We just got a template for dealing with China’s unfair trade practices

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Another of those practices – the use of trade as a coercive tool for non-trade-related issues – was also aired last week when the World Trade Organisation agreed to examine China’s tariffs of up to 220 per cent on Australian wine.

Those tariffs were imposed (along with others on barley, lobsters, coal and other products) after Australia called for an international investigation of the origins of COVID-19, banned Huawei from participating in 5G roll-outs and criticised China’s treatment of the Uighurs and Hong Kong.

China’s unfair and abusive practices and Donald Trump’s misguided and MAGA-driven trade wars highlight how far the international trading system based on a philosophy of open markets – a system that helped turbo-charge China’s growth – has broken down and how ineffective the WTO has become in policing its rules.

Other countries, including the UK, Canada and New Zealand, are lining up as third parties in the dispute, which has essentially wiped out Australian wine exports to China because it encapsulates some of the core criticisms of China’s trade practices.

Last month the WTO completed a trade policy review of China – as much an assessment by China’s peers as an investigation by the WTO itself – that found, unlike the previous review in 2018 – deep dissatisfaction with China’s behaviours.

While the WTO’s summation was diplomatic (and was seized on by China as an endorsement of its policies) the review provoked scathing criticisms from, not just Australia or the US but the EU, Japan, the UK and Canada. They accused China of bullying and engaging in practices that were inconsistent with the commitments China made when it joined the WTO in 2001.

The bans on Australian and Canadian products (in Canada’s case for the detention of Huawei chief financial officer, Meng Wanzhou) were described by the Canadians as part of a pattern that demonstrated China’s “growing willingness to deploy economic coercive measures to block or otherwise hinder trade in response to political disagreements.”

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The US Charge d’Affaires at the WTO, David Bisbee, said the expectations when China joined the WTO – that it would dismantle policies and practices that were incompatible with an international trading system based on open market-oriented policies – had not been realised and it appeared China had no inclination to change.

China had used the imprimatur of WTO membership to become the world’s largest trader while doubling down on its state-led, non-market approach to trade, he said.

The UK implicitly criticised China for its treatment of the Uighurs, calling on it to ratify the International Labour Organisation’s conventions on forced labour. The EU targeted China’s “expansive” use of the concept of national security in its trade policies while Japan accused it of lacking transparency and distorting global steel markets with its over-capacity. South Korea complained about abuses in trademark registration processes while India was unhappy about China’s barriers to access to its markets for India’s agricultural products.

There were a number of criticisms of China’s self-designated status (allowed under WTO rules) as a developing country, which enables it to claim “special and differential treatment” on trade issues relative to developed economies. That was a particular bugbear of the Trump administration, given China’s prominence in world trade.

China now says it is willing to be “pragmatic” about its insistence that it is still entitled to claim that status, whatever that might mean.

China has for decades been accused of flooding world markets with cheap and subsidised products.

China has for decades been accused of flooding world markets with cheap and subsidised products.Credit:Bloomberg

China’s unfair and abusive practices and Donald Trump’s misguided and MAGA-driven trade wars highlight how far the international trading system based on a philosophy of open markets – a system that helped turbo-charge China’s growth – has broken down and how ineffective the WTO has become in policing its rules.

The US-EU deal on steel and aluminium, the support for Australia’s complaint to the WTO over the treatment of our wine industry and the depth and breadth of the criticism China’s trade practices attracted in the WTO review, however, perhaps provide an insight, or even a preview, of how China’s behaviours might be modified.

Trump’s tariffs (which have been left in place by Joe Biden) don’t work. They hurt the US more than China.

There is now, however, a sufficient commonality of interest and real angst among China’s major trading partners across a range of issues – from state subsidies to the use of access to China’s markets as a weapon in non-traded issues, to human rights abuses – to use its own tactics against it.
China can maintain its state-planned and controlled economy and society. That is very much its own business and a matter for its own people to decide.

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If, however, it wants access to the world’s major markets then, assuming the key western economies could agree a broad set of rules for engagement with China, whether within or outside the WTO, it would have to do so on terms that reflect a far more level and transparent playing field for trade and one in which there was no scope for using market access as a mechanism for coercion on non-trade matters.

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