Promises:
Easy to make.
And for Chinese leaders,
even easier to break.
Here are 5 Trade Promises China Has Broken.
Welcome back to China Uncensored.
I’m Chris Chappell.
We all know there’s a trade war between China and the US.
But we didn’t start the fire.
It was always burning
since the World Trade Organization let China join.
That was back in 2001.
And it came after certain US officials
had lobbied for years to let China into the WTO club.
“I strongly support China’s admission into the World Trade Organization.
The World Trade Organization—or WTO for short—
is an international group created in 1995
to help governments negotiate trade deals.
The idea was to make international trade as free, and easy,
and non-violent as possible.
Unlike the tragic Molasses War of 1882.
That was a sticky situation.
Anyway, US corporations had been lobbying President Clinton
to help China join the WTO,
because they were confident that if only they could
get access to the China market,
they would make so much money!
I mean, er, help bring, um, democracy to China.
Yeah, that’s the reason!
“The more we bring China into the world,
the more the world will bring freedom to China.”
That worked out well...for the Chinese regime.
Entering the WTO in 2001
gave China access to other countries’ markets,
and spurred China’s super-fast economic growth.
But there was supposed to be a catch to joining the WTO.
China had to agree to the rules outlined in this 103-page document
called “Accession of the People’s Republic of China”.
Also known as “The Protocol.”
Well that sounds totally normal and not weird at all.
Fast forward 18 years, and the world
has been doing a lot of trade with China,
but the Chinese regime has still not complied
with quite a number of their Protocol commitments.
Which is a nice way of saying, they’ve been cheating.
So in today’s episode,
we’ll focus on 5 trade promises that China made—
and broke.
Broken Promise Number 5:
Ending Price Controls
When China joined the WTO,
they promised to end price controls.
That is, to “allow prices for traded goods and services
in every sector to be determined by market forces.”
But guess what?
In a 2018 report to congress on China’s WTO compliance,
the United States Trade representative said China’s
“government and the Party continue to control
or otherwise influence the prices of key factors of production.”
Yeah, they’re not ending price controls.
There are a number of products and services
currently subject to government-set prices—
including pharmaceuticals, tobacco,
natural gas and telecommunications services.
Which means foreign companies
find it hard to compete in those industries,
plus a lot of related industries.
For example, price controls on fuel
mean that energy is cheaper in China,
which makes it cheaper to manufacture a lot of products.
All these things add up to mean that goods
are cheaper to make in China
than in other developing countries
where wages are also low.
Broken Promise Number 4:
Ending Subsidies
The Chinese regime props up a lot of industries
through grants and loans from state-owned banks.
And in some cases,
local governments also offer land rights at super low prices,
to make it cheaper for certain industries to get started.
And—like price controls—
these subsidies have enabled a lot of Chinese companies
to sell products at below market rates.
“Pervasive involvement of the Chinese government
has resulted in numerous subsidies
being provided to Chinese companies
leading to artificially low-priced manufactured goods,”
say the authors of a study called
China’s Long Road to Market Economy Status.
Of course, the Chinese regime
has promised to remove these state subsidies.
But the US Trade representative has identified
“hundreds of prohibited subsidies
in a wide range of manufacturing sectors.”
“These subsidies contribute to the serious excess capacity problems
that plague industries like steel, aluminum,
solar panels and fishing
and devastate global markets and foreign competitors.”
Why do you think your made-in-China solar panels are so cheap?
On top of that, China promised to disclose its subsidies,
but has reneged on that promise too,
by hiding the subsidies being provided on a local level.
“China continues to shield
massive sub-central government subsidies
from the scrutiny of WTO members.”
I get it.
If you’re going to give out illegal subsidies,
you really should try to cover your tracks.
Which leads us to...
Broken Promise Number 3:
Transparency
The Chinese Communist Party has never been
particularly good about being transparent.
I mean, just Google “China cover up”
and you’ll see what I mean.
And when it comes to trade,
“China disregards many of its WTO transparency obligations,
which places its trading partners at a disadvantage
and often serves as a cloak for China to conceal
unfair trade policies and practices from scrutiny.”
For example, China promised to make available
to its WTO trading partners
all trade-related laws and regulations
before they’re implemented or enforced.
They don’t do that.
China also promised to provide translations
of all of its trade-related laws into English,
French or Spanish.
They don’t do that, either.
In fact, the Chinese government never even set up
an agency or program to undertake these translations,
which, again,
are a basic requirement for being part of the WTO.
But I get it.
Lotta laws, lotsa hassle,
all that translation and notification ahead of time.
Maybe you just have to request them, right?
Nope.
“Not only does China have a poor record
of adhering to its notification obligations,”
says the US Trade Representative,
“but it also fails to cooperate when other members
make requests for information.”
China’s regulatory system is so opaque, in fact,
that foreign companies and governments
can’t fully understand legal requirements
in some areas of the Chinese economy.
This obviously puts foreign companies at a huge disadvantage.
It means they can be accused of breaking laws
they didn’t know existed
and had almost no way of finding out about
because Chinese officials basically kept them opaque.
But even if foreign companies did have a full understanding
of China’s laws and regulations,
that still might not be of much use.
And that’s because of...
Broken Promise Number 2:
A Fair and Impartial Justice System
Before entering the WTO,
China committed to broad legal reforms that included transparency,
equal treatment under the law,
and a fair judicial review process.
If these reforms were implemented,
they would strengthen the rule of law and make it easier
for foreign companies to do business in China.
But, surprise!
That hasn’t happened.
A study done for a U.S. industry association
anonymously interviewed companies doing business in China.
Off the record, these companies reported time and again
that officials took advantage of China’s utter lack
of any type of foreign investment approval process
to block foreign investment.
Or officials force the foreign company
to take on a Chinese joint venture partner,
or to extract valuable commercial secrets
as a price for market entry.
The extent of the problem is likely underreported, the study says,
because companies are scared to speak out publicly.
That’s because foreign companies have received
“explicit or implicit threats from Chinese government officials –
typically made orally rather than in writing –
about possible retaliatory actions
that could have severe repercussions
for a company’s business prospects in China.”
The US Trade representative says this kind of situation in China
is “able to persist in part because of
the absence of the rule of law in China,
which fosters the use of vague and unwritten policies.”
And finally...
Broken Promise Number 1:
Protecting Intellectual Property
Remember the 103-page Protocol?
In it, China promised to stop forcing foreign companies
to hand over their valuable, sometimes sensitive technology.
After a seven-month investigation
into China’s unfair trade practices,
the US Trade Representative last year
issued a long list of hair-raising accusations.
They include forced technology transfer,
state sponsored cyber-theft,
and industrial espionage.
Which makes China’s failure to protect U.S. intellectual property
from theft by Chinese companies seem almost insignificant.
The report found that “Chinese theft of American IP
currently costs between $225 billion
and $600 billion annually.”
And that is probably a low-ball estimate.
But besides the money,
there’s also the security risk posed by China
using the advanced technology it steals
to gain a military advantage.
Like those J-20 fighter jets that look just a little too familiar.
So what should the US do with this basket
of China’s broken trade promises?
Well, if you ask president Trump, it’s tariffs.
“China has been taken advantage of the United States
for many, many years.
I'm not just talking about during the Obama administration.
You can go back long before that.”
Not to name names here,
but we’ve been taken advantage of long before Obama...
To balance out the Chinese regime’s decades of cheating,
Trump put tariffs on Chinese imports.
But then the Chinese regime hit back
by putting their own tariffs on US goods.
Then the US added more tariffs,
and China added more,
and then there was going to be a trade deal
but it fell through, and now there’s a trade war.
So what’s going to happen now?
“You want to know something?
You want to know something?
We always win.”
Or...the Chinese Communist Party
could just honor its trade promises,
and then we’d all win.
But I won’t hold my breath.
So what do you think about
all the trade promises China has broken?
Leave your comments below.
Once again, I’m Chris Chappell.
See you next time.