Dennis Shea (also known as Xi Danan), who served as the U.S. Ambassador to the World Trade Organization (WTO) during the Trump administration, said in an opinion piece in The Hill on Sunday that “to address the Chinese challenge, the U.S. and Europe must look beyond the WTO.”
Shea previously served as deputy U.S. trade representative and head of mission in Geneva, and U.S. ambassador to the WTO, following his nomination by the U.S. Senate for confirmation on March 1, 2018. His term ended on Jan. 20 of this year. Shea received his B.A. from Harvard College, Harvard University’s undergraduate school, and his M.A. and J.D. from Harvard Graduate School of Arts and Sciences and Harvard Law School. He served as a member of the U.S.-China Economic and Security Review Commission for 11 years prior to joining the Office of the U.S. Trade Representative.
In response to the EU’s recent presentation of a new trade strategy for the coming years and its emphasis on prioritizing major WTO reforms, Shea said, “The EU’s new trade policy includes a welcome call for greater transatlantic cooperation to address the economic challenges posed by communist-ruled China. In particular, the EU proposes to reinvigorate the trilateral process, a joint initiative of the U.S., EU and Japan to develop new WTO rules to curb the characteristics of China’s non-market economy, most notably industrial subsidies and the excessive role of state-owned enterprises.” He noted that “it would certainly be worthwhile to build on the trilateral work and introduce it into the WTO. But it would be a mistake to make the expansion of the WTO rulebook the sole, or even the main, focus of transatlantic cooperation with China. In fact, putting all our eggs in the WTO rulemaking basket would play directly into China’s hands.”
According to Shea, “The development of new WTO rules to address the ‘negative spillover’ effects of subsidies, which is the stated goal of the EU, defines the problem too narrowly. China’s economic system, with its unique blend of public, private and CCP resources to advance industrial policy objectives, is inconsistent with WTO guidelines of transparency, non-discrimination, reciprocity and market orientation. This hard fact needs to be recognized.” He said, “The WTO-centric approach also assumes that the CCP believes it must abide by international rules. However, there is overwhelming evidence that this is not the case. The CCP’s failure to comply with the timely reporting requirements of the WHO International health Regulations has undoubtedly contributed to the occurrence of the New Crown pandemic. The CCP’s terrorist actions against the Uighurs in Xinjiang are inconsistent with the Universal Declaration of Human Rights. The CCP’s imposition of national security laws in Hong Kong violates the Sino-British Joint Declaration, which guarantees a high degree of autonomy for Hong Kong. China’s expansive territorial claims in the South China Sea violate the United Nations Convention on the Law of the Sea.”
According to Shea, “We see this pattern repeated in trade. The Office of the U.S. Trade Representative has documented that China’s record of compliance with its WTO obligations has been poor. A major problem is China’s general lack of transparency about its trade policies and practices. China has also been very willing to use its trade prowess as a wedge. Witness China’s retaliation against Australian exports, presumably in violation of WTO rules, because Australia dared to demand an independent investigation into the origins of the Epidemic. Japan, South Korea and the Philippines have borne the brunt of similar trade retaliation in response to actions Beijing deemed unacceptable.”
Shea said, “Finally, a WTO-centric approach assumes that the institution has the ability to set meaningful rules within a reasonable Time frame. But the WTO’s consensus principle requires unanimous acceptance by all 164 WTO members before a decision can be adopted. At the WTO, China strongly opposes the creation of new subsidy rules, arguing that they are ‘a direct yoke to limit China’s development.’ Even if China were to participate in the WTO negotiations, it could seek to block consensus among other WTO members. In the most optimistic scenario, the end result is likely to be a weak set of rules that largely accommodates CCP concerns.” He said, “And don’t expect the negotiations to be completed anytime soon. A multilateral negotiation currently underway at the WTO to limit fisheries subsidies – has been underway for 19 years. Enforcing existing rules will take just as long. Boeing’s subsidy dispute with Airbus lasted 16 years before it was finally resolved by the WTO.”
Shea said, “If we are in a new era of transatlantic cooperation with China, it is reasonable to ask: Do the interests and goals of the United States and the EU align? Do we assess the challenges in the same way? Are we willing to work together to impose costs on China to discipline bad behavior and encourage change, even if doing so imposes costs on us? Answering these questions will help determine the ambition of any potential cooperation.” According to him, “Today, the United States and the European Union seem to be viewing China through different lenses. It is jaw-dropping to hear key European leaders invoke the discredited mantra of ‘change through trade’. The timing and substance of the recently concluded China-EU Comprehensive Investment Agreement (CIA) also raises questions about whose interests the agreement is really serving. At the WTO, the EU has so far taken an overly cautious approach, refusing even to co-sponsor a U.S.-drafted statement affirming the centrality of market-oriented conditions in the global trading system. The EU’s concern is that the statement would somehow imply that China cannot be part of the organization.”
Shea said, “Only time will tell whether the desire to cooperate will bear fruit. But there are many aspects to an effective transatlantic response to the Chinese challenge, beyond the new WTO rules. These aspects include: joint sanctions against Chinese companies engaged in predatory or illegal practices; a common defense mechanism in the face of retaliatory trade actions by China; collective efforts to improve supply chain resilience for key commodities; joint development of technical standards for future dominant industries; and, yes, tariffs.”
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