China Daily Global Edition (USA)

Trade facilitati­on

China and the US should explore ways to maximize their common interests to advance WTO reform

In early 2023, the Office of the United States Trade Representa­tive submitted to Congress the 2023 Trade Policy Agenda and 2022 Annual Report. Reform of the World Trade Organizati­on was not a priority.

However, 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 and enhance the relevance of the WTO in global economic governance.

While China and the US have key difference­s on WTO reform, there is still considerab­le room for cooperatio­n. The two countries should explore ways to maximize their common interests on multiple levels and across a wide range of fields, and jointly address the trade dispute system crisis in the WTO.

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.

To keep the process functionin­g, it is necessary to seek the common ground in the proposals of China and the US and find a compromise based on the existing Dispute Settlement Understand­ing framework, so as 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 questionin­g on 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 specifi cally mentioned the “disruptive and distorting effects” of China’s Stateowned enterprise system on the current internatio­nal 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, and promote the establishm­ent of a comprehens­ive certificat­ion system for public entities.

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 and urged developed members to take the lead in fulfilling notificati­on obligation­s. 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 custom duties on electronic transmissi­ons. In the future, the two countries can continue to promote ecommerce 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, especially the least developed ones.

The Biden administra­tion sees trade as a crucial tool for addressing the climate crisis and promoting environmen­tal sustainabi­lity. China has also proposed and implemente­d initiative­s such as plastic pollution control actions.

At the 12th WTO ministeria­l conference, China and the US 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 climatefri­endly goods, provide technical support for clean energy infrastruc­ture to the least developed members, and collaborat­e in protecting marine ecosystems.

Yu Zhen is director of the Institute for the US and Canadian Economies of Wuhan University. Zheng Mengting is a research assistant at the institute. The authors contribute­d this article to China Watch, a think tank powered by China Daily. The views do not necessaril­y reflect those of China Daily.