USTR Highlights Chinese Trade Barriers in Wake of JCCT Progress
The U.S. and China are making progress on a number of trade and investment fronts, but the Obama administration is still concerned with inadequate improvements and sometimes worsening trade barriers both systematically and across a wide range of sectors, the Office of U.S. Trade Representative said in a report on China’s World Trade Organization compliance (here). Since the Joint Commission on Commerce and Trade met in mid-December, administration officials have mostly praised U.S.-Chinese cooperation on improvements to trade relations (see 1412300012).
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But Chinese officials need to do more to open up the Chinese market for U.S. express delivery and logistics services, speed up approval processes, administer accurate tariff-rate quotas, among other areas of needed improvement, said USTR.
China is fulfilling its WTO commitment to allow subsidiaries of foreign-owned, express delivery servicers to operate in the Chinese market, but continues to put U.S. market share at risk through a number of restrictions, said the report. “For the past three years, the United States has worked intensively with China to alleviate problems that foreign companies have encountered when trying to obtain permits under a new permitting system that [Chinese regulator SPB] imposed for all suppliers of domestic express package delivery services in China,” said USTR. While SPB "has moved forward with the issuance of more permits, it has done so on a slower pace than had been agreed. The United States has been pressing SPB to quickly review and approve any new permits that U.S. companies request, and it will continue to do so for as long as is needed.”
A number of new delivery service regulations, including those in the country’s new Postal Law, also burden foreign companies with unreasonable and “intrusive” requirements for services, labor and packaging. USTR said it would pressure China to dismantle those onerous regulations.
The Chinese government also imposes burdensome and discriminatory regulations on foreign logistics operations, such as freight forwarding, said USTR. “Over the years, the Ministry of Transport has been slow to approve applications by foreign companies seeking to supply road transport and related logistics services and has been unwilling to issue nationwide trucking licenses, which has limited the ability of foreign companies to build economies of scale,” said USTR. “Local regulatory authorities often target their enforcement efforts at foreign companies, while permitting local companies to operate freely.” Chinese officials continue to prop up local logistics services, and U.S. companies criticize opaque implementation of regulations.
Chinese export subsidies may also be violating World Trade Organization rules, said the report. China has not yet submitted a report to the WTO on export subsidies for large portions of the countries, despite joining the body more than 13 years ago. Without the disclosure, U.S. officials aren’t able to determine the level of agricultural subsidies in the country, said USTR.
On top of its subsidy policy, the Chinese government is hampering foreign exports through a range of barriers, including quotas, licensing, duties and price targeting in raw materials sectors, where the country is among the leaders in production, said USTR. “Through these export restraints, it appears that China is able to provide substantial economic advantages to a wide range of downstream producers in China at the expense of foreign downstream producers, while creating pressure on foreign downstream producers to move their operations, technologies and jobs to China,” said the report. The Chinese delegation at the WTO agreed to remove export restraints on rare earth materials, tungsten and molybdenum, after the U.S. won a WTO dispute over those restraints earlier in 2014 (see 14081215).
No real changes have been made in a decade to Chinese inspection-related requirements, as well, said USTR. Foreign traders say the Chinese government occasionally slows down and even suspends the process to issue Quarantine Inspection Permits, the report said, adding that the government doesn’t give advanced notice to traders when it plans to slow down or suspect QIP issuance. “Because of the commercial necessity to contract for commodity shipments when prices are low, combined with the inherent delays in having QIPs issued, many cargoes of products such as soybeans, meat and poultry arrive in Chinese ports without QIPs, resulting in delays in discharge and additional demurrage bills for Chinese purchasers,” said USTR. “Traders report that shipment quantities are often closely scrutinized and are at risk for disapproval if considered too large.”
Chinese biotechnology approval processes are also insufficient and damaging to trade, while sanitary and phytosanitary measures are unscientific and opaque, the report says.
China has brought its agricultural tariffs down to levels it committed to when joining the WTO, but Chinese officials often don’t allow imports to fill the Chinese tariff-rate quota system for bulk agricultural commodities, said USTR. “U.S. fertilizer exports to China have declined sharply since China acceded to the WTO, as separate Chinese government policies promoting domestic fertilizer … appear to have made it difficult for foreign producers to compete in China’s market,” said USTR.