The trading system has accommodated an emerging China. How will it adapt to and be shaped by a dominant China? Our key argument is that while China will have strong reasons to sustain the open trading order, that cannot be taken for granted. The world needs to tether China to the multilateral system as an insurance against the small possibility that China will seek to translate its power into trading privilege.

# **II. China’s Current Trade Ascendancy and Its Implications**

China‘s trade ascendancy and presence are not a distant phenomenon. In manufacturing trade, China is now a large supplier to all the major markets, and its presence has grown significantly over the course of the Doha Round negotiations. We identify the world‘s ten largest traders and for each of them also identify the largest sources of supply in the manufacturing sector.<sup>1</sup> Figure 1 presents the results. China‘s share in the major import markets has doubled between 2001 and 2009, and in some of the most important world markets, China now accounts for more than a fifth of total manufacturing imports. China‘s share of manufacturing imports in Japan is 35 percent, in the European Union about 30 percent, and in the United States slightly over 25 percent.<sup>2</sup> Furthermore, China looms especially large in the markets of major trading partners in sectors where protection is greatest. To illustrate this, we identify for each of the top ten trading partners, the ten most protected sectors (defined at the Harmonized Schedule (HS) 2-digit level of aggregation in 2009 in terms of the MFN tariff alone). Figure 2 depicts China‘s share in these sectors in the largest ten traders for 2001 and 2009.

Two points are worth highlighting. First, in the most protected sectors, China‘s share of imports in 2009 is substantially greater than for overall imports (shown in Figure 1) and dwarfs that of any other supplier in each of these markets.<sup>3</sup> For example, China‘s share in these sectors in Japan is over 70 percent, in Korea over 60 percent, in Brazil about 55 percent, in the United States, Canada, and the European Union about 50 percent each. Second, even in these protected sectors, China‘s share has increased dramatically over the course of the Doha Round. In many of the importing countries (e.g., Brazil, the European Union, and the United States), China‘s share has more than doubled. Also striking is how much market share China has gained even in countries such as Canada, Mexico, and Turkey that have free trade agreements with close and large neighbors. Thus, liberalization under the Doha agenda today, especially in the politically charged, high-tariff sectors, is increasingly about other countries opening their markets to

> 1 This section relies on joint research with Francis Ng.  Throughout our analysis, we exclude two resource-intensive manufacturing categories: minerals, fuels, and oils (HS 27) and pearls, stones, and precious metals (HS 71). 2 These figures may exaggerate China‘s dominance because trade is measured in gross terms rather than valued added terms (see Johnson and Noguera, forthcoming).

> 3 Across countries and sectors, China features consistently as the most important supplier and often by a substantial amount. For example, in the United States, China has by far the highest share of imports in eight out of the ten most protected sectors, ranging from 22 percent in man-made fibers (HS 55) to 76 percent in footwear (HS 64).

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