How the WTO failed to enforce WTO-rules on China – Harry Broadman

 

Harry Broadman

China entry into the World Trade Organization (WTO) was twenty years ago seen as a success for the global trade, but then the WTO was unable to enforce its rules onto its new member, says Harry Broadman, chief of staff of the US President’s council of economic advisers (1990-1991) and US assistant trade representative (1991-1993) in an interview with Politico. What are the options to deal with China in international trade?

Politico:

U.S. companies should have stepped up to call out unfair Chinese trading practices, but most did not out of fear of potential state reprisals, Broadman said.

“A lot of U.S. firms would come to us and they would complain about Chinese [imports] and say that we had to put in place safeguards, but they’d always add, ‘Don’t tell the Chinese that we came to you and told you this!’” said Broadman, now at the Berkeley Research Group. “They knew that if we started punishing the Chinese in a particular sector, they were going to know that it was Company X and Company Y [that complained].”

But he cautioned against perceptions that China’s WTO entry has been a universally one-sided losing proposition for U.S. businesses that invested in China and established operations there.

“You can see that the firms who are there today were largely the firms who have been there for the last 20 years and they wouldn’t be there if they were not making money,” Broadman said.

There are growing calls for the U.S. to demand meaningful accountability for China within the WTO system or to pursue fairer trade terms outside of it.

“We’re now at a point where Beijing is clearly in broad violation of its 2001 accession agreement,” Broadman said, proposing three options that China should be given: renegotiate its WTO membership terms, be shown the WTO “exit door,” or immediately execute its promised reforms.

Practically, however, the WTO may be incapable of bringing China’s unfair trading practices to heel because all 164 member nations — including China itself — need to accede to any new agreements.

More at Politico.

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China did not comply with the WTO agreement – Harry Broadman

 

Harry Broadman

China did not comply with the conditions it signed up for when it entered the World Trade Organization (WTO), says former White House advisor Harry Broadman at the NACD Northern California Chapter in a discussion about American business in China. And while US president Joe Biden has taken on China bilaterally, it needs collective action to change the country’s attitude to trade, he adds.

Harry Broadman is a speaker at the China Speakers Bureau. Do you need him at your (online) meeting or conference? Do get in touch or fill in our speakers’ request form.

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How will Biden treat China? – Harry Broadman

 

Harry Broadman

The new US president Biden will be treating China in a multi-lateral fashion, not bilateral, like Donald Trump who saw trade basically as a real-estate transaction, says former White House trade negotiator Harry Broadman to BNN Bloomberg. China has ignored its trade obligations since admission into the World Trade Organization in 2001, he says, and Broadman does not expect another line now Trump has shaken that international boat.

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The US should not have taken on China alone - Harry Broadman

Harry Broadman

By trying to take on China alone on trade, the US failed to achieve real results in its first trade deal, says trade-veteran Harry Broadman to Bloomberg. China did not adhere to the multilateral trade deal it closed by joining the WTO, but Donald Trump failed to address the issues related to that. 

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The threat of decoupling the economies of China and the US - Harry Broadman

Harry Broadman

The US administration is trying to decouple its economy from China's. And while there might be some arguments in favor of that position, the treat of decoupling for the world economy is huge, says international trade expert Harry Broadman in Forbes (here in pdf-format). Down the line, the US and global economies will be worse off, he warns.

Harry Broadman:

There are two putative goals of the current US administration for proactive policy “decoupling” between the U.S. and China. The first is to reorient U.S. firms’ supply chains away from China to U.S. sources, which would have the effect of helping to achieve President Trump’s principal trade policy goal with China: elimination of the bilateral U.S.-China merchandise trade deficit. The second is to prevent China’s further progress in the global race for superiority in innovation and market dominance in advanced technology products and services. 

It is not up for debate that China has both engaged in trade policies that are not WTO-compliant ever since its accession to the WTO in 2001 as well as in the piracy of intellectual property and technology decades before it joined the WTO and still does. Yet, not only will the U.S. goal of forced bilateral decoupling between the two largest economies fail in a marketplace whose structure is now inherently globalized, but the policy tools being waged by the U.S., combined with its go-it-alone approach to try to contain and isolate China both economically and technologically, will not induce the changes Washington seeks from Beijing. 

Indeed, there is an appreciable risk that the outcomes produced by the U.S. strategy of proactive decoupling will serve to only make the U.S. worse off and jeopardize global economic growth. There are far more effective ways to deal with China's conduct and to generate outcomes that will more greatly benefit both the U.S. population and the world community... 

What to do? Let's tell it like it is: China is knowingly in broad violation of the legal WTO commitments it signed in 2001. 

The world community has a fundamental choice before it. If the globe’s second largest economy cannot live up to its WTO commitments, then let’s all be grownups and take collective action and agree that China shall either fundamentally renegotiate its WTO membership or be removed from that system. The result? Beijing will then not get preferential tariff and other favorable treatments that come with WTO accession. 

This is not a pejorative view of China—by any means. Like every nation, the Chinese have the absolute full right to have whatever type of economy they wish. But no country can have its cake and eat it too. Fundamentally, this is a values statement: the goals of Xi Jinping and the Chinese Communist Party, which he leads, are not those shared by the U.S. and many other nations. 

If on the other hand, we want to close our eyes about China staying in the WTO, then the only other choice is to terminate the WTO all together since it has zero credibility. However, here is where things become dismal. The Trump administration is itself operating outside the WTO. Indeed, the current occupant of the Oval Office seemingly would quite welcome the demise of the WTO. 

Without question, that is an outcome the overwhelming number of the world of nations will deeply regret. As a result, one should be hopeful this would have little chance of occurring. 

The question then is: Who will step up to the plate and spur the collective action the world so deeply needs now?

Much more in Forbes. (here in pdf-format)

Harry Broadman is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch or fill in our speakers' request form.

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What if rare earths enter the trade war - Arthur Kroeber

Arthur Kroeber

China has been checking its weaponry for the ongoing trade war and stopping the export of rare earths has been one of them. But China will have to be very selective in using this weapon, otherwise it might hurt itself more than the US, says economist Arthur Kroeber, according to CBS.

CBS:

If China does clamp down, they are likely to be selective in which elements to target because the country wants to be seen as playing by World Trade Organization rules, said Arthur Kroeber, head of research at Gavekal Economics and editor-in-chief of China Economic Quarterly, on a call with clients this week. China's goal is to paint the U.S. as a "lawless actor" that disrupts economic growth, he said. 

"I really think that they have a problem [in] that none of the options are very good and all of them involve very significant costs to China," Kroeber said. "So if they're going to do any of them they have to do them extremely carefully, and I think quite selectively."

More at CBS.

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Why the WTO has to rethink China's position - Harry Broadman

Harry Broadman

China's accession into the World Trade Organization (WTO) was hailed as an important step of the now second-largest economy into the global trade community. But those illusions are over, says trade expert Harry Broadman to Gulfnews. "China has forfeited its right to be treated as a WTO market economy."

Harry Broadman:

At its roots, China isn’t a market-based economy. It’s separation of business and government remains ephemeral; private property rights are still fuzzy, and rarely protected; identification of the beneficial owner(s) and who has ultimate control over decisions within some of the country’s key enterprises is opaque. The large state-owned banks hold little check, if any, over the large backbone state-owned enterprises to whom they lend and often never pay off debts owed.

Communist Party officials occupy some of the most senior positions in the enterprise and financial sectors, including most recently naming the country’s top banking regulator as the party chief and deputy governor of the Central Bank; and foreign investors must transfer technology to Chinese firms if they wish to invest in the country.

At the same time, Trump’s insistence on handling China in a US go-it-alone manner is just plain wrong-headed. We know from his many statements that anything but negotiating on a bilateral basis is anathema to him — a man whose career was built on doing one-off real estate deals in New York. But international trade negotiations are far more nuanced and complex.

Rather than using the “power of collective action” and building a coalition of other major trading powers — many of whom like the US have been exposed to China conducting trade inconsistent with prevailing international norms — Trump’s efforts will have him falling flat on his face.

What’s needed is a fundamental alteration of the treatment of China within the WTO framework — that is, if the WTO is to have any further meaning and survive. It’s finally time to call a spade a spade.

And, it’s also high time for the US to change its trade tactics towards Beijing. It needs to form a coalition of WTO members who make it clear that it really is Beijing’s choice to decide the type of economy it believes China’s population wants.

But that as of now, China has forfeited its right to be treated as a WTO market economy and it has three options: renegotiate its WTO Accession; gracefully exit the WTO; or diplomatically be shown the WTO door.

More at Gulfnews.

Harry Broadman is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch or fill in our speakers' request form.

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Trump's trade policies good for the year 1818 - Harry Broadman

Harry Broadman

US president Donald Trump's bilateral approach for solving trade issues would have worked in 1818, not in 2018, writes China veteran Harry Broadman in the Gulf News. The US do have serious trade problems with China, but the US would be better off if Trump would be able to create more alliances.

Harry Broadman:

US President Donald Trump sees international trade negotiations as if he was living in 1818 when commerce between countries more often than not was conducted bilaterally. He’s proclaimed on several occasions that he can get a far better bargain taking up trade agreements with other heads of state on a one-to-one basis. 

Indeed, the US Negotiator-in-Chief is “Bilateral Man”, hardly surprising for someone who cut his teeth doing one-off commercial real estate deals within the confines of New York City. 

But this is 2018, and trade consummated even between two countries generally is comprised of multiple intermediate transactions mediated across several national borders. 

Hence, that is why the bedrock rules governing trade agreements today — embodied in the World Trade Organisation (WTO), the successor organisation to the General Agreement on Trade and Tariffs (GATT), which was founded in 1947 — are multilateral in nature and negotiated among sovereign, not business, entities. 

It would appear that the modern — and yes, complex — system of trade agreements is far outside of Trump’s comfort zone, perhaps even his understanding. 

As indicated by his handling of the trade problems between the US and China — which are indeed serious and haven’t been dealt with sufficiently by earlier administrations — his anathema towards building coalitions among the 162 other countries that are WTO members to improve governance of international trade exposes all of us to significant risks.

More in the Gulf News.

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