On February 15, 2022, the Office of the U.S. Trade Representative (USTR) released its annual 2021 Report To Congress on China’s WTO Compliance. Upon the release of the report, USTR Katherine Tai said:  “China has not moved to embrace the market-oriented principles on which the WTO and its rules are based … [but] has instead retained and expanded its state-led, non-market approach to the economy and trade. It is clear that in pursuing that approach, China’s policies and practices challenge the premise of the WTO’s rules and cause serious harm to workers and businesses around the world, particularly in industries targeted by China’s industrial plans.”

After 20 years of WTO membership, the report notes, “China still embraces a state-led, non-market approach to the economy and trade, despite other 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 has continued its poor record of WTO compliance and observing the fundamental principles upon which WTO agreements are based – non-discrimination, openness, reciprocity, fairness and transparency.  The report states, “Too often, China flouts the rules to achieve industrial policy objectives. In addition, and of more serious concern to the United States and other WTO members, China has not made sufficient progress in transitioning toward a market economy.”

A section of the report focuses on the effectiveness of the various strategies that have been pursued over the years to address the unique problems China poses and concludes that, despite both bilateral dialogues and WTO enforcement measures, “[o]ver time, … commitments from China became more difficult to secure.”  Even when China did change specific practices, the report notes that underlying policies did not change and meaningful reforms were elusive, and since China is the largest trader among WTO members, “the harm caused by these problems is significantly magnified.”  As a result, the USTR indicates there is a  “critical need for new and more effective strategies – including taking actions outside the WTO where necessary” – to address problems with China.  Accordingly, the report states that the United States is “pursuing a multi-faceted strategic approach that accounts for the current realities in the U.S.-China trade relationship and the many challenges that China poses for the United States and other trading partners, both now and likely in the future.”

The final section of the report details certain problematic Chinese policies and practices, such as non-tariff measures, state-owned and state-invested enterprises, intellectual property rights and infringement, industrial subsidies, excess capacity, agriculture domestic support, food safety laws, services sector issues (such as banking, telecommunications and insurance), and concerns over China’s transparency obligations under the WTO.

In raising these concerns and discussing China’s poor WTO compliance, the USTR nevertheless acknowledges that “we cannot build a wall between the United States and China and assume that it will address the problems posed by China. That would ignore China’s importance to, and integration in, the world economy and would only change the mode of its impact on the United States, but not the ultimate result. We therefore must work to strengthen our economy, our supply chains, our infrastructure, our workers, our farmers and our businesses and to lay a solid foundation for us to continue to innovate and maintain our technological edge.”

To compare recent past USTR annual reports, please see the Updates of January 19, 2021,  March 10, 2020 and February 6, 2019.