Trade: US rebukes China over its trade compliance

Jon Condon, 17/02/2022

THE United States has issued a stern rebuke over China’s compliance with its World Trade Organisation commitments last year.

The US Trade Representative’s annual report released this week is largely critical of China’s approach to trade, stating that it has failed to embrace the market-oriented principles on which World Trade Organisation rules are based.

Many of the issues raised in the report will resonate with the growing list of Australian red meat processors caught up in long-running market access suspensions with China.

In a discussion of agricultural trade, the USTR describes China as “a difficult and unpredictable market for US agricultural exporters, largely because of inconsistent enforcement of regulations and selective intervention in the market by China’s regulatory authorities.”

However, the report does note advances made through the US-China Phase One Economic and Trade Agreement, noting that the agreement addressed many non-tariff barriers to agricultural trade and made “significant reforms in some agricultural sub-sectors, including meat and poultry products and facility registration.”

But USTR cautions that China has failed to take meaningful action on some other Phase One commitments, including a required risk assessment for the use of ractopamine in beef and pork production.

After the trade war through 2019, China and the US in early 2020 reached a tense phase one bilateral agreement over trade, however China failed “by a wide margin” to purchase an additional $200 billion worth of US goods and services as agreed.

“When China acceded to the WTO (20 years ago), it voluntarily agreed to embrace the WTO’s open, market-oriented approach and to embed it in China’s trading system and institutions,” the USTR report said.

“China also agreed to take on the obligations set forth in existing WTO rules, while also making numerous China-specific commitments. China’s record of compliance with these terms has been poor. After 20 years of WTO membership, China still embraces a state-led, non-market approach to the economy and trade, despite other WTO members’ expectations – and China’s own representations – that China would transform its economy and pursue the open, market-oriented policies endorsed by the WTO.”

In fact, China’s embrace of a state-led, non-market approach to the economy and trade had increased rather than decreased over time, and the ‘mercantilism’ that it generates has harmed and disadvantaged companies and workers around the world, often severely, the report said.

“China also has a long record of violating, disregarding and evading WTO rules to achieve its industrial policy objectives.”

The report identifies and explains numerous “unfair, non-market and distortive trade policies and practices” used by China in pursuit of its industrial policy objectives. It also maps out how China has sought to frustrate WTO oversight mechanisms, such as through its poor record of adhering to its WTO transparency obligations.

At times, the US did secure broad commitments from China for fundamental shifts in the direction of Chinese policies and practices, the report said, but these commitments were “unenforceable and China repeatedly failed to follow through on them. Over time, moreover, commitments from China became more difficult to secure.”

Beef trade

Focussing on beef trade, the report noted that in May 2017, China committed to allow the resumption of US beef shipments into its market consistent with international food safety and animal health standards.

“However, China back-tracked one month later and insisted that it would retain certain conditions relating to veterinary drugs, growth promotants and animal health that were inconsistent with international food safety and animal health standards,” it said.

“For example, China insisted on maintaining a zero-tolerance ban on the use of beta-agonists and synthetic hormones commonly used by global cattle producers under strict veterinary controls and following Codex guidelines.”

Beef from only about three percent of US cattle currently qualified for importation into China under these conditions.

In the Phase One Agreement reached in 2020, China agreed to expand the scope of US beef products allowed to be imported, to eliminate age restrictions on cattle slaughtered for export to China and to recognize the US beef and beef products’ traceability system.

China also agreed to establish maximum residue levels for three synthetic hormones legally used for decades in the US and other countries, consistent with Codex standards and guidelines. Where Codex standards and guidelines do not yet exist, China agreed to use MRLs established by other countries that have performed science-based risk assessments.

While China confirmed to the US that it had adopted Codex-consistent MRLs for use of the three synthetic hormones in beef, China still has not published the MRLs.

“The lack of publication contributes to regulatory ambiguity for US beef producers and traders, who remain uncertain regarding which products will be allowed for import into China. China’s failure to publish the MRLs is another example of China’s inadequate implementation of the Phase One Agreement,” the report said.





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