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TWN
Info Service on WTO and Trade Issues (Oct22/12) Geneva, 20 Oct (D. Ravi Kanth) — China has chided the United States at the World Trade Organization over its slew of unilateral “export controls on advanced computing chips, development and maintenance of semiconductors, and manufacturing of advanced semiconductors” targeting China. In what appears to be the “crudest” kind of “mercantilist” war launched by Washington against Beijing by allegedly flouting the core principles of the WTO, especially that of most-favoured-nation treatment (MFN), China urged the US to eschew the “bullying” tactics and adhere to the multilateral trade rules. Under the agenda item of “other business” at a meeting of the WTO’s Committee on Market Access on 19 October, China chastised the US for applying the “so-called Foreign Direct Product Rules to 28 Chinese entities.” In a statement delivered at the meeting of the Committee on Market Access, seen by the SUNS, China said that “the relevant measures of the US side are suspected of violating the WTO’s non-discriminatory provisions such as the MFN treatment principle, general elimination of quantitative restrictions etc.” Paragraph 1 of Article 1 of the GATT 1947 concerning “General Most-Favoured Nation Treatment”, states: “With respect to customs duties and charges of any kind imposed on or in connection with importation or exportation or imposed on the international transfer of payments for imports or exports, and with respect to the method of levying such duties and charges, and with respect to all rules and formalities in connection with importation and exportation, and with respect to all matters referred to in paragraphs 2 and 4 of Article III,* any advantage, favour, privilege or immunity granted by any contracting party to any product originating in or destined for any other country shall be accorded immediately and unconditionally to the like product originating in or destined for the territories of all other contracting parties.” In a similar vein, under Article XI of the GATT 1947 dealing with “General Elimination of Quantitative Restrictions”, members are mandated not to impose prohibitions or restrictions other than duties, taxes or other charges. Beijing has described the latest slew of US measures, which are being treated as a “security-policy choke-hold” by some trade analysts, as being tantamount to “typically bullying acts, reflecting the Cold War mentality of the US side.” China informed members at the WTO that the US measures “have seriously blocked the normal economic and trade exchanges globally.” Further, according to China, these measures imposed by the US “not only affect the legitimate rights and interests of Chinese enterprises, [but] definitely also damage the legitimate business interests of US enterprises and harm the interests of businesses in other relevant members.” Given the deeply interconnected semiconductor industry internationally, China cautioned that Washington’s measures will cause serious consequences to the global supply chain. China argued that the US actions “are purely government interventions, which can never be market-oriented as the US always touts.” Beijing warned that Washington’s “actions seriously threaten the sound development of the global semiconductor industry and damage the rules of the market and the international economic and trade order.” At a time when inflation has become rampant in the US and other countries across the world with the prospects of a likely recession looming, due to the disruption of global supply chains since the COVID-19 pandemic in 2020, China said that the US actions “disrupt the stability of the global industrial chains and supply chains and seriously undermine the collective efforts of all WTO members to jointly promote global economic recovery and tackle the global challenges.” China urged the US to “immediately terminate its harmful practices” and called upon the US side “to play its leading role to make positive contributions, rather than vice-versa, to build the global industrial chains and supply chains, which are safe and stable, smooth and efficient, open and inclusive, and beneficial to all stakeholders and to the global economy especially when the world is facing multiple challenges.” It remains to be seen whether China would also formally invoke dispute settlement proceedings against the US at the WTO. Washington has not yet notified the recent spate of measures to the WTO. In 2019, when the Trump administration had started imposing security-driven trade measures, China made a strong statement at the Committee on Market Access, saying that the “unilateral sanctioning measures violated Articles 1 (General Most-Favoured-Nation Treatment) and XI of the GATT (General Elimination of Quantitative Restrictions), and failed to comply with Article XXI (Security Exceptions).” US “HEGEMONIC” WAR In what seems like a “war cry” to maintain its supremacy and hegemony in every sector from COVID-19 vaccines, diagnostics, and therapeutics to semiconductors, the US national security advisor Mr Jake Sullivan made the US position rather clear in its aim to choke off supplies of semiconductors and other items to China. While announcing the slew of measures against China on 7 October, Mr Sullivan said: “We previously maintained a sliding scale approach that said we need to stay only a couple of generations ahead. This is not the strategic environment in which we are today. Given the foundational nature of certain technologies, such as advanced logic and memory chips, we maintain as large of a lead as possible.” While the statement by Mr Sullivan suggests competition in one respect, it also speaks volumes about Washington’s intention to expand sanctions aimed at stymying the development of advanced semiconductor industries in China and other developing countries. Speaking to the SUNS in 2019, the former South African trade minister Mr Rob Davies warned that the trade war for “hegemony” won’t end soon. He predicted somewhat presciently that “it is essentially a battle over who is going to be the hegemon and who is going to lead the fourth industrial revolution.” After almost three years, Mr Davies’ pronouncements seem to have been proved correct by the slew of measures imposed by the US to maintain its grip on supremacy and hegemony in utter disregard of the multilateral rules that it had created and is now apparently dismantling. “But the far-reaching nature of these sanctions will have implications for the reliability of the global trading and financial order – they express the crudest kind of mercantile reordering of the world system possible,” writes Pratap Bhanu Mehta, an acknowledged Indian public intellectual, in the Indian Express on 20 October. He said the US sanctions are “a recipe for creating immense uncertainty in global supply chains,” cautioning that “China is too important to isolate.” According to Mehta, the repercussions of the US sanctions will be felt across all areas including in fighting climate change and other global challenges. US TRADE POLICY ACADEMICS QUESTION SANCTIONS Meanwhile, according to US trade policy academic Prof Steve Charnovitz of George Washington University, the US sanctions will force China to “redouble its efforts at homegrown technology innovation.” He characterized the US policy against China as “counterproductive.” Writing in the International Economic Law and Policy (IELP) blog on 17 October, another US trade policy academic Ms Mona Paulsen, raised several questions about the US “choke-hold” security sanctions. She said: “Yet, what does it mean when one member (the US) cites its “economic heft” to drive the membership’s understanding? What are the legal consequences of a blending of “national” focused security and global concerns. For example, if a measure aims to deliver jobs and take action to diversify supply chains for the “security of the American people and [their] allies and partners” while explicitly seeking to “impose costs” on another WTO member? Earlier this summer, USTR Tai observed that US tariffs on Chinese goods maintain “leverage” too. Due to its relative market strength, can the United States forge a new status quo for all WTO members, requiring the latter to conform?” Clearly, the US actions are replete with far-reaching ramifications, including for the prospects of supplies of rare earth materials that are critical to the development of Information Technology industries and even production of electric batteries. Also, the US sanctions could punish countries that are currently engaged in semiconductor trade with China such as Korea, the Netherlands, and others. More disturbingly, the US sanctions could create uncertainty for its nationals and Green Card holders who are currently working in China. In short, the US sanctions seem to have put the global trading system in “a state of comatose” while destroying the WTO with its unilateral measures that appear to have “immolated” the WTO’s rule-book. +
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