Breaking News
Get Actionable Insights with InvestingPro+: Start 7 Day FREE Trial Register here
Investing Pro 0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

In the U.S.-China Deal, Trump Finds a Way Around WTO Process

Stock MarketsJan 16, 2020 02:38PM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 

(Bloomberg) -- Terms of Trade is a daily newsletter that untangles a world embroiled in trade wars. Sign up here. 

The first phase of President Donald Trump’s accord with China aims to resolve a series of longstanding trade disputes between Washington and Beijing and in doing so, may bolster his theory that unilateral tariffs are a better enforcement tool than the World Trade Organization.

As part of Wednesday’s deal, China pledged to address various policies that the U.S. has pursued in past WTO disputes, such as Beijing’s technology transfer requirements; subsidies and quotas for agricultural goods; and restrictions on foreign financial services providers.

The agreement reinforces U.S. Trade Representative Robert Lighthizer’s view that the best way to get China to quickly and comprehensively comply with WTO disputes is to negotiate them under threat of punitive tariffs.

“Relying solely on the WTO litigation has its flaws,” Lighthizer told members of the Senate Finance Committee last year. “You can be winning cases for years and years and years and not getting real outcomes.”

Lighthizer has long been a critic of the WTO’s cumbersome dispute settlement process, which helps resolve trade conflicts among its 164 members. He previously said that nations are exploiting the WTO to try to “gain concessions through lawsuits that they could never get at the negotiating table.”

Technology Transfers

The U.S.-China pact requires both governments to eschew any policies that require or pressure companies or people to transfer their technologies as a condition of doing business.

“Any transfer or licensing of technology between persons of a party and those of the other party must be based on market terms that are voluntary and reflect mutual agreement,” the accord said.

The U.S. and China also said they would protect the confidentiality of any “sensitive technical information” disclosed during regulatory or administrative reviews and the parties would not require or pressure foreign entities to disclose sensitive technical information that’s not necessary to conduct such reviews.

The commitments could help resolve a 2018 WTO complaint against a half-dozen Chinese laws that the U.S. said violated WTO rules governing the use of trade-related intellectual property rights.

The case cuts to the heart of the conflict because Trump argued that his retaliatory tariffs were necessary to counter an alleged Chinese campaign to steal American IP.

Electronic Payments

Another important commitment in phase one requires Chinese regulators to rapidly process applications from U.S. electronic payment providers -- such as American Express Co (NYSE:AXP)., Mastercard Inc (NYSE:MA)., and Visa Inc (NYSE:V). -- to operate as wholly foreign-owned entities in China.

In return, the U.S. said it would offer non-discriminatory treatment to Chinese electronic-payment service suppliers, including China UnionPay.

The new commitments could help address U.S. allegations that China failed to comply with a 2012 WTO ruling that rejected Beijing’s discriminatory treatment of U.S. credit-card companies.

The U.S. has long argued that the Chinese policies regarding uniform business specifications, technical standards and operability rules effectively prevented foreign access to China’s $1 trillion annual e-payment services marketplace.

Chinese Agricultural Rules

Phase one of the agreement also requires China to fully comply with WTO’s findings in a pair of U.S. dispute victories against China’s agricultural subsidies and quotas.

The agreement said China must adhere to its WTO agriculture commitments and ensure that, from Dec. 31, 2019, its tariff-rate quota measures for wheat, rice, and corn are in conformity with the terms of a 2019 WTO ruling.

Last year, the WTO found that Beijing provided farm subsidies in excess of its international trade commitments and didn’t follow proper procedures when it imposed trade restrictions on agricultural imports.

China has already agreed to comply with the rulings, rather than seek to appeal the WTO’s findings in the hopes of obtaining a more favorable ruling.

“China has not been transparent about its protectionist policies,” said Vince Peterson, president of U.S. Wheat Associates. “Now it remains to be seen if China will comply fully with its WTO commitments and this new agreement so that trade between our two countries can flourish.”

Dispute Settlement

Phase one will further sideline the WTO’s dispute settlement system because it establishes a bilateral dispute resolution arrangement whereby the U.S. and China will regularly meet to resolve any issues with the agreement.

QuickTake: What’s Next for Trade Referee After Sabotage by U.S.

This comes a month after the Trump administration essentially paralyzed the WTO’s dispute settlement system by choking off staff and funding for the appellate body.

As of Dec. 11, the WTO’s seven-member appellate body, which acts as a quasi-supreme court for disputes that involve billions of dollars in international commerce, is now unable to issue any judgments on future trade dispute cases.

While WTO members can still bring disputes to the trade body and receive an initial ruling, any party to the dispute could appeal that ruling into legal limbo -- thereby providing the losing party with a veto.

That means the WTO has lost its ability to fully adjudicate trade disputes and governments are now free to impose unilateral measures on their trade partners without fear of WTO oversight.

In the U.S.-China Deal, Trump Finds a Way Around WTO Process
 

Related Articles

Global automakers face electric shock in China
Global automakers face electric shock in China By Reuters - May 25, 2022

By Norihiko Shirouzu BEIJING (Reuters) - If global automakers think they can extend their dominance in China into the electric era, they may be in for a shock. Kings of the...

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments (1)
Fred Smith
Fred Smith Jan 16, 2020 2:44PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
The USA markets and economy are what they depict when ppl are given tax breaks, regulations are removed. Jobs, wages, low unemployment, cheap gas, booming economy
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
or
Sign up with Email