Trade disputes and quality upgrading in China. Who loses and who gains?

The trade war triggered by the Trump administration is posing serious risks to the stability of the

international trade balance, challenging the capacity of the World Trade Organization (WTO) to

provide a clear regulatory ground for the smooth functioning of global trade (Stiglitz, 2018).



Among the determinants which revealed the vulnerability of the trade order, China's accession to WTO

in 2001 is unambiguously claimed as one of the major disruptive forces. Indeed, the integration within

the global trade system and the increasing exposure of western countries to trade with China came

with a series of collateral effects. The Chinese'Syndrome, as coined by Autor et al. (2011), describes

the US domestic labor market effects as triggered by the rise in import competition. Other main

concerns relate to the slow pace at which China is delivering significant changes in its labor market

policies and the persistence of its non`trade barriers.

The poor performance of multilateral negotiations, while fostering a revival of trade agreements,

determined a rise in the use of the Dispute Settlement Body (DSB)1, characterized by an escalation of

investigations against China. Currently, China is involved in 43 cases as respondent party, a third of the

total (with most disputes lodged by the EU and US). The intense and disproportionate action against

China suggests a strategic behavior of the complainant countries, with the DSB playing an instrumental

and prominent role in limiting discretionary trade policies. The current USA's attempt to block the

appointment of judges to the DSB may be intended as a way to further undermine, by slowing the DSB

activity, the whole Organization.