New WTO rules unlikely to rein in China: USTR report

Economies across the globe have come to realise that China’s non-market economic policy and trade structures as well as its state-led, mercantilist approach to trade, is skewed and lopsided; it benefits only China, to the detriment of its trading partners.

An annual report by the U.S. Trade Representative’s office to the U.S. Congress has concluded that efforts aimed at introducing new rules at the World Trade Organization (WTO) to rein in China’s “mercantilist” trade practices are likely to be futile.

The annual report on China’s WTO compliance is, at least in part, seen as a justification for the six-month long U.S.-China trade war, aimed at forcing China to change its economic model.

The report also underscores the feeling of continued frustration from the U.S. on WTO’s inability to curb, China’s trade-distorting non-market oriented economic policies. Significantly, it offered little hope of change of ground reality in the near future.

“It is unrealistic to expect success in any negotiation of new WTO rules that would restrict China’s current approach to the economy and trade in a meaningful way,” reads the USTR report.

Some U.S. allies, including Canada, the European Union and Japan, which are also frustrated with pressures created by China’s economic policies, have begun talks on the first potential changes and modernization of WTO rules since it was founded in 1995.

However, since any new rule or changes to existing rules must be agreed upon by all 164 WTO member nations, and given that past efforts at such an attempt has stalled, the USTR opined it is “highly unlikely” that China would agree to new disciplines targeting changes to its trade practices and economic systems.

APPROACHING DEADLINE

The report reveals very little on the ongoing negotiations between the United States and China, despite an approaching deadline of March 2 after which U.S. tariffs on Chinese imports are likely to rise to 25% from their current 10%.

Last week, there were high-level intense talks between U.S.-Chinese officials on U.S. demands for structural policy changes. These include enforcing intellectual property protections, ending cyber theft of trade secrets, halting the forced transfers of American technology to Chinese firms and reining in industrial subsidies.

Although U.S. President Donald Trump has earlier stated his desire to meet his Chinese counterpart to hammer out a trade deal, the USTR report makes it lucidly clear thar there remains a mountain load of work before the difference between the two sides can be bridged.

The USTR report cited the key structural issues in the talks, which also include China’s new cybersecurity law and discriminatory regulatory practices, as examples of how China aids domestic firms at the expense of foreign competitors in ways that escape WTO rules, adding that China has become “a unique and pressing problem for the WTO and the multilateral trading system.”

To this end, USTR said the United States intends to “hold China accountable” for its adherence to existing WTO rules and “any unfair and market-distorting trade practices that hurt U.S. workers, businesses, farmers or ranchers.”

It further reads, “Until China transforms its approach to the economy and trade, the United States will take all appropriate actions to ensure that the costs of China’s non-market economic system are borne by China, not by the United States”.

The report also highlighted that “China retains its non-market economic structure and its state-led, mercantilist approach to trade, to the detriment of its trading partners”.

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