On February 16, 2022, the United States Trade Representative (USTR) released its 2021 Report on China’s World Trade Organization (WTO) Compliance. The report, issued yearly to Congress pursuant to section 421 of the U.S.-China Relations Act of 2000, outlines the current Administration’s assessment of China’s membership in the WTO. Notably, this year marks the 20th edition of the report and is the first assessment issued since the January 2020 “Phase One Agreement” entered into force.

Report Overview

The report is divided into four sections. An overview of the findings as provided by USTR is provided below:

  1. An assessment of China’s WTO membership, including the unique challenges that China’s state-led, non-market approach to the economy and trade pose for the multilateral trading system.
    • “Since last year’s report, our assessment of China’s record in terms of complying with WTO rules and observing the fundamental principles on which the WTO agreements are based has not changed.”
  2. A review of the effectiveness of the various strategies that have been pursued to address the unique problems posed by China.
    • “Given China’s interest in a more stable relationship with the United States, China followed through in implementing some provisions of the Phase One Agreement. At the same time, China has not yet implemented some of the more significant commitments that it made in the Phase One Agreement.”
  3. A call for new and more effective strategies – including taking actions outside the WTO where necessary to address problems posed by China.
    • “While the WTO still has a significant role to play, enforcement of WTO rules has become less significant and solutions independent of the WTO are considered necessary, including solutions through bilateral engagement and the use of domestic trade tools.”
  4. A catalog of the problematic policies and practices that stem from China’s state-led, non-market approach to the economy and trade.

Non-Tariff Measures

  • “China continues to pursue a wide array of industrial plans and related policies that seek to limit market access for imported goods, foreign manufacturers and foreign services suppliers, while offering substantial government guidance, resources, and regulatory support to Chinese industries.”
  • “China’s WTO subsidy notifications have marginally improved over the years in terms of timeliness and completeness. Nevertheless, since joining the WTO 20 years ago, China has not yet submitted to the WTO a complete notification of subsidies maintained by the central government.”

Intellectual Property Rights

  • Currently, China is in the midst of establishing an intellectual property appellate court and revisions to certain laws and regulations. Despite various plans and directives issued by the State Council, inadequacies in China’s intellectual property protection and enforcement regime continue to present serious barriers to U.S. exports and investment. As a result, China was again placed on the Priority Watch List in USTR’s 2021 Special 301 Report.
  • “The Phase One Agreement addresses numerous longstanding U.S. concerns relating to China’s inadequate intellectual property protection and enforcement.” “As of December 2021, China has published a number of draft measures for comment and issued some final measures relating to implementation of the intellectual property chapter of the Phase One Agreement.” “The United States continues to monitor China’s implementation of the intellectual property chapter of the Phase One Agreement, including the impact of the final measures that have been issued.”

Agriculture

  • “China remains a difficult and unpredictable market for U.S. agricultural exporters, largely because of inconsistent enforcement of regulations and selective intervention in the market by China’s regulatory authorities.”
  • “The Phase One Agreement includes enforceable commitments requiring China to purchase and import increased amounts of U.S. agricultural and seafood products in 2020 and 2021.” “China has also fallen far short of implementing its commitments to purchase U.S. goods and services in 2020 and 2021.”

Services

  • “The prospects for U.S. service suppliers in China should be promising, given the size of China’s market. Nevertheless, the U.S. share of China’s services market remains well below the U.S. share of the global services market.”
  • “In 2021, numerous challenges persisted in a number of services sectors. As in past years, Chinese regulators continued to use discriminatory regulatory processes, informal bans on entry and expansion, case-by-case approvals in some services sectors, overly burdensome licensing and operating requirements, and other means to frustrate the efforts of U.S. suppliers of services to achieve their full market potential in China.”

Transparency

  • “One of the core principles reflected throughout China’s WTO accession agreement is transparency. Unfortunately, after 20 years of WTO membership, China still has a poor record when it comes to adherence to its transparency obligations.”

A full copy of the report is available here.

For more information on U.S.-China Trade Policy, contact our team and see previous posts below.

https://www.cmtradelaw.com/category/china/