1. On China Trade
President Trump hits the nail on its head. This is the key issue for WTO to address. All other tariffs related issues arise from this font.
President Trump hits the nail on its head. This is the key issue for WTO to address. All other tariffs related issues arise from this font.
2. After its accession to the World Trade Organization (WTO) in 2001, China was supposed to revise hundreds of laws, regulations and other measures to bring them into conformity with its WTO obligations, as required by the terms set forth in its Protocol of Accession.
3. U.S. policymakers hoped that the terms set forth in China’s Protocol of Accession would dismantle existing state-led policies and practices that were incompatible with an international trading system expressly based on open, market-oriented policies.
4. But those hopes were disappointed. China largely remains a state-led economy today, and the United States and other trading partners continue to encounter serious problems with China’s trade regime.
5. Meanwhile, China has used the imprimatur of WTO membership to become a dominant player in international trade.
6. Given these facts, it seems clear that the United States erred in supporting China’s entry into the WTO on terms that have proven to be ineffective in securing China’s embrace of an open, market-oriented trade regime.
7. Furthermore, it is now clear that the WTO rules are not sufficient to constrain China’s market-distorting behavior.
This is not just me opining. I have reproduced above, verbatim, an overview from the most recent (16th) 2018 Report to Congress from U.S. Trade Representative.
This is not just me opining. I have reproduced above, verbatim, an overview from the most recent (16th) 2018 Report to Congress from U.S. Trade Representative.
8. The report is 161 pages long and goes into excruciating detail on ways, large and small, in which China has not complied with its terms of accession to WTO in 2001.
9. Furthermore, there is no reason for WTO to continue to treat China as a Developing Nation (which confers on it many lop-sided trade advantages) when its GDP rivals that of the whole of E.U., is 3 times that of Germany, and 5 times that of France and the U.K. Trump is right.
10. So the question is how to address the issue of China taking unfair advantage of WTO by not holding its end of the bargain, just because most Western nations are too timid to confront it. There is the usual and ineffective bureaucratic way, and there's the Trump approach.
11. Let's draw a parallel with how U.S. used to approach E.U. nations on ponying up their fair and committed share of funding for NATO. Decades of polite negotiations produced lots of empty promises but zero results. Trump fixed it within a year -- rather impolitely!
12. Geopolitical strategists will recommend the same ineffective and interminable gabfests, in which champagne will flow endlessly for years, producing promises from China which will forever be fulfilled at some indefinite point of time in the future. Everyone will claim success!
13. Trump of course wants none of that nincompoopery, for which he will be excoriated by the worthies for starting "trade wars" in a rather uncouth way -- not at all in keeping with the proper etiquette of unilateral surrender disguised as enlightenment.
14. Thank God for Trump's direct approach which is more often effective than not. It's way past time international community of WTO members held China's feet to the fire and prevailed on it to trade with the West on an equal footing with the E.U. and the U.S. No preferences!
15. It's a highly principled approach. WTO must be the arbiter of fair and open trade, not the orchestrator of convoluted rules that unfairly advantage China for gaming the system by claiming to be a Developing Nation in need of market-distorting Western largesse.
16. Forget all talk about tariffs, which was instrumental in bringing to the fore the more fundamental issue, but will be a side-show going forward. Fix the root cause, and level the playing field, by removing the trade barriers surreptitiously erected by China.
17. By the way, if anyone is interested in reading the Office of the U.S. Trade Representative’s report to Congress on China’s compliance with global trading rules, you can download it here.
ustr.gov/sites/default/…
The END.
ustr.gov/sites/default/…
The END.
As I predicted yesterday, the game will quickly move on to a more substantive and principled negotiation (trade relations based on reciprocal rules and intellectual property protection), leaving behind the tactical talk of crude tariffs.
