My Top Three Suggestions for WTO Complaints against Chinese Non-Market Policies and Practices
In an exchange today at a House Ways and Means Committee Trade Subcommittee hearing, Rep. Jodey Arrington (R-TX) and trade lawyer Kelly Ann Shaw expressed skepticism about the possibility of WTO rules being used to address various Chinese non-market policies and practices:
Arrington: We gave permanent normal trading relations to China in the WTO many years ago, with great expectation, good things, namely, to democratize, if you will, the country of China under the regime of communist control. But also we expected that we would have a rules based trade order that would be enforced on every Member of the trade community, including this new Member. ... It hasn't worked out quite so well. We haven't seen that vigilant enforcement to prevent transferring sensitive intellectual property and other sensitive information around technologies, American technologies, subsidies, all kinds of unfair trade practices, not to go through the litany of them. But it doesn't seem that the WTO has been effective or has cared to equally enforce the trade rules to all its Members. So Ms Shaw, how are things going to address that issue? Because that seems to be the big one for the United States, and we seem to have to be going it alone to address these in a bilateral way, when most of the things that we're doing to address the unfair trade practices should be resolved ... by the World Trade Organization. Can you just give me a status on that?
Shaw: I think it's a great question. What I would say is that China takes the view that some of its most egregious unfair trade practices are not covered by WTO rules. And unfortunately we had an activist Appellate Body that shared that view and limited the tools the United States had to address the China challenge, the United States and its allied countries. So at the moment, there isn't really a lot we can do at the WTO to address some of these state subsidies, the terrible practices of state owned enterprises, the technology theft, the excess capacity and overcapacity. We have to address those issues outside of the WTO unfortunately. That doesn't mean the WTO doesn't have value, in terms of the Committee structure, the technical level discussions, the body of rules that help U.S. agriculture, farmers, producers, but we can't address China there, so we have to turn elsewhere.
I'm going to use this exchange to highlight my top three suggestions for WTO Members to bring complaints against Chinese non-market policies and practices:
- Complaints against Chinese subsidies under the adverse effects provisions of SCM Agreement Article 5.
- Complaints against Chinese export credits under the prohibited export subsidies provisions of SCM Agreement Article 3.1(a) (China might invoke the exception in Annex I, item (k) related to export credit practices that are in conformity with the OECD Arrangement, but I don't think it would be successful here).
- Complaints against the behavior of Chinese state-owned enterprises under para. 46 of China's Accession Working Party Report ("The representative of China further confirmed that China would ensure that all state-owned and state-invested enterprises would make purchases and sales based solely on commercial considerations, e.g., price, quality, marketability and availability, and that the enterprises of other WTO Members would have an adequate opportunity to compete for sales to and purchases from these enterprises on non-discriminatory terms and conditions.").
So who would bring these complaints? Arrington makes it sound a bit like there is a WTO prosecutor that enforces the rules, but obviously it is the WTO Members that do the enforcing.
The U.S. hasn't brought WTO complaints against anyone since 2019, so a U.S. complaint against China on these issues isn't likely. (The obvious context here is the U.S. blocking of appointments to the Appellate Body, and its non-participation in the MPIA).
As for the EU, it has brought several recent WTO complaints against China, but these complaints have mostly focused on narrow, technical issues such as intellectual property protection and trade remedies. It does not seem ready to bring broader systemic complaints.
Why don't the EU or others bring these systemic complaints? I've heard various arguments on this point, but none of them are particularly convincing, and I'm not sure about the actual answer.
Instead of WTO complaints, the emphasis these days has been on dialogues and unilateral protectionism as ways to address China's policies and practices, but as the evidence mounts that these approaches are less effective than WTO complaints, maybe people will rethink this.