EU Trade Commissioner Phil Hogan, US Trade Representative Robert Lighthizer and Japanese Trade Minister Hiroshi Kajiyama agreed on Tuesday 14 January in Washington on concrete elements to tackle the crisis in the multilateral trading system and to rebalance their trade with China.
In 2017, the EU, the United States and Japan began talks on the basis of the finding that the World Trade Organisation (WTO) was not equipped to fight against abuses of the Chinese economic model.
On Tuesday, in a rare moment of harmony, these trade talks led, for the first time, to concrete proposals (see EUROPE 12169/18, 12104/12).
Broaden the scope of prohibited subsidies. The parties suggest, at this stage, to refine and complement WTO rules (Agreement on Subsidies and Countervailing Measures, or 'ASCM ') as to the types of subsidies that should always be prohibited.
This would include: - any subsidy via unlimited guarantees to companies; - subsidies to an insolvent or ailing enterprise in the absence of a credible restructuring plan; - subsidies to enterprises unable to get long-term financing or investment from independent commercial sources in sectors or industries with overcapacity; - certain direct forgiveness of debt (Article 3.1 of the ASCM).
Reversal of the burden of proof. Another avenue advocated by the three jurisdictions is the reversal of the burden of proof in trade defence investigations for the most harmful subsidies. This would place the onus on China and any other 'donors' to demonstrate that their subsidies do not adversely affect trade and to notify the WTO. This principle has already been applied by the EU in recent years, albeit to a lesser extent.
Notifications, capacity, dumping margins... The notification of subsidies to the WTO should be systematised, with any non-notified subsidy to be considered de facto prohibited.
It would also add, to the list of serious damage to the interests of a WTO Member, any case where a subsidy would also weaken the production capacity of the WTO Member (Article 6.3 of the ASCM).
A small European victory, no doubt: both the Japanese and the US support the creation of a 'benchmark' for calculating dumping margins in their investigations based on analogue countries - a mechanism already applied by the EU in its new methodology (see EUROPE 11918/17).
Forced technology transfers. The trio will also work within the WTO to establish rules on Chinese forced technology transfer practices.
Discussions will continue, the EU, Washington and Tokyo promise in their joint statement. Also on the agenda: - the need to maintain market oriented conditions in the trading system; - the modification of the taxonomy of developing countries to suspend the preferential treatment of the best performing economies; - the development of international rules on electronic commerce; - international forums such as the one on steel or semiconductors.
To read the joint statement: https://bit.ly/2QTfE1Q (Original version in French by Hermine Donceel)