The US says it is looking to China to reduce market access barriers

The US says it is looking to China to reduce market access barriers

The US says real reform is needed if China is to improve its economic standing and its trading relationship with America – with continued major areas of concern including export restraints, subsidies, and inadequate transparency.

The US Trade Representative's (USTR) annual report to Congress on China's compliance with its World Trade Organization (WTO) obligations says many of the problems that arise in the US-China trade and investment relationship can be traced to the Chinese government's interventionist policies and practices. This, in addition to the role of state-owned enterprises and other national champions in China's economy, continues to generate significant trade distortions that inevitably give rise to trade frictions, it says.

"The United States notes that China's current leadership, in place since 2013, has highlighted the need to pursue further economic reform in China, but to date not much progress is evident."

The report says a wide range of Chinese policies and practices continued to generate significant concerns among US stakeholders last year, as did the "continuing abuse of administrative processes" by Chinese government officials.

Major areas of concern continue to include serious problems with intellectual property rights enforcement in China; the government's prolific use of industrial policies favouring state-owned enterprises and domestic national champions, including "secure and controllable" information and communications technology (ICT) policies, export restraints, subsidies, unique national standards and investment restrictions; continuing restrictions on services market access; and inadequate transparency.

China's slow movement toward accession to the WTO Government Procurement Agreement (GPA) also hinders development of the US-China trade relationship, the report noted.

In particular, the report points out that China continues to deploy a combination of export restraints, including export quotas, export licensing, minimum export prices, export duties and other restrictions, on a number of raw material inputs where it holds the leverage of being among the world's leading producers.

"Through these export restraints, it appears that China is able to provide substantial economic advantages to a wide range of downstream producers in China at the expense of foreign downstream producers, while creating pressure on foreign downstream producers to move their operations, technologies and jobs to China," the USTR explains.

In November last year, at the request of the US, the WTO set up a dispute settlement panel to examine China's export restrictions on 11 raw materials. The US claims China failed to follow through on a commitment made when it joined the WTO to eliminate export duties on antimony, indium, magnesia, copper, cobalt, graphite, lead, tantalum, talc, tin and chromium.

The raw materials are key inputs used in a number of sectors, including textile and apparel products such as polyester fabric, metallised yarns, buttons, zippers, and shoelace grommets.

WTO dispute panel to study China raw materials duties

Going forward, the US says it is looking to China to reduce market access barriers, uniformly follow the fundamental principles of non-discrimination and transparency, significantly reduce the level of government intervention in the economy, fully institutionalise market mechanisms, require state-owned enterprises to compete with other enterprises on fair and non-discriminatory terms, and fully embrace the rule of law.

"Taking these steps is critical to realising the tremendous potential presented by China's WTO membership, including the breadth and depth of trade and investment – and prosperity – possible in a thriving, balanced global trading system."

The report adds: "At present, China's trade policies and practices in several specific areas cause particular concern. In 2017, the US will continue to pursue vigorous and expanded bilateral engagement to resolve the serious issues that remain in these areas. The US also will continue to hold China accountable for adherence to WTO rules when dialogue does not resolve US concerns, including through the use of the dispute settlement mechanism at the WTO."

Another looming threat is the legal challenge launched by China last month against the EU and US over their reluctance to treat it as a "market economy" under World Trade Organization rules. 

At the heart of the dispute is whether or not China has transitioned to a market economy in the 16 years since it joined the WTO. While Beijing believes the shift should happen automatically after 11 December 2016, the EU, US, Japan and other WTO members have resisted the move.

Treating China as a non-market economy (NME) makes it easier for countries to penalise Chinese exports in anti-dumping proceedings, often leading to higher anti-dumping duties. 

However, in a separate article published on just-style today (10 January), Mike Flanagan argues the Chinese government's stance is a serious threat to the country's apparel exports:

Is China about burst its apparel trade bubble?