On February 16, 2022, the Office of the United States Trade Representative (USTR) released its 2021 Report to Congress on China’s WTO Compliance. This is the 20th report prepared pursuant to Section 421 of the United States-China Relations Act of 2000, which requires the USTR to submit an annual report to Congress on China’s compliance with commitments made as part of its membership of the World Trade Organization (WTO). . It is also the first report published under the direction of US Trade Representative Katherine Tai.

The report consists of four parts: 1) an assessment of China’s membership in the WTO; 2) bilateral and multilateral efforts by the United States and other WTO members to address what the USTR describes as “unique challenges” presented by China’s WTO membership; 3) an explanation of the new US strategy to address “the many problems posed by China’s state-run, non-market approach to economics and trade”; and 4) Chinese policies and procedures that the USTR considers problematic.¹

The first part provides a brief history of China’s accession to the WTO, then explains the obligations and the steps that China has agreed to take to gain accession, including the special provisions drafted to deal with the particular situation of China. In particular, the report points out that China “has agreed to adopt the open and market-oriented approach of the WTO” and to integrate this approach into its trade system and institutions. The report claims that China has a “poor record” when it comes to “complying with WTO rules and observing the fundamental principles on which WTO agreements are based”. Since the previous report, there has been no change in the USTR’s assessment of China’s record in adopting market-oriented policies.²

Part Two begins with an overview of China’s first twenty years of membership in the WTO, including bilateral meetings between the United States and China that took place “to push China to comply and internalize WTO rules and standards and other market-oriented changes”. It then discusses the mechanisms of the WTO, including dispute settlement, and domestic trade tools that the United States has used to fight “China’s compliance with its WTO obligations” and China’s “unfair” trade practices. Internal trade tools include the Section 301 investigations and resulting imposition of additional tariffs, as well as the Phase One agreement reached by the two countries. The report argues that the phase one agreement “fails to address many of the . . . concerns that the United States “wanted to address in its negotiations with China, including “industrial plans, subsidies, state-owned enterprises, excess capacity, state-sponsored cyber theft of intellectual property, standards, cybersecurity, data localization requirements, restrictions on cross-border data transfers, competition law enforcement and regulatory transparency” and “certain matters in the areas of intellectual property, technology transfer and access to the services market[.]The report claims that, just like in 2020, China is “not on track to implement its commitments to purchase American goods and services in calendar year 2021.” The second part concludes with a discussion of the “fundamental problems” that persist with China’s economic and trade regime, highlighting fundamental structural problems such as a heavy reliance on “market-distorting industrial policies”. . . preferential treatment of state enterprises, massive subsidies to national industries. . . forced technology transfer, state-sponsored theft of intellectual property, and serious and persistent non-market excess capacity in key industries.³

The third part calls for new strategies to deal with Chinese practices. The new “multi-faceted strategy [U.S.] approach” consists of the following: 1) continued bilateral engagement with China, both with respect to China’s compliance with its obligations under the Phase One Agreement and “priority issues” for the current administration; 2) the continued use of domestic trade tools, which the United States “is ready to use.” . . as needed in order to achieve a fairer level playing field with China for American workers and businesses”; 3) exploring an update of US trade tools, both strengthening existing trade tools and creating new ones; and 4) working with “like-minded” business partners to explore new initiatives to “address unique issues posed by non-market policies and procedures,” including strengthening existing business relationships in the Indo-Pacific region, working to make critical supply chains less vulnerable; and pursuing initiatives at the WTO and in forums like the G7, G20 and the Organization for Economic Co-operation and Development. In particular, at the WTO, the U.S. agenda “includes pushing and building support for WTO reforms” to update the organization and “react to experiences since its inception, including the China’s accession to the WTO.⁴

Part Four summarizes the United States’ main concerns with China’s approach to domestic economic policy and trade. The report points to a wide range of concerns, ranging from non-tariff measures to intellectual property rights, from agriculture to services and transparency. Regarding non-tariff measures, the report states that “China continues to pursue a wide range of industrial plans and related policies that aim to limit market access for imported goods, foreign manufacturers and suppliers of foreign services, while offering significant government guidance, resources and resources. regulatory support for Chinese industries. The report claims that “one of the most ambitious and harmful industrial plans” is that of China. Made in China 2025 plan, which she says has an “overarching goal. . . replace foreign technologies, products and services with Chinese technologies, products and services in the Chinese market[.]The report acknowledges that “China’s subsidy notifications to the WTO have improved slightly over the years in terms of timeliness and completeness.” However, he claims that “China has not yet submitted a full notification to the WTO of the subsidies maintained by the central government”.⁵

Regarding intellectual property rights, the report notes that China is in the process of establishing an intellectual property appeal court and revising some laws and regulations. However, the report asserts that “deficiencies in China’s intellectual property protection and enforcement regime continue to present serious impediments to U.S. exports and investment.” Additionally, several markets in China were reported as “illustrating[ing] major challenges in the fight against piracy and counterfeiting”. The report notes that the phase one agreement addressed many of these concerns. He adds that China has published a number of draft measures and even published final measures “relating to the implementation of the intellectual property chapter of the agreement”, including the Patent lawthe Copyrightand the Criminal law. However, the report notes that “China has work to do to finalize the draft measures. . . and publish further draft measures,” and that the United States “continues to monitor China’s implementation of the intellectual property chapter of the phase one agreement.”⁶

Regarding agriculture, the report describes China as “a difficult and unpredictable market for U.S. agricultural exporters,” primarily due to “inconsistent application of regulations and selective market intervention by authorities.” of Chinese regulation”. The phase one agreement “addresses numerous non-tariff barriers to agricultural trade” and “includes enforceable commitments requiring China to purchase and import increased quantities of U.S. agricultural and seafood products in 2020 and 2021.” The report notes that China’s implementation of this part of the agreement has been “generally positive, with significant reform in some agricultural sub-sectors[.]”However, he also comments that”[t]here, there has been a noticeable lack of meaningful action in other areas, including with respect to agricultural biotechnology and a risk assessment required for the use of ractopamine in beef and pork production.⁷

Regarding services, the report states that “the United States’ share of the Chinese services market remains well below the United States’ share of the global services market, and the Organization for Cooperation and economic development continues to rank China’s services regime as one of the most restrictive among countries in the world.” big savings. The report identifies numerous challenges that have persisted in 2021 across multiple service sectors, which it attributes to Chinese regulators’ continued use of “discriminatory regulatory processes, informal entry and expansion bans, case-by-case approvals in certain service sectors, overly burdensome licensing and operating requirements, and other means of thwarting the efforts of US service providers to realize their full market potential in China. Phase 1 agreement “addresses a number of long-standing trade and investment barriers for U.S. providers of a wide range of financial services,” the report notes that “China’s restrictions on the flow of Cross-border data could continue to create significant challenges for U.S. financial services providers in China.⁸

Finally, with regard to transparency, the report states that “[o]One of the core principles reflected in China’s WTO accession agreement is transparency. However, the report claims that China “still has a poor record of meeting its transparency obligations.”⁹

For more information, you can find a copy of the report here.