Rather than fulfilling its mission of steering the Communist behemoth toward longstanding Western trading norms, the WTO instead stands accused of enabling Beijing’s state-directed mercantilism, in turn allowing China to flood the world with cheap exports while limiting foreign access to its own market.
.. Now it is coming to a head under the first American presidency of an open free-trade skeptic, in a case just starting to wend its way through the Geneva process. The issue: whether China has graduated to a “market economy,” a change of status that would make it considerably harder for other nations to block imports they believe are improperly aided by Chinese government distortions.
.. both the U.S. and European Union demanding the change, calling it “nonnegotiable,” and Chinese officials are likely to reiterate that demand when they talk trade next week with President Trump during his Beijing visit
.. “This is without question the most serious litigation matter we have at the WTO right now,” Robert Lighthizer, the Trump administration’s trade representative, told Congress in June. A China victory, he added, “would be cataclysmic for the WTO.”
.. Under Geneva’s guidance, tariffs world-wide have plunged nearly 80% and trade’s share of the global economy has more than doubled. More than 160 countries representing 98% of world commerce are now WTO members, and most of the few remaining nonmembers—like Belarus and Timor-Leste—are negotiating to join.
.. the director-general of the WTO, credits his organization with preventing a recurrence after the 2008 financial crisis of the trade wars that exacerbated the Great Depression.
.. Since 2007, China has been party to more than a quarter of all WTO cases, as trading partners scrambled to erect barriers protecting their industries while demanding better access to China’s markets.
.. China sought out disputes in which it had no direct stake and joined more than 100 as a “third party,” giving officials access to proceedings as observers. The Chinese offered large stipends to prominent American and European trade-law scholars to teach seminars in China for young bureaucrats. They retained top U.S. law firms.
.. Steptoe & Johnson LLP became the go-to firm for combating a new American policy imposing extra-steep duties on Chinese imports aided by allegedly illegal subsidies
.. WTO defenders note the U.S. has still won the vast majority of cases it has filed in Geneva, and say it should be pleased that China has chosen to pursue its trade grievances through global arbiters.
.. Commerce Secretary Wilbur Ross in April launched an official study of “the structural problem” of the WTO and its courts, arguing the body has “an institutional bias…toward the exporters rather than toward the people that are being beleaguered by inappropriate imports.”
.. A looming challenge to the WTO is the pending case determining China’s official status in the world trading system—whether members are now required to treat it as a “market” economy.
.. Beijing reads the pact as having automatically guaranteed it market status 15 years after its December 2001 accession. The U.S., Europe, Japan and others say the change was intended to be a privilege contingent on liberalization promises Beijing has yet to keep.
.. The “nonmarket” designation makes it easier for trading partners to impose inflated tariffs on goods they conclude have been “dumped”—or sold below “fair” value. That’s because prices and costs are seen as so distorted in a “nonmarket economy” that other countries are given wide latitude to determine on their own what they consider “fair.”
.. A flip from “nonmarket” to “market” would boost EU imports from China by as much as 21%, or $84 billion
.. The study concluded that Washington applied an average duty of 162% against Chinese goods, compared with a 33% rate for market economies.
.. . The study concluded that Washington applied an average duty of 162% against Chinese goods, compared with a 33% rate for market economies.
“That gray zone is the key point of tension,” says Chad Bown, a WTO expert at the pro-free-trade Peterson Institute for International Economics. “How you deal with that is ultimately going to determine whether the WTO system in its current form can hang together or not.”
Bannon Calls Comey Firing the Biggest Mistake in ‘Modern Political History’
He cited as an example a request that Mr. McConnell once made of Mr. Trump to stop talking about “draining the swamp.”
.. Mr. Bannon predicted deep division within the Republican Party over Mr. Trump’s recent move to end the program that provided temporary relief from deportation for hundreds of thousands of young people in the United States illegally. The president set a March end date for the program and asked Congress to come up with a solution in the meantime, a task that Mr. Bannon said could split Republicans and cost them their House majority in the 2018 midterm elections.
“If this goes all the way down to its logical conclusion, in February and March it will be a civil war inside the Republican Party,” he said.
.. “The media image, I think, is pretty accurate,” he said. “I’m a street fighter. That’s what I am.”
.. Mr. Bannon also condemned top officials in the George W. Bush administration, calling them “idiots” friendly to what he termed China’s anti-American economic agenda. He singled out Condoleezza Rice and Colin L. Powell, former secretaries of state, and Brent Scowcroft, an adviser to Mr. Bush and his father, as those most worthy of his scorn, criticizing them for China’s 2001 entry into the World Trade Organization.
“They’ve gotten us in this situation, and they question a good man like Donald Trump,” he said. “I hold these people in contempt, total and complete contempt.”
.. Mr. Bannon also attacked Gary D. Cohn, Mr. Trump’s top economic adviser, who publicly criticized the president’s comments about Charlottesville. “If you don’t like what he’s doing and you don’t agree with it, you have an obligation to resign,” Mr. Bannon said. “You can tell him, ‘Hey, maybe you can do it a better way.’ But if you’re going to break, then resign.”
How China Aims to Limit the West’s Global Influence
Reply
In January, at the World Economic Forum in Davos, Switzerland, President Xi Jinping of China called his country a champion of free trade and globalization. And at an international conference in Beijing in May, he laid out China’s grand vision of promoting global integration by linking Asia, Europe and beyond through a new network of roads, railways and sea routes.
.. China is fashioning a new form of multilateralism
.. This strategy will advance its economic and political influence in a far more effective manner than a unilateral approach built on brute economic force, a tactic that has produced mixed results for China so far.
.. With the United States apparently pulling back from multilateralism
.. This form of multilateralism is built on transactional principles very different from the type of global order the United States and other Western economies have championed, one built on trust and mutual cooperation. It will eschew values like democracy, human rights and freedom of expression, which the United States has long sought to promote around the world.
.. Beijing’s strategy has two main prongs. The first is to change the rules of the game from within, by expanding Chinese influence in existing international institutions.
.. But the other side of the bargain — China’s opening — was not fulfilled. Foreign exporters and investors still face many barriers in China.
.. Foreign businesses undertaking production in China also have to partner with local companies, requiring transfers of technological expertise and intellectual property. Foreign investment is still restricted in certain sectors, including financial services like insurance.
.. The country is now one of the prime users of the W.T.O. dispute-settlement process to protect its own interests and to aggressively counter trade actions brought against it by other countries.
.. At these organizations, the United States and other advanced Western economies together still have the dominant voting power. So, China has been subtle in its approach, creating alliances with other emerging-market countries like India and Russia to advance its priorities.
.. The second prong of China’s strategy is to set up its own international institutions.
.. Initiatives like One Belt, One Road — the plan to invest $1 trillion or more in transcontinental infrastructure — and the Asian Infrastructure Investment Bank, which started operation last year, allow Beijing to cloak its influence behind the facade of a large group of countries
.. The professed multilateral nature of its initiatives allows Beijing to pull other countries more tightly into its fold. It becomes harder for countries that do not share China’s values to stay on the sidelines. Many countries joining with China say they must do so to influence these new institutions from the inside rather than just complain about them from the outside. This was the justification when Britain, Germany and France signed up to become founding members of the Asian infrastructure bank, leaving the United States fuming.
Trump Lies. China Thrives.
China has moved so fast into a cashless society, where everyone pays for everything with a mobile phone, that Chinese newspapers report beggars in major cities have started to place a printout of a QR code in their begging bowls so any passer-by can scan it and use mobile payment apps like Alibaba’s Alipay
.. Chinese men and women friends tell me they don’t carry purses or wallets anymore, only a mobile phone, which they use for everything — including for buying vegetables from street vendors.
.. the fact that China has 700 million people doing so many transactions daily on the mobile internet means it’s piling up massive amounts of information that can be harvested to identify trends and spur new artificial intelligence applications.
.. Trump’s broad complaint that China is not playing fair on trade and has grown in some areas at the expense of U.S. and European workers has merit and needs to be addressed — now
.. when the U.S. allowed China to join the World Trade Organization in 2001 and gain much less restricted access to our markets, we gave China the right to keep protecting parts of its market — because it was a “developing economy.” The assumption was that as China reformed and become more of our equal, its trade barriers and government aid to Chinese companies would melt away.
.. China grew in strength, became America’s equal in many fields and continued to protect its own companies from foreign competition, either by limiting access or demanding that foreign companies take on a Chinese partner and transfer their intellectual property to China as the price of access, or by funneling Chinese firms low-interest loans to grow and buy foreign competitors.
.. 81 percent of its members felt “less welcome” in China than in the past and had little confidence any longer that China would carry through on promises to open its markets.
.. China tells the world that its policy is “reform and opening,” but on the ground its policy “more resembles reform and closing.”
.. Alibaba can set up its own cloud server in America, but Amazon or Microsoft can’t do the same in China. China just agreed to allow U.S. credit card giants, like Visa and MasterCard, access to its huge market — something it was required to do under W.T.O. rules but just dragged its feet on for years
.. The world leader in industrial robots, the German company Kuka Robotics, was just bought by the Chinese company Midea; Beijing would never allow the U.S. to buy one of China’s industrial gems like that.