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The facts and China's position on China-US trade friction

China Daily | Updated: 2018-09-26 08:00

2. The discussion of fair trade should not be detached from the principle of mutual benefit of the WTO

In recent years, the US has turned away from "free trade" to advocating so-called "fair trade", to which it has added new meanings. Unlike previous administrations, the incumbent administration emphasizes a "fair trade" that is not based on international rules but "America first", or the protection of America's own interests. The core is so-called "reciprocal" opening, an idea of absolute equality, believing that all countries should apply identical tariff levels and provide identical market access in all sectors in their dealings with the US. In the eyes of the US government, the lack of reciprocity in market opening in other markets puts the US in an unfair position, and leads to bilateral trade imbalances. Such a concept of reciprocity is inconsistent with the reciprocal and mutually advantageous principle of the WTO.

The principle of reciprocity of the WTO takes into consideration different development stages by granting special and differential and more favorable treatment to developing members. This arrangement aims to attract new developing members, increase the WTO's representation and enhance the inclusiveness of the multilateral system, while respecting the right to develop of developing countries and regions. It enshrines the principle of mutual benefit in exchanging present favors for future opening. Developing members that are in the initial stage of development need appropriate protection for their industries to promote sound growth, which will provide more opportunities for developed countries in time. This differential and more favorable treatment is in the long-term interests of all countries and regions, including developed members, and this is genuine global fairness. In 2001, China joined the WTO as a developing member and has been treated as such. It still remains a developing country even after more than a decade of rapid economic development. China's large population of 1.39 billion dilutes massive economic figures to low levels on a per capita basis. According to IMF statistics, in 2017 the per capita GDP of China was US$8,643, only 14.5% of that of the US, and ranking 71st in the world. By the end of 2017 there were still 30.46 million rural people living in poverty. It is unfair to demand absolute equality in tariffs between China and the US simply on the grounds of China's economic aggregate and trade volume. The absolute equality approach also violates the MFN and non-discrimination principles of the WTO.

So-called Reciprocal Opening is not in Line with the Non-Discrimination Principle of the WTO

In the WTO, the reciprocal and mutually advantageous principle (including most-favored nation treatment and national treatment) and the non-discrimination principle are closely linked. The preambles of the Marrakesh Agreement Establishing the World Trade Organization and GATT 1994 mention "reciprocal and mutually advantageous arrangements directed to the substantial reduction of tariffs and other barriers to trade and to the elimination of discriminatory treatment in international trade relations". At its heart is providing MFN treatment to all WTO members and not arbitrarily discriminating against other WTO members. But it is often prone to misunderstanding or abuse, incompatible with the MFN treatment on many occasions and prone to become an excuse for discriminatory treatment. On February 12th, 2018, the US announced for the first time that it was considering reciprocal tariffs on certain products coming into the US, the same as those imposed by the counterpart on the import of the same products from the US. By insisting on absolute equality in treatment regarding a certain product, this idea of reciprocity distorts the mutual benefit principle. The WTO-defined "reciprocal" and the so-called "reciprocal" of the US have different meanings. If reciprocal tariffs were to be implemented on a large scale, it would lead to different tariffs for different countries, deviating from the MFN treatment. And if reciprocal tariffs are imposed on a small number of countries with high tariff rates, it would be tantamount to the US withholding MFN treatment towards these countries.

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