Friction between US and China undermines efforts to resolve global trade disputes

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WASHINGTON — Rising tensions between the United States and China are hampering efforts by members of the World Trade Organization to restore its ability to resolve international trade disputes.

Along with China’s entry into the WTO 20 years ago this month came the expectation that Beijing would gradually embrace Western free trade practices.

But rather than integrating China into the world trading system, the WTO is accused of allowing Beijing to flood the market with cheap and subsidized products.

With the growing division among its members, the group has struggled to enforce existing rules, let alone update them to reflect changes in the global economy over the past decades.

The United States accused China of failing to honor its commitments, including failing to protect intellectual property and throwing cheap steel into the global market, which Beijing denied.

A recent sign of friction spilling over to the WTO’s dispute settlement function, the United States has since 2019 blocked new appointments to its seven-judge appeals body that examines trade disputes. This is the core function of the group, designed to render final judgments in trade disputes between the 164 members of the WTO.

The United States says it acted because the tribunal has an overbreadth history, although many of its specific complaints relate to its disputes with China. Lower committees still hear cases brought by members, but appeals from those unhappy with the initial decisions have nowhere to go.

Countries including Australia and Mexico are pressing the United States to lift their freeze, and U.S. Trade Representative Katherine Tai said the United States has entered into dialogue with some members . But the United States and China are complaining that the other side has not changed its practices even after WTO judges asked it to do so.

The United States and other Western countries accuse China of flooding world markets with products such as steel; a steel company near Shanghai.


Photo:

Yang Mujun / Sipa Asia / Zuma Press

“We have had victories in every case that has been decided, but many of them have been hollow,” David Bisbee, US representative to the WTO in Geneva, said in a statement as the WTO released. a review of China’s trade policy. He was referring to cases the United States has brought against China over the years. “Even when China changed specific practices that we challenged, China often did not change underlying policies, and meaningful reforms from China remained elusive.”

China said the United States has also failed to implement the agreed changes in cases involving the United States’ use of anti-dumping duties on Chinese products.

One example cited by China is a dispute in 2011 over the United States’ restrictive import measures against what it considered to be state-owned enterprises. The Appellate Body sided with China’s narrow interpretation of these entities, making it more difficult for the United States to use such measures, including anti-dumping duties.

“The implementation by the United States has not been satisfactory for China,” said Tu Xinquan, dean of the China Institute for WTO Studies at the University of International Trade and Economics from Beijing. “As a result, Chinese companies are still facing difficulties. “

The U.S. Trade Representative’s office did not comment immediately on the matter.

Tensions between the United States and China increased under the Trump administration when it imposed tariffs of tens of billions of dollars on Chinese imports each year to reduce the United States’ trade deficit with the country.

Frictions continued under President Biden, who extended the former administration’s tariffs on many Chinese goods, and this week announced a diplomatic boycott of the 2022 Winter Olympics in Beijing.

China’s admission to the WTO took place in 2001 with the support of the United States. But over time, friction grew between the two sides and the two countries used the WTO to resolve their trade disputes.

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Of the 22 complaints filed by China at the WTO, 16 were against the United States for poultry, light trucks and massive tariffs imposed by the Trump administration, among others.

The United States has filed 27 complaints against China since 2001 on issues ranging from auto parts, rare earths to government subsidies. More generally, the United States and other Western countries accuse Beijing of flooding world markets with products such as steel and solar panels through state-owned enterprises and subsidies.

“The WTO system was never designed to discipline an economy that is contrary to it,” said Charlene Barshefsky, a former US trade representative who led the negotiations leading to China’s entry into the group. “In the case of China, a state-led model is totally incompatible with the market, incompatible with the rule of law, incompatible with transparency, incompatible with all individual WTO rules.

The Chinese Embassy in Washington did not immediately respond to a request for comment.

US companies and government officials cite a case involving electronic payment services as an example of China’s failure to comply with WTO dispute rulings.

“The WTO system was never designed to discipline an economy that runs counter to it.”


– Charlene Barshefsky, former US Trade Representative.

A WTO panel ruled in 2012 that China had used “pervasive and discriminatory measures” to limit access to Chinese credit and debit card markets for US companies such as Visa, Mastercard and American Express.

The panel also found that Beijing had ensured market dominance for its own company, China Union Pay. Despite its agreement to deal with the complaint, it was not until 2020 that China allowed the entry of American financial services companies into its market.

China also agreed to make changes to its policies after the Appellate Body found in 2009 that Beijing’s policies on intellectual property rights were inconsistent with its WTO obligations, giving a victory to the United States which accused China of failing to protect and enforce copyright in films, music and software. .

More than a decade later, intellectual property rights are among the biggest points of contention between the two economies.

“The WTO has said very clearly that intellectual property rights are protected. Yet 85% of counterfeits entering any country come from China, “said Craig Allen, chairman of the US-China Business Council, adding that it” seriously distorts the standard, principles and institutional procedures of the WTO. “.

Ms. Tai, the U.S. Trade Representative, has expressed in recent weeks the willingness of the Biden administration to engage in conversations to overhaul the system.

“Although we have already started working with some members, I want to hear from others on how we can move forward,” she said.

Mr Tu of the China University of International Affairs and Economics said he did not hope the United States would engage in serious efforts to redress the Appellate Body, which he considers as a “professional and independent function” which has served many members.

He said China shared the United States’ position that the Appellate Body needs to be reformed and that measures such as increasing the number of judges and extending their terms from the current four years will improve. the efficiency of the court, for the benefit of all members, including the United States and China.

Write to Yuka Hayashi at [email protected]

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