Washington, Tokyo and Brussels call for more restrictions on industrial subsidies

At the headquarters of the World Trade Organization in Geneva, Switzerland, in December 2019. Denis Balibouse / REUTERS

The United States resumes, at least temporarily, the path of multilateral concertation to reform the rules of world trade. With Japan and the European Union (EU), they signed, Tuesday, January 14, in Washington, a joint declaration calling for the strengthening of the regulations of the World Trade Organization (WTO) in the area of ​​industrial subsidies, aimed at China, without naming it.

Signatories want to ban new state aid who "Result in trade distortions in certain jurisdictions" and are outside of current WTO rules. They target in particular those who benefit "Distressed or insolvent companies that do not have a credible restructuring plan" or who are "Unable to obtain long-term financing or investment from independent commercial sources" in overcapacity sectors.

Tokyo, Washington and Brussels also want to review the dispute resolution system. They propose that WTO members declare themselves the subsidies granted, under penalty of stiffer sanctions, and that the term"Public body" be redefined, following a decision by WTO arbitrators to exclude Crown corporations. In China, the contours of private enterprise – some groups sometimes have Communist Party members on their boards of directors – are particularly blurred.

Remedies "unsuitable" and "too late"

The statement also points out that technology transfer “Loyal, voluntary and based on market principles can be beneficial for growth and development”. A barely veiled criticism of the forced technology transfers demanded by Beijing for foreign companies wanting to set up in the country.

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In October 2019, the American think tank Peterson Institute for International Economics ruled that appeals within the WTO are today "Maladjusted" and "Too late", against subsidies resulting in trade distortions. It is particularly difficult to prove its existence in "Opaque economies like China".

Under these conditions, the WTO is ineffective. The latest remedies have failed to resolve disputes in the aluminum, solar panels or steel sectors. In 2017, the United States imposed anti-dumping duties on 90% of its Chinese imports in these sectors accused of benefiting from illegal subsidies, before extending them to other third countries. According to a report by the Organization for Economic Co-operation and Development, published in 2019, four of the five biggest recipients of subsidies in the aluminum sector are Chinese companies.

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