TWN Info Service on WTO and Trade Issues (Oct20/15)
16 October 2020
Third World Network

China criticizes US on joint proposal on market-oriented conditions
Published in SUNS #9212 dated 16 October 2020

Washington DC, 15 Oct (D. Ravi Kanth) – China has severely criticized the United States on its joint proposal with Brazil and Japan on addressing the importance of market-oriented conditions to the global trading system.

Without naming the United States, China said some members suffer from “selective amnesia” and fail to do first what they want others to do, said trade envoys.

At the WTO General Council meeting on 13 October, the US and China clashed on the joint proposal circulated by the US, Japan, and Brazil, at a time when the governments in various countries, particularly the US, have resorted to economic stimulus programs and heavy subsidization on several fronts, said trade envoys, who asked not to be quoted.

The US also appeared to suffer a setback at the meeting on its aggressive push to negotiate on differentiating developing countries for availing special and differential treatment, as well as on market-oriented reforms at the World Trade Organization.

Many developing countries, including China, India, and South Africa among others, rejected the US proposal on reforming the negotiating function of the WTO.

As regards the joint proposal on the importance of market-oriented conditions, the US trade envoy Ambassador Dennis Shea said “the joint Brazil-Japan-US statement reflects our shared belief in the core principles of the WTO, to include that market-oriented conditions are fundamental to a free, fair, and mutually advantageous world trading system.”

Ambassador Shea said that “we affirm a number of criteria that reflect the market-oriented conditions and disciplines to which our own enterprises are subject”, emphasizing that “all Members’ enterprises should operate under these conditions to ensure a level playing field for our citizens, workers, and businesses.”

The deputy USTR said that the discussion on this joint proposal is necessary “in the context of achieving meaningful WTO reform.”

“To achieve such reform, WTO Members must continue moving toward – and not away from – more open, market-oriented policies and conditions,” the US trade envoy emphasized.

Ambassador Shea admitted that in recent G20 discussions as reflected in the Riyadh Initiative Annex to the Trade Ministers’ Communique, “not all WTO Members agree that “market-oriented policies” is a principle of the WTO.”

Without naming China, the US trade envoy said that “one Member in particular could not reaffirm the principles of the Marrakesh Declaration or even bring itself to reference the Declaration, and went on to dispute that its accession commitments tied it to any market-oriented policies.”

Ambassador Shea said that “the usefulness of the recent G20 exercise was to clearly articulate this division in the Membership, and that some do not agree with the core values of the institution. This crystalizes for us the importance of reaffirming those core values.”

Elaborating on the joint proposal, the US said that it recalls “that the WTO was established to promote Member economies’ participation in a world trading system “based on open, market-oriented policies and the commitments set out in the Uruguay Round Agreements and Decisions”.”

Ambassador Shea claimed that “the market-based reforms that GATT parties and acceding Members undertook during that process helped to ensure that their participation was indeed based on open, market-oriented conditions,” arguing that “these Members’ reform efforts demonstrated their commitment to an international trading system that depends on the operation of market-oriented conditions in each of our economies.”

The common foundation, said Ambassador Shea, “is critical to realizing the benefits of the international trading system that come from our mutual commitment to these rules,” and “this common foundation is necessary to ensure a level playing field for all Members.”

Responding to the arguments advanced by some countries against the joint proposal, the deputy USTR clarified that “market-oriented conditions provide a level playing field and therefore are necessary conditions for fair trade.”

Ambassador Shea pointedly asked whether “fair trade can result when special advantages are given to domestic entities under these conditions?”

Ambassador Shea maintained that “the Brazil-Japan-US joint statement affirms that Members’ enterprises should operate under market-oriented conditions and notes the elements that indicate and ensure those conditions for market participants.”

Several members, particularly Australia and the European Union, supported the joint proposal, with the EU saying that “market-oriented conditions are central to allowing a level-playing field”.

The EU also suggested that it is concerned with “non-market-oriented policies and practices that have resulted in distortions to the world trading system.”

However, a sharply contrasting response was provided by China, South Africa, and Pakistan.

India offered a somewhat mixed response to the joint proposal, saying that it is open to the issues raised in the joint proposal, while expressing disappointment over the re-introduction of a proposal that was already discussed in the previous General Council (GC) meetings, said trade envoys, who asked not to be quoted.

In its intervention, China’s trade envoy Ambassador Zhang Xiangchen said that the selective quoting of the Marrakesh agreement by some members, particularly the United States, demonstrate their “selective amnesia.”

Ambassador Xiangchen said, when members discuss about the Marrakesh Declaration, they should not forget Article 5 which states: “Ministers recall that the results of the negotiations embody provisions conferring differential and more favorable treatment for developing economies, including special attention to the particular situation of least-developed countries”.

Quoting Albert Einstein, who once said that “success is equal to hard work plus correct method plus less empty talk”, Ambassador Xiangchen said the “Chinese people have also believed in “empty talks harm the country” since ancient times.”

He pointedly asked the proponents of the joint proposal, “what is the purpose of this proposal? What are the follow-up measures to be taken in the next step?”

Ambassador Xiangchen said it is puzzling that “at this moment, if we cannot prevent a Member’s government from forcing foreign companies to sell their equities and technology to its national companies in any way, how can we sit here comfortably and discuss and tell the world what the market-orientated conditions are?”

He said members should be aware of their failure “to take effective actions to stop unilateralist and protectionist measures that undermine the market rules from raging around the world, and this organization we work.”

“We (members) should feel ashamed”, the Chinese envoy said, suggesting that some members continue to “talk empty about the market-oriented conditions to give more reasons for the international community to laugh at us, for being not only incapable, but also naive?”

“When a principle or a system is broken, what we should do is to take concrete actions to try to fix it rather than verbally repeating the importance and correctness of the rules to show the innocence of someone who broke the rules,” the Chinese trade envoy emphasized.

He quoted Ambassador Shea, who said that “when the state puts its thumb – or even its fist – on the scale to distort competition and drive preferred outcomes to benefit certain domestic actors, that is unfair”, saying that he “couldn’t agree with him more about that.”

Ambassador Xiangchen said “it is common sense that if you ask others to do something, you should do it first,” and went on to give several examples such as, “When a country, on the grounds of national security, arbitrarily and frequently imposes tariffs on foreign goods or deprives foreign services of market access, that is unfair.”

The Chinese envoy said “when a country uses tariffs as a leverage to force its trading partners to concede in trade negotiations, the market is distorted” and “when a country blatantly violates fundamental trade rules and at the same time blocks the independent and neutral adjudications, the level playing field is gone.”

Therefore, he said, “instead of chanting the empty slogan of “market-oriented conditions”, it’s better for us to take concrete actions to address the above wrongful practices which undermine the fair competition and market- oriented conditions.”

In its intervention, South Africa said that while it agrees with the “importance of promoting market-oriented policies,” it is important to recognize that “the market is not perfect and there are cases of over-pricing, market concentration, rising unemployment and inequality, necessitating government intervention to ensure proper functioning of the market and to promote a range of public policy imperatives.”

South Africa’s trade envoy Ambassador Xolelwa Mlumbi-Peter recalled “the preamble of the Marrakesh Agreement that recognizes the right of every developing country, including LDCs, to secure a share of the growth in world trade commensurate with the needs of their economic development.”

Ambassador Xolelwa argued that the joint statement by the US, Brazil, and Japan recognizes “the right and ability of Members to regulate in the public interest and in promoting the public`s welfare” but members need to know “what is meant by “no significant government interference”.”

She argued that “almost all WTO Members have mixed economies where Governments intervene in the economy to achieve a developmental mandate,” adding that it is important “in a context of a legally binding multilateral framework that is subject to dispute settlement and especially in the context of COVID-19 during which many developed Members, have undertaken massive fiscal stimulus packages.”

“This is by far the best demonstration of the important role the State plays in national economies,” she said.

South Africa said members must have “a multilateral trading system that supports inclusive growth, and enables national authorities to pursue steps to achieve national developmental objectives and outcomes based on their peculiar circumstances.”

States must have the discretion “to decide how best to achieve national economic objectives and public policy objectives,” South Africa argued, emphasizing that “relying solely on the market is not practical given many market failures attributed to current practices of multinational corporations, including price gouging, patent abuse and other anti-competitive practices of pharmaceutical giants and digital platforms.”