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© Bloomberg. A worker assemble mirrors on cabinets at the Dicheng Technology Co. factory in Hangzhou, China, on Tuesday, Jan. 12, 2021. Dicheng exports bathroom cabinets to Latin America, Southeast Asia and the Middle East. Photographer: Qilai Shen/Bloomberg
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(Bloomberg) — China’s ambassador to the World Trade Organization said there’s scope for Beijing to work with the U.S., the European Union and other Western nations on an agreement aimed at curbing the practices at the heart of the still-simmering U.S.-China trade conflict.“China will keep an open mind to that,” Li Chenggang said in an interview in Geneva on Wednesday, his first known talk with a Western media outlet since being appointed in February. “If we have a fair and a frank discussion on the issues, I think China will try its best to keep an open mind.”Trade ministers from the world’s seven largest advanced economies are working on an initiative aimed at reining in Chinese trade abuses such as forced technology transfer, market-changing industrial subsidies and trade-distorting actions by state enterprises.
The Group of Seven’s goal in the talks, which have been ongoing since 2017, is to produce an agreement that might eventually be adopted by the members of the WTO. But getting China to join the talks, which are ostensibly aimed at restricting Beijing’s state-led economic model, remains a major hurdle.
If China plays ball, the negotiations could represent the most significant attempt to rewrite WTO rules since the ultimately unsuccessful Doha Round of trade negotiations was launched in 2001.
However, Li warned that new international trade rules should not be negotiated in China’s absence and then presented as a fait accompli. “You cannot prejudge your conclusion and then put rules on the table and ask others to say simply ‘yes’ or ‘no,’” he said. “That will make the discussion very difficult.”A comprehensive multilateral resolution to China’s most divisive trade practices would accomplish far more than the bilateral truce the U.S. and China signed in 2019 that left unresolved many of the key conflicts in the U.S.-China trade relationship.
Li said these issues went unaddressed in the first phase of the U.S.-China trade agreement because the Trump administration never supported its accusations with evidence.
“In the negotiations and discussions, we frequently ask the other side, ‘Please give us the facts’,” Li said. “If there is a real problem in practice we will investigate. If something is wrong we will correct it. But there are no facts.”“The other side says that maybe one day you will make a retaliation on our companies,” Li added. “But if you cannot give me the facts, what can I do?”
To be sure, the U.S. published an extensive report in 2018 that detailed the ways China’s “state-led, trade-disruptive economic model” harmed other nations.
The report said China provides massive, market-distorting subsidies to its domestic industries, exercises control over its state-owned enterprises and influences the price of key factors of production, including land, labor, energy and capital.
The U.S. report linked to Alibaba (NYSE:) Group Holding Ltd.’s 2014 Securities and Exchange Commission filing, which said the Chinese government “exercises significant control over China’s economic growth by allocating resources, controlling payment of foreign currency-denominated obligations, setting monetary policy, regulating financial services and institutions and providing preferential treatment to particular industries or companies.”
As for technology theft, the U.S. published a report in 2018 detailing how China’s foreign ownership restrictions, administrative approvals and joint-venture requirements in sectors like electric vehicles and aviation required foreign companies to transfer their technology secrets to the Chinese.
The report said “foreign companies have no effective recourse in China and have been hesitant to report these informal pressures for fear of Chinese government retaliation and the potential loss of business opportunities.”
©2021 Bloomberg L.P.
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