US could 'fatally undermine' WTO, says China's ambassador

Zhang Xiangchen, Chinese Ambassador to the World Trade Organisation, speaking during an interview in Geneva, Switzerland, on March 22, 2018.
Zhang Xiangchen, Chinese Ambassador to the World Trade Organisation, speaking during an interview in Geneva, Switzerland, on March 22, 2018.PHOTO: REUTERS

BEIJING/GENEVA (BLOOMBERG) - The Trump administration is delivering the World Trade Organisation "three hard blows" that could destroy the body's ability to regulate global commerce, China's ambassador to the Geneva-based body said.

"The US is blocking selection of new Appellate Body members, taking restrictive trade measures under Section 232 and threatening to impose tariff measures of US$50 billion of goods imports from China under Section 301 of US domestic law," said Zhang Xiangchen, China's envoy to the WTO since last year.

"Any one of these, if left untreated, will fatally undermine the functioning of the WTO."

As the US and China resume talks in Washington this week over the Trump administration's demands that Beijing cut its bilateral trade surplus by US$200 billion, Zhang's comments underline China's efforts to defend the WTO system, under which it has grown to be the world's biggest trading nation since joining in 2001.

While Trump as a presidential candidate threatened to withdraw from the body, officials since then have merely said the US wants to improve it.

"The current situation faced by the WTO has given many members a sense of crisis, making them increasingly realize the importance of the multilateral trading system," Zhang said in a written interview with Bloomberg News.

"This sense of crisis is essential to getting the WTO out of the difficulties."

China has criticised the Trump administration's refusal to appoint new members to the WTO appellate body, which has the final say in upholding, modifying, or reversing WTO rulings.

The seven-member appellate body is operating with four active members, which is just one more than the three-member minimum required to sign off on appellate body rulings.

China has frequently found itself in the firing line at the WTO for allegations of dumping goods to abusing intellectual property - and not just from the US.

Beijing has faced 22 complaint cases from the US and eight from the European Union. The EU and Japan have also recently sought to join the US complaint case over China's alleged discriminatory technology licensing.

Zhang signaled that the US demands presented during talks in Beijing earlier this month aren't in line with WTO rules. The US is said to have asked for a reduction in its deficit with China of US$200 billion by 2020 and for no retaliation to its own tariffs, should they be imposed.

"In the history of the multilateral trading system, there have been few instances of import commitments," Zhang said.

"Such practices clearly violate the non-discrimination principle of the GATT, therefore have long been abandoned."

Against the backdrop of US criticism of the Chinese government's deep role in the economy, the trade demands don't make sense, Zhang said.

"The US is blaming the Chinese Government for state intervention on the one hand, while pressing China, by way of issuing government orders, to increase imports, restrict exports, and reduce excess capacity on the other hand," he said.

"Governments can make efforts to promote trade, but cannot force companies to do business by pointing gun at their heads."

Zhang's written comments come as President Xi Jinping's envoy, Liu He, is scheduled to meet lawmakers, the Commerce Department, the Trade Representative's office, and potentially Trump himself.

Zhang indicated that the current dispute isn't comparable to the stand-off between the US and its then-rival Japan three decades ago - in which Japan met many of the Reagan administration's demands and agreed to let its currency appreciate versus the dollar to re-balance trade flows.

"Past experience is not necessarily helpful in tackling today's problems," he said.

"We must be clear that the 21st century is not the 1980s, and Beijing is not Tokyo."