Occasion for fine-tuning trade deals

Chinese, US trade policies up for review at WTO

Asjadul Kibria | Published: July 20, 2018 21:24:14 | Updated: July 25, 2018 21:54:35

The global trade regime is going through a turbulent time. US President Donald Trump  has started a trade war by imposing higher tariffs on a slew of Chinese products. China has also retaliated. The US has threatened to impose higher tariffs on the import some other Chinese products.

China and the US, as well as some other European countries have already taken the tariff disputes to the World Trade Organisation (WTO) and filed complaints with the Dispute Settlement Body (DBS) of the world trade body. They have argued that different tariff measures taken against them are inconsistent  with the principles and provisions of a number of agreements of the WTO.

While trade war threatens the world, China faced the biennial trade policy review at the WTO on July 11-13 and the US will face the review in December. [Table 1]

Reviewing the national trade policies of the member countries is a core work of the WTO under its Trade Policy Review Mechanism (TPRM). A review body is responsible for conducting the review. The body comprises all the members of the organisation. WTO secretariat is responsible for prepare a country report while the member country has to submit an official policy statement to facilitate the review process.  Selected members get opportunities to make comments and raise questions in the review meeting. All the members are also allowed to submit written questions before the formal review meeting take place. 

In fact, trade TPRM provides an opportunity to other countries to deeply understand the trade-related policies and practices of any member country. These include tariff and non-tariff measures, customs procedures, international trade agreements, import restrictions, export incentives, trade finance and some other tools. The review also gives the trading partners a good scope to place their queries on any trade or economic issue. Furthermore, the process is an occasion for the member countries, particularly the developing and the least developed countries (LDCs), to evaluate their own trade policies.

China has faced the seventh review of its trade policy at the multilateral trade body last week, and the USA will face its 10th in December. This will also be the first multilateral review of the US trade policy since Donald Trump has assumed the country's presidency.

The WTO secretariat and the Chinese government have prepared two independent reports on the trade policies and practices of China. Member countries placed about 2,000 questions and queries on Chinese trade practices.

In the review meeting, representative of the Chinese government briefly described the various contributions China has made to the WTO since joining the organisation in December 2001. He also expressed concern about the US measures to contain import from China by applying trade-restrictive measures, higher tariffs, to be precise.

The US envoy in WTO, on the other hand, listed a number of trade-distorting practices of China. He also alleged that China did not respond to the US concern. He argued that market-distorting subsidies and other types of state supports in China were hampering the competitiveness of China and other countries. He also blamed China for lax enforcement of intellectual property rights, forced technology transfers and cyber theft. Last but not least, he criticised the WTO for its failure to take remedial measures against the trade-distorting practices of China.

RELEVANCE FOR BANGLADESH: Review of trade policies of China and the USA at the WTO forum has great significance for Bangladesh.

China is the leading trade partner of Bangladesh (Table-2). Bilateral trade with China crossed $10 billion level in FY16 with balance heavily tilted to China. The country is also the largest import source of Bangladesh.  Import from China crossed $10 billion level in FY17 (The full data for the past fiscal year is yet to be available).

Country's merchandise export to China, however, dropped after eight years in the past fiscal year. The decline was sharp, around 27 per cent. Export Promotion Bureau (EPB) data showed that export to China stood at $694.96 million in FY18 which was $949.41 million in FY17. Export of Bangladeshi products to China last declined in FY09 when it was dropped to $97.06 million from $106.95 million in FY08. Since then, export to China increased annually until past year when it declined again. The sharp decline is a matter of concern as China provides tariff-free market access for 60 per cent of its products to the LDCs including Bangladesh.

China implemented the market access facility in 2010 and Bangladeshi export experienced a huge jump in FY11 to $319.60 million from $180.0 million in FY10. While the annual export to China was approaching $1.0 billion level, the big drop in past year is a setback. The reason is still not clear and it is important to take a deep look into the matter.

Bangladesh didn't put any question or query on China during its trade policy review in the last week. But the reports and discussions in the process are helpful to readjust the country's trade strategy with China.

Again, bilateral trade with the US crossed $ 7.0 billion level in FY16 (Table-2) with trade balance comfortably tilted to Bangladesh. Nevertheless, export to the US has been declining for the last three years. It was $6.22 billion in FY16 which dropped to $5.98 billion in FY17 and further declined to $ 5.84 billion in FY18. The decline in export to the largest destination for Bangladeshi products is also a matter of concern where the country is also facing 15.20 per cent tariff on average.

Bangladesh is eligible for duty-free quota-free market access to the US, at least for 97 per cent of the products as per the Hong Kong Ministerial Declaration of the WTO. But the US administration has been continuously denying the legitimate market access to Bangladesh. Rather Obama administration suspended the Generalised System of Preference (GSP) benefit in 2013. Though GSP eligible products were only one per cent of Bangladesh export, the suspension gave a wrong message to the other trading partners. After a series of efforts, Bangladesh government finally decided not to renegotiate the GSP with the US.

But it is still not clear what will be the revised trade strategy for Bangladesh to access US market. Trump administration has asked all the trading partners to negotiate everything bilaterally. For Bangladesh, it is quite difficult due to very comprehensive and complex nature of the US bilateral trade relation structure.

When the US trade policy will face the review at the WTO in December, there will be an opportunity for all its trading partners, including Bangladesh, to put their questions to the US regarding its trade practices.


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