The United States has notified the World Trade Organization of seven Chinese companies that it says should have been flagged as state trading enterprises under the WTO rules, according to a WTO filing dated Nov. 29 and published on Wednesday. The United States has long complained that Beijing is keeping the world in the dark about potentially unfair trading by state-backed firms, which it suspects can get a leg-up over their competitors because of their government connections. In 2014, Washington lost patience and submitted a “counter notification” on China’s behalf, listing 153 Chinese enterprises that it thought Beijing should declare to the WTO.
The latest list is a second instalment, including the energy and chemicals firms China National Offshore Oil Corporation, Sinochem Group and China International Petroleum and Chemicals Co., Ltd. The other names on the new U.S. list are China Tobacco International Inc, China National Agricultural Means of Production Group Co., Chinatex Corporation and Xinjiang Yin Long International Agriculture Cooperation Co., Ltd.
U.S. Trade Representative Robert Lighthizer wants to toughen up on transparency at the WTO and has proposed that countries that fail to meet their notification obligations should be punished by losing certain administrative rights. “It is impossible to negotiate new rules when many of the current ones are not being followed,” Lighthizer told the WTO ministerial conference in Buenos Aires on Monday.
“This is why the United States is leading a discussion on the need to correct the sad performance of many members in notifications and transparency. Some members are intentionally circumventing these obligations, and addressing these lapses will remain a top U.S. priority.” China’s mission to the WTO in Geneva did not immediately respond to a request for comment.
The drive for transparency has been a theme in U.S.-China trade relations ever since China joined the WTO in 2001, and Washington’s calls for China to sharpen up are echoed in Tokyo and Brussels. The European Union and the United States have both told the WTO that they oppose granting China “market economy” status, a designation that would force them to take Chinese prices at face value when assessing potentially unfair trading. They argue that the pervasive role of the state in the Chinese economy means that prices are deeply distorted.
China argues that under the terms of its WTO accession, it should have been automatically granted market economy status a year ago. But David Malpass, U.S. Treasury undersecretary for international affairs, said on Nov. 30 that state involvement in China’s economy was actually increasing. “State-owned enterprises have not faced hard budget constraints and China’s industrial policy has become more and more problematic for foreign firms. Huge exports credits are flowing in non-economic ways that distort markets,” he said.