U.S. Promises a `Reckoning' If China Doesn't Change Trade Policy

(Bloomberg) -- The Trump Administration admonished China Wednesday for failing to abide by World Trade Organization rules and threatened to double down on its unilateral approach to punishing Beijing’s alleged trade abuses.

The U.S. is mulling actions “outside the WTO” to curb China’s trade abuses, Deputy U.S. Trade Representative Dennis Shea told a meeting of trade officials at the WTO’s triennial review of China’s trade policies in Geneva. “This reckoning can no longer be put off.”

The American critique comes a day after the U.S. laid out plans to impose tariffs on an additional $200 billion in Chinese goods, escalating the trade war between the world’s two largest economies. Beijing described the latest U.S. move as “totally unacceptable” and vowed to fight back.

“We find no indication that China has been prepared to make the fundamental changes that would be necessary to bring its trade and investment regime into alignment with the regimes of other WTO members,” Shea said, according to a copy of his prepared remarks.

World Growth

On Tuesday, the U.S. Trade Representative launched a process under Section 301 of the Trade Act of 1974 to respond to “China’s harmful industrial policies” with 10 percent tariffs on $200 billion worth of Chinese goods.

Shea’s comments heightened fears that the Trump administration will escalate its trade conflict with China in a way that sidelines the WTO and reverses the tide of global economic growth. A full-blown global trade war would shave 0.4 percentage point off world growth, according to Bloomberg Economics.

The WTO doesn’t “offer all of the tools necessary to remedy this situation” and there is “no clear path toward the negotiation of new rules” to address China’s trade abuses, Shea said. “The best solution is for China finally to take the initiative to fully and effectively embrace open, market-oriented policies.”

The European Union, Japan and others are expected to join the U.S. critique of China’s trade policy measures at the WTO meeting on Wednesday.

The Chinese Ministry of Commerce said it would consider further countermeasures against the U.S. and pledged to file WTO dispute proceedings to challenge the Trump administration’s “unilateralist behavior.”

Shea’s comments deviate sharply from the conclusions of a recent Chinese government white paper that said China has “comprehensively fulfilled” its WTO commitments and “substantially opened its market to the world.”

“China has used the imprimatur of WTO membership to become one of the WTO’s largest traders, while largely retaining its state-led, mercantilist approach to trade and investment, to the detriment of the United States,” Shea said.

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