US trade agency sees negotiating new WTO rules to rein in China as futile

A woman walks past a bench painted in the colours of the US flag outside a clothing store in Beijing, China 7 January – Reuters

WASHINGTON (Reuters): Negotiating new World Trade Organization rules to try to rein in China’s “mercantilist” trade practices would be largely a futile exercise, the Trump administration’s trade office said on Monday, vowing to pursue its unilateral approach to protect US workers, farmers and businesses.

The US Trade Representative’s office used its annual report to Congress on China’s WTO compliance in part to justify its actions in a six-month trade war with Beijing aimed at forcing changes in China’s economic model.

The report also reflects the United States’ continued frustration with the WTO’s inability to curb what it sees as China’s trade-distorting non-market economic policies, and offered little hope that situation could change soon.

“It is unrealistic to expect success in any negotiation of new WTO rules that would restrict China’s current approach to the economy and trade in a meaningful way,” the USTR said in the report.

Some US allies, including Canada, the European Union and Japan, which are also frustrated with pressures created by China’s economic policies, have begun talks on the first potential changes and modernisation of WTO rules since it was founded in 1995.

But any WTO rule changes must be agreed by all 164 member nations, and past efforts have stalled. It was “highly unlikely” China would agree to new disciplines targeting changes to its trade practices and economic system, the USTR said.



Tariff deadline

The report shed little light on progress in talks between the United States and China to ease a bruising tariff fight, despite a swiftly approaching 2 March deadline to hike US tariffs to 25% from 10% on $200 billion worth of Chinese goods imports.

The WTO report follows two days of intense talks between high-level US and Chinese officials last week centred on US demands for structural policy changes. These include enforcing intellectual property protections, ending cyber theft of trade secrets, halting the forced transfers of American technology to Chinese firms and reining in industrial subsidies.

While US President Donald Trump said he would like to meet Chinese President Xi Jinping to try to hammer out a trade deal, the USTR report makes clear a massive amount of work will be needed to bridge the gulf between the two countries.

It cited the key structural issues in the talks, which also include China’s new cybersecurity law and discriminatory regulatory practices, as examples of how China aids domestic firms at the expense of foreign competitors in ways that escape WTO rules, adding that China has become “a unique and pressing problem for the WTO and the multilateral trading system.”

The criticism also comes as the United States weakens the WTO’s role as global commerce watchdog by blocking the appointments of judges to its appellate body, which may no longer be able to function by December, when two judges step down.

‘Holding China accountable’

USTR said the United States intends to “hold China accountable” for adhering to existing WTO rules and “any unfair and market-distorting trade practices that hurt US workers, businesses, farmers or ranchers.”

“Until China transforms its approach to the economy and trade, 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,” USTR said.

The agency reiterated a broad array of concerns over China’s key structural issues, such as its 2025 plan for investment in particular sectors and its failure to follow market-oriented principles expected of WTO members, the report said.

“China retains its non-market economic structure and its state-led, mercantilist approach to trade, to the detriment of its trading partners,” it said.