During a “Trade Regime Review” of China at the World Trade Organization (WTO), U.S. officials were highly critical of the country’s polices and actions.
“China’s industrial policies skew the playing field against imported goods and services and foreign manufacturers and services suppliers through an array of supporting measures,” U.S. Chargé d’Affaires to the WTO David F. Bisbee said.
Bisbee said when China acceded to the WTO 20 years ago, WTO members expected that the terms set in “China’s Protocol of Accession” would permanently dismantle existing Chinese policies and practices that were “incompatible with an international trading system expressly based on open, market-oriented policies.”
“But those expectations have not been realized, and it appears that China has no inclination to change,” he said. “Instead, China has used the imprimatur of WTO membership to become the WTO’s largest trader, while doubling down on its state-led, non-market approach to trade, to the detriment of workers and businesses in the United States and other countries.”
The United States’ most fundamental concerns with China’s trade regime involve China’s industrial policies, Bisbee told the WTO. While other WTO members also seek to help their industries develop, China’s approach is materially different.
“China’s industrial policies go well beyond guiding and supporting domestic industries,” he said. “These measures include market access limitations, investment restrictions and massive subsidies that lead to severe and persistent excess capacity. Other unfair trade practices include preferential treatment for state-owned enterprises and other favored Chinese companies, discriminatory regulatory requirements, unique national standards, data restrictions, inadequate enforcement of intellectual property rights, cybertheft and the use of competition law enforcement for industrial policy purposes. China uses these measures to secure dominance in global markets, which undermines U.S. economic interests.”
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Assessing China’s trade policies today, Bisbee said, “we also cannot ignore reports of China’s use of forced labor in several sectors” and “we also take note of another Chinese practice, which has come to be known as ‘economic coercion.’ If another WTO member speaks out against or otherwise offends China, China’s response increasingly has been to use its economic clout to pressure the offending country to ‘correct its mistakes.’ A number of WTO members in this room have experienced China’s ‘economic coercion,’ which takes many forms.”
Over the years, the United States has made extensive efforts to encourage China to comply with and internalize WTO rules and norms and make other market-oriented changes, Bisbee said. This included convening numerous high-level bilateral dialogues with China, “but they only led to modest changes, and China did not always follow through on its commitments,” he said.
At the WTO, the U.S. also worked hard to enforce China’s compliance with WTO rules, bringing 27 dispute settlement cases against China, often in collaboration with other WTO members.
“We secured victories in every case that was decided, but many of them were hollow,” Bisbee said. “Even when China changed the specific practices that we had challenged, China often did not change the underlying policies, and meaningful reforms by China remained elusive.”
Because of this situation, he noted that the U.S. has and will continue to pursue all available tools in an effort to persuade China to make needed changes. Some progress was made last year with the signing of an economic and trade agreement with China, he said, but “our most fundamental concerns with China’s trade regime remain unaddressed.”
The U.S. is not the only WTO member whose workers and businesses are being harmed by China’s unfair trade practices, Bisee said, and “we will be more successful in building truly fair international trade that enables healthy competition if we work together, and speak up.”
“Of course, the best solution remains for China to take the initiative to fully and effectively embrace open, market-oriented policies, and that is what we continue to urge China to do,” he added.
U.S. Trade Representative Katherine Tai similarly said that “China has not taken the anticipated steps to transform its state-led, non-market approach to trade and the economy.”
Tai said the U.S. has asked several follow-up questions about what it claims are China’s prolific use of government guidance funds as a means to provide massive financial support to Chinese industries, which is highlighted in the WTO Secretariat’s report on this issue.
“China’s brief response to numerous U.S. questions about these government guidance funds was simply to say that the state has no role in them,” Tai said. “We note that China’s response appears to be inconsistent with publicly available information and it is not responsive to most of the questions asked by the United States.”
Additional follow-up questions concern a variety of topics, including the Made in China 2025 industrial plan, excess capacity, state-owned enterprises, export credits, value-added tax export rebates, export duties, recycling materials, China’s Foreign Investment Negative List, services market access and the Belt and Road Initiative.
The WTO committee chairperson’s report on the review noted that while China was commended for measures to facilitate trade and reduce overall customs clearance times, as well as for fully implementing the WTO’s Trade Facilitation Agreement ahead of schedule, it was encouraged to continue tariff liberalization initiatives, particularly on agricultural products where tariffs were considered to be still relatively high.
“For many members, the lack of transparency with regard to China’s state measures was an issue of fundamental concern,” the report said. “Members noted a generally opaque subsidy regime and the lack of timely notifications on key issues such as state-trading enterprises and domestic support and encouraged China to submit these notifications. Members underlined that transparency was a fundamental WTO principle and urged China to fully comply with its transparency commitments.”
Trade Policy Reviews are an exercise mandated in the WTO agreements, in which member countries’ trade and related policies are examined and evaluated at regular intervals. Significant developments that may have an impact on the global trading system are also monitored. All WTO members are subject to review, with the frequency of review depending on the country’s size.
For its part, China said in its submission to the trade review that over the last 20 years, it “has fully participated in the various work of the WTO, actively participated in reform of the WTO, and committed itself to supporting the WTO’s greater role in further opening up and enhancing development, and strengthening the authority and efficacy of the multilateral trading system.”
“In China’s view, the WTO is facing severe challenges: unilateralism and protectionism are currently spreading; the dispute settlement mechanism has been undermined; the multilateral negotiation process is slow and COVID-19 has dealt a heavy blow to the global economy,” China said. “As President Xi Jinping emphasized on several occasions, China supports necessary reform of the WTO and firmly safeguards the multilateral trading system.”
China pledged to “actively participate in the WTO reform, improve global governance, and promote high-quality cooperation on Belt and Road, its initiative that seeks to connect Asia with Africa and Europe via land and maritime networks with the aim of improving regional integration, increasing trade and stimulating economic growth, and increasing it economic and political influence.
The country said it will further implement the United Nations Framework Convention on Climate Change and the Paris Agreement to address climate change. China said it will strive to peak carbon dioxide emissions by 2030 and achieve carbon neutrality by 2060 to promote sustainable development.