The Office of the U.S. Trade Representative said the World Trade Organization rules are not keeping China in check, and the United States should not have supported China’s 2001 entry into the WTO.
The Office of the U.S. Trade Representative’s annual report released last week on China’s compliance with World Trade Organization obligations says the U.S. was wrong to support China’s 2001 entry into the WTO, since China has used the cachet of its membership identification to become a “dominant player” in global trade.
The accession terms China agreed to “have proven to be ineffective in securing China’s embrace of an open, market-oriented trade regime,” the report says.
Global markets are less efficient than they could be, as the principal beneficiaries of China’s policies and practices are state-owned enterprises and other “significant” domestic companies attempting to climb the economic value chain.
WTO rules aren’t keeping China in check, as the WTO doesn’t directly discipline “many of the most troubling” Chinese trade policies, the report says.
WTO rules weren’t formulated “with a state-led economy in mind,” and while China’s accession protocol disciplined certain state-led policies and practices, Beijing has since replaced them with more sophisticated and “still troubling” policies and practices, the report says.
USTR also accuses China of being “not interested in moving toward a true market economy.”
Continual high-level bilateral dialogues over the past decade-plus have “failed to generate anything more than incremental market access improvements or the repeal or modification of problematic Chinese measures that should never have been issued in the first place.”
China remains “determined” to keep the state leading the economy, while actively seeking to “impede, disadvantage and harm” foreign companies, even though this approach is at odds with WTO rules setting forth a global market-based system, the report says.
USTR also reiterated the U.S.’s large trade deficit with China, noting that “various factors” can contribute to a trade imbalance, but that the “size and direction” of the bilateral imbalance shows a trade relationship that’s “neither natural nor sustainable.”
The U.S. goods trade deficit with China was $83 billion for the year 2001, and was projected to total $365 billion in 2017.
USTR said the U.S. will “continue” to use WTO dispute panels as an enforcement tool and raise concerns during WTO committees and councils to highlight problematic Chinese policies and practices.
But USTR hasn’t brought one original case to the WTO during this presidential administration.
“The notion that our problems with China can be solved by bringing more cases at the WTO alone is naive at best, and at worst, it distracts policymakers from facing the gravity of the challenge presented by China’s non-market policies,” the report says.
One of the troublesome policy areas espoused by China is its “indigenous innovation” policies, which provide preferential treatment when companies own or develop intellectual property (IP) in China.
Despite telling U.S. officials during a high-level government dialogue in 2014 that it will treat IP owned or developed in other countries the same as China-owned or -developed IP, China continues to pursue policies requiring or favoring ownership or development of IP within their borders, the report says.
China also pledged to de-link indigenous innovation policies and requirements from its government procurement practices, which also hasn’t happened, USTR said.
Concerns also exist regarding China’s Cybersecurity Law implemented in 2017, which is imposing “severe restrictions” on a wide range of U.S. and other foreign information and communications technology products and services “with an apparent long-term goal of replacing foreign ICT products and services.”
USTR also released an annually mandated report on Russia’s compliance with WTO obligations, which also found Russia isn’t living up to key commitments it made when it joined the WTO in 2012.
“As these two reports show, the global trading system is threatened by major economies who do not intend to open their markets to trade and participate fairly,” U.S. Trade Representative Robert Lighthizer said in a statement.
USTR: China uses status as WTO member to become ‘dominant’ trade player
