Info Service on WTO and Trade Issues (Jan18/04)
24 January 2018
Third World Network
US likely to project China as biggest threat to WTO at Davos meet
Published in SUNS #8605 dated 23 January 2018
Geneva, 22 Jan (D. Ravi Kanth) - The United States is likely to project
China as the biggest threat to the World Trade Organization and the
global trading regime at the World Economic Forum's annual Davos meeting
beginning on Tuesday (23 January), said trade envoys familiar with
The US President Donald Trump who is scheduled to address the world
business, financial, and political elite at Davos on Friday (26 January)
could try to drive home the message that there will be global trade
chaos if China is allowed to continue with its "state-led"
industrial policies based on a "mercantilist" framework.
The US could also try to promote a united front of all G7 and other
countries to counter the Chinese threat on e-commerce and other issues
but not investment facilitation or disciplines for micro, small, and
medium enterprises (MSMEs), said a trade envoy from an industrialized
country, who asked not to be quoted.
Ahead of the Davos meeting, the US Trade Representative, Robert Lighthizer,
launched a broadside against China on trade issues, painting Beijing
as a serial violator of commitments it undertook to join the World
Trade Organization, including the dangers it posed because of "state-led
In a 145-page report to the US Congress "on China's WTO Compliance"
issued on Friday (19 January), the United States Trade Representative
(USTR) charged that "China has used the imprimatur of WTO membership
to become a dominant player in international trade."
The US, according to the USTR, "erred in supporting China's entry
into the WTO on terms that have proven to be ineffective in securing
China's embrace of an open, market-oriented trade regime."
"The principal beneficiaries of China's policies and practices
are Chinese state-owned enterprises and other significant domestic
companies attempting to move up the economic value chain," the
Consequently, "markets all over the world are less efficient
than they should be," it alleged.
Despite repeated assurances "for fundamental shifts in the direction
of Chinese policies and practices," China ensured that its "regulatory
authorities do not allow US companies to make their own decisions
about technology transfer and the assignment or licensing of intellectual
China resorts to pressuring "foreign companies to transfer technology
as a condition for securing investment or other approvals," the
Among other factors, China's continued surge in trade surplus with
the US which touched US$350 billion in 2016 and is projected to go
up to US$365 billion in 2017 was made possible because of China's
WTO accession, according to the USTR.
Therefore, the USTR said, Washington will take "all other steps
necessary to reign in harmful state-led, mercantilist policies and
practices pursued by China, even when they do not fall squarely within
WTO disciplines, as evidenced by USTR's ongoing investigation of Chinese
technology transfer policies, and practices pursuant to Section 301
of the Trade Act of 1974."
"The notion that our problems with China can be solved by bringing
more cases at the WTO alone is naive at best, and worst it distracts
policymakers from facing the gravity of the challenge presented by
China's non- market policies," the USTR said.
The Uruguay Round Agreements and Decisions, according to the USTR,
enjoined on WTO members to follow "open and market-oriented policies"
but not adopt "state-led economic policies," nor "pursue
mercantilist trade policies."
The WTO's dispute settlement mechanism, according to the USTR, is
"not designed to address a situation in which a WTO member has
opted for state-led trade regime that prevails over market policies
and pursues policies guided by mercantilism rather than global economic
The dispute settlement system is not "effective in a trade regime
that broadly conflicts with the fundamental underpinnings of the WTO
system," the USTR maintained.
Significantly, the Davos meeting could bring about convergence among
G7 countries - the US, Japan, Germany, France, United Kingdom, Italy,
and Canada - on how to counter China on the global economic stage.
Even President Trump might tone down his America First trade policies
and launch a frontal attack on China at Davos to shift the global
The USTR's report offers a bleak scenario on China's aggressive "mercantile"
trade policies, particularly stemming from "Made in China 2025"
policy targeting 10 strategic industries.
China, according to the report, is targeting "industries including
advanced information technology, automated machine tools and robotics,
aviation and spacecraft equipment, maritime engineering equipment
and high-tech vessels, advance rail transport equipment, new energy
vehicles (NEVs), power equipment, farm machinery, new materials, bio-pharmaceuticals
and advanced medical device products."
Based on promoting "indigenous innovation," the Chinese
strategy aims "to replace foreign technology with Chinese technology
in the Chinese market through any means possible so as to ready Chinese
companies for dominating international markets," the USTR report
Further, "Made in China 2025 seeks to build up Chinese companies
in the 10 targeted, strategic industries at the expense of, and to
the detriment of, foreign industries and their technologies through
a multi-step process over 10 years."
Clearly, concern about China's business and industrial policy framework
might bring convergence among the G7 leaders.
"If he [Donald Trump] can persuade the Davos audience that all
he is doing is demanding a level playing field, he might get a positive
reception," says Gideon Rachman of Financial Times on Sunday
The US will get support from the EU, Japan, and other countries if
it decides to "pursue China through the WTO", Rachman argued.
The USTR is also going to issue reports on other countries including
India with which it has a trade deficit.
"If he seems inclined to take on all-comers, he [Trump] risks
creating an anti-US coalition on trade," according to Rachman.
The WEF has co-opted for this year's annual meet at Davos, world political
leaders such as Prime Minister Narendra Modi of India, President Emmanuel
Macron of France, and Germany's enfeebled chancellor Angela Merkel.
Finally, the WEF has co-opted President Donald Trump just at a time
when the American president is engulfed by domestic political crisis
following the publication Fire and Fury by Michael Wolff.
"Co-opting "difficult" political figures is the name
of the Davos game," writes Gideon Rachman of Financial Times
The WEF which has in the past rolled out the red carpet for figures
as diverse as the presidents of Russia and Iran is eager to embrace
Mr Trump. Klaus Schwab, long-time WEF president, is an expert in extravagant
flattery and Mr Trump is known to respond well to that, Rachman says
in his article, "Trump calls the tune at Davos party - US president's
speech may prove a turning point for the global elite."
A Reuters news agency story "Europe readies riposte to Trump's
"America First" push in Davos" on Sunday argued that
"European leaders will be out in force at the World Economic
Forum in Davos this week to defend multilateralism before US President
Donald Trump arrives to deliver his "America First" message."
In short, the Davos meeting this year, which will also witness an
informal trade ministerial meeting on Friday (26 January), would indicate
how the Quad - the US, the European Union, Japan, and Canada - are
going to try to shape the trade agenda at the WTO.
It remains to be seen whether the US will support the EU, Japan, and
Canada on plurilaterals for investment facilitation, disciplines for
MSMEs, and commencing dialogue on trade and gender issues.
Ironically, the US which pursued state-led industrial and economic
policies crafted by Alexander Hamilton and later resorted to aggressive
"mercantilist" policies after the Spanish war in 1898 in
the past century is today pointing fingers at China, said another
trade envoy who asked not to be quoted.