Negotiating new WTO rules to rein in China futile: US trade agency

The US has set a March 2 deadline to hike tariffs to 25 percent from 10 percent on $200 billion worth of Chinese goods imports. (AFP)
Updated 05 February 2019

Negotiating new WTO rules to rein in China futile: US trade agency

  • The US remains frustrated with the WTO’s inability to curb what it sees as China’s trade-distorting non-market economic policies
  • But any WTO rule changes must be agreed by all 164-member nations, and past efforts have stalled

WASHINGTON: Negotiating new World Trade Organization rules to try to rein in China’s “mercantilist” trade practices would be largely a futile exercise, the Trump administration’s trade office said on Monday, vowing to pursue its unilateral approach to protect US workers, farmers and businesses.
The US Trade Representative’s office used its annual report to Congress on China’s WTO compliance in part to justify its actions in a six-month trade war with Beijing aimed at forcing changes in China’s economic model.
The report also reflects the US’ continued frustration with the WTO’s inability to curb what it sees as China’s trade-distorting non-market economic policies, and offered little hope that situation could change soon.
“It is unrealistic to expect success in any negotiation of new WTO rules that would restrict China’s current approach to the economy and trade in a meaningful way,” the USTR said in the report.
Some US allies, including Canada, the European Union and Japan, which are also frustrated with pressures created by China’s economic policies, have begun talks on the first potential changes and modernization of WTO rules since it was founded in 1995.
But any WTO rule changes must be agreed by all 164-member nations, and past efforts have stalled. It was “highly unlikely” China would agree to new disciplines targeting changes to its trade practices and economic system, the USTR said.
The report shed little light on progress in talks between the US and China to ease a bruising tariff fight, despite a swiftly approaching March 2 deadline to hike US tariffs to 25 percent from 10 percent on $200 billion worth of Chinese goods imports.
The WTO report follows two days of intense talks between high-level US and Chinese officials last week centered on US demands for structural policy changes. These include enforcing intellectual property protections, ending cyber theft of trade secrets, halting the forced transfers of American technology to Chinese firms and reining in industrial subsidies.
While US President Donald Trump said he would like to meet Chinese President Xi Jinping to try to hammer out a trade deal, the USTR report makes clear a massive amount of work will be needed to bridge the gulf between the two countries.
It cited the key structural issues in the talks, which also include China’s new cybersecurity law and discriminatory regulatory practices, as examples of how China aids domestic firms at the expense of foreign competitors in ways that escape WTO rules, adding that China has become “a unique and pressing problem for the WTO and the multilateral trading system.”
The criticism also comes as the US weakens the WTO’s role as global commerce watchdog by blocking the appointments of judges to its appellate body, which may no longer be able to function by December, when two judges step down.
USTR said the US intends to “hold China accountable” for adhering to existing WTO rules and “any unfair and market-distorting trade practices that hurt US workers, businesses, farmers or ranchers.” “Until China transforms its approach to the economy and trade, the US will take all appropriate actions to ensure that the costs of China’s non-market economic system are borne by China, not by the US,” USTR said.
The agency reiterated a broad array of concerns over China’s key structural issues, such as its 2025 plan for investment in particular sectors and its failure to follow market-oriented principles expected of WTO members, the report said.
“China retains its non-market economic structure and its state-led, mercantilist approach to trade, to the detriment of its trading partners,” it said.


Oil falls below $57 on virus impact and OPEC+ delay

Updated 19 February 2020

Oil falls below $57 on virus impact and OPEC+ delay

  • Contagion ‘is spooking market players,’ analysts say after Asian shares fall and Apple issues warning

LONDON: Oil fell below $57 a barrel on Tuesday, pressured by concerns over the impact on crude demand from the coronavirus outbreak in China and a lack of further action by OPEC and its allies to support the market.

Forecasters including the International Energy Agency (IEA) have cut 2020 oil demand estimates because of the virus. Though new cases in mainland China have dipped, global experts say it is too early to judge if the outbreak is being contained.

Brent crude was down 82 cents at $56.85 a barrel in mid-afternoon trade after rallying in the previous five sessions. US West Texas Intermediate crude fell 70 cents to $51.35.

“Risk aversion has returned to the markets,” said Commerzbank analyst Carsten Fritsch.

“OPEC+ has shown no sign yet of reacting to the virus-related slump in demand by making additional production cuts.”

The virus is having a wider impact on companies and financial markets. Asian shares fell and Wall Street was poised to retreat on Tuesday after Apple said it would miss quarterly revenue guidance owing to weakened demand in China.

“This has spooked market players and triggered a sharp pullback in risk assets,” said Tamas Varga of oil broker PVM.

The IEA last week said that first-quarter oil demand is likely to fall by 435,000 barrels per day (bpd) from the same period last year in the first quarterly decline since the financial crisis in 2009.

The Organization of the Petroleum Exporting Countries (OPEC) and its allies, including Russia, have been considering further production cuts to tighten supply and support prices.

The group, known as OPEC+, has a pact to cut oil output by 1.7 million bpd until the end of March.

The next OPEC+ meeting next month is set to consider an advisory panel’s recommendation to cut supply by a further 600,000 bpd. Talks on holding an earlier meeting in February appear to have made no progress, OPEC sources said.

As well as OPEC+ voluntary curbs, support for prices has come from involuntary losses in Libya, where output has collapsed since Jan. 18 because of a blockade of ports and oilfields.