At WTO, China's trade policy sparks war of words amid a darkening geopolitical outlook

China's trade policy drew castigation in Geneva this week as its economic rivals found fault with a lack of transparency in its state subsidies and in the impact of industrial overcapacity in the Chinese economy.

After the World Trade Organization itself pointed to the opaque nature of China's state support measures in a lengthy report, a two-day session at the body saw more than 70 of its members take the floor and Beijing fielding over 1,500 written questions.

Li Fei, China's vice-minister for commerce, led a delegation of more than 40 officials travelling from the Chinese capital, delivering an opening statement that pledged commitment to open trade and liberalisation.

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"China is a fertile ground for foreign companies to take root and thrive," Li said.

"China strives to foster a world-class, market-oriented, law-based and internationalised business environment. Multinational companies are upbeat about investing in China."

On Friday, Han Yong, director general of WTO affairs at China's commerce ministry, refuted claims of the distortionary impacts of excess capacity in the country's manufacturing sector.

In addition, Han flatly denied allegations of economic coercion made, mostly, by Western members, according to sources present.

"It is disappointing but perhaps not surprising that China's response to this criticism is one of denial," said the assistant US trade representative for China, Terry McCartin, in response.

"That is, China denies the existence of excess capacity and overproduction and instead it points the finger at others," McCartin added.

Sources described the exchanges as "frank and open" and conducted by and large in "constructive" fashion.

But the barbs laid bare schisms in the global trading system that will doubtless persist amid a darkening geopolitical outlook.

Britain, the European Union, India, Japan and Taiwan were among those joining the United States in demanding that China make significant changes to its economic model, a Geneva trade source said.

India said it was "concerned by the size of the deficit" with China, which "persisted year after year". Delhi also complained about "non-transparent subsidies", which "injure local industry".

Britain's ambassador to the WTO, Simon Manley, "recognised and welcomed China's leadership here at the WTO", but criticised its domestic policies.

"We ask China to undertake further reforms to show members that it is committed to transparency and to regulating the provision of subsidies," Manley said.

Ukraine's representative said Russia's invasion was "the main obstacle" in its trade ties with China, saying the Beijing had undermined "trade in all sectors and threatens trade routes".

Friendlier nations to Beijing such as Brazil, which has also taken measures to combat what it sees as subsidised Chinese imports, couched critique in less direct fashion.

"Brazil celebrates 50 years of diplomatic relations with China, marked by strategic partnerships in the WTO, Brics and G20," its representative said. "Despite global challenges, their bilateral relations remain mature and stable."

"Brazil also encourages China to provide more detailed information on its industrial and agricultural support programmes to the WTO," they added.

In contrast, some Global South members were more fulsome in their praise of Beijing.

Chad, representing African nations, "commended China's commitment to the multilateral trading system and its efforts in creating favourable conditions for development and international trade dynamics".

And Laos, representing the Association of Southeast Asian Nations, praised China's "strengthened connectivity and cooperation" while calling for an enhancement of the Asean-China free-trade area.

Meanwhile, in Brussels this week, EU member states broadly threw their support behind provisional tariffs recently imposed on Chinese-made electric vehicles.

Just four of the bloc's 27 members - Hungary, Cyprus, Malta and Slovakia - opposed the duties of up to 38.1 per cent in a non-binding vote. Germany and Sweden, both vocal critics of the investigation, abstained from the vote.

The logic in those capitals was that visibly opposing the tariffs would leave the European Commission weaker in negotiations with Beijing around ending the dispute.

Under this reasoning, such opposition would also send a signal to a potential second-term Donald Trump presidency that Brussels could be pushed around.

Those who voted for tariffs were France, Italy, the Netherlands, Spain, Belgium, Bulgaria, Denmark, Latvia, Lithuania and Poland.

A day after China hawk Ursula von der Leyen secured a second term at the helm of the commission, the EU opened another front in its percolating trade war with Beijing.

Provisional anti-dumping duties of up to 36.4 per cent will be applied to Chinese biodiesel imports from mid-August.

Earlier in the week, the EU imposed anti-dumping duties of up to 235.6 per cent on Chinese exports of erythritol, a zero-calorie sweetener mostly used as a sugar substitute in food and drinks.

Matters are unlikely to improve for Beijing with the re-election of von der Leyen by the European Parliament on Thursday. The chamber unveiled details of key policymaking committees on Friday, with key bodies stuffed with lawmakers critical of China.

Beijing-sanctioned members Raphael Glucksmann and Miriam Lexmann will sit on the trade committee, with French MEP Glucksmann also on the foreign-affairs panel. All committee chairs will be announced next week.

This article originally appeared on the South China Morning Post (SCMP).

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