Announcement to tackle China’s preferred subsidies . . .
The United States, the European Union, and Japan proposed new global trade rules on Tuesday targeted at Beijing. Japan Economy Minister Hiroshi Kajiyama, U.S. Trade Representative Robert Lighthizer, and EU trade commissioner Phil Hogan said in a joint statement that existing World Trade Organization (WTO) rules were insufficient in curbing subsidies to industries in economies like China, and that the three partners intend to bring their proposals to the Geneva-based WTO for formal adoption. The proposal would ban new subsidy types and mentions the need to end the “unfair practices” of forced technology transfer.
Details, implementation remain a challenge . . .
The agreement comes after two years of trilateral negotiations, and includes mechanisms to continue mutual co-operation on a number of key items. Still, the path to formal WTO adoption remains a long one and relies on buy-in from target economies like China – and to a lesser extent, Singapore, and South Korea – which designate themselves as developing countries. The EU last year hailed a breakthrough in talks with China on industrial subsidies, and Beijing has indicated a willingness to discuss industrial subsidies further – but wants the WTO to also tackle the agricultural subsidies in the EU, U.S., and Japan that it feels are unfair.
The week’s big changes lie in multilateral, not bilateral announcements . . .
The move follows the Trump administration’s formal removal of China’s designation as a currency manipulator on Monday. That removal led to Wednesday’s signing of a new, phase-one trade deal with China. The agreement is modest in its scope, and while broadly heralded as a sign of de-escalation and China’s commitment to buy more U.S. exports, it does little to tackle the structural elements of China’s economy, which the White House takes issue with. It remains to be seen if the path to resolving those structural issues lies in the trilateral subsidy proposal.