The Office of the United States Trade Representative (USTR) released a new report on Wednesday, Feb. 16, criticizing China for not meeting its broad trade commitments, including those made when it joined the WTO in 2001 and other commitments made in the Phase 1 Trade Agreement between two countries in 2020.

Since China joined the WTO in 2001, the USTR has submitted its assessment report to the National Assembly every year. It is the first report chaired by U.S. Trade Representative Katherine Tai.

In its annual review of China’s compliance with its WTO obligations, the USTR condemned the Chinese government’s disregard for the global trade body’s rules and its transparent and market-oriented practices. 

U.S. Trade Representative Katherine Tai said, “China has instead retained and expanded its state-led, non-market approach to the economy and trade,” 

She added, “China’s policies and practices challenge the premise of the WTO’s rules and cause serious harm to workers and businesses around the world.”

USTR reports that China seeks to protect many domestic industries through a restrictive investment regime. Many aspects of China’s current investment regime raise serious concerns for foreign investors.

The report pointed out that the WTO has not done enough to punish China for its trade violations and calls for external measures outside the WTO to deal with China.

 The U.S. is adopting several strategies to hold China accountable. 

​​These strategies include bilateral dialogue with China, its progress towards meeting its 2020 trade agreement commitments; working with allies such as Japan and Europe; and repurposing and expanding domestic trade tools, such as using tariffs to encourage companies to reduce carbon emissions.

In its report to Congress, the USTR condemned China’s failure to honor the Phase 1 trade agreement with the U.S. The report said that China does not have much time to fulfill its promises to import U.S. goods and services in 2020 and 2021.

On January 15th, 2020, the United States and China signed a phase 1 trade agreement. In the agreement, China committed to buy at least $200 billion in additional U.S. products and services in two years, 2020 and 2021, in addition to 2017 purchases. China’s purchasing activities mainly focus on four main sectors: manufacturing, agriculture, energy, and services. But final trade data for 2021 shows that China has not kept its promises.

A China competition bill passed by the U.S. House of Representatives in early February and under consideration in the Senate would expand the use of countervailing duties to target cross-border subsidies to Chinese companies who invest in overseas production to circumvent U.S. tariffs.

The report said the U.S. was still seeking bilateral engagement to make China responsible for its commitments, including the phase one trade deal.

In addition, the report said, the Chinese government has also continued to employ a broad range of intervening industrial policies and support measures, providing substantial government guidance, substantial financial resources, and favorable regulatory support to industries across China’s economy, often in pursuit of specific production capacities, production levels, and market share.

To advance its industrial policy goals, the Chinese government has also restricted market access for imported goods and services and limited the ability of manufacturers and suppliers to do business with foreign service providers in China. The Chinese government often uses illegal ways to obtain foreign intellectual property and technology to advance its industrial policy goals.

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