Report: U.S. should counteract China’s practices

The U.S.-China Economic and Security Review Commission recommends the U.S. government consider bringing a type of WTO case scarcely used against China.    The U.S.-China Economic and Security Review Commission is recommending that Congress consider whether the U.S. should coordinate with allies in bringing a rarely used case to target China’s nonmarket practices at the World Trade Organization (WTO), which could lead to members suspending concessions — like lowered tariffs — that China benefits from as a WTO member.
   Among the recommendations of the commission’s 2018 Annual Report is for Congress to consider bringing a “non-violation nullification or impairment” case pursuant to Article 23(b) of the General Agreement on Tariffs and Trade (GATT).
   That GATT provision allows cases to be brought on the basis that a WTO member’s benefits are undermined as a result of another member’s trade practices, regardless of whether they conflict with any specific WTO rule.
   According to the GATT, if consultations between the complaining and defending parties don’t resolve the matter in a “reasonable time,” the matter may be referred to the WTO for “a ruling on the matter, as appropriate.”
   If the circumstances are determined to be “serious enough,” authorization may be granted for a party or parties to suspend the application of trade concessions against the party in question, according to GATT Article 23.
   Among 25 other recommendations from the report is for Congress to direct the Office of the U.S. Trade Representative to identify trade-distorting practices of Chinese state-owned enterprises and “develop policies to counteract their anticompetitive impact.”
   The commission also recommended that Congress direct the Commerce Department and other relevant agencies to prepare a report examining and assessing the adequacy of U.S. export control policy for dual-use technology as it relates to U.S. treatment of Hong Kong and China as separate customs areas and that Congress direct the Agriculture Department and USTR to develop policy to address China’s “asynchronous” biotech review and approval system.
   “Chinese industrial policies create market barriers to entry, discriminate against foreign firms, encourage technology transfer as a condition of market access, provide limited protection and recourse for foreign intellectual property holders in strategic industries and unfairly subsidize local Chinese companies in their development and expansion abroad,” the report states.
   “Various tools are available to the United States to address these challenges, including unilateral tools (e.g., trade actions like antidumping and countervailing duties and Section 201 cases, the Committee on Foreign Investment in the United States and prosecution of economic espionage), bilateral tools (e.g., high-level bilateral dialogues) and multilateral tools (e.g., World Trade Organization [WTO] cases and joint pressure).”
   But tools to address China’s unfair economic practices often have been targeted to address the symptom and not the source of concern, the report goes on to say.
   Further, U.S. actions to address China’s trade-distorting practices have “proven narrow” and limited in effectiveness against the “broad sweep” of Beijing’s development strategy, the size of the Chinese market and the government’s willingness to intervene in local firms and markets, the report states.
   The commission’s recommendations also addressed China’s Belt and Road Initiative and included urging Congress to order a Government Accountability Office report of China’s intellectual property violations and the extent to which U.S. firms have been affected.