Place priority on trade goals
China and US should prioritize common interests to advance WTO reform
Unlike the Donald Trump administration, the Joe Biden administration has shown a positive attitude toward WTO reform and it has been collaborating with allies on the issue. It is a sign that the WTO remains an important tool for the US to achieve its trade policy goals.
With a belief that reform of the WTO can be aligned with the needs and interests of the US, the Biden administration views reform of the WTO as an opportunity to target China, its biggest economic competitor.
China is an active participant and advocate of the WTO. It supports developing countries to further integrate into the multilateral trading system.
While China and the US have key differences on WTO reform, there is still considerable room for cooperation.
The paralysis of the WTO’s dispute settlement system remains unresolved. The US proposes that the WTO dispute settlement process should by default be limited to adjudication by panels, while China and the European Union insist on a two-stage arbitration procedure with the Multi-Party Interim Appeal Arrangement.
The future negotiations on the dispute settlement system still face great uncertainty. It is necessary to seek common ground in the proposals of China and the US and find a compromise based on the existing Dispute Settlement Understanding framework to break the negotiation deadlock.
The China Is Not a Developing Country Act, passed by the Biden administration, aims to terminate China’s rights in the WTO based on its developing country status — but according to the latest World Bank classification released in 2023, the threshold for high-income economies is $13,845 per capita Gross National Income in 2022, while China’s figure was around $12,850. It is a fact that China remains a developing country and it should have the rights as such.
That said, in response to the question of classification, China should make Special and Differential Treatment trade-offs based on its current level of development and actively call on developing member countries to assume obligations in line with their economic capabilities.
Furthermore, the US has specifically mentioned the “disruptive and distorting effects” of China’s State-owned enterprises on the global trading system, attempting to categorize the SOEs as public entities to accuse them of violating relevant subsidy rules.
To address this issue, China should continue to deepen its SOE reform, differentiate enterprise types based on specific functions, and emphasize the market-oriented nature of the SOEs.
China should also clarify the definition of “public entities” and the legitimacy of specific economic functions of the government to gain recognition for them from WTO member countries.
Meanwhile, a joint statement issued by the US, Japan, and the
European Union has called for enforcing punitive measures for notification and transparency obligations. However, due to differences in development levels, member countries face varying degrees of difficulties in fulfilling transparency obligations. China has explicitly expressed opposition to this proposal. In the reform of transparency and notification mechanisms, China and the US should adhere to soft constraints to take full consideration of all member parties, build up the notification capabilities of WTO members, and improve the reverse notification mechanism and the Secretariat report in the Trade Policy Review Mechanism. In this way, overall reform of the transparency mechanism will be achieved through both self-reporting and peer reporting.
In addition, negotiations on the e-commerce agenda need to be advanced. The digital technology revolution has created new forms of international trade, but the development of e-commerce has created concerns about data security and cybersecurity.
At the 12th WTO ministerial conference, China and the US reached an agreement on not imposing customs duties on electronic transmissions. In the future, the two countries can continue to promote e-commerce cooperation in areas such as facilitating cross-border e-commerce, electronic authentication, online consumer protection, and data security.
At the same time, China and the US need to recognize the inequality in digital trade development among the different members of the WTO, respect the interests and demands of each member economy in the field of e-commerce, and provide technological assistance to developing economies.
At the 12th WTO ministerial conference, China and the US also accepted the Agreement on Fisheries Subsidies, the WTO’s first-ever multilateral trade agreement with the environment at its core.
China and the US should continue to jointly promote the formulation of rules in trade and environmental sustainability, facilitate the movement of climate-friendly goods, provide technical support for clean energy infrastructure to the least developed members, and collaborate in protecting marine ecosystems.