USTR Report: Chinese Government Creates Friction for Global Trade

China

Source: http://www.flickr.com/photos/timokl/

China’s economic development depends as much on international diplomacy as it does on domestic investment and political reform. According to state-run news agency Xinhua, Chinese Foreign Minister Wang Yi said earlier this month that one of China’s top economic priorities for 2014 will be economic diplomacy, conducted with the goal of capitalizing on opportunities to grow both the domestic and global economy.

It’s hard to understate the increasingly important role that China plays in the global economy. According to the Office of the U.S. Trade Representative, or USTR, which recently filed a report to Congress on China’s compliance with World Trade Organization regulations, China is a $450 billion market for U.S. business. Economic reform aimed at rapid but stable and sustainable appeared to dominate the Third Plenum meeting of the Chinese Communist Party, and the country appears to be on the cusp whole-heartedly adopting the market mechanism.

There are, though, legacy problems that make China’s participation in the global economy complex and often difficult. As the USTR pointed out in its report to Congress, “the overall picture currently presented by China’s WTO membership has remained complex, largely due to the Chinese government’s interventionist policies and practices and the large role of state-owned enterprises in China’s economy.”

Heavy state involvement in China’s economy has “generated serious trade frictions with China’s many trade partners, including the United States,” reports the USTR. Some of the top concerns related to China’s participation in the WTO were highlighted in a fact sheet that emerged from the December 19-20 U.S.-China Joint Commission on Commerce and Trade, which was held in Beijing. Intellectual property topped the list with both sides moving forward on the development of a trade secrets law that would protect intellectual property. Restrictions on exports of U.S. beef were also addressed, and restrictions are expected to be lifted by July 2014. China is a $25 billion market for U.S. agriculture.

While the USTR reiterated that it is encouraged by the steps China is taking toward economic reform, it also repeatedly argued that, “If China is going to deal successfully with its economic challenges at home, it must reduce the role of the state in planning the economy, reform state-owned enterprises, eliminate preferences for domestic national champions, and remove market access barriers currently confronting foreign goods and services.” If China is truly going to be a leader in the global economy, then, as the USTR outlines, it needs to be transparent and fully embrace the market mechanism.

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