[CTC] IUST: USTR says U.S. ‘erred’ in supporting China’s WTO entry

[Dolan, Mike]

This report vindicates our original opposition to PNTR and China’s accession to the WTO: https://ustr.gov/sites/default/files/files/Press/Reports/China%202017%20WTO%20Report.pdf … this is pretty big news.

https://insidetrade.com/daily-news/ustr-says-us-%E2%80%98erred%E2%80%99-supporting-china%E2%80%99s-wto-entry-blasts-beijing
USTR says U.S. ‘erred’ in supporting China’s WTO entry; blasts Beijing
The U.S. decision to support the terms of China’s accession to the World Trade Organization more than 20 years ago was a mistake, the Office of the U.S. Trade Representative says in its annual report on China’s compliance with its WTO commitments.
The report</node/161667> blasts China for maintaining a state-led economy that embraces policies at odds with fundamental WTO commitments and principles.
“China largely remains a state-led economy today, and the United States and other trading partners continue to encounter serious problems with China’s trade regime,” states the 161-page annual report to Congress. “Meanwhile, China has used the imprimatur of WTO membership to become a dominant player in international trade."
“Given these facts, it seems clear that the United States erred in supporting China’s entry into the WTO on terms that have proven to be ineffective in securing China’s embrace of an open, market-oriented trade regime,” the report states.
The report, published on Jan. 19, largely tracks with what USTR Robert Lighthizer said about China last September, in remarks at the Center for Strategic and International Studies. The USTR said then that the WTO cannot handle</node/160304> the scale of Beijing’s mercantilist economic and industrial policy, so the U.S. must use every tool available to it to defend itself.
“Furthermore, it is now clear that the WTO rules are not sufficient to constrain China’s market-distorting behavior,” the report states. “While some problematic policies and practices being pursued by the Chinese government have been found by WTO panels or the Appellate Body to run afoul of China’s WTO obligations, many of the most troubling ones are not directly disciplined by WTO rules or the additional commitments that China made in its Protocol of Accession.”
USTR also warns against viewing dispute settlement at the WTO as a panacea for resolving China’s non-market policies.
“The notion that our problems with China can be solved by bringing more cases at the WTO alone is naïve at best, and at worst it distracts policymakers from facing the gravity of the challenge presented by China’s non-market policies,” the report states. “While the WTO agreements do include a dispute settlement mechanism, this mechanism is not designed to address a situation in which a WTO member has opted for a state-led trade regime that prevails over market forces and pursues policies guided by mercantilism rather than global economic cooperation.”
The report also sheds light on U.S. trade policy priorities for China. It says the U.S. will continue to pursue some WTO cases against China that were initiated by previous administrations and “take all other steps necessary to rein in harmful state-led, mercantilist policies and practices pursued by China, even when they do not fall squarely within WTO disciplines, as evidenced by USTR’s ongoing” Section 301 probe into China’s intellectual property practices.
The White House is considering the creation of a reciprocal investment regime</node/161621> with China following the Section 301 investigation, sources have told Inside U.S. Trade. Investment restrictions appeal to some administration officials because such measures are largely not covered by WTO agreements.
USTR’s report also provides a sneak peek into the meat of the 301 probe. “It seems clear, however, that China’s regulatory authorities do not allow U.S. companies to make their own decisions about technology transfer and the assignment or licensing of intellectual property rights, but instead continue to require or pressure foreign companies to transfer technology as a condition for securing investment or other approvals,” the report states.
As it has in prior reports, USTR lists a series of complaints and delves into detail in each of them. Priority areas for USTR include what it calls China’s industrial policy to promote domestic industry and snuff out foreign competition, including the Made in China 2025 program; subsidies in a slew of sectors; investment restrictions; excess capacity; secure and controllable information and communication technology policies; cybersecurity and data transfer restrictions; IP enforcement issues; export restraints; unique national standards; agricultural policies that block U.S. market access; restrictions on services market access; and transparency problems.
The report slams China for improperly imposing antidumping and countervailing duties without sufficient evidence as retaliation for trade remedies other countries impose on Chinese products. USTR also blasts China for using its Antimonopoly Law</node/154601> to protect domestic champions and industries from foreign competition.
At the WTO, the U.S. will continue to pursue disputes over China’s agricultural domestic support, its administration of agricultural tariff rate quotas, export quotas and export duties on 11 raw materials, duties on broiler chicken products, electronic payment (epay) services barriers, and film market access issues, the report states.
A panel decision in the agricultural market access support dispute is expected in 2018, according to the report. In the TRQ dispute a panel has been established but not composed. The U.S. will continue to monitor China’s elimination of duties in the raw materials dispute.
A compliance panel report this week in the broiler chicken dispute found China has not complied</node/161633> with previous rulings and recommendations. In the epay dispute, meanwhile, the U.S. will continue to push for full Chinese compliance. And the U.S. and China are holding negotiations over new market access for U.S. films in China in line with the settlement in that dispute, the report states.
Outside of the WTO, USTR blasts China for not following through on a range of commitments, both broad and specific, that Chinese officials have made at bilateral dialogues over the past decade.
“These bilateral efforts largely have been unsuccessful -- not because of failures by U.S. policymakers, but because Chinese policymakers were not interested in moving toward a true market economy,” the report states. USTR documents what it says are Chinese failures to follow through on a range of pledges, from commitments made to the Trump administration under the 100-day plan last year to promises made to the Obama administration not to engage in mercantilist ITC and tech transfer policies.
The report states that the Trump administration has declined to engage with China on a one-year plan under the Comprehensive Economic Dialogue that it created because it does not believe doing so would yield “fundamental” changes to China’s trade policy.
China has failed to follow through completely on commitments it made to the Trump administration on market access for beef, biotechnology and electronic payment services, the report states. China has also not eased foreign investment restrictions in banking, securities, fund management, asset management, futures and life insurance services sectors, nor has it reduced its auto tariff as it unilaterally said it would last November after President Trump met with Chinese President Xi Jinping in Beijing, according to the report.
USTR also blasts China for not embracing what it calls the “‘new era’ contemplated by WTO members, where ‘global economic cooperation’ reflects the widespread desire to operate in a fairer and more open multilateral trading system and where all WTO members pursue open, market-oriented policies,” the report states.
“Unfortunately, the ‘new era’ contemplated by China is one that is based on ‘socialism with Chinese characteristics,’ as recently enshrined in the Constitution of the Chinese Communist Party,” it states. -- Jack Caporal (jcaporal at iwpnews.com<mailto:jcaporal at iwpnews.com>)
Related News | USTR</topic/USTR> | China</topic/China> | World Trade Organization</topic/World-Trade-Organization> | Other WTO News</topic/Other-WTO-News> |

Mike Dolan
Teamsters



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