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New WTO Case Against Mainland China Among Recommendations in Annual Report by U.S. Commission

As previously reported, the U.S.-China Economic and Security Review Commission recently released its 2018 report to Congress on the national security implications of the trade and economic relationship between the United States and mainland China. In addition to the previously outlined recommendation that Congress direct the U.S. Department of Commerce and other relevant government agencies to prepare a report examining and assessing the adequacy of U.S. export control policy for dual-use technology as it relates to the U.S. treatment of Hong Kong and mainland China as separate customs areas, the Commission is recommending that a new case be filed against mainland China at the World Trade Organisation.

Among other things, the report finds that the uni-lateral, bi-lateral and multi-lateral tools the United States has used have been successful at targeting some discrete aspects of mainland China’s industrial policies, such as individual subsidy programmes or tariffs. However, the report states, U.S. policy makers have expressed growing frustration that these tools, including antidumping and countervailing duties, Section 201 safeguards, Section 232 and 301 import restrictions, bi-lateral discussions and forums and WTO litigation, have each “proven limited when set against a vast array of industrial policies viewed as a political and economic imperative by Chinese leadership.”

In an effort to devise a more effective approach to the economic challenges mainland China presents, the report recommends that Congress examine whether the Office of the U.S. Trade Representative should bring a “non-violation nullification or impairment” case against mainland China at the WTO under Article 23(b) of the General Agreement on Tariffs and Trade. Such claims allow WTO members to dispute measures that do not explicitly violate WTO agreements but are deemed to have nullified or impaired an expected benefit (e.g., that as a result of its accession to the WTO mainland China would participate in the multi-lateral trading system on open, market-oriented terms). However, the report notes that such cases have been rare and narrow in scope, making it difficult to predict the outcome if the United States were to pursue one.

The report recommended that Congress take the following actions as well.

  • direct the U.S. Government Accountability Office to conduct an assessment of Sino-U.S. collaborative initiatives in technical co-operation that, among other things, considers whether the intellectual property rights of U.S. researchers and companies are being adequately protected and investigates if any U.S. companies, universities or labs participating in U.S. government-led collaboration with mainland China have been subject to cyber penetration originating in the mainland
  • direct the U.S. Department of Agriculture to identify the extent to which mainland China’s asynchronous biotech review and approval system for agricultural products adversely impacts U.S. industry and work with USTR to seek bi-lateral or multi-lateral measures to address these impacts
  • direct the USDA to prepare an annual report on its technical engagement with mainland China on food safety, inspection, mechanisms for addressing sanitary and phytosanitary problems, and any technical assistance provided to mainland China to improve its food safety inspection regime
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