The U.S. Trade Representative (USTR) is required by law to report annually to Congress on compliance by the People’s Republic of China (China) and the Russian Federation (Russia) with commitments made in connection with their accession to the World Trade Organization (WTO), including both multilateral commitments and any bilateral commitments made to the United States. In releasing the reports on February 5, 2019, the USTR stated, “China and Russia present unique and serious challenges for members of the WTO and the multilateral trading system, largely because of their failure to embrace the pursuit of open, market-oriented policies.” China became a member of the WTO in 2001 – see 2018 China WTO Compliance Report; Russia joined the WTO in 2012 – see 2018 Russia WTO Compliance Report.
China Report – In Part 1 of the report that provides an assessment of China’s WTO membership, the USTR states that China’s compliance with WTO rules is “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.” The report notes China’s failure to adhere to multiple bilateral and multilateral commitments, including commitments to refrain from forcible technology transfers; open its electronic payment services market; and review applications of agricultural biotechnology products in a timely and science-based manner. The report also notes China’s continuing use of export and import substitution subsidies in sectors as diverse as automobiles, textiles, advanced materials, medical products and agriculture, despite explicit prohibitions in the WTO Agreement. It highlights that China repeatedly deploys illegal export restraints, such as export quotas, export licensing, minimum export prices, export duties and other restrictions, to “provide substantial cost advantages to a wide range of downstream producers in China at the expense of foreign producers, while creating pressure on foreign producers to move their operations, technologies and jobs to China.” In the report, the USTR finds that “[a]ny review of China’s trade regime also shows that China’s regulatory system is so opaque that it is often difficult for U.S. companies – or even the U.S. government – to fully understand China’s legal requirements in a particular area of the economy. This problem is exacerbated by China’s extremely poor record of adhering to its transparency obligations as a WTO member.” Part 2 of the report provides a detailed analysis of China’s trade regime from a WTO perspective, including identifying and explaining China’s policies and practices that disadvantage or harm U.S. companies.
Russia Report – This report states that “the United States and others welcomed Russia into the WTO’s rules-based system with the hope of expanding the benefits of open and freely competitive markets. The reality has been disappointing.” It notes that U.S. trade with Russia has fluctuated since Russia’s WTO admission in 2012, and criticizes the continued promulgation of Russia’s protectionist measures and disregard of general WTO principles. While the report indicates that Russia has implemented its scheduled tariff reductions and lifted its transit ban on poultry products, importing into the country remains “a difficult task.” Non-tariff trade barriers remain an issue of concern, and Russia continues to have “a less than transparent customs legal regime” and other “arbitrary behind-the-border measures and other discriminatory practices to exclude U.S. exports.” While Russia strengthened its intellectual property rights (IPR) regime as part of its WTO accession, the report indicates that “reliable and effective implementation of those rules has stalled.” Overall, the USTR concludes that “[d]espite 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. But, 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.”