The Office of the United States Trade Representative released its 2023 Report to Congress on China’s WTO Compliance, the Biden-Harris Administration’s assessment of the People’s Republic of China’s (PRC) membership in the World Trade Organization.
“China remains the biggest challenge to the international trading system established by the World Trade Organization. It has been 22 years since China acceded to the WTO, and China still embraces a state-directed, non-market approach to the economy and trade, which runs counter to the norms and principles embodied by the WTO,” said Ambassador Katherine Tai.
“Even more problematic, China’s approach targets industries for global market domination by Chinese companies using an array of constantly evolving non-market policies and practices.
"This report details the breadth and scale of China’s non-market policies and practices and the serious harm that they cause to workers, businesses, and industries in the United States and around the world. ”
"While the United States and other like- minded WTO Members have pursued various WTO- focused strategies over the years to address the many problems created by China, it remains clear that new and more effective strategies – including strategies that involve taking actions outside the WTO where necessary – are critically needed to address those problems.
"As is now more than clear, China’s approach to the economy and trade, which is characterized by a routine reliance on non-market policies and practices, undermines fair, market-oriented decisions made by foreign enterprises and distorts market outcomes in significant ways.
China’s so-called “socialist market economy” has turned decidedly predatory...
"China’s efforts are also relentless. China has shown every indication that it will continue to intervene in the market in any way that it deems necessary to achieve the state’s industrial plan objectives. China does not act with moderation.
"Plainly, China’s approach is far different from the open, market-oriented approach envisioned by the WTO membership and pursued by the United States and almost all other WTO Members.
Critically, the WTO has been unable to effectively address China’s continued pursuit of a state-led, non-market approach to the economy and trade.
China’s non- market policies and practices are not effectively disciplined by existing WTO rules... In short, China’s approach is fundamentally at odds with the multilateral trading system.
As its economic power has grown, the Chinese government more and more has resorted to the threat or use of measures affecting trade and investment in an abusive, arbitrary or pretextual manner to pressure, induce or influence a foreign government into taking, or not taking, a decision or action in order to achieve a strategic political or policy objective, or to prevent or interfere with the foreign government’s exercise of its legitimate sovereign rights or choices.
China’s “dual circulation” strategy, in place since 2020, touts the importance of China continuing to participate in international trade, while simultaneously seeking to become self-sufficient domestically.
The autarky that this strategy envisions runs counter to the WTO’s goal of developing an integrated, more viable and durable multilateral trading system.
As has become clear, the WTO’s dispute settlement mechanism is of only limited value in addressing a situation where a WTO Member is dedicated to a state-led economic and trade regime that prevails over market forces.
China has sought to use the WTO dispute settlement system to subject U.S. national security measures to review, pursuing a strategy that would convert the WTO into a permanent venue for national security disagreements.
China has been using its WTO membership to develop rapidly – albeit largely in an anticompetitive manner that comes at the expense of others. China is now the second largest economy in the world, and it is also the largest goods trader – and the largest exporter – among WTO Members.
China’s government continues to employ extensive industrial policies of a kind not found in market economies. It provides substantial government guidance, massive financial resources and favorable regulatory support to domestic industries across the economy, often in pursuit of specific targets for capacity and production levels and dominant market shares.
In sum, the reality confronting the United States and other WTO Members is not simply that China has chosen to pursue an economic and trade regime that conflicts in significant and harmful ways with the market-oriented approach endorsed by the WTO membership, to the detriment of our workers and businesses. China also does not hold the same core values as other WTO members, especially the democratic market economies. China plainly does not embrace our core values, which, like the fundamental principles of the WTO, include openness, fair competition, non-discrimination, reciprocity and transparency as well as adherence to the rule of law.
Specific Trade Concerns include:
One of the more far-reaching and harmful industrial plans is Made in China 2025. China’s State Council released this industrial plan in May 2015. It is a 10- year plan targeting 10 strategic sectors, including advanced information technology, automated machine tools and robotics, aviation and spaceflight equipment, maritime engineering equipment and high-tech vessels, advanced rail transit equipment, new energy vehicles (NEVs), power equipment, farm machinery, new materials, biopharmaceuticals and advanced medical device products.
Statements by China’s President also made clear that China continues to view the role of the state very differently from the United States and other market economies.
In October 2016, he called for strengthening the role of the CCP in state-owned enterprises and emphasized that state-owned enterprises should be “important forces” to implement national strategies and enhance national power.
In February 2019, in an article in a CCP journal, China’s President further called for the strengthening of the Party’s “leadership over the rule of law,” and he vowed that China “must never copy the models or practices of other countries” and “we must never follow the path of Western ‘constitutionalism,’ ‘separation of powers’ or ‘judicial independence.’”
In 2017 USTR initiatied an investigation under Section 301 focused on policies and practices of the Government of China related to technology transfer, intellectual property and innovation.
The investigation identified four categories of reported Chinese government conduct that would be the subject of the inquiry:
Based on the findings in USTR’s Section 301 investigation, the United States took a range of responsive actions, including the pursuit of a successful WTO case challenging certain discriminatory technology licensing measures maintained by China in addition to the imposition of substantial additional tariffs on Chinese imports.
China has repeatedly committed to treat intellectual property owned or developed in other countries the same as intellectual property owned or developed in China
Similar commitment have been made in the government procurement context, where China agreed to de-link indigenous innovation policies at all levels of the Chinese government from government procurement preferences. Many years later, however, this promise had not been fulfilled.
Further sections of the report address Industrial Subsidies and Excess Capacity; Agricultural Domestic Support,Fisheries Subsidies and Trade Remedies.
The 2023 Report to Congress on China’s WTO Compliance is the 21st report prepared pursuant to section 421 of the U.S.-China Relations Act of 2000 which requires the United States Trade Representative to report annually to Congress on compliance by the People’s Republic of China with commitments made in connection with its accession to the World Trade Organization, including both multilateral commitments and any bilateral commitments made to the United States.
The full report can be found here.
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