U.S. Trade Rep. Katherine Tai had a couple exchanges at last week's Senate Finance Committee hearing in which she suggested that WTO complaints against China had not been effective, and for that reason the Biden administration had moved away from filing these complaints. I disagree with her on the effectiveness of these WTO complaints. I'll first set out the Senate exchanges, then I'll comment on the issue in more detail.
Here's an exchange between Tai and Senator John Cornyn (R-TX) (1:08:10):
Cornyn: Has the administration taken any enforcement actions against China?
Tai: The administration absolutely has moved forward with an aggressive set of policies against China across the administration.
Cornyn: Have you taken any enforcement actions?
Tai: I suppose it depends on what you mean by enforcement actions.
Cornyn: I mean enforcement actions.
Tai: With respect to export controls on semiconductors, ... you've seen enforcement there.
Cornyn: I'm not just talking about talk, I'm talking about actual enforcement actions against China.
Tai: I think that those actions have certainly moved markets.
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Cornyn: [China is] accessing the World Trade Organization seeking to dispute provisions of the Inflation Reduction Act. Meanwhile, China continues to subsidize and prefer their products by spending a lot of money, making it much harder for American businesses to compete. Has the administration taken any sort of enforcement actions against China at the World Trade Organization or anywhere else to go after them? They are taking advantage of that access to the World Trade Organization against us. But are we doing it against them?
Tai: We have in the past taken lots of actions against China at the WTO.
Cornyn: When was the last time you did it?
Tai: Well, let me put it this way. Let me answer your original question.
Cornyn: When did you do it?
Tai: Well, it's been ineffective, Senator Cornyn, which is why we no longer do the things that aren't effective. We are focused on being effective. ... We initiated an enforcement action today under Section 301 on Chinese non-market policies and practices affecting the maritime industry and shipbuilding industries. So yes, we have, this morning.
And here's an exchange between Tai and Senator Marsha Blackburn (R-TN) (1:38:59):
Blackburn: I want to talk to you about enforcement actions against China, because I hear a lot about this in Tennessee. Theft of intellectual property, the genocide, the crimes against the Uyghurs, what all is happening in Xinjiang, the military aggression against Taiwan, and of course, you've got TikTok, and what we're seeing there. So I know you've just announced the 301 on shipbuilding. What other enforcement actions have you taken against China?
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Tai: Every single day what we do, whether it's directly vis-a-vis China, or it's work that we are doing with other partners and allies ...
Blackburn: OK, but no new cases against China at the WTO on your watch.
Tai: I mean, cases against China at the WTO have not netted us structural change in China.
Blackburn: Okay, so you're not going after them, and you failed to use the dispute settlement mechanisms under the Phase One agreement, correct?
Tai: The Phase One agreement enforcement, we absolutely are advancing in terms of raising the issues with China. We have done that. Right now, I think probably the most important aspect of China enforcement, set aside the 301 that we just started today on shipbuilding, comes to the review of the existing tariffs and how we can make them more effective and strategic.
With regard to the effectiveness of WTO complaints against China, I looked at this in a paper with Jim Bacchus and Huan Zhu a few years ago, and our conclusion was that the evidence points to WTO complaints against China being pretty effective at inducing changes to China's practices and policies (about as effective as complaints against the U.S. or the EU anyway -- no one is perfect here). Weihuan Zhou has also looked at this issue, and he reached a similar conclusion. (By contrast, from what I can tell, unilateral approaches that some people appear to believe will induce change in China, such as Section 301 or AD/CVD, have not had much impact on China's practices and policies.)
When I point to these conclusions on the effectiveness of WTO dispute settlement, some people try to push back in very general terms, but they never offer anything concrete. They have an impression or a sense that the WTO complaints were ineffective, but no specific contradictory details on the overall results. Of course, they may point to a particular case that didn't get a good outcome, but there are cases like that in relation to the U.S. and the EU as well. What I'm talking about here is the broad impact across all the cases. It's true that you don't always get something, but you often do. If someone thinks they have evidence that contradicts me on this overall impact, please feel free to offer it!
In terms of getting "structural change" in China through WTO dispute settlement, here I would say that someone would need to bring a structural changes-type complaint -- e.g., a complaint invoking para. 46 of China's working party report -- in order to get that kind of change.
It's also worth noting here that the Biden administration's lack of WTO enforcement is not just about China, as the U.S. hasn't brought any WTO complaints against anyone under the Biden administration. Obviously, the U.S. blockage of Appellate Body appointments plays a role in this, and the absence of recent U.S. complaints is, at least in part, tied to that. But there are a range of compromises that could satisfy the U.S. concerns about the Appellate Body (or it could join the MPIA) if it wanted to use WTO dispute settlement.
And finally, on enforcement of the Phase One agreement, I have not come across any public information on how this enforcement mechanism has been used. As I've written, the Phase One enforcement mechanism is not likely to be effective at inducing policy change, because it just internationalizes Section 301 tariffs. Nevertheless, it would be interesting to hear the details of what USTR has been doing with this mechanism. I'd like to see more in depth questioning from members of Congress on this point in order to get USTR to disclose more information.
