U.S., China Clash Over How to Solve ‘Existential’ Trade Threat
(Bloomberg) -- U.S. and Chinese officials clashed in Geneva on Tuesday as the world’s two largest economies disagreed over how to reform the global trading system.
Deputy U.S. Trade Representative Dennis Shea said the World Trade Organization must confront China’s trade abuses while rethinking its preferential rights as a developing nation. Chinese Ambassador Zhang Xiangchen countered that “no one can be singled out” and that Beijing will not back any effort to undermine the WTO’s basic principles.
The dispute illustrates the difficulty China and the U.S. face in overcoming escalating tensions that have prompted Washington to impose tariffs on Chinese imports totaling $250 billion and similar retaliatory actions from Beijing. They’ll need to reconcile their diverging views on reforming the WTO while engaged in a commercial war over the fundamental differences between their economic systems.
“Adequately responding to the challenges of non-market economies is nothing less than an existential matter for this institution,” Shea said Tuesday in comments delivered at the WTO.
Difficult, Crucial Questions
Shea said WTO members must tackle the “difficult but crucial question” of whether countries should continue to provide China with the ability to claim more flexible WTO terms than the U.S.
The WTO’s core agreements offer China and other members -- generally those who are poorer or have recently joined the WTO -- special rights that include exemptions, longer implementation periods and technical assistance. Despite being the world’s second-largest economy, China still considers itself a developing country and benefits from more lenient WTO restrictions on its ability to subsidize farmers, for example.
Shea said this situation cannot persist and urged WTO members to “re-think our treatment of development in order to reflect current realities.”
Zhang criticized the U.S. for blocking the appointment of members to the appellate body, which has the final say in WTO rulings that affect some of the world’s largest companies. “The entire dispute settlement system is in severe crisis,” said Zhang.
For more than a year the Trump administration has refused to consider appellate body appointments because it says the forum’s current members have overstepped their mandate by taking an “activist approach” as well as making “unnecessary findings” and issuing “advisory opinions.”
To date, the U.S. block on appellate body appointments has reduced the seven-member body to three, which is the minimum required to adjudicate WTO appellate cases. If the U.S. continues its hold beyond Dec. 10, 2019, the appellate body will be paralyzed because it won’t have enough panelists required to sign off on rulings.
Shea also said WTO members should come to “new understandings” that will enable countries to pursue plurilateral trade negotiations among like-minded members -- rather than obtaining the consensus of all 164 WTO members.
Zhang warned against any efforts to “weaken the spirit of consensus” at the WTO. “China believes that any kind of reform should be a mutual, comprehensive and gradual process, as it is a common cause” of all members, Zhang said.
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