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USTR Expresses Optimism in Annual Review of China’s WTO Compliance

Friday, December 27, 2013
Sandler, Travis & Rosenberg Trade Report

The Office of the U.S. Trade Representative issued this week its twelfth report to Congress on China’s compliance with its World Trade Organization obligations, including both multilateral commitments and any bilateral commitments made specifically to the United States in connection with China's accession to the multilateral body. The report highlights a number of positive developments that appear to confirm a re-focusing of China’s energies on economic reform. According to the USTR, a particularly notable development took place in July 2013 when China referenced its ongoing bilateral investment treaty negotiations with the U.S. and announced that it was prepared to increase its ambition and focus on the negotiation of a high-standard agreement. This announcement was followed a few months later by the creation of the Shanghai Free Trade Zone, which is meant to be a pilot project for significant trade and investment liberalization and financial reform.

Another important occurrence was the endorsement by the Third Plenum Decision of several ambitious economic reform pronouncements that call for making the market “decisive” and “dominant,” reducing Chinese government intervention in the economy, accelerating China’s opening up to foreign goods and services, reforming China’s state-owned enterprises, and improving transparency and the rule of law to allow fair competition in the domestic market. The USTR indicates that these initiatives signal a high-level determination to accelerate needed economic reform, which, if realized, would provide substantial benefits to China and its trading partners.

The report states that despite these encouraging news a broad range of Chinese policies and practices continue to generate significant concerns among U.S. stakeholders. They include export restraints, investment restrictions, serious problems with intellectual property rights enforcement (including in the area of trade secrets), indigenous innovation policies, technology transfer initiatives, government subsidization, inappropriate use of trade remedy laws, and China’s slow movement toward accession to the WTO Government Procurement Agreement. In addition, the Chinese government’s provision of preferences and financial support to SOEs and domestic national champions continues to skew the commercial playing field in many sectors, both in the Chinese market and abroad.

Looking ahead, the report indicates that the U.S. will look 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 institutionalize market mechanisms, require SOEs to compete with other enterprises on fair and non-discriminatory terms, and fully embrace the rule of law. 

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