1 | It intends to “be the linchpin of a new global alliance of like-minded partners”, based on “common values of fairness, openness and competition” and “centered on areas where our interests converge, our collective leverage can best be used”. European Commission (2020). EU-US: A new transatlantic agenda for global change. European Commission. Accessed: September 2021.
2 | The “US Trade policy agenda” (United States Trade Representative, March 2021, hereafter USTR (2021)) lists “China’s Coercive and Unfair Economic Trade Practices Through a Comprehensive Strategy” and “Partnering with Friends and Allies” among priorities. The “Trade Policy Review” (European Commission, February 2021) identifies “the rapid rise of China, demonstrating global ambitions and pursuing a distinct state-capitalist model” among the main factors for the early review.
3 | Brown, Alexander & Gunter, Jacob & Zenglein, M. J. (2021). “Course Correction: China’s Shifting Approach to Economic Globalization“. MERICS. Berlin (Germany): MERICS.
4 | Blanchette, Jude (2021). “From “China Inc.” to “CCP Inc.”: A New Paradigm for Chinese State Capitalism”. China Leadership Monitor. Stanford (US): The Hoover Institution.
5 | A level playing field is a situation in which market participants “compete on an equal footing” (OECD). Discriminative state interventions such as specific subsidies, regulatory discrimination, and national preference are the usual culprit for tilting the playing field.
6 | Organisation for Economic Co-operation and Development (2019a). "Measuring distortions in international markets: the aluminium value chain". OECD Trade Policy Papers. No. 218. Paris: OECD Publishing. Organisation for Economic Co-operation and Development (2019b). "Measuring distortions in international markets: The semiconductor value chain", OECD Trade Policy Papers, No. 234. Paris: OECD Publishing.
7 | A simple quantity definition would define international unilateralism as the action of one party, bilateralism of two, and multilateralism of three of more. A more quality-based approach would define multilateralism as a combination of indivisibility, generalized organizing principles, and diffuse reciprocity. Bilateralism would be based on preferentialism and changes its goals and priorities on a case-by-case basis. Unilateralism describes a situation where a state acts autonomously with tools under its sole responsibility. Tago, A. (2017). “Multilateralism, Bilateralism, and Unilateralism in Foreign Policy”. Oxford Research Encyclopedia of Politics.
8 | Predatory behavior, also referred to as mercantilist, is when the creation of wealth for the acting party is realized by the punction of someone else’s welfare, rather than a net value-added in terms of overall utility.
9 | The United States jointly proposed with Brazil in July 2020 that “market-oriented conditions are fundamental to a free, fair, and mutually advantageous world trading system.” They were joined later by Japan, but opposed by the EU in exchanges at the WTO.
10 | Trade Talks (2021). “The EU’s new trade policy, with S. Weyand of DG Trade”. Trade Talks 148. Peterson Institute for International Economics.
11 | The “Trade Policy Review” of the European Commission (published in February 2021) recognizes that “the US has raised a number of valid concerns” about the role of the Appellate Body, including the need for “judicial economy”, for new rules on SOEs, and for stricter timelines. The question of the leverage to get serious WTO reform regarding China’s state-led economy was the first asked to S. Weyand during her interview at one of the most famous American podcasts on trade matters (Trade Talks (2021)).
12 | In two articles in Foreign Affairs in 2020, US Trade Representative Robert Lighthizer justified the unilateral approach by referring to a lack of determination in Europe to confront China for its distortive actions. Scholar and former Obama official M. Bown shared similar concerns (Trade Talks (2021)).
13 | White House (2021). US-EU summit statement. Accessed: September 2021. Washington DC: White House.
14 | Office of the United States Representative (2017). Joint Statement by the United States, European Union and Japan at MC11. Accessed: October 2021.
15 | World Trade Organization (2019). Procedures To Enhance Transparency and Strengthen Notification Requirements Under WTO Agreements. JOB/CTG/14/Rev.2.
16 | Office of the United States Representative (2020). Joint Statement of the Trilateral Meeting of the Trade Ministers of Japan, the United States and the European Union. Accessed: July 2021.
17 | Office of the United States Representative (May 2018). Joint Statement of the Trilateral Meeting of the Trade Ministers of Japan, the United States and the European Union. Accessed: July 2021. Office of the United States Representative (September 2018). Joint Statement of the Trilateral Meeting of the Trade Ministers of Japan, the United States and the European Union. Accessed: July 2021.
18 | Under the CAI, SOEs – defined as all firms with a certain respect of state influence, including local SOEs – have an obligation to act according to commercial considerations and not discriminate against EU firms, as well as extra transparency obligations. Any subsidy to an SOE is considered ”specific”, hence eligible for trade sanctions.
19 | S. Weyand, DG of the DG Trade at the webinar “The EU-China CAI: will it be a game changer?” organized by the Peterson Institute for International Economics (2021).
20 | At her various confirmation hearings this year, the incoming USTR K. Tai refrained from singling out SOEs when talking about the challenges relating to the “state-directed economics.” Besides, the US Trade Policy Agenda for 2021 only refers to subsidies and transparency under the objective of addressing China’s “unfair economic trade practices.”
21 | The Ottawa group is Australia, Brazil, Canada, Chile, EU, Japan, Kenya, South Korea, Mexico, New Zealand, Norway, Singapore, and Switzerland. European Commission (2021). “Joint Communiqué of the Ottawa Ministerial on WTO Reform”.
22 | In line with long-standing positions, the propositions of China on WTO reform (State Council of the People’s Republic of China (2018). China and the WTO. Accessed: February 2021) focuses on market access in agriculture, fewer subsidies by developed economies in that sector, and more policy space for developing countries. China as the “champion of the developing world” is constitutive of the CCP narrative, explained by Wang Yi when detailing Xi Jinping’s thought on diplomacy (Qiushi (2021). 深入学习贯彻习近平外交思想, 不断开创中国特色大国外交新局).
23 | World Tarde Organization (2019). Communication from the USA. WT/GC/W/757. EU supported a proposition formally made by Norway (WT/GC/W/770). The United States got Brazil, Singapore, and Mexico to let go of the developing status for future negotiations.
24 | Both propositions have shied away from stripping China of that status, but only of the related benefits.
25 | The long proponent of extra industrial policy space for developing countries D. Rodrik (an idea expressed clearly as soon as 1997 in Has globalization gone too far?) has been joined by other respected scholars such as J. Bhagwati and P. Krugman. The IMF in 2018 acknowledged that no country had successfully caught up with advanced economies without strong industrial policies (Cherif, R. and Hasanov F., “The return of the policy that shall not be named”, IMF Working paper 19/74. Washington: International Monetary Fund).
26 | Demands from most developing countries, under the informal G90 group, has been trimmed down from 87 demands in 2002 to 10 propositions in 2017 (see WTO documents: JOB/DEV/48; JOB/TNC/60).
27 | In line with the long-standing position of the Democrats, the US Trade Policy Agenda for 2021 has “Promoting Equitable Economic Growth Around the World” among its ten priorities. The piece disregards mere market opening as a satisfying condition for common prosperity and poverty alleviation in third countries.
28 | Other subjects of international rules, such as sector-specific disciplines on overcapacities, development financing, corruption, economic coercion, and external debt could also benefit from extra disciplines against Chinese practices. Being less directly related to the level-playing-field issue, they are left out from this report.
29 | World Trade Organization (2000). Brazil - Export Financing Programme for Aircraft Recourse by Canada to Article 21.5 of the DSU - AB-2000-3 - Report of the Appellate Body. WT/DS46/AB/RW.
30 | Hopewell, Kristen (2019). “Power transitions and global trade governance: The impact of a rising China on the export credit regime". Regulation & Governance 15 (3), 634-652.
31 | Export-Import Bank of the United States (2021). "EXIM 2020 Competitiveness Report". Washington DC: Export-Import Bank of the United States. Multiple Chinese ministries published encourage in September 2020 the use of export credit to support “core enterprises” supply chain 中国人民银行 工业和信息化部 司法部 商务部 国资委 市场监管总局 银保监会 外汇局关于规范发展供应链金融 支持供应链产业链稳定循环和优化升级的意见). In March 2021, the ”Notice of the China Export Credit Insurance Corporation of the MofCom on Further Utilizing the Role of Export Credit Insurance” was issued by the Chinese ministry of Commerce, 商务部中国出口信用保险公司关于进一步发挥出口信用保险作用加快商务高质量发展的通知).
32 | The EU, the United States, Australia, Brazil, Canada, Japan, Korea, New Zealand, Norway, Switzerland and Turkey jointly announced the suspension of their participation because of the lack of meaningful progress. China, India, and Russia are among the few participants missing from the statement.
33 | United States Trade Representative (2021). US Trade policy agenda. Accessed: July 2021.
34 | European Commission (2020). 38th Annual Report from the Commission to the Council and the European Parliament on the EU's Anti-Dumping, Anti-Subsidy and Safeguard activities and the Use of TDIs by Third Countries targeting the EU in 2019. 2020/776. See p.13 for electric bicycles.
35 | Hackenbroich, J. & Oertel, J. & Sandner, P. & Zerka, P. (2020). Defending Europe’s economic sovereignty: new ways to resist economic coercion. European Council on Foreign Relations. Ruhlig, T. (2020). Towards a more principle European China policy. Institut français des relations internationals. Huotari, M. & Weidenfeld, J. & Arcesati, R. (2020). Managing economic cooperation and competition with China - Towards a More Integrated European Trade Policy Approach. MERICS.
36 | Office of the United States Representative (May 2018). Joint Statement of the Trilateral Meeting of the Trade Ministers of Japan, the United States and the European Union. Accessed: July 2021. For the concrete outcomes of the non-market-economy status and the unilateral approach used by the US and the EU: Sandkamp, & Yalcin, K. (2020). Different Antidumping Legislations within the WTO. CESifo Working Paper No. 8398. CESifo GmbH.
37 | Since then, China has dropped the case it brought, most probably to prevent the decision and the explanatory report from being published. As acknowledge by Chinese scholar Tu Xinquan in an interview with CSIS in July 2019.
38 | Zhiguo Yu (2020). The US is now a “Non-Market Economy” – Anti-Dumping Ruling by China. International Economic Law and Policy Blog.
39 | Coercive technological transfer here refers to public actions coercing foreign firms to a technological transfer that would not have happened under a free competing market (OECD). Technological theft is not per se a level-playing-field issue as it is outside the realm of economic exchanges.
40 | Office of the United States Representative (2018). “Findings of the investigation into China’s acts, policies, and practices related to technology transfer, intellectual property, and innovation under section 301 of the trade act of 1974”. p.19.
41 | Wei, L. & Davies, B. (2020). “Negotiating a Truce, December 2019-January 2020 ”. In: Superpower showdown – How the battle between Trump and Xi threatens a new cold war. P359-386. New York, NY : Harper Business. Blustein, P. (2019) “Might Unmakes Right”. In: Schism – China, America and the fracturing of the global trading system. P253. Waterloo, ON, Canada : Centre for International Governance Innovation.
42 | Lester, S. (2021). Forced Technology Transfer Provisions in the CAI and the US-China Phase 1 Deal. International Economic Law and Policy Blog. Following the EU’s sanctions on local officials responsible of human rights violation towards the Uighur minority, China retaliated by sanctioning European officials and civil society institutions. With some of its members being targeted, the European Parliament put the ratification process of the CAI on hold on April 2021.
43 | “The Biden Administration will examine how Treasury, Commerce and USTR can work together to put effective pressure on countries intervening in the FX market to gain a trade advantage” (Office of the United States Representative, US Trade policy agenda, 2021). United States Department of the Treasury (2021). Report on Macroeconomic and Foreign Exchange Policies of Major Trading Partners of the United States. Washington DC: United States Department of the Treasury.
44 | The latest annual report on China by the IMF still criticizes the opaqueness around the renminbi exchange rate.
45 | World Trade organization (2020). Advancing Sustainability Goals Through Trade Rules To Level The Playing Field. WT/GC/W/814.
46 | TDIs, as recognized by the WTO, are tools crafted to put some extra barriers to products entering the domestic market. They are anti-dumping, countervailing duties (in the case of subsidies) or safeguard.
47 | A point made by then EU Trade Commissioner M. De Gucht in a speech at the High-Level Conference: Modernisation of TDIs in 2012. Gstöhl, S. & De Bievre, D. (2018). Actors and Processes in EU Trade Policy. In: The trade policy of the European Union. P69—77. London: Palghrave. Pepermans, A. (2016). The Huawei case and what it reveals about Europe’s trade policy. European Foreign Affairs Review. Pepermans, A. (2017). The Sino-European solar panel dispute. Journal of Contemporary European Research.
48 | See EU legal document: 2020/776; 2020/C 51/12; 2020/C 351/08; 2020/C 352 I/01; 2019 C 192/30, 2019/C 342/09 and 2020/776. Crochet, V. & Hedge, V. (2020). China’s ‘Going Global’ Policy: Transnational Subsidies under the ASCM. Leuven Centre for Global Governance.
49 | Chimits, Francois (2021). The EU targets distortions in the Chinese aluminum value chain. MERICS, EU-China briefing. MERICS
50 | US Congressional Research Service (2021). Trade Remedies: Antidumping and Countervailing Duties.
51 | See the 1998 amendment incorporated Section 351.527 in the US Code of Federal Regulations (§ 351.527).
52 | OECD (2019a), "Measuring distortions in international markets: the aluminium value chain", OECD Trade Policy Papers, No. 218, OECD Publishing, Paris. OECD (2019b), "Measuring distortions in international markets: The semiconductor value chain", OECD Trade Policy Papers, No. 234
53 | The covered sectors are aerospace and defense; aluminum, automobiles, cement, chemicals, glass and ceramics, rolling stock, semiconductors, shipbuilding, solar photovoltaic panels, steel, telecom network equipment, and wind turbines. The sample cover in almost every sector more than two-thirds of the world production, along with a balanced geographical coverage. OECD (2021).
54 | Such key sectors could be derived from the sectors prioritized by Chinese industrial policies. To have an idea of such sectors, see “Evolving Made in China 2025: China’s industrial policy in the quest for global tech leadership” by A. Holzmann and M. J. Zenglein (2019, MERICS).
55 | As part of its second priority of its trade policy agenda, called “Putting workers at the Center”, the USTR stated that “Trading partners will not be allowed to gain a competitive advantage by violating workers’ rights.” The current USTR has long been a proponent of actions against labor-rights infringement abroad.
56 | The last three are referred to as likely Chinese distortions by both the USTR 2021 Trade policy agenda and recent EU TDIs investigations.
57 | The June 2021 G7 Communique mentions “the need for the world’s leading democratic nations to unite behind a shared vision to ensure the multilateral trading system is reformed, with a modernised rulebook and a reformed WTO at its centre”, with the following points to be advanced: modernization of the rulebook and protect against unfair practices (such as forced tech transfers, IP theft, lowering green and social standards to gain competitive advantages, market-distorting actions of SOEs and harmful subsidies).
58 | The WTO has an exclusivity clause barring domestic rules on distortions already effectively covered (Art 32.1).
59 | France and Germany reiterated in February 2021 their strong support to the mechanism as part of a joint proposal on reducing European dependencies.
60 | China Chamber of Commerce to the European Union (2020). CCCEU responds to EC white paper. Brussels: China Chamber of Commerce to the European Union.
61 | European Parliament (2020). EU international procurement instrument. Brussels: European Parliament.
62 | Federation of German Industries (BDI) (2020). International Public Procurement: New Opportunities for the EU?.
63 | In April 2021, the EU, the United Kingdom, Canada, Japan, Australia, Israel, and South Korea lodged a request for arbitration regarding a US effort to lower its opening commitments made under the WTO Government Procurement Agreement, initiated under Trump and confirmed under Biden (see: GPA/ARB/USA/1 - GPA/ARB/USA/1/Add. 7).