Lighthizer says trade talks won’t drive U.S. firms to China

Date: Wednesday, March 13, 2019
Source: American Shipper

U.S. Trade Representative Robert Lighthizer testified before the Senate Finance Committee Tuesday during a hearing on World Trade Organization reform.

Lighthizer said one of the “clearly unforeseeable” aspects of China being granted permanent normal trade relations status at the World Trade Organization was a shift of U.S. manufacturing to China and subsequent loss of U.S. technology.

“I do think that we’ve got to be careful about providing more incentives for companies,” Brown said during the committee hearing on WTO reform.

Lighthizer mentioned the U.S. has tabled a proposal at the WTO that countries cannot self-designate their development status if they are “one of the rich countries in various criteria that are internationally recognized.” 

WTO members provide concessions based on their development status, which is self-declared, as provided by WTO rules.

The U.S. in February pitched a WTO reform draft proposal calling for current and future WTO negotiations to withhold the special and differential treatment normally provided for developing countries if the World Bank classifies the countries as “high income,” if the countries are OECD members, if the countries are in the G20 and if the countries account for 0.5 percent or more of world trade, Reuters reported Feb. 15.

The OECD is a 36-country intergovernmental organization focused on promoting economic progress and world trade, among other things, and most members are high-income economies.

China, the No. 2 biggest world economy, benefits from identifying itself as a developing country at the WTO.

Lighthizer added that some countries in the consensus WTO system will likely oppose the U.S. proposal.

“The people that are taking advantage of it aren’t going to agree to it,” he said. “It’s a fundamental problem. It’s something that we’re shedding light on. I think some other countries are starting also to talk about it. There’s even been a suggestion that, ‘Well, maybe the United States ought to just self-designate itself as a developing country, and then we’re all treated the same.’”

Lighthizer continued, “If I knew the actual answer, I would give it to you. What we’re doing now is shedding light on it, telling people what a problem there is, and when we have new negotiations, making it clear that we’re not going to give people other than the truly poor nations of the world any kind of a benefit in terms of the kind of obligations that we’re undertaking.”

Sen. Rob Portman, R-Ohio, a former USTR, raised the possibility of switching the WTO from a consensus-based to a majority- or supermajority-based system.

“It’s troubling to me that other countries would use this consensus to protect, in an unfair way, their own economies,” Lighthizer said. “On the other hand, I would never recommend anyone to say let’s have two-thirds of the people in the world sit down and vote and make rules that would have a negative effect on the U.S. So to me, the consensus is a dilemma.”

It’s important the U.S. move forward in areas of reform that would be simpler, such as e-commerce and digital trade, which could be done plurilaterally, Lighthizer said.

As the U.S., EU and Japan work to roll out more details this spring on their joint WTO reform vision, the U.S. is trying to promote a common understanding between the three WTO members on the issues of technical transfer, intellectual property and Chinese investment in other countries, he said.

Officials from the three WTO member governments have met five times as part of their reform effort, Lighthizer said.

“I think it’s been very successful,” he said. “It has brought other people along, but the focus has really been the three of us, and we’re trying to come up with specific examples.”

The U.S. Council for International Business (USCIB) on Wednesday released an outline for WTO reform.

USCIB’s “roadmap” focuses on addressing subsidies and other “market-distorting” support to state-owned enterprises, the establishment of new rules for digital trade and customs processes on electronic transmissions and ensuring an efficient appellate body, among other issues.

The New York-based trade association emphasized the importance for the WTO members to draw input from business.

“The private sector has a direct stake in the rules that will be the outcome of the government-to-government discussions and, accordingly, private sector comments and recommendations should be actively solicited and given careful consideration,” USCIB said.

“The WTO’s existing agreements, such as those on intellectual property rights, sanitary and phytosanitary measures and technical barriers to trade, provide practical commercial benefits for business because they establish global frameworks of rules designed to facilitate international trade,” said USCIB President and CEO Peter Robinson and USCIB Trade and Investment Committee Chair Charles Johnston in a letter this week to the Senate Commerce Committee.


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