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  September 23rd, 2015 | Written by

China Not Living Up to WTO Commitments to Detriment of Global Trading System: ITIF

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  • ITIF report: Each time China moves toward opening up trade, it introduces another new trade barrier to counteract it.
  • ITIF: The WTO enforcement system has been ineffective in stopping China’s trade infractions.
  • Constructive confrontation includes confronting state capitalism and better empowerment of U.S. agencies.

The Information Technology and Innovation Foundation, a Washington, DC-based think tank, released a new report outlining how China has failed to live up to the commitments it made when it joined the World Trade Organization in 2001.

The report also describes how those breaches have harmed the global trading system and economic growth across the United States and Europe.

ITIF urged U.S. and European policymakers to adopt a new strategy of “constructive confrontation” to rein in China’s innovation mercantilism.

“Trade with China has been one step forward, two steps back for almost 15 years,” said report co-author Stephen J. Ezell, vice president for global innovation policy at ITIF. “Each time China claims to move toward opening up trade, they turn around and introduce another new mercantilist trade barrier to counteract it.

“Unfortunately, the WTO enforcement system has been ineffective in stopping these infractions,” Ezell added. “And with such a weak dispute settlement system in place at the WTO, China is largely shielded from being punished for its misdeeds by individual countries.”

The report also contends that China’s aggressive innovation mercantilism has become more severe, with the country continuing to disregard core tenets of rules-based trade and seeking absolute advantage in a range of industries. “This continued flouting of WTO principles poses a serious threat to the global innovation system―not to mention the U.S. and EU economies and the health of their advanced industries,” says the report.

Among the commitments that China made when it joined the WTO but failed to fully deliver on, according to the report: refraining from requiring technology transfer as a condition of market access; joining the Government Procurement Agreement; requiring state-owned enterprises to make purchases based on commercial considerations; giving foreign banks national treatment; opening the telecommunications market to foreign producers; liberalizing foreign film distribution; reducing export subsidies; reducing intellectual property theft and violations; and abiding by the Technical Barriers to Trade Agreement and not manipulating technology standards.

Ezell and co-author Dr. Robert D. Atkinson, ITIF’s president and founder, recommend “constructive confrontation” as the new path forward for U.S. and European policymakers to counter China’s innovation mercantilism. More specifically, they call for a results-oriented, not legal process-oriented, strategy; new thinking about confronting state capitalism; and better empowerment of U.S. agencies and institutions to contest Chinese technology mercantilism.

“China participating in the global trading system could be a boon for the global economy, but only if it plays by the rules and norms of the WTO,” said Atkinson. “And right now, they are acting counter to both the spirit and the letter of the law.”

The United States and Europe have been playing whack a mole, Atkinson argued, winning some cases, losing others, and failing to take on many more. “The only real choice now is constructive confrontation,” he added. “Without it, the global trading system will continue to deteriorate, U.S. and EU advanced industries will continue to suffer, and China will continue to walk all over its trading partners.”