China Trade Policy Review Concludes, Highlighting IPRs, Industrial Policy, and Transparency

Trade officials at WTO headquarters in Geneva, Switzerland, wrapped up their review of China’s trade policies and macroeconomic environment on Friday 13 July, capping two days of discussions that touched on topics such as industrial overcapacity, national industrial strategy, and intellectual property rights practices and enforcement.

The first day of Trade Policy Review (TPR) meetings, held on Wednesday 11 July, allowed Chinese officials the chance to present their view of Beijing’s achievements to date and plans for the future. It also gave various other delegations the chance to take the floor and highlight which areas of Beijing’s policy had evolved since the last review, and which areas they would like to see change in the future.

The chairperson of the WTO’s Trade Policy Review Body (TPRB), Ambassador Eloi Laouru of Benin, summed up the discussions on Friday as a valuable opportunity to discuss the economic situation of a significant trader and “major player in the multilateral trading system” such as China.

He noted, for example, that many delegations took the floor to praise the significant strides Beijing has made towards “broadening market access and investment opportunities, the greater involvement of the private sector in the economy, and its commitment to fossil fuel subsidy reform,” according to a transcript of his remarks released by the global trade club.

There were also calls from various members, however, for China to improve its subsidy notification records and other transparency efforts related to trade, and to move towards a “more market-oriented approach to investment and resource allocation.” The TPRB chair also referred to members’ questions or concerns over the “Made in China 2025” industrial plan and the domestic measures in place to bring it into being, as well as the role of state-owned enterprises and other state interventions in the overall Chinese economy.

Various delegations had particularly highlighted the latter concern, with some arguing that the state’s strong role in the economy, or in some cases insufficient involvement, were complicating efforts from businesses based abroad in developing deeper ties with Beijing, according to a Geneva trade official familiar with the meeting.

China received over 1900 written questions regarding its policies, and around 70 delegations took the floor over the two-day event. As one of the world’s four largest traders, Beijing’s next TPR will be in three years, under new WTO timeframes for these trade monitoring exercises.

The secretariat report, one of two major reports prepared for the TPR, noted China’s significant role in stimulating the global economy, while stating that China’s “real GDP growth has been moderating as the economy adjusts to the ‘new normal’, which implies more stable, albeit lower growth rates.”

The report found that e-commerce and tourism are playing significant roles in services trade, while goods trade is having a smaller role in overall Chinese foreign trade, along with noting progress in tackling income inequality and poverty concerns at home. It also highlights Beijing’s efforts to make coal a lesser part of its overall energy mix, along with reducing the role of fossil fuels overall, though coal still provides over 60 percent of China’s energy.

The secretariat analysis also cited growth in both outbound and incoming foreign direct investment (FDI), along with significant WTO developments that Beijing has been involved in. These included, for example, trade disputes, talks to join the plurilateral Government Procurement Agreement (GPA), and updates to China’s WTO notifications of different subsides and other relevant trade policy developments.

Chinese vice minister responds to members’ questions

“Each time I came here, I have received more questions – a record number of questions,” said Chinese Vice Minister of Commerce Wang Shouwen in a video statement about the latest China TPR, relative to the past ones. He said that this was a positive sign of members’ interest in doing business with Beijing and the WTO’s role in underpinning the overall multilateral trading system, including through its trade monitoring function.

According to a Geneva trade official, Wang gave a detailed statement on Friday in response to many of the questions and concerns raised by delegations during either Wednesday’s discussions or the submission of written questions beforehand.

For example, Wang addressed topics such as industrial overcapacity, Beijing’s “Made in China 2025” industrial policy projects; the country’s efforts to become a more market-oriented economy; and intellectual property rights policy and enforcement.

Wang argued that in all areas, China is looking to ensure that progress is being made and WTO rules being followed. In the area of intellectual property rights, for instance, he suggested that questions over alleged forced technology transfers imposed on foreign companies wishing to do business in China are not government policy, but that “technical cooperation” results from voluntary deals in setting up these business arrangements.

Industrial capacity, he said, was a collective problem, while also highlighting the difference between being a major steel producer, like China, and a major steel exporter, like others.

He also welcomed the vast bulk of comments made by members to date during the TPR, while reportedly suggesting that a few had been “unacceptable.”

The US, Canada, and the EU, all of whom had spoken during the first day of the TPR, reportedly took the floor again, among a half-dozen others. According to a Geneva trade official, the US disagreed with Wang’s claims of compliance with adverse dispute settlement rulings, as well as the Chinese official’s description of improved domestic enforcement of intellectual property rights. The US official said that it was “unusual” how many concerns were put forward by members during the TPR.

The EU, meanwhile, highlighted transparency and the role of state-owned enterprises as key areas of concern in its second intervention on Friday, having previously made a statement on Wednesday referring to the same issues as well as calling for greater efforts towards opening up the Chinese economy to investments from overseas companies. The EU had also welcomed, however, the constructive role that China can play in supporting the multilateral trading system, particularly during a time of significant strain.

The TPR came just days before an EU-China leaders’ summit that tackled various areas of possible trade and investment cooperation, and during a time of heightened tensions between Washington and Beijing over a series of trade irritants. Discussions over the state of the multilateral trading system are slated to continue in various international forums, such as the WTO, in the weeks and months to come, including at a meeting of the latter organisation’s General Council at the end of July. Ahead of that event, the US has submitted a paper laying out its own questions and concerns over China’s trade regime in further detail.