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TWN
Info Service on WTO and Trade Issues (Jun25/12) Geneva, 16 Jun (D. Ravi Kanth) — China on 13 June seemingly exposed the “double standards” adopted by the Trump administration on the huge surpluses that the United States has amassed in the global trade in services, inveighing against Washington’s “unilateral reciprocal tariffs” while seeking to accelerate the stalled Doha services negotiations at the World Trade Organization, said people familiar with the development. “This action blatantly violates the fundamental WTO principles, undermines the rules-based multilateral trading system, and threatens the legitimate interests of the WTO members,” China said in its statement at a meeting of the WTO’s Council for Trade in Services (CTS) on 13 June. However, the US dismissed China’s statement, seemingly pointing a finger at how China did not fulfill its WTO accession commitments while resorting to several allegedly WTO-inconsistent practices, said people familiar with the development. Several countries shared the concerns voiced by China while also criticizing China’s allegedly trade restrictive practices, said people familiar with the development. At the concluding session of the Council for Trade in Services meeting on 13 June, China appears to have exposed the “misleading” narrative advanced by Washington on goods trade while at the same time the US ignores the huge surpluses made by its services exporters year after year, according to Chinese officials. Explaining how it took “firm and justified countermeasures”, China argued that its actions against the US “reciprocal tariffs” were taken “not only to safeguard our own legitimate rights and interests, but also to protect the common interests of the international community.” China provided a brief account of its meeting with the US last month as well as the recent meeting at Lancaster House in London, suggesting that these two meetings “marked an important step forward for both sides in seeking to resolve differences through equal dialogue and negotiations, and set a positive example for resolving trade disputes while respecting multilateral rules.” US NARRATIVE China said that it placed a request on the CTS agenda to discuss the agenda item on WTO Members’ collective responsibility to strengthen and stabilize global trade in services “specifically to highlight the fundamental problems inherent in the US “reciprocal tariffs” narrative, particularly from the perspective of trade in services.” It urged members to remain “vigilant against the spillover effect of current trade frictions and market fluctuations into the services sector,” while upholding “the authority of the WTO, resolve differences through consultations in accordance with WTO rules, and push forward WTO reform to address the current challenges.” China said that the US narrative on “reciprocal tariffs is both one-sided and misleading.” According to China, “the US is the world’s largest exporter of services”, with the US services exports having “reached 1.3 trillion US dollars” in 2024, accounting for 13 percent of the global total. More importantly, America’s trade surpluses in services trade on average exceeded US$250 billion during 2010 to 2024, with the surplus approaching US$300 billion in 2024, China said. Significantly, the US not only notched “sustained long-term trade surpluses with its major trading partners,” but also “in today’s global value chains, design, R&D, production, and sales are intricately connected.” Therefore, China said that “focusing only on goods trade while overlooking services trade presents a clearly incomplete and misleading picture.” Citing the Trade in Value Added (TiVA) data from the US Bureau of Economic Analysis (BEA), in 2020, China said, “the US goods and services sector both accounted for around 50% of its total exports, but the domestic value added in services exports reached as high as 66%, and the domestic value added share in goods was only 34%.” China said the above data suggests that “the actual value added in service surplus is significantly higher than goods for the US.” “Among US service exports, industries with particularly high domestic value added ratios include information and communication technology (75%-80%), finance and insurance (70%), professional and business services (65%-70%), and intellectual property licensing (up to 80%),” China argued. China said, “the US gains very high returns in international trade and globalization by deeply participating in the highest value-added activities, such as R&D, design, branding, and sales.” THE iPHONE Giving the example of the “iPhone”, China said that iPhones assembled in China and exported are “recorded as approximately US$600-800 in its goods exports statistics.” However, China said it earns about “US$20 as assembly fees, representing roughly 3%-6% of the value added in iPhone exports,” while “Apple’s US headquarters captures around 43%-60% of the profits, roughly US$300- 500, through brand value, design, patents, and other high-value activities.” The above iPhone example, according to China, “clearly illustrates the limitations of traditional trade statistics in reflecting value creation and distribution, and highlights the critical role of services trade and high value-added activities in contributing to the national economy.” Consequently, China said that it “believes that the US is not only a winner of trade in services, but also the primary beneficiary of the entire multilateral trading system and globalization.” Beijing said Washington “cannot only look at trade in goods and ignore trade in services,” adding that “the US cannot only look at surface data and ignore the real global value chain effect.” China argued that “the US cannot only allow itself to benefit while not letting others, especially preventing developing countries to benefit from this organization.” SPILLOVER EFFECT China also highlighted the findings of the WTO’s Global Trade Outlook and Statistics report released earlier this April wherein the WTO had said that the “reciprocal tariff-induced declines in goods trade weaken demand for related services such as transport and logistics, while broader uncertainty dampens discretionary spending on travel and slows investment-related activities.” The dip in the global volume of commercial services trade is largely due to the “reciprocal tariffs”, China said. The WTO figures suggest that global trade in services is “forecast to grow by 4.0% in 2025 and 4.1% in 2026 – well below baseline projections of 5.1% and 4.8%.” It indicated that “services trade is also expected to be adversely affected by reciprocal tariffs, and that these effects are continuing to unfold.” Moreover, “the risk of trade friction in services trade is on the rise,” China said, giving the example of Washington’s intention “to impose a 100% tariff on all foreign-made films.” Even as the “US film industry has long held a dominant position in the global market, with a trade surplus of 15.3 billion US dollars in 2023, and nine out of the top ten global box office films in 2024 were Hollywood productions,” said China, the US narrative seemingly belies its claims when it is “the main beneficiary in this sector.” Arguably, China pointed out, “other members would be justified in taking the so-called reciprocal counter-measures against it.” “In this regard, the US should fully consider the potential consequences of triggering new trade frictions in the services trade sector,” China warned. RECENT US ACTIONS Highlighting the recent bilateral free trade agreements between the US and the United Kingdom and other countries as a positive example that eased tensions, China said: “A small boat can’t withstand stormy waves; only by working together can we sail steadily and far.” While “bilateral negotiations may serve as a channel to ease and resolve trade frictions,” China insisted that “such arrangements must be based on WTO rules, must not violate the basic principle of non-discrimination, and must not harm the interests of third parties.” Beijing urged all WTO members “to address trade concerns, including those related to tariffs and non-tariff barriers, within the WTO framework, and to handle trade disputes through multilateral cooperation rather than unilateral measures.” Noting that “the WTO is facing serious challenges,” China said that it sees an opportunity to “reform the WTO.” It called on members to accelerate “the reform of the WTO, with the aim to strengthen an open, stable, and predictable multilateral trading system.” According to China, the reform must include “restoring the full and effective functioning of the dispute settlement mechanism as soon as possible, advancing modern rule-making in a more flexible and inclusive manner, and promptly incorporating the JSI [Joint Statement Initiative] outcomes, such as the IFD [Investment Facilitation for Development] and E-commerce Agreement” into the Annex 4 list of plurilateral agreements under the WTO Agreement. China said it “supports dialogue and discussion on topics of interest to members – such as financial services, environmental services, AI, and good regulatory practices, and is committed to working together with all members to achieve tangible outcomes at MC14 [WTO’s 14th ministerial conference, to be held in Yaounde, Cameroon, from 26-29 March 2026].” Welcoming the “support and constructive comments and suggestions expressed by members in their interventions,” China said they underscore the “importance of the MTS [multilateral trading system] and Members’ strong willingness to stabilize and strengthen the system.” Quoting the WTO Director-General’s statement made at the Coalition of Services Industries annual summit in Washington recently, China said “the services trade is vulnerable; the increased tariffs are weighing on services trade as well”. “If higher barriers gather momentum, it would be bad for global trade, growth and development and for American firms, workers and consumers”, China cautioned. SHARP REBUTTAL In a sharp rebuttal to the US response that China is seemingly “the culprit” for the distortions in global trade since it joined the WTO in December 2001, China, in its second intervention, said that “since China’s accession to the WTO, it has consistently and faithfully adhered to WTO rules and principles.” Pointing to “China’s trade policy reviews and our active participation in, as well as faithful implementation of, the dispute settlement mechanism,” it argued that Beijing “has maintained a good record of compliance with multilateral trade rules.” It characterized the US accusations against China as once again reflecting “unfounded and unsubstantiated biases, and the usual attempt used by the US to blame others for their unilateral actions.” Furthermore, “in today’s world, it is inconceivable for a nation of China’s scale to achieve development by systematically violating the rules,” China said. “Consequently, China places greater emphasis on the multilateral trading system than any other country.” In conclusion, China said it remains “open to the concerns raised by Members, including the United States and is willing to engage in multilateral discussions regarding necessary WTO reform.” Given the “shared interest of conducting international trade on a rules-based system,” China said “this is why we call on members to respect WTO rules in bilateral consultations and call on all members to resolve their concerns by advancing the WTO reforms.” +
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