USTR faults China for continued WTO obligation shortfalls

The White House’s Office of the U.S. Trade Representative (USTR) told congressional lawmakers in its annual assessment that China’s compliance with World Trade Organization (WTO) obligations “remains poor.”

The USTR submits the report to Congress annually as a requirement of the 2000 U.S.-China Relations Act. China officially joined the WTO on Dec. 11, 2001.

Accession to the WTO required China to remove trade barriers and open its market to foreign companies and their exports, including upholding obligations to more than 20 multilateral WTO agreements.

“China has continued to embrace a state-led, mercantilist approach to the economy and trade, despite WTO members’ expectations — and China’s own representations — that China would transform its economy and pursue the open, market-oriented policies endorsed by the WTO,” said the 194-page 2019 USTR Report to Congress on China’s WTO Compliance, released Friday.

“The costs associated with China’s unfair and distortive policies and practices have been substantial,” the report added. “Companies in economies disciplined by the market cannot effectively compete with both Chinese companies and the Chinese state.”

USTR said China’s interference in its economy has increased since the country’s current political leaders came to power in 2013.

The U.S. believes the problems with China’s lack of WTO compliance will worsen with the country’s Made in China 2025 industrial plan, through which the Chinese government aims to invest $500 billion in 10 manufacturing sectors, including advanced information technology, robotics, aircraft, marine vessels, rail equipment, new energy vehicles, electric power generation, agricultural machinery, new materials, pharmaceuticals and medical devices.

“Based on the recent history of the steel and aluminum industries, China’s non-market distortions in these newer sectors will likely result in oversupply, leading to loss of jobs and production in market economies,” USTR warned.

While the U.S. has prevailed in a couple dozen trade disputes with China before the WTO, the USTR complained that these actions often come at significant expense to the U.S. government and result in China resisting to resolve the matters.

“Faced with these realities, [the Trump] administration announced two years ago that it would be pursuing a new, more aggressive approach to the United States’ engagement with China,” USTR said in its report.

The report touted the Trump administration’s signing of the Phase One trade agreement with China on Jan. 15, which requires China to make reforms involving U.S. intellectual property, technology transfers, agriculture commodity purchases, financial services and currency adjustments.

USTR said it’s ready to engage China on a Phase Two agreement to address China’s excess industrial capacities, subsidies, state-owned enterprises, cybersecurity, cross-border data transfers, pharmaceuticals and medical devices, competition law enforcement, and regulatory transparency and standards.