Transcript: Pascal Lamy, Jin Xu and Dai Changzheng on the China-U.S. Trade War and the Future Global Trade Order
November 11 , 2025CCG VIP Luncheon explores pathways for global trade reconstruction amid rising geopolitical and economic tension.
- Pascal Lamy, Vice-President of the Paris Peace Forum, President of the European branch of the Brunswick Group, Coordinator of the Jacques Delors think tank network, and former Director-General of the World Trade Organisation (WTO)
- Jin Xu, President of the China Association of International Trade (CAIT)
- Dai Changzheng, Dean, School of International Relations, University of International Business and Economics (UIBE)
Director-General level officials from China’s Commerce Ministry also attended and spoke.
Among the attendees were ambassadors from Austria, Fiji, Iceland, and Latvia, as well as diplomats from countries including Croatia, Egypt, Germany, India, Indonesia, Japan, Pakistan, Turkey, and the UAE, along with leaders from international organisations and multinational corporations.
The following transcript is based on the video and has not been reviewed by any of the speakers.
Henry Huiyao Wang, Founder and President of the Center for China & Globalization (CCG)
Pascal Lamy, President Jin and Dean Dai, and of course our DDG Chen from WTO Department of MOFCOM, and all the distinguished senior guests and diplomats and business representatives and media. So, ladies and gentlemen, so good afternoon again. Welcome all of you to the 19th CCG Monthly VIP luncheon that we’ve been doing this last year and this year.
We have held it for almost 20 times. And last month we just held the 18th CCG VIP luncheon, and we had 17 ambassadors and another 20 country representatives. It was a big event also. So we’re honoured to welcome all of you again.
And of course, today we are having a very interesting and timely subject—the US-China trade war and the reconstruction of the global trade order. And we have invited very authoritative experts and global leaders on this subject. And of course, our department officials who look after this matter as well. We also have former WTO DG, Director Chai, and many others.
So it’s really a very interesting time. I think China and the US have reached this historical agreement—I mean, a truce in Busan just two weeks ago, and I think this is very significant. President Trump gave this one out of ten—he gave twelve to this summit. And China said it was a very good meeting. So I think there’s a new level and of understanding.And also there will be some new cooperation and compromise on both sides, looking for a very good way forward.
I was quite impressed that the U.S. Embassy, not too long ago, held a reception to welcome their new Deputy Head of Mission, and he was saying that now the US is looking for strategic stability with China. A few years ago, it was strategic rivalry; now it’s looking for strategic stability. And I also checked—actually Secretary Rubio said that in July during his interview with Fox News, that China and the US, you know, we really can’t change each other; we have to coexist. Let’s seek strategic stability.
And recently, the American think tank RAND Corporation published a new report with a much more positive tone than before, including that they have to live with China in the long term. So we have to really work together. Taiwan, you know, should maybe gradually promote peaceful unification and things like that. And the title of that report is “Stabilise China-U.S. Rivalry”. So stabilising is the password now.
So what I think is how we can stabilise the global trade issue and how we can really solve this potential disruption not only for the US and China, but for the world. And we have really great experts today. We just came back from the Shanghai Import Expo, and we did a forum on international trade and green transition there—the CCG organised it with members of commerce. CCG was the organiser for that conference. And we also had Pascal Lamy speak there, which is great—to welcome him to speak here again. And we also had the former China Chief Negotiator for joining the WTO, Minister Long Yongtu, speak there as well.
So it’s really a great time to talk, and so I really want to emphasise that we are entering a new era. We’re getting into a very interesting time, but also probably a dangerous time. It could be the best of times; it could be the worst of times. It depends on how we interpret that and explain that. So that’s why we’re having these great experts today.
But first, I would like to introduce our first keynote speaker—that is, Pascal Lamy. You know Pascal Lamy. I think we don’t need too much introduction. He’s really well known.
He is currently the coordinator of the Jacques Delors Institute, which has offices in Paris, Berlin, and Brussels. And he is the Founding Chairman of the Paris Peace Forum and chairman of the European branch of the Brunswick Group. From 2005 to 2013, Pascal served two consecutive terms as the Director-General of the World Trade Organisation (WTO), and prior to that, he was European Commissioner for Trade (1999-2004). He was also Director-General of Crédit Lyonnais, Chief of Staff to the President of the European Commission, Jacques Delors. And also, he was the Sherpa of the G7, which almost took him ten years to organise all those G7 meetings. He was also Deputy Chief of Staff of the Prime Minister of France and Minister for the Economy of France. So he has a very impressive track record.
And he’s also an adjunct professor at the China Europe International Business School, as far as I know. So he travels to China, and every time he comes, we make sure he’ll come to at least one CCG event. This time, he came to two CCG events—one in Shanghai and one in Beijing. So without further ado, let’s welcome Pascal to give us his sharing and his keynote. Let’s welcome him.
Pascal Lamy, Vice-President of the Paris Peace Forum, President of the European branch of the Brunswick Group, Coordinator of the Jacques Delors think tank network, and former Director-General of the World Trade Organisation (WTO)
Well, good morning, ladies and gentlemen. Of course, very happy to be back at the Center for China and Globalization, and I’m a relatively frequent host of Henry, and that’s great.
So, we know the topic of today. We’ve been settled with a large topic—the U.S.-China trade war and reconstruction of the global trade order. And I will focus my remarks on three points. The first one is to take the liberty of some distance from the way Henry has sketched the big picture. Second, of course, having a look at the dynamics of the multilateral trading system and global trade, looking at what I call a new normal. And then, finally, indulging in a few suggestions on the way to go.
Starting with the first point, I will take some distance from the big picture as characterized by the Center for China and Globalization in its written introduction to today’s discussion. I totally agree that if you want people to participate in the discussion, you have to be a bit provocative—you have to create a sort of shock, which is what the Center did in writing that the U.S.-China trade war is profoundly shaking the foundations of the multilateral trading system and that this is triggering a great transformation. I don’t agree with that. Of course, the U.S.-China relationship matters a lot, and it has its own trade issues, and I’ll come back to that, of course, in a minute. But to be simple, frank, and maybe a bit blunt, I do not agree that such a dramatisation is the right description of either the situation or the way it will evolve.
This presentation is, strangely, by the way, aligned with a piece that the U.S. Trade Representative published in The New York Times this summer, where he states that the U.S. have successfully started revolutionising globalisation and international trade. This may be the view of Mr Trump and Mr Greer. This is not my view.
Now, this being said—and that’s my second point—there are changes taking place in the multilateral system and in the global trade flow’s pattern, under the influence of several factors, which have changed. To put it again very sketchily, at the risk of oversimplification, we had a previous period of expansion of international trade and globalisation, understood as the process of multi-localisation of production systems, whether goods or services, which was triggered and pushed by two major factors.
One of an ideological nature, which was a sort of consensus—and that was the case when I was EU Trade Commissioner or DG of the WTO—sort of consensus, not unanimity, but consensus that overall, opening trade is the way to go. It’s efficient. If I do something better than you do, and if you do something better than I do, we have an objective interest to trade. And the sum of these efficiencies that stem from international division of labour creates more growth, hence possibly, depending on domestic systems, more welfare.
The second engine that pushed the intensification of international trade at the time was, of course, technology. As technology, from let’s say the 1970s to the next 40 or 50 years, kept rapidly, and massively sometimes, crushing the cost of distance. If you look at human history, the cost of distance has always been the main obstacle to trade. Of course, humans have invented other obstacles to trade, like tariffs, subsidies, and quantitative restrictions. But overall, crushing the cost of distance is the way to open trade. And this is what happened.
Now, this has changed. The ideological engine has changed, and the ideological engine has somehow changed. The ideological engine has changed because the previous consensus has been dented by a series of events or trends, starting, of course, with the U.S.-China rivalry—and I’ll come back to that. Overall, what at the time were the benefits of interdependence have now become the risks of over-dependence, thus leading to some sort of decoupling between these two elephants of world trade.
The second element that has entered the previous consensus is the fragility of some supply chains. And this happened following a series of unpredictable events, such as weather events, Fukushima, or, of course, we all remember Covid.
And the third factor is the social impact of a rapid, and for some, violent, international division of labor in some regions, in some countries, and unsurprisingly, first in the U.S. And I say unsurprisingly because the U.S., as compared to their revenue per head, have a relatively weak welfare system that protects very little of the people who have to change, relocate, retrain, lose their job. And this is a political reality which depends very much on the country and the regions of the country. Look at the U.S.—I mean, the southern part of the U.S. has obviously benefited from this intensification of global exchange, whereas some parts in the north of the U.S. have lost. So this is a sort of different picture, which has been colored differently.
And as far as technology is concerned, I think that we are still in an extremely rapid phase of technological change, but that this change—I mean, the impact on international trade and globalisation—is more ambivalent. On the one side, it’s obvious that digitalisation pushes international trade, and mostly in services, which is a part of international trade, the proportion of which is growing most rapidly. There are probably, in India, a few dozen million doctors who are ready to enter a global market for telediagnosis or teletreatment. This will be a big expanding market and a big contribution to international trade in services.
So, on the one side, digitalisation. On the other side, I think there is a risk—and sometimes this risk has already materialised—of fragmentation of digital ecosystems. The relationship we have with data is different from the one we have with our shirts, or with our socks, or even with our cars. Even if those who sell cars try to create a strong emotional relationship between your car and yourself, data is different. The reasons why the U.S. regulates data this way, China that way, Europe this way, or India that way are fundamental. They have to do with philosophy. They have to do with politics. They have to do with culture. And we have there an element that will slow the previous, very positive technological factor pushing globalisation. And then the question is whether or not we are able to organise a coexistence.
So overall, I think it’s clear that the balance between efficiency and resilience—as China was heavily tilted on the side of efficiency during a few decades—and this is where I depart from the introduction of Henry, excuse me, which is not heavily tilted on the side of security and resilience, but tilted the other way. It’s not the question of a change of paradigm. The game is always in this trade-off between the efficiencies of international division of labour that trigger welfare, and the security-resilience component of that. But we now are in a period where this has taken the upper hand, as, again, to put it simply, geopolitics has taken the upper hand on geo-economics.
I regret this. I spent part of my life trying to make geo-economics a factor of peace, whether it’s in Europe, whether it’s in the larger world. I regret that we are now in this situation, but the world has become brutal, and geopolitics now dominates. So this triggers—which is my second point—a sort of new normal, which I think we have to factor in the way we strategise, whether in governance, countries, or businesses, with three main features, which I will mention rapidly.
The first one is the weaponisation of trade by the U.S. and China as a consequence of their geostrategic rivalry, which is here to stay. Each of the two sides believes they should win the power race in the 21st century. This is a reality whether we like it or not. And this has, of course, major consequences in times of tensions. And it has trade consequences either with tariff frictions or escalation—I always hesitate to use the word “war” for tariffs, but this is a recognised conventional wisdom—or, by the way, we have to notice, by the use of export restrictions, which are less common than import restrictions. I mean, the WTO is very good at disciplining import restrictions. It has provisions that discipline export restrictions—let me underline this—but in a less strong way than import restrictions. And we have this in the case of the U.S. on chips, and in the case of China on rare earths.
This is a U.S.-China problem. I’m not saying it may not have spillover effects on other actors, but they are marginal. We see a tendency of the U.S. trying to introduce in their own bilateral deals, which are concluded under the threat of Trump’s tariffs. We can see a tendency of the U.S. to try and include, introduce clauses that are China-damaging clauses. Look at the agreement with Malaysia or with Cambodia, which are very recent. There are at least traces of that. I haven’t looked at that in enough detail, but this is reality. So it’s not just a U.S.-China problem, but it is mainly a U.S.-China problem, and it mainly influences the U.S.-China exchange in the part of the exchange which, let’s say, is strategically sensitive.
Now, this first trend, in my view, is here to stay for the next decade. Sure, there will be ups and downs, you know, there will be escalations and deescalations—we have to factor this in the way we look ahead.
The second feature, of course, is U.S. protectionism, which I see as an exception, not for the U.S. If you look at the history of the U.S., they’ve had a regular high-level protectionist fever, one at the end of the 19th century with the McKinley tariff, one in the 1930s with the Smoot-Hawley tariff, and now Trump. The U.S. is the only country on this planet that has ever had three big protectionist surges and fevers of this kind.
So in many ways, we have to recognise that if we look at the very long-term history, the U.S. is a sort of trade outlier. They were born in a trade war. They had a civil war, which was triggered by a problem of tariffs.
So we have to, I think, understand that this is not just Mr Trump. It is Mr Trump because he has an incredibly weird belief that tariffs are the way to go in the 21st century to address a number of problems, by the way, a whole range of problems, but there is something of a constant in U.S. history about this. Remember, for instance, that they did not ratify the International Trade Organisation treaty, which was negotiated within the sort of Bretton Woods package after the Second World War ended, hence the GATT, and hence the WTO much later.
On this, I think, again, it’s an exception. The U.S. is 13% of world imports, and in the remaining 87%, they keep their head cooler and do not indulge in any sort of contamination. This will be a problem between the U.S. and their bilateral trade partners, but this does not turn the multilateral system upside down. And I don’t think that—at least under the form of tariffs—this is a very long-term trend.
I do recognise that once you have tariffs that give 300 billion a year to the Treasury, it’s going to be difficult to get rid of that—not for trade reasons, but for cash reasons. But we also have to consider that, as of today, two-thirds of Americans, according to polling, disapprove of Trump’s handling of tariffs. So he is not where this public opinion is on this.
The third and last trend, which I see impacting international trade and the way it is regulated and the way it happens, is what I call precautionism. Protectionism is when you protect your producers from foreign competition. Precautionism is when you protect your people from risks: safety, security, health, environment. All these are areas where our populations at large—because they are becoming less poor, because they are ageing in a number of continents—are asking for more precaution. And this has a big impact on the way a number of economic sectors are regulated, on the way there are prescriptions, certifications, procedures, and standards that establish and administer this precaution.
And I’m not going to enter into any detail, but it’s pretty clear that this sort of obstacle is an obstacle that does not stem from regulations. Trade obstacles in this area stem from discrepancies between regulations, which is the cost you have to engage if you are an exporter of goods or services to be compatible with the regulations in the country where you export. And this is a sort of new kind of distance. The physical distance is decreasing, but this regulatory distance is increasing.
And we see that, for instance, in the area of the environment, where inevitably, given the way the Paris Agreement has been structured, trade-related environmental measures are different from country to country, and this difference is an obstacle to trade—which is, by the way, the reason why I very much welcome this Brazilian announcement 3 days ago in Belém that they have launched an informal platform to try and address this trade-and-environment nexus, which is difficult to address in the WTO because developing countries don’t want to discuss environment in WTO, and because developed countries don’t want to discuss trade in the UNFCCC. So for this reason, a discussion on this has been so far blocked. And I hope that this Brazilian initiative will move things forward.
Last point on this, not to be too long: precautionism, as opposed to protectionism, changes the WTO doctrine. In protectionism, you can gear obstacles to trade to the level of development of a country. I can, if I’m a European Commissioner, have a zero tariff for roses from Rwanda, 15% from Colombia, and 25% from Israel. This is inbuilt in “special and differential treatment,” which is one of the big principles of the WTO. If it’s about administering the pesticide residue in these roses, I cannot do that. My pesticide residue standard for roses will be equal on this. I will not have a more favourable for Rwanda than of Colombia or Israel. And this is something that changes fundamentally the relationship between developed and developing countries in the WTO, and, in my view, at this stage has not been properly addressed.
Finally, before I conclude, a few words on the way to go. As I see it, and this is, of course, a personal view, I do not abide by any political instruction anymore. First, I think, this leads to a necessity to consolidate the WTO. Second, it probably will have a few consequences on the way China trades. And finally, because I’m a European, it may also have some consequences on the way the EU and China trade.
On WTO reform, I won’t be long—many people in this room are familiar with this topic. Let me just remind you that it’s about two reforms which often are confused. The first one has to do with the updating of the WTO rulebook, which hasn’t been properly updated for a long time, in areas like precisely this trade-and-environment nexus which I was mentioning, or in digital trade, or in reforming the dispute settlement system, although the one that has been put in place without the U.S. is working well, this famous MPIA. So I don’t think this is urgent, whereas I think other topics are more urgent.
And of course, there’s another side to WTO reform, which is very dear to my heart—which is how to modernise the organisation itself, and review the balance between authority given to member states and authority given to the Secretariat, in order to make the WTO a 21st-century organisation. In many ways, the procedures of the WTO are totally outdated. And the fact, for instance, that the Secretariat is not allowed to table a diagnosis on the problem, or not able to table any proposal, looks to me absolutely stupid. If that was allowed, what takes five, six, or seven years would probably take a maximum of one year. And in many ways, on this point, those who say that the WTO is dead get it wrong. The WTO is not dead. In many ways, it’s a sleeping beauty which needs should be awakened. Now, of course, on this, the big question is whether the fact that the U.S. had de facto left the WTO whether is a facilitating or a complicating factor for WTO reform. I leave this question open. But for sure, the issue is an issue of trust.
Second, impact on China. Of course, China is much more exposed than others to changes in the international trading context. China exports roughly nearly four trillion dollars a year, whereas the U.S. is around two, and the EU somewhere in the middle. So this matters a lot for China. And this will need to be addressed—notably, and I will only mention this point to remain short, in tackling the formidably high Chinese trade surplus, which stems, in my view, 80% from its macro-economic imbalance and 20% from trade and investment measures.
So 80% of the big problem we all have with China, which is its trade surplus, is in Chinese hands. And that’s not open to us. The Chinese leadership has been saying for many years that there is a need to rebalance consumption as opposed to exports. The good news is that the Chinese leadership agrees with that. The bad news is that it hasn’t changed, and it remains to be changed. On the other side, there is a part of that which is amenable to trade measures, including in opening more of the Chinese economy in areas like services, where the relative competitiveness of Chinese manufacturers is now great, but the relative competitiveness of Chinese services within the Chinese market is not great. So there is a possibility to move forward to the benefit of the Chinese population. And of course, this also has to do with probably more outbound investment from China abroad.
And finally, on EU-China, which is a trade relationship very different from the U.S.-China one, not least because if you look at the composition of this trade deficit, there’s a lot of American added value in Chinese exports to America; there is much less European added value in Chinese exports to Europe. So there is something there, a difference that needs to be addressed differently. And I think on this, the solution on the bilateral side is to renegotiate this CAI agreement, which is now unfortunately out of date. But this is a good occasion to update it. And it’s not the propositions that are amiss, at least in the minds of experts. And of course, they can work together in the WTO to foster and solidify a coalition of reform along the lines I briefly outlined.
So, I started with saying I might not agree with Henry on his introduction, but I agree with his conclusion that what is needed is what he called stability. And I agree that given where we are with the Russian invasion of Ukraine, given where China is, those of us who still believe, rightly or wrongly, they might marginally influence this big picture, should have as a sort of principle: let’s try and stabilise this moving system. Thank you very much for your attention.
Henry Huiyao Wang
Great. Thank you, Pascal, for your excellent speech and keynote speech. It’s really—you’re right—you know, we have to be looking more forward. Of course, China-US is a big phenomenon, but then the rest of the world, in particular the EU, can make a big difference. So we have to see whether this new pattern is going to last. And I totally agree with you, we have to be aware of the precaution, as you said, protection and precaution. Too much precaution, talking about security, talking about safety, all the others risk and the de-risking and decoupling—those are really the biggest risks: losing prosperity, losing free trade probably. So that concept, we have to switch back.
So great. Thank you. And also, you mentioned how to maintain the WTO—I’m sure all the audience here quite agrees with you. And particularly, you mentioned we need to revive the CAI, you know, the Comprehensive Agreement on Investment between China and the EU. And let’s re-discuss that, and I’m sure we’re going to have new things out of that. I agree with you that we can update that and make a new agreement.
So we’re having our next speaker, but we’re a little bit pressed for time. I’d like to invite President Jin Xu. He’s the president of the China Association of International Trade (CAIT). So he has been with the Association of International Trade for quite some time as the chairman. And Mr Jin has a very impressive professional record as well. He served in the Chinese Embassy in Turkey. He was also in the Commercial Counsel’s Office in San Francisco, and Deputy Director-General of the Department of American and Oceanian Trade Affairs, MOFCOM. And of course, he was the Minister Counsellor at the Chinese Embassy in the UK. He was also the President of one of the research institutes at UIBE as well. So without further ado, we would like to give the floor to President Jin for your remarks. Thank you.
Jin Xu, President, China Society for International Trade
Thank you very much, Henry. And the fish really smells very good—please don’t take it away. I will finish my fish after my speech. And I think after Pascal Lamy’s speech, where you almost finished most of our job today, and as Henry said, you know, we just came back from the Import Expo two days ago, I think we had a very successful forum that day.
And I feel very pleased that we have three colleagues from MOFCOM. Mr Han Bing used to be a Minister Counsellor in the Chinese Embassy in Egypt. Mr Song Yaoming used to be our Minister at our Chinese Embassy in Japan, and Chen Yusong from the Department of WTO in MOFCOM. And we have a very handsome, very lovely, and very capable person, Madam Chai Xiaolin, and she used to be a very close friend of Lamy’s—worked together many years ago, right? And thank you very much. I feel very happy when you come here. So after my speech, when somebody asks any questions, I will give the answer to Madam Chai Xiaolin. She knows everything.
We are gathered today at a pivotal moment for the global economy. The multinational trading system, with the WTO as its core, is facing its most profound test in decades. The U.S.-China trade friction, fueled by unilateralism and protectionism, has shaken the very foundations of this system. Its impact is global, triggering a reconfiguration of supply chains, challenging international economic rules, and creating significant headwinds for globalisation itself. In this era of great transformation, three fundamental questions demand our urgent attention.
First, where is the current global trade order headed? It is clear that we are moving away from the post-Cold War paradigm. We are now seeing the end of globalisation, but its profound evolution. The future order will likely be more complex—a hybrid system. On one hand, we see fragmentation, with a shift from pure efficiency in supply chains to an emphasis on resilience and security, leading to trends like friend-shoring. On the other hand, the rise of regional agreements and the intense competition to set the rules for the 21st century in areas like digital trade and climate change will shape the new multilayered architecture.
Second, how must the multilateral framework be reformed for the 21st century? The WTO is in urgent need of modernisation. The immediate priority is to restore its standing dispute settlement mechanism. Furthermore, the rulebook must be updated. We need new international regulations that address contemporary issues—digital commerce, industrial subsidies, and sustainable development. This reform must be inclusive itself, protect the right to development for less advanced economies, and ensure that new rules do not become new barriers. This requires compromise and political will from all members.
Third, what role should the U.S. and China play as the world’s two largest economies? The dynamic between the U.S. and China would define the character of the future system. A zero-sum approach for decoupling leads nowhere. Instead, both nations have a responsibility to find a way to coexist and compete responsibly, avoiding a fragmented global economy. For the Chinese part, we are committed to contributing wisdom and solutions centred on three roles:
An anchor for multilateralism. China will continue to be a steadfast supporter of the WTO. We believe in resolving differences through dialogue and consultation, not unilateral tariffs, thereby providing certainty for global markets.
A proactive driver of opening up. Our actions speak loudly through initiatives like the Belt and Road Initiative. And by joining pacts like the RCEP and applying for the CPTPP, China is pursuing institutional opening up. We are actively aligning with high-standard international trade rules to create a more market-oriented and law-based business environment.
A campaigner for inclusive development. The wisdom China offers is the principle of wide consultation, joint contribution, and shared benefits—in Chinese “共商(gongshang)”, “共建(gongjian)”, “ 共享(gongxiang)”. And we advocate for a trading system that is not only open, but also balanced and inclusive—“普惠(puhui)”. Our approach to WTO reform emphasises special and differential treatment for developing countries, ensuring that growth benefits the many, not the few.
In conclusion, the path ahead is challenging but not without hope. By choosing cooperation over confrontation, openness over isolation, and inclusiveness over exclusion, we can work together to build an open world economy that is more resilient, equitable and sustainable for the future.
Thank you, Pascal Lamy. I want to quote your words you said before. Pascal Lamy, as a former Director-General of the WTO, is known for his insightful and often candid remarks on globalisation and the multilateral trading system, and here are some of his key quotes presented. Lamy has a nuanced view of globalisation, acknowledging both its benefits and its costs. He famously stated that “globalisation is deficient and painful for some people, but de-globalisation will be inefficient and painful for everybody.” So this highlights his belief that while globalisation creates winners and losers, reversing it should be worse for everybody.
And thank you very much, Henry, and thank you, everybody. Please enjoy your lunch, thank you.
Henry Huiyao Wang
Thank you very much, President Jin, for your very good remarks. Your quote on Pascal Lamy is also quite good. And we also have a new quote now: Too much precaution is also protectionism. So thank you, Mr Jin, again for your very comprehensive description of the China trade situation as the President of the China International Trade Association under MOFCOM.
Now I’d like to invite our senior expert, Professor Dai. He’s the Dean of the Institute of International Relations at the University of International Business and Economics (UIBE). But he’s also one of the leading scholars in political science. He was a visiting fellow at Harvard Kennedy School, and he’s also a member of the China Political Science Association and the China Public Administration Society, along with many academic titles. So we’re very pleased to welcome Mr Dai to share his views from an academic point of view. Let’s welcome Dean Dai for his speech. Welcome.
Dai Changzheng, Dean, School of International Relations, University of International Business and Economics (UIBE)
Thank you, President Wang. And I’m very pleased to be here, to be treated to such a splendid lunch, and also pleased to meet new friends. I thank President Wang for giving me such a great opportunity to share my views on the trade order with our colleagues and experts.
Mr Lamy, Director Chen, President Jin, and President Wang, distinguished experts and colleagues, if there is a theme, I‘d like to say my title is “Forging a New Path amid Global Changes in Response to the Reconstruction of the Global Trade Order.”
The profound changes unseen in a century are accelerating worldwide. Global trade governance faces unprecedented changes. I would like to first share some thoughts on the current situation, future prospects, and response strategies.
According to the latest data from the World Trade Organisation, due to sluggish global economic recovery and factors such as U.S. tariff policies, the growth forecast for global merchandise trade in 2026 has been drastically revised down to 0.5%, reaching a new low in recent years. Behind this sharp fluctuation lies a profound transformation of the global trade order. Understanding the roots of the transformation, assessing future trends, and exploring response strategies constitute defining changes of our time.
So first of all, my first point is: why have those phenomena happened? What are the root causes? I’d like to say two causes converged together to have brought about greater negative impacts on the world trade order.
First of all, of course, is the geopolitical competition between the major powers. Increasingly, the competition between the great powers has been serious in the process. Witnessing the rise of China, the United States is reluctant to acknowledge such a trend. So, from 2008, and at least from 2016, the government of the United States initiated a variety of tools and policies toward China, and tried to politicise trade and business and even weaponise business and trade. So that’s why the “war” between China and the United States happened. This is not just a trade and business issue, but a geopolitical issue. Economically, we see that it is a trade ability issue. Actually, it has a profound meaning for geopolitical competition. This is the first reason.
The second reason is the structural reason why the anti-globalisation trend happened and why the trade war happened. That is because, in the long run, in the past, the world was under a liberal system. And under this liberal system, globalisation marched forward. Japan and Germany, such countries, actually exported large amounts of goods and services to the United States and China. And in that way, the elites—I mean, represented by the elites in Wall Street—gained a great deal. But this process has also brought about very harmful negative changes to the common people. Because the wages of the common people have slowed down, have been at a very low standard, and the livelihoods of the people are harmed and influenced by such a process. The American government has no way to balance or to change such a situation. This is a structural change in the economic and trade system in the world, but China was blamed by the United States. Of course, globalisation, as President Wang and Lamy said, has created losers and winners. Increasingly, the United States has been dissatisfied with such a trend, with such a process. So that’s why the United States government changed its policy.
In the past twenty to thirty years, the United States’ policy toward China was hedge and engage, but now they increasingly look at China as a rival. So those are the two reasons—geopolitical competition and structural changes in the globalisation process converged together to make such disorder happen. And I‘d like to say these two root causes are the real reason why business and trade orders are increasingly becoming serious today.
Second, I’d like to say for the future prospects, we may see there are some possibilities. First of all, the global trade system has been in the change and adjustment. The U.S. side may continue to take protectionist, nationalist, and unilateral policies toward other nations and other countries, of course, with China being the first target. And this may continue to disrupt the trade order in the coming future.
But America’s policy will bring about two results. One is that the non-U.S. countries will stand in line to continue free trade, to build up a multilateral trade system, and to continue a liberal way of trade and business. And the United States will build on its own centre to still bring about pressures on other nations and keep its way of protectionism and unilateralism. So that is maybe the first point.
So I’d like to say that, first of all, of course, this trade system is in the process of adjustment. Second is that the United States will act in its own way, and China and other emerging markets and countries—I’d like to say “Global South”—will stand on multilateralism and the liberal way of business.
Another situation that will happen is that trade and business of the United States will go outside, go to other countries, and this will bring about pressure for other markets. And perhaps the governments of liberal economies will meet much pressure from their domestic constituencies. And these are the two futures.
Towards such a way, the response strategy I suggest is to forge a new path that makes changes.
First of all, we should still adhere to genuine multilateralism. This is key to improving global trade governance, and China will be the first to advocate such an initiative.
The second is that countries should work together to advance functional reforms of multilateral trade mechanisms. Digital production and green technologies, and other new industries will bring about new chances for the World Trade Organisation. I would like to say they will become the new impetus for business and trade.
The third is that we should manage great-power competition. We should try our best, as our previous experts just talked about. Now that President Xi met Trump in Korea, it is just a pause in the trade war. And this is a symbol that after 10 years of trade war, China and the United States are both considering in what way the trade will go on, in what way we will end or pacify our trade war. So this is the third.
Finally, the fundamental approach is that every country should deal with its own domestic things. Each country has the right to find its own way of economic development—not just the liberal model, but the Chinese way of advancing economic development—and together make international trade a prosperous future.
In conclusion, although we are facing a new, unprecedented future today, still, we still have chances to change it. Now China has launched four initiatives: the Global Development Initiative, the Global Security Initiative, the Global Civilisation Initiative, and the Global Governance Initiative. That is to say, China will still be a responsible major power in the world, and together with the Global South and other developing countries, the world will have a bright future.
Thank you very much.
Henry Huiyao Wang
Okay, thank you, Dean Dai, for your very comprehensive, theoretical, and also quite practical speech. You’re right. We have to handle this fragmentation of world trade. But of course, the U.S., as we know, represents 12% of total trade, and 88% the rest of the world. We have to really safeguard multilateralism, and together we should do that. So again, thank Dean Dai for his sharing.
I know we have DDG Chen at the table, and also Chai Xiaolin, former Director-General of the Division of Trade in Services and Investment, WTO and also former Director-General of the Department of WTO Affairs, Ministry of Commerce. So I don’t know if you have anything to share, maybe share a bit of MOFCOM, maybe your observation, comments, and thoughts. Director Chen is very knowledgeable; he’s involved in many negotiations.
Q&A
Chen Yusong, Deputy Director-General, Department of WTO Affairs, Ministry of Commerce
Thank you very much. It’s also my great pleasure to be here. And it’s better to hear the three speakers, I mean, insightful comments and remarks regarding the China-U.S. trade relationship and also the global trade order. Especially, I think we get quite insightful comments from Pascal Lamy regarding some historical analysis of U.S. trade policy and also some comments on the current WTO reform. And certainly you have much more authority than all of us, I mean, in how to improve the World Trade Organisation.
I think maybe I could have two questions. The first question regarding, you have just mentioned, you used the term precautionism. It’s the first time I heard it in this regard. But for me, I’ve been working for the World Trade Organisation for a couple of years, I think currently the U.S. is kind of abusing the use of traditional national security exceptions in the WTO Article 21, especially the reciprocity tariff in the name of national security or Section 232. I think it’s totally not precautionism, it’s just abusive use of national security.
So in this regard, I would like to see whether you have some comments or remarks on that. And is it possible for WTO members to establish some ground rules on how to define national security, and how WTO members can impose any limitation on the imposition of national security measures? I think this is quite a fundamental issue in national security.
And on another issue, I think probably we also feel a little bit confused regarding the recent U.S.-EU trade agreement, the so-called Turnberry Agreement. It quite surprised me because we know that in the previous decade, the EU and the U.S. had had tremendous and quite a lot of trade frictions. But this time, the EU has come to a kind of compromise very shorter than we had expected. But it’s quite unbalanced for me, because the EU has agreed that they accept the tariff from the United States, I mean 15%, but the EU could also provide zero tariff for imports from the United States.
So my question would be whether this kind of Turnberry Agreement could constitute a kind of long-term foundation for a cross-Atlantic trade relationship, because it quite astonishes me. And also, we have the question of whether it’s consistent with WTO rules. So how do you envisage the next step for the U.S.-EU relationship? So these are my two questions. Thank you.
Pascal Lamy
The fact is that not two questions, but three questions. The first one is about whether national security is part of a precaution. Yes, but in my view, it is a sort of extreme interpretation of precaution. Although Article 21 leaves space for trade measures which are based on national security considerations, the whole question is not whether they are or not, but disciplines. There is one discipline. The problem is: how large is the corridor? And this is to be decided by the dispute settlement. But of course, it’s a very delicate topic because it’s very near to sovereignty. But if I take one example, we’ve had a trade embargo between the U.S. and Cuba for decades, and everybody agreed that this was within Article 21. I never heard Cuba complaining at the WTO against the U.S. because of this trade embargo. So this is a reality, although I think, and we have a case law on Article 21, notably on a dispute between Russia and Ukraine, coincidentally.
Second, on precautionism—this is not new. We have the WTO, the TBT and the SPS agreements. They both establish certain principles that apply, in my view, to precautionism. To put it very simply, you are allowed to obstruct trade for precautionary reasons, provided you do it in proportioning to the restriction on trade to the risk you want to address. That’s the principle. And then, of course, this is appreciated on a case-by-case basis, either by countries or by the dispute settlement. And I think, personally—I’m not speaking for anybody—that this should be the basic principle we should apply to what the developing countries call “green protectionism” and what we Europeans call “greening trade”: do it in a way that is justified and proportionate, while—and this is the final part of my answer on this second point—moving to help developing countries growing their greening capacity.
Remember the initiative I took in 05, which was the Aid for Trade. I think we should now have an initiative—“Aid for Green,” so that you do not just interact between trade and environment, but you interact between trade, environment, and development. And this is, by the way, the proposal which the Institut Jacques Delors in Brussels has done and which has led to this new CTIP concept in the European Union, who is as good at creating acronyms as regulations.
Third, on Turnberry—you’re absolutely right. This is a big change, and this is unbalanced. It would not have happened in the past, but it’s happening now. Now, what has changed? One thing has changed, which is that Russia has invaded Ukraine, thus creating a major security risk for the European Union. Given the fact that we still depend highly, not totally, but highly on the U.S.’s nuclear protection, we are in the hands of the U.S., and Mr Trump, as we all know, is as transactional in this area as he is in other areas. And he’s not only weaponising trade, but he’s merchandising security. This is why we had to swallow this asymmetric deal.
Now, I’m not saying I like it. Those of you who are not Europeans—there are many, I think—have to understand that for us Europeans, losing Ukraine is dramatically more important than losing a few percentage points of the U.S. market. That’s a political reality which we have to factor in. I regret it. I am among those who believe that the EU in the future should gain more strategic autonomy. As you know, this has been a long-standing discussion within EU members. I think the ideological breakthrough has been done. We know now that Putin is not a friend. We know that the U.S. might not be a friend. So, the sort of concept of where we have to go in the future is, I think, much clearer now. The problem remains to be done.
I mean, I think there is acceptance that this is the way to go, and this is a big change. For a long time, Eastern countries have been saying, “Be careful about Russia,” and we’ve been saying, “We, in the West, stop nightmaring.” Oh, these are all things. And on the other side, some of us have been saying for a long time that the U.S. might not always be there. And the Eastern part of Europe said, “Come on, of course they will always be there. ” So, for a long time, this has constrained any discussion on this. That’s over, because of experience, and thanks, in a way, to Mr Putin and Mr Trump—if we can thank them for something, which is rare in my view.
But that’s why we had to swallow Turnberry. And, by the way, to my knowledge, Japan, Korea, Australia, and Canada, who are under the same umbrella, have had, or will have to accept similar deals under the blackmail—the military blackmail—of Mr Trump. If the U.S. were to drop their support to Ukraine today, we Europeans are not be able to sustain the war. We did 25% at the beginning, and we now are at 50%. We probably will be at 75% a year or two years from now. The problem is that you need 100%. And for the moment, the U.S. is providing the difference. And that’s a reality whether we like it or not.
Chai Xiaolin, former Director-General, Division of Trade in Services and Investment, WTO; former Director-General, Department of WTO Affairs, Ministry of Commerce
Thank you very much again, Henry, for your kind invitation. I’m humbled to claim that I’m an expert on the WTO. And so thank you very much for this. And I also wanted to thank DG Lamy for making such an inspiring remark, I learned a lot and, very good to see you. Also, I want to take this opportunity to thank Chairman Jin Xu and Professor Dai from my university for your insightful and enlightening remarks as well.
Of course, following Henry’s opening introduction, it is very timely to have the discussion of this kind and to share views from different perspectives on this very important subject. But of course, I’m very hesitant to add anything after my boss, DG Lamy, because he is the true expert on WTO matters. But I know that there is no free lunch, so I have to pay for my lunch. So I’ll just make a few very quick comments centred around the WTO.
First, I think it is really unfortunate. People know that the WTO turns 30 this year, and we’re celebrating and commemorating. But it is unfortunate that the Celebration of the WTO at 30 has been taken by events. So we hear more and feel more about the so-called inability of the WTO to respond to global challenges, and we hear less about its achievements in the last 80 years, including the time before the WTO was born in 1995.
But the fact is, since the multilateral trading system took shape, global trade has grown by 4,500%. And trade-enabled growth has lifted over 1.5 billion people from poverty, about 25% of the total global population. So to me, it’s impressive and massive. Like everybody was sharing your sentiment and views, and I agree that currently the multilateral trading system faces many challenges. And as DG Lamy said, the rulebook of the WTO needs to be updated to better serve the economic needs of the 21st century.
But there is a big “but.” The WTO’s fundamental promise remains that is transparency, stability, trade opening, dispute settlement, and nondiscrimination. So these are the fundamentals of the WTO, and these fundamental promises remain. And thanks to these fundamental promises, WTO research confirms that despite recent rising tariffs, broken supply chains, and resurgence of unilateralism, the WTO-led framework has shown remarkable resilience, because roughly more than 80% of global trade today still operates under WTO most-favoured-nation rules.
Of course, as I said, no organisation in this world could enjoy the fame of eternity. There might be quick wins and low-hanging fruit to harvest while engaging in long-term efforts of a systemic nature. So, for me, the question is how we can rebuild the trust and confidence among 166 members in the WTO.
So I venture to say and pose questions to all of you sitting around the table: depending on the willingness of the members, if the WTO should intensify its functions—namely, multilateral trade negotiation functions, its deliberative functions on trade and global commons, and its dispute settlement functions. At the same time, the system needs to look into how rules apply to digital and AI-driven commerce, and to climate change mitigation and adaptation. Of course, just now DG Lamy has also used a word which I like very much—that the WTO has to, and needs to, and should deliver on development, because more than 80% of WTO members are developing countries, right? So, the word I borrow from DG Lamy is “Aid for Green,” because the future of trade is digital, green, inclusive, and services.
Therefore, I think there are a lot of things that can be done. If there is a will, there is a way—of course, political will. Henry, just give me one or two seconds. I just wanted to say, my last word is that I’d like to make a big shout-out to you and commend you, Mabel Lu Miao, and your team, for doing a great job in sound analysis, diving into issues behind headline news, networking, and promoting friendly and professional exchanges as we gathered here today. Such an important role could not be emphasised enough in times of uncertainty.
So thank you very much for all the good and hard work, and please continue. Thank you.
Wolf Dietrich Heim, Ambassador of Austria to China
Yes. Well, thank you. And also, I’d like to thank the host for the wonderful occasion and the speakers for their inspiration. I would like to add just a few things as a comment. You know, when we talk about China on the rise, I think we would also be very happy to see China take on more responsibility, as they have done very skillfully in facilitating a settlement and the normalisation of relations between Iran—where I served previously—and Saudi Arabia only 2 years ago. I think that was a great job that is still contributing to the stability in the region.
Now, talking about trade, I think that on arriving here, I would also hope that China is addressing. When we talk about protectionism, and certainly from the European perspective, to talk about overcapacity in some parts of the industry, like the steel sector, I think that is something that is of concern. And, someone who takes protectionist measures will then see a rebound and a distortion of the whole market. That is something that I find interesting to watch, how we see that.
Now, as for the WTO, I have two questions because this is something that has already been an issue that I’ve been dealing with. When we talk about the Government Procurement Ordinance at the time of the accession of China to the WTO, and 25 years later, I think I would still hope that we have more of a level playing field in some of the areas where Austrian or European businesses provide goods for the Chinese market. I would like to maybe ask Director Lamy whether that was something at the time and how that is evolving. I think I’ll stop here. Thank you.
Marshall Mills, Senior Resident Representative in China, International Monetary Fund
Yes, thank you for this opportunity to listen to Mr Lamy and the other speakers and for some very good questions. Being from the IMF, I had a particular interest in the observation that Mr Lamy had on the sources of China’s trade surplus, being 80% macroeconomic. I wondered if he could elaborate on that and what he would recommend in response.
Han Bing, Senior Research Fellow, CCG; former Deputy Director-General of the European Affairs Department, Ministry of Commerce
Thank you for giving me the chance to put one question. Mr Lamy said the “new normal” has three features. The second one is U.S. Protectionism. Under Trump’s administration, they imposed tariffs on the whole world. So I would like to understand that the U.S.-China rivalry should be the new normal is the first feature; the third one is precautionism. So I think these two features are quite certain. But what about the U.S. protectionism? Because of the Trump tariffs, there are some causes, for example, in the U.S., against Trump and the tariffs. How long will it last if the administration changes after Trump? Will it also be the “new normal”? Maybe it’s not that certain, but I would like to have your thinking about this. Thank you.
Henry Huiyao Wang
Okay, great. So, probably before we give the floor to the speakers, I just want to briefly talk about what the Ambassador from Austria mentioned. I think China, now, for example, in recent developments, are going to now forgo the developing country benefits at the WTO, which is a great movement. And even though they still align with the Global South for political reasons, economically, they are really abandoning all those benefits now. Second, I think for China-EU relations, we really need good political relations. You see, the Spanish King is in China now. And in the last three years, the Spanish Prime Minister has visited China three times. So now Chinese investment in Spain is increasing dramatically. So I think having good political relations would lead to good economic cooperation. That’s just my brief comment. So we have Pascal to address the questions, and then also the other two speakers.
Pascal Lamy
Okay, so Xiaolin carefully did not raise any question, but I agree with you, Xiaolin, as often, that international trade has to go digital, green, and Inclusive, while recognising that inclusive has a lot to do with domestic systems and not with the WTO. The WTO is about opening trade. It’s not about managing the distribution of the benefits and cost of opening trade; it has to do with solidarity systems and welfare systems in each and every different country. And I’m sure that on this, Bangladesh, Sweden, Portugal, or Rwanda do not see things the same way. So that’s something which I think has to be understood.
To your question about government procurement: at the time of the WTO accession of China, a commitment was taken by China to join the Government Procurement Agreement in the future. Now we are still in the future, and we might remain a bit of time in the future. I regret it because it’s a huge market that would open. And what I regret even a bit more is that not only is China not joining the WTO Government Procurement Agreement, but China is moving backwards. China is in the process of giving a premium of 20% to local content in public procurement, thus penalising foreign operators on the Chinese market. And this is a serious problem because, given the size of China’s public procurement, imposing a penalty, in fact, on non-Chinese tenders of 20% is much more than a big tariff. So again, sorry for being blunt, but before joining the Public Government Agreement, China should stop this sort of discrimination.
On the question by the IMF, I’ve been looking very carefully at that for many years. Just let me give you one element: if you look at the Chinese trade surplus, it shrank rapidly between China’s accession and during 10 years. China opened, and the surplus shrank. Since roughly 2010, this convergence has stopped. Why has it stopped? A, because China has stopped opening—not totally, there’ve been bits and pieces here and there, notably vis-a-vis developing countries whose exports do not threaten China’s manufacturing system. On the contrary, they need raw materials. So this has been a contribution to the development of many poorer countries. But the fact is that China has recentralised its economic governance system. The proportion of SOEs and of the part of the Chinese economy which is under the command of the state and the CPC is probably twice what it was at the beginning of the year, let’s say, 2010. And this is one of the reasons for the overproduction, which stems from the fact that a lot of incentives have been given to increase the production capacity, including a lot of public support. And this is understandable in a strategy that medium- and long-term wants to make China ultra-competitive at the frontier of technology. The Chinese system is running the system efficiently—I mean, look at what’s happened with EVs, for instance. But we also see that in reality, like EVs, the domestic competition is terrible; a lot of casualties will happen. But it also has an impact on exports, which for some of them are subsidised.
But to go back to the fundamental problem: this imbalance between consumption and production again is not something we can address. Although I would say that, in my view, the IMF should look a bit more at recent developments in the exchange rate. The tradition in the IMF is only to look at the current balance. I think the IMF maybe should look a bit more at whether or not the Chinese currency is at the level it should be, given the rhythm of development of the Chinese economy.
Finally, on U.S. protectionism in the future, I think we have to distinguish between U.S.-China relations and U.S.-rest of the world relations. I think the U.S.-rest of the world will probably stabilise trade-wise, although removing the tariffs will be a budgetary problem. Even if a successor of Trump wants to remove the tariffs, the question will be: where do you get the money which you lose with this cash machine? And this is likely to trigger a debate in Congress about who would pay for the removal of these structures. We all know it will benefit consumers, but conventional wisdom is not always where economic wisdom is. The notion that tariffs are paid by the consumer, which is an economic reality and an indisputable economic reality, is not a political reality. Then we have an issue there, which is very good to address.
So the rest of the world, I believe, given where U.S. public opinion is, and given the likely impact of tariffs on inflation, which is happening a bit slower than expected, but which is happening—I don’t see a risk of a sort of post-Trump having the same sort of religious belief that tariff is the most marvelous thing in the world. If it’s about U.S.-China, I differ. I think the U.S.-China relationship is a strategic one. This is geopolitics, trade, and other measures that the U.S. uses to try and push back China, and that China uses to try and push back the U.S. Trade issues are part of this arsenal. It’s not the main, depending on the times, but it’s part of the toolbox. And given we are moving to a digital economy, the dual-use sensitivity of a lot of digital systems will increase this weaponisation. So I have no doubt about that. So I think we should distinguish this.
Now, let’s be also clear: in terms of volumes of trade, this dual-use military strategic digital sensitivity is not that big as compared to hair dryers and refrigerators, and socks and shirts. It’s not a big amount, but it is a sensitive amount.
Henry Huiyao Wang
Okay, great. I don’t know if Mr Jin and Mr Dai have anything to add. Yeah, we had a really great luncheon discussion. I thank Pascal as well, giving us a very great, comprehensive answer. I think one thing I could add is that China seems to find its own development path because 60% of China is private sector, another 20% SOE, another 20% multinational, and that trilateral structure seems to be working for this kind of effectiveness. But of course, we have to also see how we can get more effective cooperation with the world, which I think we’re doing.
But again, I appreciate the comments by Mr Lamy. I think we had a really great discussion today. And I want to thank Pascal Lamy, the Founding President of the Paris Peace Forum and former DG of the WTO; Mr. Jin, the President of the China Association of International Trade; and Dean Dai, the Dean of the School of International Relations of UIBE; and of course DDG Chen from MOFCOM; and Madam Chai Xiaolin, former WTO senior official and former MOFCOM senior official. And also those other CCG fellows and senior fellows, and of course, our usual great friends from India, from the diplomatic and international community of Beijing. So thank you all very much. So let’s take a photo to remember our event. Thank you.
