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WTO Review Calls for China to Step Up Trade Responsibility

Following a two-day review of China’s trade policy by the World Trade Organization, members called on the country to assume the increased responsibility linked to being a major player in the multilateral trading system, while China took the opportunity to take a stab at U.S. policy.

The Trade Policy Review committee commended China on its recent reform initiatives aimed at broadening market access and investment opportunities, the greater involvement of the private sector in the economy, and its commitment to fossil fuel subsidy reform. It also cited China’s ongoing reform of customs procedures and commitments in the Trade Facilitation Agreement, and several committee members lauded China on the Belt and Road Initiative and viewed it as an avenue for mutual cooperation and growth, while some urged the country to follow international best practices and adhere to a level-playing field for trade and investment opportunities.

While many also gave a nod to China’s continued liberalization of its foreign investment regime, they said it should do more to further enhance access for foreign investors. Concerns were raised regarding joint venture requirements and to what some perceived as being “inconsistent and unpredictable regulatory practices and technology transfer requirements.”

In questioning government representatives at the review hearings, countries expressed serious concerns about the “preponderant role of the state in general, and of state-owned enterprises in particular,” a report from the committee chair noted. Some also felt that government influence over China’s economy has increased in various sectors and said China should take a more market-oriented approach to investment and resource allocation.

Questions were also raised about China’s support and subsidy policies, which have been the source of WTO complaints and actions, including from the U.S. Some members noted the importance of enforcing competition policy, pointing to “continuous issues in China’s IPR regime and encouraged continued IPR protection and enforcement,” the chair report said.

There were also calls for more predictability regarding market price support and public stockpiling measures used for certain agricultural products, like cotton. Other areas of concern raised by members included cross-border data restriction, and the scope and impact of China’s cybersecurity legislation.

For its part, China said in a report prepared for the review, that since its accession to the WTO in 2001 “and through continuous reform and opening up, China has established an economic and trade system in line with both its national conditions and international prevailing rules and practices.” Representatives for China noted that the country is now the largest trading partner of more than 120 countries and regions, and that in the next five years, it will import $8 trillion worth of goods, attract $600 billion of foreign investment and invest $750 billion overseas.

“These will provide countries and regions around the world with a bigger market, more capital, more products and more business opportunities,” the country’s report said.

China remains committed to “deepening reform comprehensively and accelerating efforts to improve the socialist market economy,” according to the report, which continued on to note that the core issue of further deepening reform is to “properly handle the relationship between the government and the market, so that the market plays the decisive role in resource allocation, and the government plays its role better.”

The impact of the international financial crisis of 2008 to 2011 persists and against this background, China said development of its trade is facing “tremendous difficulties and challenges.” As such, it has been exploring new forms of business and trade models, looking into innovative developments of processing trade and implementing “proactive and effective import policies.”

“These efforts have resulted in remarkable outcomes in the development of China’s trade, with the structure further improved and the shift of driving forces accelerated,” the report noted.

While not taking note of the current tariff volleys with the U.S., China said it had made strides in lowering import tariffs. Starting in December, the country has lowered import tariffs on 187 tariff lines of consumer goods. The tariff rates dropped to 7.7% from 17.3% on average, covering clothing and footwear, food and supplements, drugs, chemical products for daily use, clothing and footwear, hats and caps, household appliances, and cultural and recreational goods.

On the issue of intellectual property, China said it has made “notable progress” in the adjudication of IPR cases in recent years. Compared with 2016, IPR cases increased 46% in 2017. In September, an IPR protection operation for foreign-invested enterprises was organized jointly by 12 government agencies that focused on fighting illegal acts of violating commercial secrets, infringing upon trademark and patents, and online piracy.

Regarding trade disputes and the WTO’s role, the report said, “China has repeatedly stressed that trade frictions and disputes should be addressed through dialogues, consultations and communications with mutual respect in accordance with the multilateral trading rules within the WTO framework.”

With a clear reference to the U.S., the report from China said, “China expresses its grave concern over the unilateral and protectionist practices of an individual WTO member which are openly in breach of the fundamental rules and spirit of the WTO. Opposing such practices firmly, China has filed complaints to the dispute settlement body of the WTO and calls for the entire WTO membership to stand in solidarity and maintain vigilance and resistance.”

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