The U.S.-China trade dispute has seeped into 2019 and shippers are watching closely as the March 1st tariff deadline approaches. Back in December, the United States and China called a 90-day truce on the escalating tariff war as the two economic powerhouses negotiated on a range of trade issues spurred by Section 301 investigation findings earlier in the year. Now, with only a few weeks until tariffs on $200 billion worth of Chinese products increase from ten to 25 percent, the Office of the United States Trade Representative has published a 2018 Report to Congress on China’s WTO Compliance.
“The United States will defend U.S. companies and workers from China’s unfair trading practices and will seek to restore balance to the trade relationship between the United States and China. As part of these efforts, the United States will take all appropriate actions to ensure that the costs of China’s non-market economic system are borne by China, not by the United States.”
Divided into two parts, the report first highlights China’s record of compliance with the World Trade Organization’s (WTO) rules of membership since joining in 2001, while the latter half details China’s trade regime from a WTO perspective and damages to the United States. The report stressed that WTO membership comes with expectations that countries not only strictly adhere to WTO rules, but also pursue open, market-oriented policies. China, however, has not only failed to comply, but has moved further away towards state-led, mercantilist approach to economy and trade, using market-distorting policies and practices against fellow members.
U.S. ISSUES WITH CHINA’S WTO COMPLIANCE:
Despite repeated commitments to refrain from forcible technology transfer from U.S. companies, China continues to do so through market access restrictions, the abuse of administrative processes, licensing regulations, asset purchases, and cyber and physical theft.
China committed to open the electronic payment services market in 2006. This commitment was confirmed in a 2012 ruling by the WTO’s dispute settlement body resulting from a U.S. legal challenge. Today, the reality remains that no foreign electronic payment services companies conduct business in China’s domestic market.
China’s use of export and import substitution subsidies has been ubiquitous throughout the past two decades in sectors as diverse as automobiles, textiles, advanced materials, medical products and agriculture, despite explicit prohibitions in the WTO Agreement.
China has repeatedly committed to review applications of agricultural biotechnology products in a timely, ongoing and science-based manner. However, the Chinese regulatory authorities continue to review applications slowly and without scientific rationale, while Chinese companies continue to build up their own capabilities in the area of agricultural biotechnology.
China has repeatedly deployed illegal export restraints, such as export quotas, export licensing, minimum export prices, export duties and other restrictions, on scores of raw material inputs, as determined in multiple WTO cases brought by the United States and other WTO members. China has used these illegal export restraints to provide substantial cost advantages to a wide range of downstream producers in China at the expense of foreign producers, while creating pressure on foreign producers to move their operations, technologies and jobs to China.
The 175-page manifesto’s release is strategically timed to increase pressure for a China-U.S. trade deal as the threat of 25 percent tariffs looms closer. Most shippers doing business with China have front-loaded inventory to avoid the tariff increases and delays cause by Lunar New Year manufacturing closures. While front-loading has cascaded other issues such as equipment, driver, and space shortages, into U.S. supply chains, shippers can’t afford additional costs and delays and are quickly evaluating alternative sourcing options.
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