China Holds Press Conference on WTO Trade Policy Review

On October 28, China’s State Council Information Office held a press conference (link in Chinese) to provide a briefing on China’s WTO Trade Policy Review and respond to some of the issues raised there. (We reported on China’s WTO Trade Policy Review here and here.) This piece translates and summarizes the press conference, focusing on issues related to fisheries and other subsidy negotiations, China’s performance under its WTO commitments, WTO negotiations and reforms, special and differential treatment, market access, and market distortions such as overcapacity in steel and aluminum production.

Vice Minister of Commerce Wang Shouwen was the main speaker at the press conference. He reported that China received 2,562 questions from 39 WTO members during the review, and the questions ranged from goods trade (such as questions related to China’s implementation of the Trade Facilitation Agreement), services trade (such as questions regarding the implementation of China’s Cybersecurity Law), intellectual property rights protection (such as questions on information disclosure in certain IP cases), and investments.

Wang said that China also responded to questions about China’s policies during the review, including the Belt and Road Initiative, transparency, government procurement, state-owned enterprises, overcapacity, the Dual Circulation, and trade surplus. For instance, some countries raised concerns over China’s Dual Circulation and whether it means China will slow down its opening up. Wang reiterated that it is "by no means a closed domestic circulation, but a more open domestic and international dual circulation.” With regard to the practice of forced technology transfer raised by some members, Wang said that “the newly revised Administrative Licensing Law and the new Foreign Investment Law both clearly stipulate that government administrative agencies and their staff shall not force technology transfer through administrative means.”

During the Q&A section of the press conference, in responding to a question related to some WTO Members’ criticism that China has failed to fulfill its WTO commitments, Wang emphasized that:

• China made efforts to ensure its laws and policy systems are consistent with WTO rules.
• China’s MFN tariffs are 7.4%, lower than the promised 9.8%; and China opened up 120 sectors in the services market, more than the 100 sectors it promised.
• China has submitted more than 1,000 notifications. In July, China submitted its subsidy notifications for 2019-2020, even though it is a “very challenging” obligation.
• China complies with WTO rulings, "no matter it is in favor or disfavor of us, and we always comply." "There has never been a case where the other party requested retaliation because China did not accept the WTO ruling.”

Wang also noted that some Members raised concerns or expectations that may be “beyond the WTO rules,” and “it is inappropriate to use these extra rules to judge whether China fulfilled its WTO obligations.” For instance, “there are many differences between the rules on intellectual property protection under the TRIPS Agreement and some free trade agreements. It is obviously inappropriate if someone requires China to fulfill the intellectual property protection obligations of some high-standard free trade agreements within the WTO.”

When asked about whether China supports subsidy negotiations at the WTO, Yan Dong, Director of the WTO Affairs of the Ministry of Commerce, said that:

China supports the necessary reforms of the WTO and is open to the launch of negotiations and discussions on subsidies under the WTO reform framework. Specifically, we have three propositions: First, agricultural subsidies must be discussed at the same time as industrial subsidies to ensure fair competition in both areas; second, we should discuss ways to tighten trade remedy rules such as countervailing and anti-dumping, to fix the current abuse of trade remedy measures; third, we should discuss restoring non-actionable subsidies, mainly to leave policy space for members to deal with the pandemic and climate change.

When answering a question about whether China should forgo special and differential treatment (SDT) at the WTO, Wang said:

When China joined the WTO, ...we actually benefited less from SDT than other developing members. After joining the WTO, we have never used the SDT as a “shield”. In fact, China's position and practices have made important contributions to some WTO negotiations. For example, the WTO has reached the Agreement on Trade Facilitation, which has some Category C measures that allow developing members to implement only after receiving assistance from developed members. We implemented it without asking for others’ assistance, so we did not benefit from the SDT. Another example is some Category B measures in the Trade Facilitation Agreement, which are measures that developing countries can implement after a transition period, while developed countries have to implement immediately. China is a developing country, but we have very few Category B measures. …

To give you another example, in the expansion negotiations of the Information Technology Agreement, China, as a developing country, sticking to the balance of rights and obligations, is an important contributor to the negotiations and pushed for the conclusion of the Information Technology Agreement Expansion. We also, within our capacity, provide our support and assistance to some least developed countries within the WTO and under the framework of South-South cooperation. Therefore, in the agreements reached after joining the WTO, we benefited from SDT in a very few cases. We decide whether we should benefit from SDT based on the balance of rights and obligations. In future negotiations, as a responsible major country and the largest developing country, we will still adhere to the balance of rights and obligations, pragmatically handle SDT, promote WTO reform, protect the legitimate rights and interests of developing countries and defend the multilateral trading system, based on our own economic development level and ability.

When talking about some areas that are closed to foreign capital and unfair treatment of foreign companies, Wang stated that:

China's foreign capital market access is opening up more and more. This is the result of our voluntary opening up, not an obligation under the WTO. Under the WTO, there is only one agreement on investment, called the Agreement on Trade-Related Investment Measures, namely the TRIMs Agreement. China has fully implemented this agreement. Now as some have mentioned, why are foreign investment prohibited or restricted in some areas? Because the WTO has no rules on it, and many countries have similar prohibitions or restrictions. China also hopes that some prohibitions and restrictions can be removed, but that requires WTO negotiations, or we need to negotiate bilateral investment agreements. For example, China and the United States once negotiated an investment agreement, and the EU and China have announced the conclusion of the China-EU Comprehensive Agreement on Investment, but it still needs further approval. In other words, we need to solve the problem of investment restrictions through other channels, like bilateral investment agreements and investment chapters in free trade agreements, to further open up and reduce foreign investment access restrictions. China is willing to deal with this issue through free trade agreements and bilateral investment agreements. For example, China has filed a formal application to join the CPTPP, which has high standards for investment....

Therefore, we understand the desires of some countries that China should further relax investment access. However, the criticism that China has not fulfilled the WTO regulations is unreasonable, unfair, and unacceptable.

In general, China has fully fulfilled all its commitments made upon China's accession to the WTO. As an equal market entity, Chinese SOEs have the right to operate independently in accordance with the provisions of the Constitution. In the field of investment, China has fully fulfilled its WTO obligations, and we are willing to continue to expand and open up through voluntary actions. As you all know, our first negative list of investment access, which is the negative list of investment access in the Shanghai Pilot Free Trade Zone, had more than 190 items. Now we only have 30 items on the negative list in the Pilot Free Trade Zone. The pace of opening up is very large. We are willing to further expand the opportunities for foreign investment through voluntary actions and we are also willing to negotiate investment issues through bilateral investment agreements, free trade agreements, or in the WTO.

Regarding WTO negotiations on fisheries subsidies, Yan Dong said that:

...China has always actively participated in the negotiations, ... successively put forward a number of proposals in the negotiations, and promoted the negotiation of fishery subsidies to reach an agreement at an early date with all parties. As a developing country and a major fishery country, China will undertake international obligations in the negotiations that are commensurate with its own development stage and capabilities.

In addition, from a domestic perspective, China has taken the initiative to implement the United Nations Sustainable Development Goals and adjusted domestic fishery management and subsidy policies. For example, we have controlled the production and catching capacities of fishing vessels; we have also taken the initiative to take resource conservation measures such as summer fishing moratorium and fishing moratorium on the high seas; we comprehensively strengthen the international compliance of offshore fisheries; we severely crack down on illegal fishing with a “zero tolerance” attitude. At the same time, we continue to adjust the fishery subsidy policy. In May this year, the Ministry of Finance and the Ministry of Agriculture and Rural Affairs of China issued the Notice on Implementing Supporting Policies for Fishery to Promote High-quality Fisheries Development, also known as Cainong [2021] No. 41. This document clearly raised “conforming to the general trend of WTO fisheries subsidy negotiations and promoting high-quality and sustainable development of fisheries”. [Some] of the highlights of this document are the elimination of fuel cost subsidies, adjusting the direction of subsidies, guiding fishermen to conserve fishery resources, emphasizing green development, protecting people's livelihood and resource conservation, and promoting the high-quality development of fisheries.

China firmly supports the multilateral trading system and supports the completion of fisheries subsidy negotiations as soon as possible before the 12th WTO Ministerial Conference. As a major responsible fishery country, China is and will continue taking practical actions to support the prohibition of harmful fisheries subsidies that contribute to excessive production capacity and overfishing.

With regard to some criticisms about China’s trade policy, in particular from Japan, the EU and the US, Wang noted that:

The comments and criticisms [about China] can be divided into two categories. The first category is governed by the WTO agreements. For this type of issue, we will follow the WTO agreements and improve on what is not done well, and continue to do what is done well. This is an issue within the scope of the WTO agreements. And there is another category, which is the type of criticism the reporter referred to. They may exceed the provisions of the WTO agreement. We can only say that it is a kind of hopes, because it requires China to perform duties beyond the scope of WTO rules under the WTO. It is obviously unfair, unreasonable, and unacceptable....

Regarding overcapacity and market distortions caused by government intervention, Wang noted that:

At present, more than 97% of commodity prices and service prices in China are determined by the market, and we already have a relatively complete market-based interest rate system, which means that the interest rate is determined by a relatively complete market-based interest rate system. The market mechanism of currency exchange rate is also constantly improving. And the reform of the market for land, labor, capital, technology, and data is constantly advancing.

In the meantime, China is building a high-standard market system and implementing a negative list system for market access. Except for market access that requires government approval, the market is free to enter. We have also improved the fair competition review mechanism and strengthened enforcement of Anti-Monopoly Law and Anti-Unfair Competition Law. The Bankruptcy Law is generally applicable to various market entities. Therefore, barriers have been eliminated in terms of market access, withdrawal elements, and the protection of property rights. We have created a fair competition market environment.

... China has made tremendous efforts and paid a huge price to resolve the overcapacity of iron and steel. ... Since we pushed for the supply-side structural reform in 2015, we have achieved remarkable results in reducing overcapacity. In this WTO Trade Policy Review, some member representatives raised this issue. We explained that from 2018 to 2020, China has compressed crude steel production capacity by 150 million tons. Now China’s utilization rate of crude steel capacity is over 80%, and the utilization rate of aluminum industry is over 85%, so there is no overcapacity in these two industries. We remain highly vigilant about whether there will be overcapacity in the future, and are dedicated to establishing a long-term mechanism to resolve overcapacity through the market and rule of law.

When talking about the WTO reforms, Wang said that the WTO should both resolve old issues and set rules for new issues: Agricultural subsidies and public stockholding are examples of old issues while digital trade, fisheries subsidies, and investment facilitation are new issues. Wang stated that China supported the principle of consensus in reforms of some old issues that involve the majority of Members. However, for new issues such as digital trade, China considers a plurilateral approach reasonable.

Wang also expressed his hope for resolving the Appellate Body crisis at the WTO soon.

In terms of the timeline of the trade policy review, Wang said that WTO members raised 2,151 questions during the first phase (September 29 to October 6), and China provided responses by October 19. There were more questions raised after October 6, to which China is expected to respond by November 22.

Wang also noted that 65 Members made positive comments on China’s trade practices, including “China’s active participation in WTO" and "earnestly fulfilling its commitments of accession, actively participating in fishery subsidy negotiations, actively leading investment facilitation negotiations, and constructively participating in e-commerce negotiations”; "China’s important role in international cooperation in fighting COVID" and China’s support for TRIPS waiver-related covid vaccines;  China granting tariff-free treatment to the imports of products from least developed countries; China’s voluntary reduction on tariffs and shortening the negative list for foreign investment, and efforts to actively promote trade and investment liberalization and facilitation; and China's Belt and Road initiative in promoting trade and economic cooperation among participating countries.