TWN Info Service on WTO and Trade Issues (Feb19/08)
13 February 2019
Third World Network

China’s ambiguous stance in face of US pressure

Published in SUNS #8841 dated 7 February 2019

Geneva, 6 Feb (D. Ravi Kanth) – As the United States escalates pressure on China on several fronts, Beijing is taking ambiguous positions at the World Trade Organization and elsewhere, and these could hurt its own strategic trade interests as well as the rights and obligations of other developing countries, said trade envoys, who asked not to be quoted.

The US, the principal source for the lawlessness in the global trading system because of its escalating unilateral and protectionist trade measures since January 2018, has launched a multi-pronged attack on China on both bilateral and multilateral fronts.

Washington has almost decimated the WTO’s highest adjudicating body – the Appellate Body (AB) – which will become dysfunctional from 11 December 2019 if the US continues with its current stance of blocking consensus to a process for filling the AB vacancies unless its specific concerns are addressed.

The US, however, has not offered any concrete suggestions as to how members could address the US concerns.

On the bilateral front, the US is exerting maximum pressure on China, constantly threatening to impose unilateral crowbar measures such as escalating tariffs on hundreds of billions of dollars of Chinese goods as well as opaque security measures such as the arrest in Canada, of a leading Chinese telecom company executive for extradition to the US.

The unpredictable US President Donald Trump, who calls his Chinese counterpart Xi Jinping as his best friend, continues to issue mixed messages as to what the US would do against China if Beijing fails to concede to the intransigent American demands.

In his State of the Union address on Tuesday (5 February), President Trump made it unambiguously clear that for protecting American workers and businesses , China must address the trade deficit issue along with structural changes in the Chinese economy.

“We are now making it clear to China that after years of targeting our industries, and stealing our intellectual property, the theft of American jobs has to come to an end,” Trump declared in his State of the Union speech on Tuesday.

“I have great respect for President Xi, and we are now working on a new trade deal with China,” he said during his State of the Union speech in Washington on Tuesday.

“But it [the proposed deal with China] must include real, structural change to end unfair trade practices, reduce our chronic trade deficit, and protect American jobs.”

Next week, the US Trade Representative, Ambassador Robert Lighthizer, known to be a China hawk, will travel to China, with Treasury Secretary Steven Mnuchin to discuss the final contours of the proposed US-China deal, to be unveiled during the Trump-Xi meeting later this month.

President Trump, who blamed past American administrations and lawmakers “for allowing this travesty to happen” between the world’s two largest economies, said his tariff strategy is working. He claimed that the imposition of tariffs on $250 billion of Chinese goods has benefited his treasury even though it flagrantly violated multilateral trade rules.

Talks between the US and China, according to media reports, made progress, particularly on American demands for increased purchase of soybean and energy products as well as on increased market access for the US financial giants such as J P Morgan in the investment banking.

The USTR, however, maintained that the two sides still had a lot of work to do and had not even started putting the framework of a deal on paper, according to a Bloomberg report.

If the two sides fail to reach a deal by the end of this month, the US could impose tariffs of 25 per cent on Chinese goods worth $200 billion on 2 March.

The trade war has resulted in $360 billion in tariffs imposed on each other ‘s goods and has caused turmoil for financial markets and businesses, forcing them to rethink their supply chains. China has also imposed tit-for-tat tariffs on American goods and simultaneously launched trade disputes at the WTO.

On the multilateral front, the US has escalated its war with China, particularly at the WTO. At almost every WTO meeting over the past several months, the US has repeatedly hurled a barrage of criticisms against China even though the issues concerned the US failure to adhere to the WTO rules.

The US, for example, chose to attack China at the US Trade Policy Review meeting in December 2018, even though members were seeking assurances from the US that it would abide by WTO rules and not adopt allegedly illegal measures.

“The US trade policy review meeting was turned into a China-bashing meeting,” said a trade envoy who asked not to be quoted.

On 30 January, the US raised some 70 questions on China’s recent notification of its subsidies and countervailing measures.

The US sought to know why China did not address the steel subsidy programs listed in the Article 25.8 submission of the US and the EU.

The US also asked why China did not mention providing the financial support to the fisheries sector and that outlays appear to be considerable. Washington also sought to know why China failed to provide information, including financial support, extended to the “Made in China 2025” program.

Under the banner of bringing differentiation among developing countries for denying special and differential flexibilities, the US has targeted China, India, and South Africa among others at the WTO.

In its proposal on “An Undifferentiated WTO: Self-declared development stat us risks institutional irrelevance,” the US had argued that “defenders of the status quo approach by some WTO Members for determining development status – self-declaration – may argue that Members effectively agreed to it by consensus in 1995.”

“They may even claim their authorities would never have sought WTO membership if they could not self-declare as developing. Unfortunately, clinging to this approach leads to a system that prevents true liberalization while anchoring all Members to a world that no longer exists. This contradicts the goals stated by Members in the preamble to the Marrakesh Agreement Establishing the WTO.”

Therefore, according to the US, “self-declaration and its first-order consequence – an inability to differentiate among Members – puts the WTO on a path to failed negotiations.”

“It is also a path to institutional irrelevance, whereby the WTO remains anchored to the past and unable to negotiate disciplines to address the challenges of today or tomorrow, while other international institutions move forward,” the US claimed.

The US, which had blocked an agreement on non-preferential rules of origin, has now built an alliance with Australia, Brazil, Canada, Hong Kong-China, Japan, Norway, Russia, Singapore, Switzerland, and Chinese Taipei and has called on 16 January for transparency in the rules of origin.

The US also built a formidable alliance with all the developed countries an d some developing countries to start plurilateral negotiations for crafting trade-related electronic commerce rules that could include data flows, cloud computing, removal of prohibitions on retaining data in local servers, and permanent prohibition of customs duties on electronic transmissions.

Against this backdrop, China chose to join the plurilateral e-commerce initiative knowing full well that it is going to be targeted most for its existing rules in the e-commerce. By joining the initiative to launch negotiations in e-commerce, China has undermined its position and also that of other developing countries, said a trade envoy, who asked not to be quoted.

At a time when China is needed most for building a robust alliance of developing and least-developed countries to stop the relentless assault by the US and its allies on multilateral organizations, including the WTO, and seem determined to turn the WTO into a plurilateral trade body, Beijing is adopting ambiguous posit ions, said a trade envoy from a South American country.

In sum, it is clear that unless China adopts consistent positions for building a strong alliance of developing and poorest countries at the WTO, it will not be able to stop the US and its allies from denying special and differential treatment and other flexibilities that are written in the WTO rulebook for developing countries.