The WTO can’t stop China’s bad behavior, USTR reports

BY: STEVEN OVERLY | 02/24/2023 07:35 PM EST

The World Trade Organization has largely failed to curtail China’s unsavory market practices and the U.S. and its allies must form separate coalitions in order to force change from Beijing, the Biden administration said Friday in a new report.

The comments were part of a report on China’s compliance with WTO rules that the Office of the U.S. Trade Representative produces for Congress each year, often repeating perennial concerns about China’s use of industrial subsidies and state-run enterprises to harm trade partners.

“It is unrealistic to believe that actions at the WTO alone will be sufficient to force or persuade China to make fundamental changes to its economic and trade regime,” the report states.

“The WTO system was designed for countries that are truly committed to market principles, not for an economically powerful country determined to maintain a state-led, non-market system, and China has demonstrated no willingness to change its approach in any meaningful way,” it continues.

WTO shortcomings: The WTO has not negotiated new rules that would compel China to seriously address other countries’ trade grievances because any agreement would require the approval of all 164 members — China included, USTR argues.

Not only would Beijing reject regulations that run counter to its current economic system, but its involvement in prior WTO negotiations has made those talks more difficult and less fruitful. “China has a long record of not pursuing ambitious outcomes at the WTO.”

“While the WTO still has a significant role to play, enforcement of WTO rules has become less significant and solutions independent of the WTO are necessary, including solutions pursued through bilateral engagement and the use of domestic trade tools,” the report concludes.

Other avenues: The U.S. has sought to address its concerns with China unilaterally, USTR notes in the report, most recently with former President Donald Trump’s Phase One Agreement with Beijing — which sought to strengthen China’s intellectual property protections and expand U.S. access to its financial and agricultural markets. But the Chinese government did not uphold key parts of that deal, including commitments to purchase an additional $200 billion in American goods and services.

The Trump administration also imposed hefty tariffs on a long list of Chinese products, but those have done little to curb China’s behavior. The Biden administration has maintained the tariffs, despite a push by some business interests to lift them.

“While substantial Section 301 tariffs remain in place on imports from China, we are not seeking to build a wall between the United States and China,” the report states. “Indeed, even if that were possible, it would not address the problems posed by China.”

The Biden administration has instead pursued multilateral initiatives outside of the WTO, the report notes, pointing to such efforts as the U.S.-EU Trade and Technology Council, U.S.-Japan Partnership On Trade and Indo-Pacific Economic Framework. And increasingly, other countries are coming to share U.S. concerns, USTR writes.

“While each trading partner is impacted differently by China, there is also a growing consensus that this situation will not change unless new strategies are pursued,” the report states.