A new report states that China’s non-market economic system “has evolved and become predatory” and that the U.S.’ strategy for addressing “the China challenge” also needs to evolve.
The annual report from the Office of the U.S. Trade Representative reiterates longstanding U.S. complaints about China’s “poor” record of compliance with its World Trade Organization obligations, including “violating, disregarding and evading” existing WTO rules. For example, China’s “embrace of a state-led, non-market approach to the economy and trade has increased rather than decreased over the past decade.”
Not only has this system harmed the companies and workers of other WTO members, the report states, but it “has also become decidedly predatory in nature.” Policies and practices designed to “aggressively displace foreign competitors” and “secure the dominance of Chinese enterprises in targeted industries” include market access limitations, investment restrictions, forced or pressured technology transfer including state-sponsored theft of intellectual property, preferential treatment for state-owned enterprises and other favored Chinese companies, discriminatory regulation, unique national standards, data restrictions, inadequate protection and enforcement of intellectual property rights, the use of competition law enforcement for industrial policy purposes, and forced labor.
Again this year USTR argues that currently available tools “have not been able to stop China’s predatory strategies” and that “new and more effective strategies – including strategies that involve taking actions outside the WTO where necessary – are critically needed to address those problems.” The U.S. has therefore continued to pursue a multi-faceted approach that includes (1) enhanced domestic investment in key industries to support “the industries of today and tomorrow,” (2) bilateral engagement, particularly with respect to China’s implementation of the Phase 1 trade agreement, (3) exploring how best to update existing, and develop new, domestic trade tools, and (4) working with others to build support for solutions to the many problems China has created for the global trading system.
The report also repeats that the U.S. is not interested in decoupling from China, which “would not address” the problems enumerated in the report. The U.S. approach is “more appropriately characterized as one of de-risking and diversifying,” the report states, as evidenced by the “targeted actions” that have been taken on export controls and outbound investment to protect national security.
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