Tai Presses for WTO Reforms To Target China

The Biden administration is launching a public opinion offensive to push for World Trade Organization reforms that favor the United States, with taking aim at China being a key objective. United States Trade Representative Katherine Tai delivered a speech at an American think tank on Sept. 22, calling for reform of the WTO.

Unlike the Trump administration, which withdrew from — or threatened to withdraw from — international organizations with which it was dissatisfied, one of the Biden administration’s strategies for competing with China has been to make use of multilateral mechanisms to unite allies and partners, promoting the formulation of rules in favor of the U.S. and demanding that members on all sides comply with them. The Biden administration’s recent pushes for reform of the WTO and World Bank can be seen as part of this effort.

On the one hand, it has reiterated its commitment to support the WTO; on the other, it is demanding that the WTO be reformed. That is the call President Joe Biden’s national security adviser made in April this year, in a Brookings Institution speech on the “New Washington Consensus,” and Biden himself emphasized the same thing in his address to the United Nations General Assembly a few days ago. On Sept. 22, at the American think tank the Center for Strategic and International Studies, and in the presence of WTO Director-General Ngozi Okonjo-Iweala, Tai delivered her keynote address, in which she put forward U.S. demands for WTO reform.

The U.S. believes that the WTO must adapt to help address pressing global challenges, including climate change and non-market economic policies, she said.

Both objectives — and the “non-market economic policies” in particular — related to China. In her speech at the think tank, Tai did not mention China by name, but it was heavily implied, and interviews she gave to the U.S. media beforehand clearly indicated that the target was indeed China.

In her CSIS speech, Tai put forward what the U.S. considers to be three major priorities for WTO reform: improving transparency, rebuilding the ability to negotiate new rules, and reforming the dispute settlement mechanism.

“Things like industrial targeting or discriminatory interventionist activities of state-owned enterprises,” she asserted. “This is how certain members are continuing to skew the playing field strategically and systematically. They seek to dominate key industrial sectors, promote national champions, and discriminate against foreign competitors, massively subsidize key sectors, and manipulate cost structures. And as they become dominant suppliers for many important goods and technologies, they create supply chain concentrations and vulnerabilities which in turn become levers for economic coercion.”

We all know who is on the receiving end of Tai’s accusations, but some observers point out that, in the process of restructuring the supply chain, the U.S. is doing the very same thing. This includes the CHIPS and Science Act and the Inflation Reduction Act, both of which have already been officially launched and implemented, and both of which smell strongly of direct government intervention. The CHIPS and Science Act even openly provides $52.7 billion in subsidies to the chip manufacturing industry — in urgent need of development in the U.S. — and has been accused of violating WTO regulations.

The U.S. Department of Commerce finally completed regulations on Sept. 22, directly stipulating that companies in receipt of CHIPS and Science Act subsidies would not be allowed to expand their chip manufacturing and research and development facilities in China, Russia and other countries for 10 years. Meanwhile, U.S. Secretary of Commerce Gina Raimondo, who had been “troubled” by Huawei’s release of its new handsets, recently told members of the U.S. Congress that “We have to be absolutely vigilant that not a penny of this helps China to get ahead of us.”

Directly singling out China’s status as a developing country, Tai argued in her CSIS speech that “We cannot have economic and manufacturing powerhouses gaming the system by claiming the same development status and flexibilities intended for less-advantaged members.”

Responding to the question of whether China should be treated as a developing country, Okonjo-Iweala said it was “really odd” and problematic that WTO members should be able to “classify themselves the way they want,” but that the problem with China’s developing-country status was not so much the label itself, as whether China would use that label to enjoy the “special and differential treatment” extended to developing members. On that point, the WTO is negotiating with China on a case-by-case basis as situations unfold, with China agreeing not to take advantage of developing-member treatment with regard to the fisheries agreement, for example. In the future, it is hoped that other agreements will also be dealt with through negotiation.

Under pressure from Tai, the WTO’s first female and first African director-general, attempted to defend the organization’s performance. Like other multilateral international organizations, she argued, the WTO was “a dynamic, interesting organization that has problems,” and that “reform is going on.”

Stressing the importance of trade for the well-being of people around the world and calling for “reglobalization,” Okonjo-Iweala said that, all-in-all, trade had brought great benefits to Americans, and that the U.S. was the developed economy that has profited the most from globalized trade. According to studies, between 1995 and 2011 the U.S. lost more than 2 million manufacturing jobs as a result of importing goods from China but gained 6.6 million jobs — many of which were in the high-end services industry — as a result of increased exports resulting from trade with China.