Global trade governance and Sino-US trade friction
By Su Qingyi |
Updated: 2018-11-20 15:47
Editor's note: This article is part of the Policy Preview Report for G20 Summit in Argentina.
Su Qingyi
One important aspect of Sino-US trade friction is that there is a big divergence between China and the US in their views on China’s fulfillment of its commitments to the WTO. In its report to Congress on China’s WTO compliance in 2016, the US Trade Representative said it was a wrong decision for the US to support China’s accession to the WTO. However, in June, China released a white paper, China and the World Trade Organization, stating that China has not only fulfilled its WTO entry commitments, but also went much further in the scope and depth of opening up.
Theoretically, there should have been no disagreement on China’s WTO compliance between China and the US or any other WTO member. This is because first, the commitments China made on its WTO entry in 2001 were explicitly written in three documents: the Protocol on the Accession of the People’s Republic of China to the WTO and two reports from the working party on the accession of China to the WTO. The two reports specified China’s promises to open up its services market and the protocol defined the country’s other promises outside the realm of the services market. Second, what China has done over the years since its WTO entry should also be clear to all. There ought to be no disputes on whether China has met targets on the timetable and made improvements in a number of fields. Third, starting from 2006 the WTO has been conducting a biannual Trade Policy Review of China. Every member can check China’s fulfillment of its commitments within the WTO framework. If anyone has complaints about China, the two sides can resolve the problem within the WTO review mechanism. In fact, the WTO’s Dispute Settlement Mechanism can be employed to force China to make readjustments.
The US holds a different opinion but it is unable to specify which particular WTO rules China has violated. To illustrate my point, I would like to cite three examples from the latest report by the USTR to Congress this year on China’s WTO compliance.
The first is about industrial policy. The report accused China of limiting market access for the benefit of its domestic companies by making policies such as technology transfer, “Made in China 2025”, indigenous innovation, investment restrictions, subsidies and export restraints. But the report failed to mention which policy breached WTO rules. It had an even deeper misunderstanding of “Made in China 2025” by interpreting it as a conspiracy which supports domestic companies to steal foreign technologies and ultimately dominate international markets with Chinese products. The accusation was utterly groundless.
Another is that the report said that inadequacies in China’s IPR protection present serious barriers to US exports and investment. As a result, China was placed on the Priority Watch List in USTR’s 2017 Special 301 report. It is a typical “America First” mindset to claim that the level of IPR protection in China has a negative effect on the US. According to this logic, every WTO member is entitled to accuse other members of violating WTO rules if it faces restrictions.
The third is about the opening-up of the service sector. According to the report, the US maintained that there were still many restrictions on China’s service sector and the level of opening-up was not enough simply because the US share in China’s service import was lower than its average global market share. Obviously, the report was written around US own interests, aiming at broadening market access for its own service providers. It criticized China mainly because the service sector in China was not as open as it had expected.
On the whole, the report accused China of non-compliance mainly because China’s current policies did not meet US interests.
The USTR report believes that China’s practice was not market-driven and the WTO could not stop China’s market distorting practices. It believes this violated the US interests and inflicted losses on its domestic industries. According to the US, though WTO rules constrained part of China’s behavior, the rules did not discipline the full range of China’s behavior since they were not part of China’s WTO pledges. Therefore, the US would resort to other means to press China into making corrections.
Obviously what the US does is unwarranted. First, the US is smearing China by confusing WTO rules and its own interests in judging China’s level of opening and market practices. When most of the WTO members recognized China’s efforts, it was not wise for the US to play up this issue. Second, the US turns a blind eye to the enormous contribution China has brought to the world, including the US, and it is so selfish that it blames China for not serving US interests. Third, it was irresponsible of the US to focus only on its own interests and advocate “America First”. It is not right for the US to require other countries to make changes only to serve its own interests.
More importantly, if the US believes that China’s behavior is not disciplined by the WTO, it can work with other countries to push for WTO reform, instead of circumventing the WTO. The WTO's multilateral trading rules should be respected by all its members. So far, a number of WTO members have expressed the willingness to push for reform of the WTO, including the US, but its action does not match its words.
US complaints on China’s WTO compliance reflect its expectations on WTO reform. It holds that the WTO needs new rules to constrain China’s behavior. China is willing to participate in WTO reform to make it more adaptable to new developments in economic globalization and take it as an opportunity to push for its own reform and opening-up in relevant fields.
To sum up, although Sino-US trade friction is a challenge to global trade governance, WTO members, including China and the US, can also take it as an opportunity to transform global trade governance, especially the WTO. During this process, the G20 can play a big role as its members are very representative. If G20 shares a unanimous view on various areas of WTO reform, then it will be much easier for all members to reach a consensus.
Su Qingyi is a senior research fellow and deputy head of Department of International Trade at the Institute of World Economics and Politics, Chinese Academy of Social Sciences. The author contributed this article to China Watch exclusively. The views expressed do not necessarily reflect those of China Watch.
All rights reserved. Copying or sharing of any content for other than personal use is prohibited without prior written permission.
Editor's note: This article is part of the Policy Preview Report for G20 Summit in Argentina.
Su Qingyi
One important aspect of Sino-US trade friction is that there is a big divergence between China and the US in their views on China’s fulfillment of its commitments to the WTO. In its report to Congress on China’s WTO compliance in 2016, the US Trade Representative said it was a wrong decision for the US to support China’s accession to the WTO. However, in June, China released a white paper, China and the World Trade Organization, stating that China has not only fulfilled its WTO entry commitments, but also went much further in the scope and depth of opening up.
Theoretically, there should have been no disagreement on China’s WTO compliance between China and the US or any other WTO member. This is because first, the commitments China made on its WTO entry in 2001 were explicitly written in three documents: the Protocol on the Accession of the People’s Republic of China to the WTO and two reports from the working party on the accession of China to the WTO. The two reports specified China’s promises to open up its services market and the protocol defined the country’s other promises outside the realm of the services market. Second, what China has done over the years since its WTO entry should also be clear to all. There ought to be no disputes on whether China has met targets on the timetable and made improvements in a number of fields. Third, starting from 2006 the WTO has been conducting a biannual Trade Policy Review of China. Every member can check China’s fulfillment of its commitments within the WTO framework. If anyone has complaints about China, the two sides can resolve the problem within the WTO review mechanism. In fact, the WTO’s Dispute Settlement Mechanism can be employed to force China to make readjustments.
The US holds a different opinion but it is unable to specify which particular WTO rules China has violated. To illustrate my point, I would like to cite three examples from the latest report by the USTR to Congress this year on China’s WTO compliance.
The first is about industrial policy. The report accused China of limiting market access for the benefit of its domestic companies by making policies such as technology transfer, “Made in China 2025”, indigenous innovation, investment restrictions, subsidies and export restraints. But the report failed to mention which policy breached WTO rules. It had an even deeper misunderstanding of “Made in China 2025” by interpreting it as a conspiracy which supports domestic companies to steal foreign technologies and ultimately dominate international markets with Chinese products. The accusation was utterly groundless.
Another is that the report said that inadequacies in China’s IPR protection present serious barriers to US exports and investment. As a result, China was placed on the Priority Watch List in USTR’s 2017 Special 301 report. It is a typical “America First” mindset to claim that the level of IPR protection in China has a negative effect on the US. According to this logic, every WTO member is entitled to accuse other members of violating WTO rules if it faces restrictions.
The third is about the opening-up of the service sector. According to the report, the US maintained that there were still many restrictions on China’s service sector and the level of opening-up was not enough simply because the US share in China’s service import was lower than its average global market share. Obviously, the report was written around US own interests, aiming at broadening market access for its own service providers. It criticized China mainly because the service sector in China was not as open as it had expected.
On the whole, the report accused China of non-compliance mainly because China’s current policies did not meet US interests.
The USTR report believes that China’s practice was not market-driven and the WTO could not stop China’s market distorting practices. It believes this violated the US interests and inflicted losses on its domestic industries. According to the US, though WTO rules constrained part of China’s behavior, the rules did not discipline the full range of China’s behavior since they were not part of China’s WTO pledges. Therefore, the US would resort to other means to press China into making corrections.
Obviously what the US does is unwarranted. First, the US is smearing China by confusing WTO rules and its own interests in judging China’s level of opening and market practices. When most of the WTO members recognized China’s efforts, it was not wise for the US to play up this issue. Second, the US turns a blind eye to the enormous contribution China has brought to the world, including the US, and it is so selfish that it blames China for not serving US interests. Third, it was irresponsible of the US to focus only on its own interests and advocate “America First”. It is not right for the US to require other countries to make changes only to serve its own interests.
More importantly, if the US believes that China’s behavior is not disciplined by the WTO, it can work with other countries to push for WTO reform, instead of circumventing the WTO. The WTO's multilateral trading rules should be respected by all its members. So far, a number of WTO members have expressed the willingness to push for reform of the WTO, including the US, but its action does not match its words.
US complaints on China’s WTO compliance reflect its expectations on WTO reform. It holds that the WTO needs new rules to constrain China’s behavior. China is willing to participate in WTO reform to make it more adaptable to new developments in economic globalization and take it as an opportunity to push for its own reform and opening-up in relevant fields.
To sum up, although Sino-US trade friction is a challenge to global trade governance, WTO members, including China and the US, can also take it as an opportunity to transform global trade governance, especially the WTO. During this process, the G20 can play a big role as its members are very representative. If G20 shares a unanimous view on various areas of WTO reform, then it will be much easier for all members to reach a consensus.
Su Qingyi is a senior research fellow and deputy head of Department of International Trade at the Institute of World Economics and Politics, Chinese Academy of Social Sciences. The author contributed this article to China Watch exclusively. The views expressed do not necessarily reflect those of China Watch.
All rights reserved. Copying or sharing of any content for other than personal use is prohibited without prior written permission.
