WTO Trade Policy Review of People’s Republic of China
Statement by Deputy Chief of Mission Christopher Wilson
on Behalf of the United States
July 20, 2016
The United States welcomes China’s delegation.
China’s accession to the WTO in 2001 brought on dramatic changes, both for China and its trading partners. China’s agreement to be bound by the internationally agreed rules of the WTO not only led to many significant revisions to China’s trade and investment regime, but also generated a greater willingness in enterprises around the world to strengthen and expand trade and investment ties with China. The results are plain to see. For many years now, China has served as a key engine of growth for the global economy, and since 2013 it has assumed the role of the WTO’s largest trader. Certainly, China benefits immensely from being part of the global trading system, and it is clear that China’s increased participation in that system also has had a tremendous and largely positive impact on China’s trade partners and the WTO as an institution.
At the time of China’s last Trade Policy Review, the United States and many other WTO Members remarked on several positive signs that China’s newly installed leaders had decided to focus on re-energizing economic reform following a prolonged period in which China’s prior leaders had emphasized the state’s role in the economy, diverging from the path of economic reform that had driven its accession to the WTO in 2001. China’s new leaders had endorsed a number of far-reaching economic reform pronouncements – not the least of which was that the market shall be “decisive” in allocating resources. Other positive policy statements followed, and it was clear that serious efforts were being made to realize needed economic reforms, even if the going was slow and difficult and frequently encountered bureaucratic resistance.
Over the past year, however, as growth in China’s economy has slowed, the United States has sensed an increasing reluctance among China’s economic planners to pursue further reforms. In addition, more and more U.S. enterprises have been expressing concern about a less welcoming business and regulatory environment for foreign enterprises. We are hopeful that these developments are temporary and that once China becomes more comfortable with the “New Normal” of slower but still healthy economic growth, it will resume a trajectory toward an economy that is more open and market-oriented and a business and regulatory environment that is more transparent, predictable and welcoming for foreign traders and investors.
In our view, a truly open and market-oriented economy and a truly transparent, predictable and welcoming business environment are not achievable so long as the state continues to have a heavy hand in the country’s economic development and the state continues to pursue industrial policies guiding, supporting and favoring domestic industries, particularly ones dominated by state-owned enterprises. Continued state intervention also will prevent China from realizing the prosperity that its people deserve, and can achieve, if domestic industries are allowed to compete on a level playing field where the market dictates outcomes, nor will China itself be able to assume the role of a full-time responsible stakeholder in the global trading system. State intervention will never be as efficient as the market in creating opportunities for real and sustained advancement, and it can lead to unintended results. A clear example can be found in the various Chinese government measures supporting China’s steel and aluminum industries over the past several years. These measures fueled significant capacity expansion at times of weak or falling demand and contributed heavily to today’s severe global excess capacity.
As we consider the Secretariat’s Report, we see several examples of Chinese government policies that attempt to skew the playing field in favor of domestic enterprises. These include: China’s continued use of export quotas and export duties on a large number of raw material inputs; the manipulation of value-added tax rebates on exports of steel and a variety of other manufactured products; low tariff-rate quota fill rates for many bulk agricultural commodities despite strong demand for these commodities in the China market; and prohibitions on foreign investment in the production, distribution and exhibition of movies, even though China’s movie market is the second largest in the world and is projected to become the largest market in only a few more years. The “Made in China 2025” initiative also falls into this same category. While many of its guiding principles are constructive and should help Chinese manufacturers better address the challenges they face, it also identifies domestic content goals, including the ultimate goal of increasing domestic content of core components and materials to 70 percent by 2025. These concerns and an array of other U.S. concerns, such as inadequate IPR protection and enforcement, discriminatory “secure and controllable” ICT policies, technology transfer initiatives, widespread and massive subsidization, trade remedy abuses, restrictions on services market access and problematic sanitary and phytosanitary measures, are described in detail in annual reports published by the Office of the U.S. Trade Representative.
Compounding the challenges underlying these various concerns is China’s failure to implement important transparency commitments that China made to the WTO membership when it acceded. For example, in numerous instances, a Chinese regulator has issued a problematic measure without an opportunity for the public to comment on a draft of the measure and without the required advance notification to the WTO. China also committed to make available in one or more WTO languages all laws, regulations and other measures pertaining to or affecting trade in goods, services, trade-related intellectual property rights or the control of foreign exchange; yet, China still does not routinely make available the required translations. China also has a poor record of notifying its subsidies.
The United States is working bilaterally with China to resolve these concerns through cooperative engagement where possible. We commend China for its willingness to engage with us through numerous high-level dialogues, working groups and other meetings. We also value our relationships with China’s team here at the WTO and welcome China’s work at the WTO. We welcome signs that China is attempting to become a more active leader. China has notified its readiness to implement the Trade Facilitation Agreement. China participated in the successful negotiations to expand the Information Technology Agreement, and we hope to see its implementation of that important agreement very soon. At the recent G20 Trade Ministers Meeting, China committed to the goal of concluding an ambitious, future-oriented Environmental Goods Agreement this year. This institution will increasingly depend on this kind of Chinese leadership, as WTO Members rightfully have high expectations of its top traders. As one of those top traders, the United States is committed to working with China with a shared and consistent sense of responsibility.
We wish China a successful trade policy review.