U.S. business groups expressed frustration on Wednesday with what they said are China's efforts to tilt the economic playing field in favor of domestic companies, adding that World Trade Organization rules are insufficient to police all of Beijing's trade practices.
U.S. companies face increasing threats from Chinese investment rules, industrial policies, subsidies to state-owned enterprises, excess manufacturing capacity, cybersecurity regulations and forced technology transfers, the groups told a public hearing held by the U.S. Trade Representative's office.
The session will influence an annual report on China's WTO compliance by the U.S. Trade Representative's office as well as a USTR investigation into China's intellectual property practices that could lead to imposition of trade sanctions by President Donald Trump.
China has woven a 'tapestry'
Josh Kallmer, senior vice president of global policy at the Information Technology Industry Council, said China had woven a “tapestry” of rules and policies that places foreign companies at a disadvantage and incentivizes the transfer of technology.
“It just in general puts a thumb on the competitive scale in a way that significantly and profoundly affects U.S.-based and foreign companies,” said Kallmer, who was representing a coalition of technology groups from semiconductors to software.
The concerns are not new. They were highlighted in the USTR's last report to Congress on China's WTO compliance issued on Jan, 1, 2017, and raised in subsequent meetings by Trump administration officials.
USTR Assistant Secretary Edward Gresser told the hearing that there was a growing recognition that WTO rules did not cover all of China's practices viewed as unfair. The United States and other WTO members needed “to find effective ways to address those Chinese government practices that may violate the spirit of the WTO that nevertheless may not fall squarely within the WTO disciplines,” he said.
For investors, China less attractive
Jeremie Waterman, the U.S. Chamber of Commerce’s vice president for Greater China, said China’s restrictive investment regime and other industrial policies requiring technology transfers in recent years have made China a less attractive place to invest for foreign firms, and not all of these policies can be changed with full WTO compliance.
This has been made worse by China’s “Made in China 2025” plan, which aims to supplant foreign products and technologies with domestic ones and new cybersecurity regulations that put foreign information technology products at a disadvantage, Waterman said.
“The ballast has become less stable in recent years” in the U.S.-China economic relationship, he added.