Yi Xiaozhun, former Deputy Director-General of the World Trade Organization, speaks at the China Development Forum (CDF) 2023 in Beijing on March 25 (CDF) 

Trade protectionism will only lead countries to miss the benefits of  low production costs, high efficiency and technological innovation brought by globalization. It will not improve the security of domestic supply chains but will escalate global inflation, Yi Xiaozhun, former Deputy Director-General of the World Trade Organization (WTO), told the China Development Forum 2023, which is being held in Beijing from March 25 to 27. 

According to Yi, globalization has been beneficial for the world over the past decades. Due to the COVID-19 pandemic and geopolitical tensions, some multinational companies need to diversify suppliers to improve resilience of supply chains. However, some developed countries are engaging in trade protectionism by promoting decoupling in hi-tech industries, bringing offshore manufacturing industries back on shore and pushing “friend-shoring.” “Friend-shoring” limits supply chain networks to allies and friendly countries.

Some countries have placed discriminatory restrictions on foreign suppliers using the excuse of “national security,” Yi said, stressing these restrictions are contravene market laws and WTO multilateral trade rules. “Zero-sum mentality and unilateralism will only lead to a new cold war. Such practices will affect trust between countries and make cooperation to meet global challenges, including climate changes and public health, harder,” he said.

According to Yi, Ngozi Okonjo-Iweala, Director General of the WTO, previously pointed out that trade protectionism and decoupling will cause great disruption. Once countries develop into two trade blocs, global GDP growth will decline by 5 percent.

Yi added that ensuring the security of industrial and supply chains remains a problem for many countries. Barriers cannot guarantee the security of domestic industries, as no country is able to develop a completely independent supply chain, even for large economies like China and the United States. Therefore, the attempt of several developed countries to decouple will not make domestic supply chains more secure or competitive.

China has been very involved in the global value chain since its reform and opening up started in 1978, turning itself into a global manufacturing hub. “China’s past journey shows that only opening up can lead to development, and the greatest insecurity lies in isolation,” Yi said, adding that the country needs to establish its security mechanisms in the process of opening up, instead of ceasing to open up or even decoupling for the reason of security.

For now, multinational companies are barely able to leave the Chinese market or decouple from China to develop a new global value chain. Countries should quit the zero-sum mentality and seek multilateral cooperation to achieve stable global supply chains, he said.

Copyedited by G.P. Wilson 

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