TWN Info Service on WTO and Trade Issues (Aug18/02)
3 August 2018
Third World Network
Kazakhstan to host twelfth WTO ministerial conference
Published in SUNS #8732 dated 30 July 2018

Geneva, 27 Jul (Kanaga Raja) - The General Council of the World Trade Organisation (WTO) on Thursday decided to accept Kazakhstan's invitation to host the organisation's twelfth ministerial conference (MC12) in Astana in June 2020.

The exact dates of the conference however are yet to be determined.

Reportedly the reason that the exact dates have not yet been chosen for the conference is that Kazakstan had recommended dates at the beginning of June but some delegations had expressed concern at the overlap of these dates with the annual conference of the International Labour Organisation (ILO) in Geneva.

WTO Director-General Roberto Azevedo said that Kazakhstan's offer to host MC12 "demonstrates its strong belief in the multilateral trading system."

"Coming from one of the newest WTO members, this is powerful," he added.

Mrs Zhanar Aitzhanova, the Ambassador of Kazakhstan to the WTO, expressed her country's "sincere gratitude for the confidence and trust that WTO members have placed in Kazakhstan".

She said: "It is a great honour for a young independent state and recently- acceded member to be hosting such an important meeting. We stand ready to contribute to addressing all outstanding issues to secure substantive outcomes at MC12."

Kazakhstan joined the World Trade Organisation in 2015. This is the first time that a WTO ministerial conference will be held in Central Asia.

Meanwhile, at the beginning of the meeting, the Chair of the General Council, Ambassador Junichi Ihara of Japan, informed that several decisions pertaining to activities and technical assistance projects on investment facilitation are being deferred (see SUNS #8731 dated 27 July 2018).

Under a separate agenda item, the United States submitted a document highlighting its views on China's "trade-disruptive" economic model and implications for the WTO (see WT/GC/W/745 and also WT/GC/W/746).

WT/GC/W/745 is a 14-page document on China's economic model, while the additional document WT/GC/W/ 746 is a 139-page USTR report of 2017 to the US Congress on China's WTO compliance.

In its paper on China's economic model, the US said the Marrakesh Declaration confirmed the principle that Members were to participate in a multilateral trading system, "based upon open, market-oriented policies[.]"

When China acceded to the WTO in 2002, members of the Working Party noted that "China was continuing the process of transition towards a full market economy."

It was further hoped that China's agreement to join the WTO, reflected in China's Protocol of Accession and other documents, would dismantle policies and practices incompatible with an international trading system expressly based on the principles of non-discrimination, market access, reciprocity, fairness and transparency.

The US claimed that China however maintains a state-led, "trade-disruptive" economic model not based on those fundamental principles and that imposes substantial costs on and presents severe challenges to WTO Members.

It its paper, the United States put forth its views on the fundamental aspects of China's trade-disruptive economic model, the costs it exacts and the benefits that China receives.

The US maintained that at its core, the framework of China's economy is set by the Chinese government and the Chinese Communist Party (CCP), which exercise control directly and indirectly over the allocation of resources through instruments such as government ownership and control of key economic actors and government directives.

The Chinese government, including the Party, has a constitutional mandate, echoed in China's broader legal framework, to develop the "socialist market economy," said the US.

In this context, it cited Articles 6 and 7 of the Constitution of the Peoples's Republic of China.

To fulfil these mandates, the Chinese government and the CCP direct and channel economic actors to meet government planning targets.

The government and the CCP permit market forces to operate only to the extent that such activity accords with the objectives of national economic and industrial policy.

According to the US, aside from the government's and the CCP's role in managing the economy, there also are serious concerns over how they exercise influence over the operations and investment decisions of state-owned enterprises (SOEs) and private enterprises, including foreign-invested enterprises.

The US argued that since joining the WTO, China has repeatedly signalled that it is pursuing economic reform.

For example, in November 2013, at the Third Plenary Session of the 18th Central Committee of the CCP, the CCP endorsed a number of far-reaching economic reform pronouncements, which called for making the market "decisive" in allocating resources and reducing Chinese government intervention in the economy.

And as China reminded at the last General Council meeting in May, this year marks the 40th anniversary of China's self-described "reform and opening up " policy.

Unfortunately, the US claimed, China's use of the term "reform" differs from the type of reform that a country would be pursuing if it were embracing market-oriented principles.

For China, economic reform means perfecting the government's and the Party's management of the economy and strengthening the state sector, particularly state-owned enterprises.

As long as China remains on this path, the implications for this organization are decidedly negative, the US maintained.

According to trade officials, in the subsequent discussions, both the US and China made long interventions under this agenda item.

The US reportedly spoke mainly along the lines of the arguments that it made in its paper, namely that it believed that China is not a market economy and the Communist Party of China has a large and growing role in the economy and in the courts.

China however pointed out that the Trade Policy Review of China was just held recently and that this issue should be discussed in the Trade Policy Review Body. It then went on to rebut the points made by the US.

Morocco said it appreciated what both the US and China had said. It said it respects these delegations, adding that the issue of equity is extremely important.

It said it is paying very close attention to what is going on, and is committed to globalisation within a rules-based system.

Japan said that it understands some of the concerns expressed by the US with the current situation, and it shared some of these concerns.

It said that China is a member of the G20 and has committed to fulfil its effort to opening up its market more and to paring back market-distorting subsidies. Japan also highlighted the need to adopt more market-oriented policies.

Japan said it has concerns about the non-market policies, the forced transfer of technology and the role of state-owned enterprises.

However, it also had strong concerns about unilateral responses, saying that responses that are taken must be in the context of the WTO.

Pakistan said that this is an issue that should be taken up in the Trade Policy Review Body. It said that China has been very impressive with its policies and it has been successful in alleviating poverty.

There are Chinese companies operating in the One Belt, One Road initiative in Pakistan, and they are companies that are abiding by market principles, Pakistan added.

The Russian Federation said notwithstanding the fact that the US asked for this item to be put on the agenda, we just had this discussion in the Trade Policy Review Body.

It is true that China has been successful, not only in the world economy, but also as a major trading partner.

Russia said it is highly appreciative of China's economic reforms. Every country has the right to pursue its own economic policies, it added.

The EU informed that there had been a good meeting in Washington on Wednesday (between President Trump and European Commission President Jean-Claude Juncker).

It said that there is a need for market opening and a level playing field in China.

The EU has some issues with the role of state-owned enterprises, with the forced transfer of technology and with the lack of transparency.

The EU said that it shares many of the US concerns and is keen to talk about the way these concerns can be addressed. But, this can only be done with a thorough upgrading of the rules horizontally for each and every player.

Cuba said that this issue should be dealt with in the Trade Policy Review Body. It said every government has the right to its own policies.

Chinese Taipei said that some of these issues that had been raised are a concern, and some can be addressed under the current rules. But where they can't, there needs to be a discussion about how these rules could be improved.

Venezuela said that every country has the right to choose its own economic model.

Australia said it shares some of the US concerns about whether issues they have raised can be addressed in the current WTO model.

Some can be addressed, but if not, it would like to participate in efforts where it could address them jointly, it said.

Brazil said that it would welcome further reform and liberalisation in China, as it had said at the Trade Policy Review Body.

But it is concerned about the use of recrimination and singling out criticism for one country in the WTO.

Mexico said that there is need to upgrade the rules to address many of these concerns. It urged China and the US to try and resolve their differences here.

The US came back to say that this was an important conversation, it was civil and that it was worth having.