The alliance will have to streamline their efforts and work more closely since any unilateral action by any member could undermine their core strategic group effort.
As per a source close to the discussions at hand, the European Union, the United States and Japan are making a joint effort to confront China over its excess industrial capacity and trading practices.
Trade officials from these countries are set to make a joint statement on the sidelines of the World Trade Organization ministerial meeting in Buenos Aires on this overcapacity issue, said a source speaking on the condition of anonymity as the talks on the issue are still in progress.
As yet, it remains unclear whether the statement would specifically name China.
All three economies, Brussels Washington and Tokyo have complained on how China’s subsidies its state-owned enterprises, creates state financing and investment rules that often force foreign firms to transfer strategic technologies. All three have argued that such distortions have fueled rampant overcapacity in key industries such as steel and aluminum, the end-products of which have flooded global markets forcing layoffs.
The U.S. has sided with the EU saying the WTO should not grant market economy status to China. The position is however likely to weaken western trade defenses.
“Free trade only works when we secure fair conditions for competition,” said Japanese Trade and Economy Minister Hiroshige Seko to WTO colleagues.
“Fair market conditions must not be negatively affected by measures such as market-distorting subsidies, forced technology transfer, infringement of intellectual property rights and unfair trade practices by state-owned enterprises.”
The U.S. has voiced support for efforts to strengthen WTO transparency and reporting standards in efforts aimed at exposing illegal Chinese subsidies.
U.S. Trade Representative Robert Lighthizer, in remarks to colleagues, said some members were “intentionally circumventing” their obligations and seeking unfair concessions through litigation, causing the WTO to lose its trade negotiation focus.
A report by the Financial Times has highlighted China’s intellectual property practices wherein its domestic laws have been made to force foreign partners to hand over their propitiatory technology to their local joint-venture partners.
Already the Trump administration is investigating Chinese intellectual property practices which could potentially lead to an unilateral trade retaliation under a U.S. trade law that predates the WTO’s creation in 1995.
The Trump administration is weighing the imposition of broad import restrictions on products, including steel and aluminum, citing national security grounds under a Cold War-era trade law.
However, with EU member countries, including Germany, threatening retaliation against any U.S. steel tariffs, the situation has become dicey, as Washington will have to weigh its choices with more care before taking any unilateral actions.