In an opinion piece published earlier this month, Peter Scheer, executive director of the First Amendment Coalition, which is pushing for the suit, argued that ‘The Great Firewall of China’ - the various censors and other restrictions imposed on foreign companies - amounts to an illegal barrier to trade because it makes it harder for outside firms to reach Chinese consumers online.

Web sites based outside of China take an additional few seconds to load compared to Chinese-based sites, Scheer explained, and in the online world, “a few seconds might as well be a few extra hours.”

The government firewall “halts internet commerce at China’s borders just as surely as a government regulation requiring perishable agricultural exports from the US to sit for days on China’s docks prior to transhipment to internal distribution facilities,” Scheer wrote.

The First Amendment Coalition has brought its request to the USTR; consultations are ongoing.

“This is a very complex area that we continue to think through, in consultation with interested groups including the First Amendment Coalition, and have not made any decisions one way or the other,” USTR spokeswoman Debbie Mesloh said, according to a report from AFP.

Reuters reported last week that the USTR’s office has been in touch with the law firm King and Spalding, which represents the First Amendment Coalition. “They’ve asked us for more detail about it,” said King and Spalding lawyer Gilbert Kaplan. “We are trying to put that together now.”

A recent report from the Brussels-based European Centre for International Political Economy concluded that many WTO members are legally bound “to permit an unrestricted supply of crossborder internet service.” A failure to do so could constitute a violation of the General Agreement on Trade in Services, the authors found, even given certain exceptions that allow governments to censor in order to protect public morals or ensure national security.

The First Amendment Coalition first approached the USTR’s office more than two years ago, but no WTO case ever materialised. However, Google’s recent run-in with the Chinese policies has prompted renewed scrutiny.

On 12 January, Google announced that it will no longer censor the content that it delivers to web users in China. “We recognise that this may well mean we have to shut down Google.cn, and potentially our offices in China,” wrote David Drummond, a senior vice president at Google.

The statement came soon after a mid-December cyber attack against Google’s Chinese operations. The “highly sophisticated and targeted” manoeuvre sought to hack into the Gmail accounts of Chinese human rights activists, the company claimed on its website.

Google originally based its Chinese operations outside the country’s borders but the company decided to relocate to within China in January 2006 in order to speed up the loading time of its pages. When it made the move, Google agreed to censor certain content that Beijing found unacceptable. That promise has now been rescinded.

US Secretary of State Hillary Clinton called global attention to the matter when she scolded China, along with a handful of other nations, for boosting internet censorship in the past year. “Countries that restrict free access to information or violate the basic rights of internet users risk walling themselves off from the progress of the next century,” she told an audience in Arlington, Virginia on 21 January.

China shot back with a scathing editorial in The Global Times, a pro-government newspaper. “The US campaign for uncensored and free flow of information on an unrestricted internet is a disguised attempt to impose its values on other cultures in the name of democracy,” the newspaper said, adding that “China’s real stake in the ‘free flow of information’ is evident in its refusal to be victimised by information imperialism.”

ICTSD reporting; “US asked to drag China to WTO over Google dispute,” AFP, 24 January 2010; “USTR mulling WTO case on China web barriers: lawyer,” REUTERS, 22 January 2010.

More Bridges Weekly headlines

More ICTSD highlights

In an opinion piece published earlier this month, Peter Scheer, executive director of the First Amendment Coalition, which is pushing for the suit, argued that ‘The Great Firewall of China’ - the various censors and other restrictions imposed on foreign companies - amounts to an illegal barrier to trade because it makes it harder for outside firms to reach Chinese consumers online.

Web sites based outside of China take an additional few seconds to load compared to Chinese-based sites, Scheer explained, and in the online world, “a few seconds might as well be a few extra hours.”

The government firewall “halts internet commerce at China’s borders just as surely as a government regulation requiring perishable agricultural exports from the US to sit for days on China’s docks prior to transhipment to internal distribution facilities,” Scheer wrote.

The First Amendment Coalition has brought its request to the USTR; consultations are ongoing.

“This is a very complex area that we continue to think through, in consultation with interested groups including the First Amendment Coalition, and have not made any decisions one way or the other,” USTR spokeswoman Debbie Mesloh said, according to a report from AFP.

Reuters reported last week that the USTR’s office has been in touch with the law firm King and Spalding, which represents the First Amendment Coalition. “They’ve asked us for more detail about it,” said King and Spalding lawyer Gilbert Kaplan. “We are trying to put that together now.”

A recent report from the Brussels-based European Centre for International Political Economy concluded that many WTO members are legally bound “to permit an unrestricted supply of crossborder internet service.” A failure to do so could constitute a violation of the General Agreement on Trade in Services, the authors found, even given certain exceptions that allow governments to censor in order to protect public morals or ensure national security.

The First Amendment Coalition first approached the USTR’s office more than two years ago, but no WTO case ever materialised. However, Google’s recent run-in with the Chinese policies has prompted renewed scrutiny.

On 12 January, Google announced that it will no longer censor the content that it delivers to web users in China. “We recognise that this may well mean we have to shut down Google.cn, and potentially our offices in China,” wrote David Drummond, a senior vice president at Google.

The statement came soon after a mid-December cyber attack against Google’s Chinese operations. The “highly sophisticated and targeted” manoeuvre sought to hack into the Gmail accounts of Chinese human rights activists, the company claimed on its website.

Google originally based its Chinese operations outside the country’s borders but the company decided to relocate to within China in January 2006 in order to speed up the loading time of its pages. When it made the move, Google agreed to censor certain content that Beijing found unacceptable. That promise has now been rescinded.

US Secretary of State Hillary Clinton called global attention to the matter when she scolded China, along with a handful of other nations, for boosting internet censorship in the past year. “Countries that restrict free access to information or violate the basic rights of internet users risk walling themselves off from the progress of the next century,” she told an audience in Arlington, Virginia on 21 January.

China shot back with a scathing editorial in The Global Times, a pro-government newspaper. “The US campaign for uncensored and free flow of information on an unrestricted internet is a disguised attempt to impose its values on other cultures in the name of democracy,” the newspaper said, adding that “China’s real stake in the ‘free flow of information’ is evident in its refusal to be victimised by information imperialism.”

ICTSD reporting; “US asked to drag China to WTO over Google dispute,” AFP, 24 January 2010; “USTR mulling WTO case on China web barriers: lawyer,” REUTERS, 22 January 2010.

The panel was formed in response to China’s second request for WTO dispute settlement procedures, filed 9 December 2009.

The dispute centres on new US tariffs on certain passenger vehicle and light truck tyres from China. The tariffs, which US President Barack Obama announced on 11 September, come on top of Washington’s standard 4 percent duty on tyres. The tariff is set to decrease over the next three years from 35 percent the first year to 25 percent the second, then 20 percent the third, before being eliminated.

Obama’s decision came after the US International Trade Commission (ITC), an independent federal agency responsible for investigating trade complaints, recommended that the US impose three-year duties on Chinese tyres as a safeguard measure.

The terms of China’s 2001 accession to the WTO included a ‘transitional product-specific safeguard’ clause that allows WTO members to protect themselves from import surges caused by China’s entry into the organisation. The clause is set to expire in 2013.

The ITC decision came in response to a request from the United Steel Workers (USW), a Pittsburgh-based labour union, which asserted that imports of Chinese tyres were sufficient to cause ‘market disruption’. USW maintained that Chinese tyre imports had tripled between 2004 and 2008 and caused US production to decline by 25 percent.

China requested consultation procedures three days after the new tariffs were announced, arguing that Washington’s new tariffs are unjustified and inconsistent with Articles I and II of GATT 1994, as well as with US obligations under the terms of China’s WTO accession.

Subsequent consultations did not result in a settlement. The US denied China’s first request for the establishment of a dispute settlement panel. WTO rules dictate that members cannot block a second request, however, so China’s 9 December dispute settlement application was approved.

The tyre tariffs are controversial even within the United States: labour unions are strongly in favour, but some business interests oppose them. Two US Congressmen from the Ways and Means Trade Subcommittee, Kevin Brady and Dan Boren sent a letter to US Trade Representative Ron Kirk on 21 January requesting confirmation that the administration is comprehensively monitoring the effect of the special Chinese tyre tariff on the US economy.

“I am concerned that the administration’s tyre tax will cost us jobs in the United States and raise prices for tyres for hardworking Americans,” Brady stated. “With unemployment hovering at ten percent, we must assess what impact this tax is having on Americans.”

ICTSD reporting; “WTO to probe U.S.-China Tire Rift,” THE WALL STREET JOURNAL, 13 January 2010.

Trade between China and the ten-member ASEAN bloc has mushroomed over the past ten years, shooting up at an average rate of more than 26 percent each year between 2003 and 2008. China recently became the region’s third most important trading partner, after Japan and the EU.

The new pact, which was finalised in 2004, is meant to build on that momentum, especially as markets in Europe and the US have cooled recently. Officials hope that the deal will bring cheaper manufactured goods into ASEAN while providing China with easier access to ASEAN’s raw materials exports.

But critics argue that some ASEAN producers will be suffocated by the flood of cheap Chinese imports ushered in by the drop in tariffs. Some analysts predict that losses for industries in ASEAN countries like Indonesia and Thailand will be upwards of US$ 3 billion per year.

The day the deal took effect, tariffs immediately dropped to zero on about 90 percent of all goods traded between China and six ASEAN countries - Brunei, Indonesia, Malaysia, the Philippines, Singapore and Thailand. As a result, the average tariff on ASEAN goods imported into China has fallen from 9.8 percent to 0.1 percent, while the average tariff on Chinese goods imported into ASEAN countries now stands at 0.6 percent, down from 12.8.

The four other ASEAN members - Burma, Cambodia, Laos and Vietnam - will have an additional five years to reduce their tariffs.

The new China-ASEAN trade area is the largest in the world in terms of the number of people - 1.9 billion - who live inside it. The total volume of trade in the China-ASEAN zone is roughly US$ 4.3 trillion annually, making it the third-largest such area in the world after the European Union and NAFTA.

ASEAN has been on a tear recently when it comes to negotiating free trade deals. In addition to the pact with China, the bloc has also inked trade agreements with Australia, New Zealand and Japan. A separate deal with India also took effect at the beginning of this year. Talks toward a regional deal with the EU were begun in 2007 but were put on hold last March after nearly two years of little progress. Instead, Brussels has now begun negotiating bilateral agreements with each ASEAN country.

Indonesian exporters up in arms

While many government officials are hailing the landmark deal, some ASEAN producers are convinced that freer trade with China will do them more harm than good. Exporters in Indonesia, ASEAN’s largest economy, appear particularly concerned.

Thousands of workers staged a rally in the Indonesian city of Bandung earlier this month to protest the deal and call for a delay in its implementation.

“These sectors aren’t ready to compete with imported Chinese products. If the government implements free trade now, these industries are surely going to die,” Indonesian lawmaker Airlangga Hartarto told Agence-France Presse.

According to analysis from the Ikatan Sarjana Ekonomi Indonesia, an Indonesian research group, the new trade deal could lead to total losses of US$ 3.8 billion per year for seven Indonesian industries - petrochemicals, textiles, leather products, electronics, ceramics, foods and beverages, and steel and iron products.

The Indonesian government reacted, although only at the eleventh hour, by asking for an additional two years of tariff protections for 228 products.

“The letter of notification on negotiations to discuss modifications to the 228 tariff items was submitted on December 31,” Trade Ministry official Gusmardi Bustami said, according to a report by AFP.

Indonesian trade minister Mari Pangestu has insisted that the country will honour its trade commitments, but she has also stressed that consultations were ongoing.

“An informal communication process has been conducted to get a win-win solution,” the minister told reporters this week.

Ramming through any alterations to the deal could be a tall order, as all ten ASEAN members would have to agree to the new terms, as would China. Meanwhile, Indonesian exporters are already coming faceto face with the Chinese competition.

“What the government and the business sector have failed to do, I think, is to come up with the necessary strategy to contain these short-term potential losses,” says Alexander Chandra, head of the Southeast Asia programme of the Trade Knowledge Network, a development research group.

The pact was finalised in 2004 - in fact, Jakarta first signed on in 2002 - but the Indonesian government did not begin warning domestic industries of the potential negative effects of the agreement until August of last year, Chandra says. Even then, businesses did not have enough information to make requests for specific changes to the deal.

Surin Pitsuwan, Secretary-General of ASEAN, acknowledged that governments may have to act to help domestic firms compete with cheaper imports, but added that such support “should be short-term and does not remove the incentive to innovate and cut costs.”

In a statement, the ASEAN Secretariat noted that the trade deal includes provisions for safeguard actions in the face of serious injury to domestic industries and that countries have been allowed to retain tariffs on certain ‘sensitive’ goods.

ICTSD reporting; “ASEAN-China open free trade area,” AFP, 29 December 2009; “Indonesia wants China pact revised,” THE WALL STREET JOURNAL, 13 January 2010; “Mari Rebuffs Free Trade Agreement Criticism,” THE JAKARTA GLOBE, 18 January 2010.

‘Famous brands’ fight ends

The week before Christmas saw the end of a year-old spat over the support that China provides for domestic companies that ship their goods overseas. The office of the US Trade Representative reported on 18 December that Washington and Beijing had signed an agreement to resolve the dispute, which the US, joined by Mexico, had filed 12 months earlier.

In that complaint, Washington and Mexico City accused Beijing of violating world trade rules by offering export subsidies for companies that participated in the government’s ‘Famous Export Brand’ and ‘China World Top Brand’ programmes. Through those initiatives, Beijing offered up state aid to producers of goods ranging from textiles and apparel to chemicals, medicines and food products.

Much of the government support was made contingent on export activity, and it was on this point that Washington raised its principal objection.

“Export subsidies are illegal under WTO rules,” the USTR said in a statement.

Under the deal struck last month, China agreed to either “eliminate the measures of concern” or remove any export contingencies, the USTR statement said.

Appellate Body upholds ruling on book, film, dvd distribution

Drawing the curtain on another Sino-American dispute, the WTO Appellate Body - the organisation’s highest court - upheld an earlier panel ruling that largely supported several US complaints about China’s treatment of copyrighted goods.

Beijing requires copyrighted publications and audiovisual products - things like books, journals, video games, music, DVDs - to be distributed within China by only a handful of state-approved or state-run actors. US producers of music, films and the like have complained that these restrictions have hamstrung their efforts to tap into the world’s fastest-growing major market.

The US filed suit against Beijing’s restrictions in April 2007. More than two years later, a WTO dispute settlement panel concluded that the measures violated the commitments China had made when it joined the WTO in 2001. The panel also found that the policies were at odds with the WTO’s ‘national treatment’ requirements, which forbid countries from privileging domestic goods and services over imported ones. The measure is spelled out in the General Agreement on Trade in Services (GATS).

China appealed that decision in September, but the Appellate Body largely upheld the earlier ruling.

The Motion Picture Association of America predictably hailed the Appellate Body’s ruling as “a landmark victory,” saying that the decisions marked “a major step forward in levelling the playing field for America’s creative industries seeking to do business in China.”

But Beijing can claim victory on one aspect of the judgement: the Appellate Body ruling did not explicitly find fault with China’s invocation of the ‘public morals’ argument in defending its IP restrictions. (Article XX(a) of the General Agreement on Tariffs and Trade allows WTO members to deviate from their normal trade obligations if doing so is “necessary to protect public morals.”)

To the contrary, the Appellate Body concluded that China may rely on a public morals defence to justify the violation of the terms of its accession, as long as the country can demonstrate a “clearly discernable, objective link to the regulation of trade in the goods at issue.”

In this dispute, the Appellate Body concluded that China had failed to prove that its trade restrictions were ‘necessary’ to protect public morals.  Nevertheless, the ruling has established the ‘public morals’ argument as a legitimate defence.

Raw materials panel established

Just as the ‘famous brands’ and IP suits came to a close, a raw materials case between the US and China heated up, and a potential dispute on tyre tariffs loomed on the horizon.

On 21 December, the WTO’s Dispute Settlement Body established a panel that will consider a complaint against China’s export duties and quotas on certain raw materials. Washington and Brussels filed the suit jointly over the summer, claiming that Beijing illegally restricts exports of several raw materials that are critical to manufacturers in the US and the EU.  Mexico has joined the US and the EU in the complaint, while several other countries have become third parties to the dispute.

The WTO does not generally regulate the use of export taxes, which can act as indirect subsidies to domestic industries. But when China became a WTO member in December 2001, it promised to eliminate “all taxes and charges applied to exports” on all but 84 of its goods. The products targeted in the WTO challenge are not included in that list of exceptions, but China has countered that the export restrictions are necessary on environmental grounds, as the country does not want to over-exploit its natural resources. The panel established on 21 December will now consider the case.

And another dispute looms. At the next meeting of the Dispute Settlement Body, scheduled for 19 January, China is expected to request that a panel be established to hear its complaint against tariffs that the White House slapped onto imports of Chinese tyres earlier this year.

The US blocked the request at the DSB’s last meeting, on 21 December, but WTO rules do not allow it to do so again.

ICTSD reporting; “Beijing preserves limits on movies,” THE WALL STREET JOURNAL, 23 December 2009.

“It is critical to make concrete, demonstrable progress today to demonstrate to the people of the US and China that we can work together,” US Commerce Secretary Gary Locke said in his opening remarks to the US-China Joint Commission on Commerce and Trade (JCCT).

Officials from the two sides signed a total of nine new trade deals covering investment, intellectual property, and energy cooperation, among other issues. A couple of highlights from the deals: Beijing agreed to resume imports of US pork products (which were banned in reaction to the outbreak of the ‘swine flu’ virus earlier this year) and end its requirement that most of the materials used in Chinese wind power projects be produced domestically. In return, Washington vowed to eliminate some restrictions on imports of Chinese chicken. Officials from both countries pledged not to impose new trade protectionist measures against each other’s exports.

Notwithstanding the warm feelings emanating from the lakeside conference centre in Hangzhou, officials in Washington and Beijing continued to spar over trade last week.

Chinese Commerce Minister Chen Deming confirmed on 29 October, the second day of the JCCT meeting, that Beijing is planning to launch an unfair-pricing investigation into imports of cars made by the ‘big three’ US automakers - Chrysler, Ford and General Motors. The announcement follows through on a threat Beijing issued in September, immediately after President Obama authorised the imposition of 35 percent tariffs on Chinese tyre imports (see Bridges Weekly, 16 September 2009, http://ictsd.net/i/news/bridgesweekly/55281/).

A Chinese commerce official - speaking to the government-owned China Daily newspaper on condition of anonymity - suggested that the newly announced anti-dumping investigation is more of a political gesture than anything else.

“Launching the investigation on such an occasion, during the two countries’ trade negotiations and before the US president’s visit, is undoubtedly a kind of pressure tactic by our government, which is hoping that the US will not frequently investigate other trade matters in the future,” the official said.

Government officials back in Washington were staying busy as well. Just one day after the JTTC meeting closed, the US’ International Trade Commission (ITC) - an independent federal agency that rules on trade complaints - announced its conclusion that US producers are threatened by some imports of Chinese seamless steel pipes “that are allegedly subsidised and sold in the United States at less than fair value.” The determination launches an investigation that could result in the imposition of retaliatory tariffs.

Also last week, the US Commerce Department imposed preliminary duties on imports of steel grating and steel wire strand on the grounds that the products receive unfairly high levels of support from Beijing.

But US Trade Representative Ron Kirk played down the significance of such disputes in an address to JCCT, saying that the two sides would not “allow any single issue to detract from our broader overall relationship,” The Associated Press reported.

China and the United States are each other’s second-biggest trading partners, after the EU for China and Canada for the US. Bilateral trade in 2008 totalled more than US$ 330 billion dollars, up from a mere US$ 2.5 billion in 1979.

ICTSD reporting; “Auto imports from US under scanner,” CHINA DAILY, 30 0ctober 2009; “Friction over auto exports in US-China trade talks,” THE ASSOCIATED PRESS, 29 October 2009.

The restrictions cover inputs for the steel, chemical, and aluminium industries, including yellow phosphorous, bauxite, coke, fluorspar, magnesium, manganese, silicon metal, silicon carbide and zinc. China is the world’s principal source for some of those materials.

After months, if not years, of complaining that China’s quotas, export taxes, and minimum export prices violated its international legal commitments and created an unfair advantage for local industry, the US and the EU took the first step towards launching a WTO dispute in June, when they formally requested consultations on the matter with Beijing (see BRIDGES Weekly, 24 June 2009, http://ictsd.net/i/news/bridgesweekly/49477/).  Mexico followed suit in August.

The consultations failed to resolve the matter, leading to the requests for a panel on 4 November.

“China’s restrictions on raw materials continue to distort competition and increase global prices, making conditions for our companies even more difficult in this economic climate,” said EU Trade Commissioner Catherine Ashton. “I regret that the formal consultation process and significant EU engagement on this issue has not led to an amicable solution which would have been our preferred course of action.”

Debbie Mesloh, a spokesperson for the US trade representative’s office, expressed similar sentiments, claiming that China’s measures “provide preferential conditions for Chinese industries that use these raw materials.” She stressed that Washington “remain[ed] open to working with China to find a mutually agreeable solution to our concerns.”

Specifically, Brussels is targeting Beijing’s export duties of varying levels on bauxite, coke, fluorspar, magnesium, manganese, silicon, and zinc. It is also challenging the legality of various rules for companies seeking to export raw materials. To take three examples: exporters are required to pay fees and meet minimum export prices, domestic companies are subject to different criteria from foreign-invested enterprises, and the right to export is contingent on having done so previously.  The US’ case is substantively identical.

WTO rules prohibit export quotas, except temporarily under certain circumstances. But they place few limits on the use of export taxes, so long as they apply equally for all export markets (GATT Article XI). However, when China joined the global trade body in December 2001, it promised to do away with “all taxes and charges applied to exports” on all but 84 products (defined at the 8-digit HS level). According to the US and the EU, the products they are targeting are not among those 84 exceptions, which are outlined in China’s accession agreements. The far-reaching commitments countries make when they join the WTO are enforceable under the global trade body’s dispute settlement system.

The US trade representative’s office also noted on Wednesday that other WTO rules specify that trade-related regulations must be administered in a non-discriminatory manner (GATT Article X), and that associated fees - distinct from export tariffs - should simply offset the cost of services rendered (GATT Article VIII).

At time of writing, Chinese officials could not be contacted to respond to the panel requests. In June, however, the Chinese commerce ministry defended the export restrictions, saying that they were WTO-compliant and necessary to protect China’s environment and natural resources.

The WTO Dispute Settlement Body is scheduled to consider the panel requests on 19 November.

ICTSD reporting.

The country’s newly prominent role on the world stage was the topic of much discussion and debate among a group of experts who gathered for a conference in Geneva earlier this week.

Discussions at the ‘Bridges China Dialogue’, held on 26 and 27 October in Geneva ran the gamut from climate change and eco-tourism to investment and currency valuation to protectionism and the WTO’s Doha Round of world trade talks. The meeting brought together a mix of government officials, academics, and private sector leaders, who debated and delved into technical discussions at the two-day meeting. WTO Director-General Pascal Lamy gave the keynote address on Monday afternoon.

(The conference was sponsored in part by the International Centre for Trade and Sustainable Development (ICTSD), a Geneva-based independent global think tank and the publisher of Bridges Weekly.)

Economic growth

The Chinese economy, now the fourth-biggest in the world (after the EU, the US and Japan), is expected to grow by 8 percent this year. Meanwhile, the economy of the United States continued to shrink through the second quarter of this year, although some early estimates suggest it may have begun growing in the third quarter, which ended at the end of last month. Economists predict that

Chinese exports will register a year-on-year drop of between 16 and 20 percent for 2009, said Yutai Zhang, the head of China’s Development Research Centre. But overseas shipments will bounce back in 2010, he added, noting that current models predict an uptick of between 8 and 10 percent for next year. China recently surpassed the United States to become the world’s second-largest exporter, after Germany. Some early estimates predict that the Asian Giant may even outpace Germany in exports of goods and services after the final numbers for 2009 are tallied; at the mid-year mark, the two countries were nearly equal, according to figures from the WTO.

A renewed demand for Chinese goods is already being felt in some manufacturing regions of China, Zhang told the meeting. Factories in some parts of the country are even struggling to recruit enough workers, especially skilled workers, to respond to the volume of new orders, Zhang said.

But China is importing too, and Chinese demand for goods from abroad is having significant impacts on other regions of the world, experts at the meeting said. Booming demand from within China is driving growth in African economies, said Martyn Davies, the executive director of the Centre for Chinese Studies at South Africa’s Stellenbosch University. Africa provides roughly a quarter of all of China’s foreign energy supplies, he said, noting that the Afro-Sino trade relationship was bolstered by African leaders’ strong political support for Chinese investment. The economies of all African countries - except South Africa, the continent’s richest nation - will grow this year, thanks in part to demand from the Chinese, Davies said.

In Africa and beyond, China is looking to boost its cross-border commerce with the world’s poorest nations. One fifth of all goods exported by least developed countries end up in China, said Chinese WTO ambassador Sun Zhenyu. That trade relationship should continue to grow as Beijing expands duty-free and quota-free access to goods from LDCs, Sun added.

Pressure to further open Chinese economy

A Monday afternoon session witnessed a mild confrontation between the Chinese and European ambassadors to the WTO.

European ambassador Eckart Guth kicked off the session on global economic governance with a charge that Chinese policies have driven away European investors. Beijing does not do enough to protect intellectual property rights, Guth argued, adding that the country has erected unfair barriers to foreign investment and that its government procurement policies wrongly discriminate against foreign firms.

But China’s ambassador Sun countered that European and other foreign investors do not seem to have been scared away, noting that the country attracted US$ 90 billion in overseas investment last year.  China was required to take drastic, and sometimes painful, measures to open its economy before it joined the WTO in 2001, Sun noted, adding that the international community should not forget how far the country has already come. China is getting there, he said, and in the meantime other countries should be patient.

But such a shift in attitude among Beijing’s major trading partners seems far from imminent. China is now the most popular target of other countries’ retaliatory trade measures, such as anti-dumping duties and safeguard measures, noted Simon Evenett, the co-founder of the website Global Trade Alert, which tracks protectionist policies that governments have implemented amid the ongoing economic downturn. That trend is likely to continue, Evenett added, even as the global economy gets back on its feet.

More information

The Global Trade Alert website is available here: http://www.globaltradealert.org/

A publication of the full proceedings of the meeting will be available on the Bridges China website in November.

ICTSD reporting.

Reuters reports that the proposed deal would phase out import tariffs on goods such as wind turbines, renewables, and green technologies - excluding environmentally friendly hybrid cars - in the 30 OECD countries and China. There is no word on how this would affect trade with countries that are not a part of the deal.

Reuters quotes an unnamed EU diplomat as describing the talks to be at an advanced stage. “Brussels and Washington hope this could be one of the incentives needed to get China on board in the lead up to the Copenhagen climate change talks,” the diplomat said.

Doha frustrating efforts on EGS

Many key businesses involved in environmental goods and services (EGS) say they are frustrated by the slow pace of Doha Round negotiations at the WTO. Several US companies have called on US President Barack Obama to pursue alternatives to help boost EGS trade.

And while the current deal suggests Washington is doing exactly that, the office of the US Trade Representative says that it remains committed to the Round. “We remain eager to move ahead with negotiations to eliminate tariff barriers on climate-friendly technologies and spur momentum on a larger WTO Doha package on environmental goods and services,” said USTR spokeswoman Carol Guthrie.

Paragraph 31 (iii) of the Doha Ministerial Declaration calls for a reduction, or as appropriate, elimination of tariff and non-tariff barriers (NTBs) on EGS. However, because the mandate does not define environmental goods or indicate the pace, depth or sequencing of liberalisation vis-à-vis ‘other’ goods and services, WTO members are deadlocked over what environmental goods to liberalise.

Informal consultations and meetings of delegations have continued under the guidance Philippine Ambassador Manuel Teehankee. The next phase of work will therefore involve a more substantive examination of the different sectors or categories identified in earlier discussions, namely air pollution control, renewable energy, waste management and environmental technology, among others.

China in position to profit from deal

Chinese manufacturing of the machinery needed to create renewable energy surged in recent years. The country is poised to become the world’s largest producer of wind turbines this year and the its skyrocketing production of solar panels has triggered competition concerns among manufacturers in the West (see Bridges Trade BioRes, 18 September 2009, http://ictsd.net/i/news/biores/55441/).

China has been under immense pressure from developed countries to engage meaningfully at the fifteenth Conference of the Parties of the UN Framework Convention on Climate Change, scheduled to kick off on 7 December. The US and Europe maintain that as the world’s largest polluter China should commit to significant carbon dioxide (CO2) emissions cuts as a part of a new climate change deal.

For its part, China - and other developing countries - says the advanced state of global warming is the product of industrialisation in the West. As such, Beijing is requesting billions of dollars from developed countries to assist its adaptation to greener technologies.

The deal now being negotiated is thought to be an incentive to China, whose export-oriented economy could benefit greatly from slashed duties in strategic countries. “This deal would save Chinese exporters billions of euros and dollars and could form a large part of the overall package offered to Beijing to cut emissions,” another unnamed diplomat told Reuters.

EU trade ministers approved the negotiations earlier this month. Sources told Reuters that an update on the duty discussions was released to member states on 6 October. If approved, officials say formal discussions between the OECD and China could move forward before the start of the Copenhagen conference.

While negotiations will be convened among WTO representatives, the deal would be external to the WTO process.

China is the only developing country now involved in the negotiations. However, there are reports that India and Brazil - also key countries in the climate change talks - have been contacted by Brussels and Washington as well, but observers say they are unlikely to participate.

ICTSD Reporting; “EU, U.S. Eye Green Goods Tax Pact In Climate Fight,” REUTERS, 29 September 2009.

“China has appealed to the WTO over the publication ruling,” said a spokesman for the Ministry of Commerce in Beijing, Bloomberg reported.

In August, a panel of WTO judges ruled against Beijing’s requirement that copyrighted publications and audiovisual products be imported and sold domestically through state-approved or state-owned distributors (see Bridges Weekly, 9 September 2009, http://ictsd.net/i/news/bridgesweekly/54713/).

The WTO’s Appellate Body - the organisation’s highest court - will now consider China’s request. The seven-member body has the power to uphold, modify or reverse the findings of the lower panel.

Trade tensions between the US and China have intensified in recent weeks, as the two countries have sparred over trade in tyres, chicken and autos. Last week, Beijing initiated a separate WTO dispute with Washington over the 35 percent tariffs on imports of Chinese tyres that US President Barack Obama announced earlier this month (see Bridges Weekly, 16 September 2009, http://ictsd.net/i/news/bridgesweekly/55281/).  The duties are scheduled to take effect on Saturday.

ICTSD reporting; “China appeals WTO ruling on book, film imports that backed US,” BLOOMBERG, 22 September 2009.