Accounting for Accountability
Uncovering China’s Subversion of Rules at the World Trade Organization
It is no secret that U.S.-China relations have soured significantly over the past decade. Economically, diplomatically, and militarily, our two nations have steered towards disagreement over compromise on many issues, despite living in a time where globalization has made the world seem like a much smaller place.
China deserves some praise for the economic progress it has recorded over the past 20 years, lifting millions out of poverty and into the middle class. Today, many in China enjoy a standard of living that would have been unthinkable just a few decades prior. The economic engine that the Chinese Communist Party (CCP) has built for itself has not just survived but thrived, jumping to the 2nd largest economy in the world.
Therefore, it’s puzzling why China continues to take advantage of international financial institutions, particularly in the WTO where it has identified itself as a developing nation. Since its ascension to WTO membership in 2001, China’s Communist party has repeatedly employed this tactic to obtain preferential treatment under trade agreements with other countries, despite every other member nation, besides the United States, having less economic resources.
Officials in the People’s Republic of China (PRC) may argue that, although China’s overall GDP ranks 2nd internationally and continues to grow at a rapid pace, there are still large populations living in poverty. Therefore, China must continue to receive preferential treatment under lending and trade agreements in order to effectively care for these communities, despite spending massive sums reclaiming landmasses in the East Sea, building up a significant blue water navy presence, and spearheading a national space program.
In fact, the United States also has significant populations of people living in poverty. So does Canada and much of Europe. To those PRC officials, I would ask how they would respond if the world’s largest economic powers asked all nations to judge their standing according to its worst socioeconomic factors. You cannot be the world’s fearless leader while also claiming to be a recovering patient.
But not content to only play the victim, China has also repeatedly abused WTO rules by deploying illegal export restraints — including quotas, licensing, minimum prices, duties, and other restrictions — on an array of products and raw material inputs. These restraints are aimed at benefiting Chinese producers exclusively and at the expense of foreign producers. At the same time, China continues to engage in corporate espionage and forced technology transfer, creating a hostile and unfair business environment for all kinds of foreign investment.
The issue the people of China face is not one of Western arrogance, but one of injustice and inequality brought on by their communist government. It stems from a system that keeps state-owned industries locked behind bureaucratic firewalls and siphons most of the profits to those entrenched in power.
That the CCP has failed in its promise to deliver proportional economic results to its entire population is not a justification for requiring the rest of the world to treat China’s economy as though it has “handle with care” written on the front. Every single member of the WTO must stand together to demand rulebreakers like China be held responsible and call for transparent procedures for self-identifying developing nation status. That’s why I recently introduced the Enforcing Accountability and Transparency in International Trade Act, which would require USTR to develop a strategy for facilitating the full implementation of agreements under WTO rules and ensure that wealthy, high-income nations cannot abuse trade agreements by declaring developing nations status to receive “special or differential” treatment.
For too long the United States has turned a blind eye to much of China’s unfair practices in business and trade, and it’s been the American producer and consumer who has paid the price. It’s time that the United States and its fellow countries assert their rights under WTO rules to hold China accountable for its behavior on the world stage and ensure a level playing field for all.