Ambassador Shea: Challenges Posed to the WTO by Non-Market Policies and Practices

Statement As Delivered

Ambassador Dennis Shea

WTO General Council Meeting, December 9, 2019

  1. CHALLENGES POSED TO THE WTO BY NON-MARKET POLICIES AND PRACTICES – UNITED STATES

The United States requested this agenda item to discuss an important systemic issue that is critical for the continued vitality – and the very relevance – of the WTO.  This issue is the challenges posed by non-market policies and practices to the WTO.  Indeed, the distortions caused by non-market practices threaten the goals we share for a free, fair, and mutually advantageous trading system.  Non-market practices in which governments intervene to distort competition and drive preferred outcomes to benefit certain domestic actors undermine the public’s confidence in the WTO.

It is hard to imagine our citizens supporting the WTO if the trading system cannot ensure our citizens, workers, and businesses can both compete on a level playing field, and enjoy the benefits of innovation, hard work, and fair competition.

We have known this from the time we entered into the WTO Agreement.  In the Marrakesh Declaration, the parties declaring their intention to establish the World Trade Organization stated that we wanted to promote our economies’ participation in a world trading system “based on open, market-oriented policies and the commitments set out in the Uruguay Round Agreements and Decisions”.[1]

We also collectively noted our “desire to operate in a fairer and more open multilateral trading system for the benefit and welfare of [our] peoples”.[2] And when new Members have acceded to the WTO, their protocols of accession also confirmed their efforts to embrace market-oriented policies.  Market oriented conditions were a key element to ensure that the acceding and existing WTO Members would fully benefit from reciprocal and mutually advantageous commitments.

But when the state puts its thumb – or even its fist – on the scale to distort competition and drive preferred outcomes to benefit certain domestic actors, that is unfair.  We have seen governments exercise control over the allocation of resources, such that key factors of production as land, labor, energy, and capital are not allocated or priced according to market principles, resulting in huge distortions in international trade.

We have seen State Enterprises being developed into national champions – often behind the walls of restrictive market access barriers – and then set loose on global markets.  And the non-market advantages that fueled the domestic development of State Enterprises may continue to flow – often shielded from view through lack of transparency and market discipline – and drive their international operations.

We have seen forced technology transfer practices, through which a government may obtain foreign technologies through non-market-based transactions to benefit domestic actors.

And we have seen non-market policies and practices lead to massive excess capacity, which businesses have reported in sectors as varied as steel, aluminum, cement, chemicals, refining, flat glass, shipbuilding, paper, solar panels and modules, and others.[3]

And so, we have continually seen how non-market-oriented policies and practices not only harm the interests of the particular workers or businesses directly involved.  They also undermine confidence in the world trading system as a whole and that the WTO supports fair, market oriented outcomes.

We need to return this institution to its core mission of promoting fair, market-oriented outcomes.  In the past, several of us have expressed a shared view that market-oriented conditions are fundamental to a free, fair, and mutually advantageous global trading system, leading to a level playing-field between all operators in the market.[4]  We have also in the past expressed the view that forced technology transfer policies create unfair competitive conditions for workers and businesses and undermine the proper functioning of international trade.[5]

The United States hopes that other WTO Members too share this vision.

A shared commitment to open, market-oriented policies remains critical to ensure a level playing field for our workers and businesses.  To build confidence in this organization as promoting free and fair trade, WTO Members need to discuss and reinforce our commitment to market-oriented values.

In sum, the current challenges posed to the WTO by non-market policies and practices call for us to recommit the WTO to promoting a world trading system based on open, market-oriented policies.  This recommitment is especially important as we consider WTO reform and what it may look like.  Reform will only be effective and durable if we have a shared understanding of the principles underlying this organization.

The United States will be seeking to engage with any interested WTO Member in initiatives to support market-oriented policies and outcomes and to reinforce the values we endorsed when we helped create this institution.

 

[1] Marrakesh Declaration of 15 April 1994, fifth preambular paragraph.

[2] Marrakesh Declaration, para. 2.

[3] See, e.g., European Chamber of Commerce in China, Overcapacity in China (2018).

[4] See Joint Statement on Trilateral Meeting of the Trade Ministers of the United States, Japan, and the European Union (May 31, 2018) and Joint Statement on Market Oriented Conditions (Annexed Statement 3) (“[T]he Ministers noted their citizens and businesses operate under market oriented conditions.  Such market oriented conditions are fundamental to a fair, mutually advantageous global trading system.”).

[5] See Joint Statement on Trilateral Meeting of the Trade Ministers of the United States, Japan, and the European Union (May 31, 2018) and Joint Statement on Technology Transfer Policies and Practices (Annexed Statement 2) (“The Ministers agreed that [forced technology transfer] policies and practices create unfair competitive conditions for our workers and businesses, hinder the development and use of innovative technologies, and undermine the proper functioning of international trade.”).