U.S. Report Finds China out of Compliance with WTO Commitments Relating to Textiles, Intellectual Property, Export Subsidies, and Import Barriers

On February 4, 2019, USTR Released the Annual Reports on China's WTO Compliance

China and Russia present unique and serious challenges for members of the WTO and the multilateral trading system, largely because of their failure to embrace the pursuit of open, market-oriented policies, the U.S. Trade Representative said in the annual reports. China became a member of the WTO in 2001 and Russia joined the WTO in 2012.

Selected highlights of the 2018 annual report on China’s WTO compliance:

• Despite repeated commitments to refrain from forcible technology transfer from U.S. companies, China continues to do so through market access restrictions, the abuse of administrative processes, licensing regulations, asset purchases, and cyber and physical theft.

• China committed to open the electronic payment services market in 2006. This commitment was confirmed in a 2012 ruling by the WTO’s dispute settlement body resulting from a U.S. legal challenge. Today, the reality remains that no foreign electronic payment services companies conduct business in China’s domestic market.

• China’s use of export and import substitution subsidies has been ubiquitous throughout the past two decades in sectors as diverse as automobiles, textiles, advanced materials, medical products and agriculture, despite explicit prohibitions in the WTO Agreement.

• China has repeatedly committed to review applications of agricultural biotechnology products in a timely, ongoing and science-based manner. However, the Chinese regulatory authorities continue to review applications slowly and without scientific rationale, while Chinese companies continue to build up their own capabilities in the area of agricultural biotechnology.

• China has repeatedly deployed illegal export restraints, such as export quotas, export licensing, minimum export prices, export duties and other restrictions, on scores of raw material inputs, as determined in multiple WTO cases brought by the United States and other WTO members. China has used these illegal export restraints to provide substantial cost advantages to a wide range of downstream producers in China at the expense of foreign producers, while creating pressure on foreign producers to move their operations, technologies and jobs to China.

• Any review of China’s trade regime also shows that China’s regulatory system is so opaque that it is often difficult for U.S. companies – or even the U.S. government – to fully understand China’s legal requirements in a particular area of the economy. This problem is exacerbated by China’s extremely poor record of adhering to its transparency obligations as a WTO member. These shortcomings create their own trade barriers and undermine the competiveness of China’s trading partners.