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THIRD WORLD ECONOMICS

China lambasts US at WTO over Huawei ban

China has raised the issue of US trade restrictions against Chinese telecommunications firm Huawei at the WTO, criticizing what it said was an unjustified recourse to the WTO rules’ security exceptions.

by Kanaga Raja

GENEVA: A meeting of the WTO Committee on Market Access on 28 May heard China criticizing the United States over the latter’s recent prohibitions on the Chinese telecom giant Huawei Technologies Co Ltd purportedly on national security grounds.

China said that the abuse of the national security exceptions under Article XXI of the General Agreement on Tariffs and Trade (GATT) by the US was putting the rules-based multilateral trading system in danger.

According to trade officials, the matter was brought up under the agenda item of “Other business” by China, which addressed the issue of the Executive Order issued by US President Donald Trump on 15 May.

In the Executive Order on “Securing the Information and Communications Technology and Services Supply Chain”, Trump had said that “foreign adversaries are increasingly creating and exploiting vulnerabilities in information and communications technology and services, which store and communicate vast amounts of sensitive information, facilitate the digital economy, and support critical infrastructure and vital emergency services, in order to commit malicious cyber-enabled actions, including economic and industrial espionage against the United States and its people.”

He had further said “the unrestricted acquisition or use in the United States of information and communications technology or services designed, developed, manufactured, or supplied by persons owned by, controlled by, or subject to the jurisdiction or direction of foreign adversaries augments the ability of foreign adversaries to create and exploit vulnerabilities in information and communications technology or services, with potentially catastrophic effects, and thereby constitutes an unusual and extraordinary threat to the national security, foreign policy, and economy of the United States.”

The Executive Order gives the federal government the power to block US companies from buying foreign-made telecommunications equipment deemed a national security risk.

Subsequently, the US Department of Commerce added Huawei and some 70 affiliates to its “Entity List”, effectively prohibiting Huawei from buying parts and components from US companies without US government approval, on grounds that Huawei has been involved in activities contrary to US national security or foreign policy interests.

The US ban has already resulted in several US chipmakers and software firms and platforms, such as Android, refusing updates to systems for Huawei products. Huawei and its affiliates are also being denied chips.

In turn, there are hints from China that it may restrict access to its rare earths and downstream products, essential for several high-tech appliances and activities. China has also published a draft regulation (for comments) on cyberse-curity rules that may affect several US enterprises manufacturing for Chinese markets or exports.

“Great concern”

At the 28 May meeting of the Committee on Market Access, China, voicing deep concerns, asked the US to notify subsequent administrative measures to the WTO without delay.

It also called on the US to respect the WTO rules in formulating implementation regulations regarding the export control measures.

According to trade officials, China pointed out that the US was in violation of Article I of the GATT, and that it was also not complying with the provisions in Article XXI of the GATT (on security exceptions).

It called on the US to “immediately lift all unilateral sanction measures against Chinese companies.”

China further said that it would use all available means to safeguard its national interests.

It underlined that the repeated over-generalization of national security by the US and the abuse of Article XXI of the GATT “has caused great concern in the membership” of the WTO.

While the US has pointed out on many occasions that strengthening the economy would contribute to national security and that preserving innovation and technology is vital to its national defence, China was of the view that not all issues related to the economy, or innovation and technology, could be equated with national security.

According to trade officials, in this context, China pointed out that according to the 2019 US trade policy agenda and the latest data, the US economy was currently in a healthy state with a recent boom in jobs, including manufacturing jobs. This was squarely contradictory to the US logic for invoking Article XXI, it said.

It also said that to date the US had not presented any convincing evidence when invoking the national security exception, whether in its latest Executive Order or in previous measures under Section 232 of its Trade Expansion Act of 1962.

China underlined that the WTO was based on rules and invoking Article XXI must also be based on certain rules, including the principle of good faith. The determination of a security threat should be based on objective proof rather than subjective perception, it added.

The abuse of Article XXI without any objective evidence would severely impact other members’ rights under the WTO and had put the rule-based multilateral trading system in danger, China warned.

China cited a quote by the US delegation during a GATT negotiating session in Geneva in July 1947, in which the US recognized the “great danger of having too wide an exception that would permit anything under the sun.”

Indeed, when that happened, said China, the rules would not be rules anymore, exceptions would become the rules, and that would cause a significantly negative impact on international trade and the global trade order.

According to trade officials, the US declined to make any substantive detailed comments on China’s intervention as the item was not inscribed in the agenda of the meeting and was raised instead under “Other business”.

The US merely invited interested members to find more information on the Executive Order of 15 May, and said that more information regarding additions to the Entity List could be found in the 21 May issue of the Federal Register. (SUNS8918)                                           

Third World Economics, Issue No. 682, 1-15 February 2019, pp9-10


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