The charge comes as the Trump administration continues to resist other WTO members’ proposals to appoint new members to the AB, which currently has three members, the minimum required for the seven-slot panel to issue decisions. Two members’ terms expire in about a year, which would render the AB incapable of issuing decisions.
U.S. officials have complained that AB rulings often overstep established WTO rules in several critical areas, including trade remedies, standards and technical barriers to trade.
Submitted to Congress on Monday, the report states the WTO’s dispute settlement mechanism is designed to address good faith contentions in which one member believes another member adopted a measure or took an action breaching a WTO obligation.
The mechanism isn’t designed to address a trade regime that broadly conflicts with the WTO’s fundamental underpinnings, USTR said.
The EU and China were among 14 total sponsors of a proposal that would amend WTO dispute settlement rules, including amendments that would provide for outgoing AB members to complete rulings on pending appeals beyond their terms’ expiration dates and that seek to prevent AB rulings from affecting domestic laws, among other things.
The U.S. opposed the proposal, and one of the Trump administration’s gripes with the AB system is that members already issue rulings after their terms expire, which is not provided for in existing WTO rules.
Like last year’s report to Congress, this year’s USTR report took issue with China’s self-identification as a developing country at the WTO, which affords the world’s second largest economy certain concessions.
While WTO members could adopt new rules requiring members like China to abandon nonmarket systems and state-led, mercantilist trade regimes, it’s unrealistic to expect success toward that end in any WTO negotiation, for several reasons.
Firstly, WTO rules disciplining China would require agreement among all members, including China, which is highly unlikely to agree to new rules targeted at its trade policies and practices, USTR said.
China also has a “long record” of not pursuing ambitious outcomes at the WTO, as past agreements — even relatively narrow ones — have been difficult to achieve, “and when an agreement is achieved, it is significantly less ambitious because of China’s participation,” the report says.
For example, China joined the WTO negotiation to expand the WTO Information Technology Agreement about six months after its launch and offered a “much shorter, less ambitious” list of products for coverage than had been under consideration, USTR said. The product coverage ultimately was significantly reduced from what was under consideration prior to China’s involvement.
China insisted on lengthy phase-in periods for about half of the products on its list and will not fully implement the agreement until July 2023, nearly 10 years after it joined the negotiation, the report says.
USTR also noted that bilateral dialogues, including the Trump administration’s U.S.-China Comprehensive Economic Dialogue launched in April 2017, and previous dialogues like the U.S.-China Joint Commission on Commerce and Trade and the U.S.-China Strategic Economic Dialogue, only achieved “isolated, incremental progress” and China repeatedly failed to follow through on commitments to fundamentally shift the direction of its economic policies and practices.
USTR said it appears that China might have begun to take the United States’ concerns about its economy more seriously after imposing Section 301 tariffs.
The report points to President Donald Trump’s and Chinese President Xi Jinping’s Dec. 1 meeting during which the leaders agreed to start negotiations on economic structural changes in China, with respect to cyber theft, cyber intrusions, intellectual property protection, forced technology transfer, non-tariff barriers, agriculture and services.
As the U.S. continues to collect 25 percent tariffs across $50 billion worth of goods from China in yearly import value, current 10 percent tariffs across another $200 billion worth of goods from China are set to rise to 25 percent on March 2 if the U.S. and China can’t make a deal.
The Chinese Ministry of Commerce expressed general opposition to USTR’s report, noting that “as in the past,” the report is based on U.S. domestic law, rather than evaluating China’s implementation of WTO commitments on the basis of WTO agreements and multilateral rules, according to an unofficial translation of a statement released by the ministry on Tuesday.
The ministry also noted that China in 2018 submitted to the WTO a circular on central and local subsidy policies and a circular on domestic agriculture support, which it said effectively increased transparency.
“After joining the WTO, China has earnestly fulfilled its commitments, perfected the socialist market economic system and legal system, improved the transparency of trade policies, opened up trade in goods and services, improved the legal system for the protection of intellectual property rights and strengthened law enforcement efforts,” the unofficial translation said.