US, EU and Japan to join forces on Chinese trade practices and excess industrial capacity, source reveals

The US has sided with the EU in arguing that the World Trade Organisation should not grant China market economy status

PUBLISHED : Tuesday, 12 December, 2017, 1:01pm
UPDATED : Tuesday, 12 December, 2017, 11:08pm

The United States, European Union and Japan are expected to announce a joint effort on Tuesday aimed at confronting China over its excess industrial capacity and other trade practices, a source close to the discussions said.

Trade officials from the two countries and the EU would make a joint statement on the sidelines of the World Trade Organisation ministerial meeting in Buenos Aires, aligning to address the overcapacity issue, the person said on condition of anonymity because talks on the issue were continuing.

It was unclear whether China would be specifically named in the statement.

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Washington, Brussels and Tokyo have raised complaints about China’s subsidies to state-owned enterprises, state financing and investment rules that often force foreign firms to transfer strategic technologies. They argue that such distortions have fuelled rampant overcapacity in some industries such as steel and aluminium, which are flooding global markets and forcing lay-offs elsewhere.

The US has sided with the EU in arguing that the WTO should not grant China market economy status, a move that would severely weaken Western trade defences.

On Monday, Japanese Trade and Economy Minister Hiroshige Seko voiced support for efforts to strengthen WTO transparency and reporting standards – a US initiative largely aimed at exposing illegal Chinese subsidies.

“Free trade only works when we secure fair conditions for competition,” Seko said. “Fair market conditions must not be negatively affected by measures such as market-distorting subsidies, forced technology transfer, infringement of intellectual property rights and unfair trade practices by state-owned enterprises.”

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US Trade Representative Robert Lighthizer said some members were “intentionally circumventing” their obligations and seeking unfair concessions through litigation, causing the WTO to lose its trade negotiation focus.

The Financial Times reported that the joint statement would also target China’s intellectual property practices, including requirements where firms have to turn technology over to local joint-venture partners.

The United States is investigating Chinese intellectual property practices, which could lead to unilateral trade retaliation under a US trade law that predates the WTO’s creation in 1995. The administration is also considering broad import restrictions on steel and aluminium on national security grounds under a cold war-era trade law.

EU member countries including Germany have threatened retaliation against any US steel tariffs and have urged Washington against such unilateral actions.