Statement by H.E. Ambassador SUN Zhenyu of China
on WTO Trade Policy Review of the United States
(9 June, 2008)
Thank you, Mr. Chairman.
I would like to join the previous speakers in welcoming the delegation of the United States headed by Ambassador Peter Allgeier and thank him for his overview of the development of the US macro economy and trade regime during the period under review. China appreciates the Reports by both the Secretariat and the US government to facilitate our participation in this review. China also thanks the discussant, Ambassador Claudia Uribe, for her insightful introductory remarks and in depth analysis of the US trade policy and practices.
Mr. Chairman,
Trade Policy Review Mechanism, as a key pillar of the WTO, helps to improve adherence of Members to rules, disciplines and commitments under the WTO and the smooth functioning of the multilateral trading system by achieving greater transparency in the trade policies and practices of Members. It serves as a platform for Members to enhance communication, including identifying areas of concern for improvements in their trade policy regime. So we welcome the opportunity to collectively evaluate the trade policy and practices of the US and their impact on the functioning of the multilateral trading system.
As the world’s largest economy and the biggest beneficiary for decades from the multilateral trading system, the US economy remained robust during the past two years, with an average growth of nearly 3%; the federal fiscal deficit reduced steadily to some 1.2% of GDP in 2007; both its imports and exports continued to expand faster than GDP on average; and its active participation in the multilateral trading system has brought vitality to the smooth functioning of its economy.
While these achievements are commendable, some problems have emerged in the US economy which have aroused extensive concerns among Members:
One of them is the continuous depreciation of the US dollar. As both the Secretariat and the US Reports pointed out, the US has experienced an economic slowdown since late 2007 mainly due to the sub-prime crisis, with more profound and wide-ranging spill-over effects rippling cross multiple sectors. The continuous downward adjustment on interest rates and the expansionary fiscal policy by the U.S. Federal Reserve has led to continued depreciation of the dollar, aggravated the inflation pressure worldwide and further added fuel to the rapid increase of the crude oil and food prices. This has put those developing countries which are highly dependent on the imports of these commodities under heavier inflation pressure and suffered great economic losses. As a major currency for international settlement, the dollar’s continued depreciation seriously affects the exports of other countries especially those vulnerable and export-oriented developing countries, undermining their ability to further develop and to address their social problems. As a major currency for international reserve, the dramatic depreciation of the dollar has lead to shrinking national reserve of many countries and reduced social welfare. In this connection, China hopes that the United States, as a driving engine of the world’s economy, could take quick and targeted actions to stabilize the US dollar. We hope the U.S. will not tell us this time as they did in the early 1970s to the Europeans, to say that “it is our currency, but, it is your problem”.
Another disturbing phenomenon which causes increasing concerns is the rising sentiment of protectionism in the United States. Its economic fatigue has led to a significant retrogression in domestic attitude towards multilateral trade liberalization, a rising voice for protection of domestic industries and a reduction to further trade reform. The failure of the US Congress to renew the Trade Promotion Authority and the adoption of new Farm Bill which continue to maintain enormous Agricultural subsidies have sent very negative signals at this critical juncture and given rise to the suspicision of Members on its leadership and political will to contribute in the Doha negotiations. Members are also concerned about the continuous abuse by the US of trade remedy measures. Taking anti-dumping for example, as pointed out in the Secretariat Report, at the end 2007, 224 definitive measures were in effect and the average duration of them was some 11 years with the oldest one dating back as from 1973. We continue to feel disappointment as many other Members, about the multiple delays of and reluctance the U.S. to comply the rulings of the DSB. Such a tendency in the US constitutes an obvious contradiction to its status as the biggest beneficiary and the most active cheer-leader for the multilateral trade liberalization. China therefore is very much concerned that, if this tendency of protectionism grow unchecked, it may become a threat to the global trade and the Multilateral trading system.
Mr. Chairman,
The bilateral trade relations between China and US have kept an accelerating momentum in the last 2 years, with trade volumes of 263 billion and 302 billion USD in 2006 and 2007, increasing by 24.1% and 15% respectively. The US and China are the second largest trading partners to each other.
The US and China’s trade structures are highly complementary. Therefore, maintaining healthy trade relations and deepening mutual cooperation will promote the economic development and people’s welfare of both countries, and contribute to the economic growth of the world as a whole. In this respect, I would like to highlight the following concerns:
Firstly, China has noted a growing tendency of protectionism in the US trade with China. In 2007, the US Congress introduced 52 bills in regard to its trade with China and most of these bills request the US Administration to strengthen pressure on China either through restrictions or influence over bilateral trade. China is especially concerned that such bills are more and more manipulated by non-economic factors, which is an unhealthy sign.
Secondly, China noted a sharp increase in the number of trade remedies against China. In 2007 alone, the US initiated 7 joint anti-dumping/ countervailing investigations, 5 independent anti-dumping investigations and 17 Section 337 investigations, reaching the highest number in recent years. The US showed a strong arbitrariness in the investigations and rulings, including extending the scope of investigations at will and conducted unfair treatments to Chinese firms. For instance, in the joint anti-dumping/countervailing investigations, the US on the one hand calculated on the basis of the data from Chinese enterprises to suit the countervailing investigation, but on the other hand used the data of a third country to suit the anti-dumping investigation. Another example is that, while refusing to recognize China as a “market economy” and imposing anti-dumping duties based on discriminative calculations, the U.S took countervailing measures simultaneously, resulting in double counting which are not in line with relevant WTO rules. Besides, in anti-dumping investigations the U.S acted arbitrarily in selecting surrogate countries, refusing to recognize Chinese market-oriented industries and adopting zeroing methodology in the reviews. All these have seriously damaged the lawful rights of Chinese industries and brought uncertainty to the bilateral trade. This might also set adverse examples in international trade.
Thirdly, China noted that, while requesting China to further open its market, the US still maintains restrictions and controls on the export of high-tech products for civilian use. In fact, the comparative advantages of China and the US determine that their trades are mutually complementary: China’s comparative advantage of exports mainly lie in labor-intensive products, while the US has strong advantages in exporting technology-intensive products and high value-added services. Restrictions on the export of civilian high-tech products undermine balanced development of the bilateral trade relations.
China has submitted written questions to the US and we thank the US for their responses tabled this morning. We shall study them carefully and make further comments at later stage. In addition, China would like to take this opportunity to express our concerns regarding some specific trade sectors:
With regard to trade in goods, though the overall tariff level of the US is a relatively low, tariff peaks, tariff escalations and high out-of-quota tariffs are maintained, which are impediments to trade. High tariff rates have remained in several sectors, especially in those of export interest to developing countries, such as food, textiles, footwear, plastics, dishware, chinaware and trucks. The long existing tariff escalations have restricted the import of semi-manufactured or manufactured goods with high added value. The tariff quotas and quantitative restrictions on some agricultural products aim at protecting the interests of domestic industries. The exceptional high tariff rates applied to out-of-quota imports also constitute barriers to foreign products.
Agriculture remained another core issue of concerns to China. The US has been continuously providing large amount of subsidies to its agriculture, distorting domestic production and international trade, forcing many developing Members out of competition, and leaving the livelihood and food security of billions of developing country subsistence farmers at threat. Since 2005, the US has been subsidizing corn-based biofuel that has driven up prices of food and has become a major factor to the current world food crisis. This also caused great sufferings to many developing Members, especially those vulnerable economies depending heavily on imported food. With the DDA negotiations now entering into a crucial stage, Members are looking forward to the US to play a leadership role and make substantial reductions in agricultural subsidies. Currently the prices of agricultural products are soaring worldwide, providing the best opportunity for the US to reduce its subsidies without much pain. However, it is to our great regret that the US Congress has just passed a new Farm Bill, maintaining its agriculture subsidies at a high level and increasing its direct payment to 15 products. These actions have ignored the voices of many developing Members and defied the rulings of the DSB, which cast a shadow over the successful conclusion of DDA negotiations.
With regard to non-tariff barriers to trade, there is a tendency to abuse border measures and TBT/SPS measures by the US. As the Secretariat Report pointed out, the US customs newly added a number of extreme requirements, including 100% scanning and “10+2 port documents” requirements for “national security reasons”. Although we understand the need for national security, these excessive measures have increased the time consumption and economic costs of importers, and constituted barriers to free flow of trade. Furthermore, quite a number of TBT/SPS measures without sound rationale are inconsistent with international standards, and are de facto obstacles undermining imports. Here, China would like to stress one important issue. Article 733 of the Agricultural Allocation Bill for the Fiscal Year 2008 passed at the end of 2007 stipulates that the appropriation under this bill shall not be used to “design or implement” policies on the import of cooked poultry from China. While on bilateral occasions the US has stated several times that there are no “technical problems” in the import of Chinese cooked poultry products and that this issue will be solved as soon as possible, but domestically it has kept using administrative measures to regulate trade, which are protectionism in nature and are not consistent with WTO rules. China would like to urge the US to terminate this stipulations as soon as possible.
China noted that the US has tightened its control on cross sector foreign investment. As the Secretariat Report indicated, the US has modified its laws on foreign investment and national security, granting the authority the power of investigation with little restrain, which have added uncertainties for foreign investors. Sectors such as banking, insurance, power generation and distribution, natural gas and communication are more strictly regulated at the state level. Government interventions on foreign investment have been exercised with excessive examination and supervision procedures.
Concerning transparency, China noted that there is much room for improvement. As a founding Member of GATT and WTO, the US has made several trade-related policies without sufficient consultations with interested parties or notification to the WTO. The Secretariat also noted that the US falls short of fulfilling its obligations of notification on preferential rules of origin, agricultural tariff quotas and government procurement statistics. Furthermore, too many state regulations and rules make the legal framework of the US complex and opaque, and create de facto barriers for foreign investors, especially in the service sectors and TBT/SPS fields.
With regard to the service sector, though the market access of the US is broad in general, the US seems to be reluctant to open several key sectors such as banking, insurance and telecommunication. Equity cap, restrictions in types of services or business scope, excessive qualification requirements and exceptions in MFN treatment are still maintained at the state level, seriously avoiding its commitments in practice. China noted that the US is particularly conservative on Mode 4 and on sectors such as maritime transportation and launching of civilian satellites, and maintains several discriminative measures inconsistent with the WTO rules.
Mr. Chairman,
The healthy development of the multilateral trading system requires a more open, fair and transparent policy framework. Promoting the DDA negotiations will serve the best interests of all Members, especially in the current stage when the world economy is facing mounting uncertainties. China is keenly aware that the DDA, which has been going on for 7 years, is now at a crucial stage. Whether we can break the deadlock and reach a conclusion before the end of the year depends very much on the outcome of the agriculture negotiations, particularly on the reduction of agricultural subsidies. China urges the US, as the greatest beneficiary for decades of the multilateral trading system, to play a leading role and make a new and meaningful offer to substantially reduce its domestic support in agriculture to break the ice. Only when the US and other major developed Members exercise due leadership and give strong push and through joint efforts of all can a successful conclusion of DDA be achieved.
To conclude, I wish the US Delegation a pleasant stay in Geneva and this Trade Policy Review a success.
Thank you, Mr. Chairman.
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