Recently, the U.S. Trade Representative (USTR) issued its annual reports to Congress assessing how the People’s Republic of China (China) and the Russian Federation (Russia) have been complying with their World Trade Organization (WTO) accession agreements, including both their multilateral commitments and bilateral commitments with the United States.  China became a member of the WTO in 2001 (see 2019 China WTO Compliance Report); and Russia joined the WTO in 2012 (see 2019 Russia WTO Compliance Report).

China Report

As with recent reports, the USTR in its 2019 report continues to rate China’s compliance with WTO rules as “poor” and highlights the country’s “continued embrace of a state-led, mercantilist approach to the economy and trade, despite WTO members’ expectations – and China’s own representations – that China would transform its economy and pursue the open, market-oriented policies endorsed by the WTO.” According to the report, China’s trade regime generates many WTO compliance concerns and WTO members too often must resort to the WTO’s dispute settlement regime to seek changes to China’s policies and practices. Despite many years of high-level dialogues and U.S. efforts to urge China to pursue market-based policies, “these efforts largely failed because the Chinese government and the Chinese Communist Party were not sufficiently committed to adopting a true market economy or taking on a more responsible role at the WTO.”  Instead, the report explains, China’s non-market economic system and industrial policies “have systematically distorted critical sectors of the global economy such as steel and aluminum, devastating markets in the United States and other industrialized countries.” As a result, “[u]ntil China transforms its approach to the economy and trade, the United States will take all appropriate actions to ensure that the costs of China’s non-market economic system are borne by China, not by the United States.” The report highlights and summarizes U.S. actions over the past three years to address China’s behavior, including domestic trade remedies, bilateral negotiations, WTO litigation, and strategic engagement with like-minded trading partners.

The report notes the signing of the “Phase One” trade agreement in January 2020 as a first step in structural reforms and other changes to China’s economic and trade regime in the areas of intellectual property, technology transfer, agriculture, financial services, and currency and foreign exchange. The report adds that the United States in “Phase Two” of trade negotiations with China will further focus on intellectual property and technology transfer concerns, as well as trade-in-services market access issues not addressed in the Phase One agreement. Other critical issues to be addressed, the report states, include “excess capacity, subsidies, state-owned enterprises, cybersecurity, data localization and cross-border data transfers, pharmaceuticals and medical devices, competition law enforcement, regulatory transparency, and standards.” The USTR hopes that China will continue to seriously address the concerns of the United States and other WTO members and “engage with us on a productive basis.”

Russia Report

This report notes that U.S. trade in goods with Russia has fluctuated since it joined the WTO in 2012.  For the first nine months of 2019, the report notes, imports from Russia were at the same level as for the same time period in 2018, and exports to Russia for the same period continued to fall. According to the report, “Russia has implemented nearly all of its final tariff bindings.” Russia has also updated its legislation on customs valuation, implemented a ceiling on trade-distorting domestic support payments, and, consistent with WTO transparency rules, notified certain measures to the relevant WTO committees. “Aside from these few positive steps, however, Russia appears to have done little to foster an open market based on WTO disciplines.” Instead, Russia has imposed tariffs ranging from 25 to 40 percent on various U.S. products in retaliation for the U.S. government’s Section 232 tariffs on steel and aluminum products. The report states that most of Russia’s trade restrictions are the result of non-tariff trade barriers, referencing once again a “cumbersome and opaque” customs and licensing regime. The USTR found that Russia continues to protect its markets through a variety of restrictive measures, technical regulations and burdensome reporting requirements. Regarding the protection and enforcement of intellectual property (IP) rights, the United States continues to question Russia’s implementation of its WTO commitments on data exclusivity and patent protection, noting that Russia’s IP enforcement efforts remain weak.  Ultimately, while the United States and other members welcomed Russia into the WTO in 2012 with hopes of expanded open and competitive markets there, the report acknowledges that “those hopes remain unrealized.” With text almost identical to last year’s report, the USTR concludes that Russia in 2019 continued to raise barriers to imports and exports and maintained policies that limit its economic growth: “Despite Russia’s continued reliance on inward-looking, protectionist economic policies, the United States will continue to press Russia to comply with its WTO commitments and pursue market-based principles. At the end of the day, Russia must decide its future and take responsibility for its actions and the impact of those actions on its citizens.”

To compare these annual reports against last year’s USTR reports, please see our Trump and Trade Update of February 6, 2019.