China, a Trojan Horse in the Global Trade Regime

Abstract

China’s entry into the WTO in 2001 facilitated its rise as a global economic power. It was a dominant view that binding China to WTO rules would initiate a liberalisation of the Chinese system. But the reality fell short of expectations. Rather than liberalise, China has leveraged its unique state capitalist system and weaponized trade interdependence to pursuit foreign policy aims. The thesis borrows the concept passive-aggressive legalism from Czapnik and Percurio (2023) to describe the distinct and covert manner in which China implements its trade coercion. The role of the WTO is to reduce uncertainty in global trade by governing and enforcing a rules-based system. However, the institutional framework of the WTO was never equipped to handle this type of covert and politically motivated trade coercion. The thesis therefore makes the case that China’s passive-aggressive legalism is a ‘trojan horse’ that reintroduces uncertainty into this system. Existing institutional theory does not offer an explanation for this covert introduction of uncertainty as a source of institutional change. The thesis therefore relies on Knight’s (1921) theory of uncertainty and his four mechanisms to reduce uncertainty to develop an alternative analytical framework. Based on this framework, the thesis undertakes a qualitative single case study to examine how China’s democratic trading partners have responded to the uncertainty that China's unique strategy of passive-aggressive legalism has introduced in the rules-based system of the global trade regime, governed by the WTO. The single case study reveals how China’s democratic trading partners have to a lesser extend relied on the formal framework of WTO but rather opted for alternative strategies and increased integration among like-minded allies to reduce uncertainty. By shedding light on the underlying mechanisms of this case, the thesis contributes to the institutionalist research agenda by offering the covert introduction of uncertainty as a wholly clandestine process of informal institutional change. The mechanisms uncovered in the thesis inevitably play a role in a broader geopolitical context and fits in the contemporary political debate of increasing polarization between democracies and autocracies.