "battlefield", that is the reform of the World Trade Organization (WTO).

Since 1994, the rules of the WTO have remained unchanged; the calls for reform have never ceased, though little progress had been made. This is especially true since the U.S. President Donald Trump severely criticized the global trading system the WTO members have been under increasing pressure to reform. Trump has repeatedly said that if the WTO does not make reforms that satisfy him, the United States will withdraw from the WTO. He also accused the WTO agreement of being "the single worst trade deal ever made". However, Chinese leaders have repeatedly stated that they want to maintain the WTO framework, as the WTO is a multilateral trade mechanism established in the past and an important pillar institution in the past globalization model. Today, this pillar faces the risk of being demolished; it might be easier to destroy an old mechanism, but it would be difficult to establish a new one, and every country will pay a huge cost for that. There is also a potential risk that the new trading mechanism will certainly have new rules of the game that might not be beneficial to past beneficiaries. Therefore, China needs to maintain the multilateral trading system and mechanism more firmly than other countries. This requires China to prepare for WTO reform ahead of schedule.

In addition to the United States, other international communities are also putting pressures on China. Reuters reported that the EU Trade Commissioner Cecilia Malmström pointed out at a conference in Paris on November 16 that China must make some concessions in the WTO reform negotiations; otherwise, the U.S. may abandon the existing WTO system. "China has won a lot from the WTO system, and we call on China to show leadership and to engage with us to reform and to update the system, to create a level playing field. Because otherwise the U.S. will create a level playing field outside the system," Malmström said. Currently, under the impetus of the United States, the EU, Japan, Canada, South Korea, and other U.S. allies are joining forces to promote the reform of the WTO rules system.

Anbound scholars pointing out that facing such complex situations, China's participation in WTO reform should pay attention to two important aspects. The first is China's initiative to propose WTO reform. If the WTO is destined to reform, then what members need to compete for the most is the ability, which means the more active party to propose the reform plan will enjoy more guarantees of benefits from the new rules. Second, China must be prepared to play games with its rivals. The United States and Europe are pushing for WTO reforms, mainly because they feel that China and other emerging countries have benefited too much and created unfairness; their reform plans and proposals will impact China to a considerable extent. Therefore, China needs to prepare some "concessions" as a bargaining chip in the WTO reform game.

Anbound's information tracking shows that Japan, the United States, and the EU will jointly submit a WTO reform plan in November. New penalties will be set for countries that continue to implement their national industrial incentives without reporting to the WTO. According to the proposal, if the country identified as unreported has not corrected within two years, the following penalties will be imposed: (1) Getting banned from chairing the WTO committee; (2) Unable to ask questions at important meetings on member trade policies; (3) Higher WTO contribution quotas. If no correction is done after one year, they will lose the right to speak at key meetings except at the very end of discussions. Business communities have pointed out that this "is effectively being suspended from the right of joining WTO's activities. The WTO stipulates that member states have an obligation to notify the WTO of subsidies that may affect trade and the introduction of restrictions. The international community has criticized China's system of excessive subsidies to the steel industry, but China has almost never submitted reports on subsidies since 2006. The current WTO rule is that even if it is not reported, no penalties will be levied. The United States accuses the WTO of having an unsound function; this is one of the reasons why Trump has not been hesitated to withdraw from the WTO. The U.S. Trade Representative (USTR) Robert Lighthizer is actively engaging with the reform plan, while Japan and the EU hope to retain the United States in the WTO, so these parties have jointly launched the reform plan.

Although developed countries such as the United States, Japan, and Europe have different opinions on the means and methods of WTO reform, they face common interests in the rise of emerging markets, and they need to get unified to seek for common reform. From the perspective of the U.S., the Trump administration is threatening to withdraw from the WTO and by adopting such extreme mean, it hopes to achieve the equal and mutually beneficial trade. From the perspective of the EU, its position is relatively mild and more inclined to free trade; the EU would hope more of maintaining the current situation and cooperation to sustain the WTO operations and conducted the reforms gradually. From the perspective of the Japanese, Japan would be more willing to support the WTO reform to cooperate with Europe and the United States and will be happy to participate in the reform of the United States and Europe to gain profits. However, from the current reform plans provided by the three parties, China is becoming the main target.

Anbound has repeatedly emphasized the importance of China's preparation for the WTO reform in advance, and this matter is gradually approaching and becoming a reality. If China does not pay enough attention, even if it has reached a bilateral trade understanding with the United States, it may be in a new passive situation when it faces the WTO reform. Therefore, on the one hand, China must prepare for the reform plan and on the other hand, it must be prepared to make some concessions in the negotiations. China should be aware that reforming the WTO is a concrete reflection of the anti-globalization wave on the WTO platform. Now, the EU calls on China to cooperate with the WTO reform, and China cannot but respond to this kind of pressure. To maintain the WTO's existing trade framework, China will have to make some concessions; hence a very important work is to study the areas that China might be required to make concessions. To a certain extent, the upcoming WTO reform is another WTO negotiation for China. The difference is that China has to make concessions to join the WTO in the past. This time, China has to make concessions and strive to retain the WTO as an important framework of economic globalization.

Final analysis conclusion:

WTO reform is becoming another important battlefield beyond bilateral trade friction. China needs to prepare reform plans, and get ready for certain "concessions", as well as striving to participate in more rules design in WTO reform negotiations to retain this multilateral trading mechanism.