China’s systematic “innovation mercantilism” is a threat not only to the world’s major economies—particularly to the European Union, Japan, and the United States—but also to the very soul of the global trading system. Yet while China has imposed its corrosive and harmful economic and trade policies on the world unilaterally, it would be impossible for any other nation, acting on its own, to mount an effective response. China has proved that it is undeterred by the threat of economic nationalism, even on the part of the United States, just as it is unphased by transactional deals and ad hoc trade disputes with the European Union and Japan at the World Trade Organization (WTO). In fact, the last few years have seen China doubling down rather than reforming as it continues its quest for global dominance across a wide array of advanced industries that, once lost in an affected nation or region, are virtually impossible to resurrect.


The last few years have seen a seismic shift in views toward China’s mercantilism in the United States, the European Union, and Japan. This is most clear in issues around nonreciprocal market access, predatory state-funded and state-directed foreign investment, forced technology transfers, and theft of trade secrets. To its credit, the Trump administration has taken the lead in highlighting China’s harmful policies, and tried to use mainly bilateral leverage in getting China to change its approach.

It's mentioned that China is forcing technology transfer, but according to the TRIMS agreement developing countries are allowed to ask for technology transfer from developed countries in exchange for paying for IP owned by developed countries, so how is it trade mercantilism is China abides by TRIMS and even the TRIMS+ agreement? Another thing is that every country practice theft of trade secrets. It has been determined that France was the biggest theft of German technologies. https://www.france24.com/en/20110104-france-industrial-espionage-economy-germany-russia-china-business

The Enabling Clause is the WTO legal basis for the Generalized System of Preferences (GSP). Under the GSP, developed countries offer non-reciprocal preferential treatment (such as zero or low duties on imports) to products originating in developing countries.

Under the GSP, developing countries such as China can enjoy non-reciprocal preferential treatment. https://www.wto.org/english/tratop_e/devel_e/dev_special_differential_provisions_e.htm

As for predatory state-funded and state-directed foreign investment, China does own state-funded companies, but how does one determine if it's predatory or not? The United States often give tax subsidies to local companies or bail them out, so is there any legal basis in all of this, and why didn't the WTO do anything about China if it were true as the U.S. alleges?

Does the U.S. accursation of “innovation mercantilism” by China have any legal basis?


1 Answer 1



Assessments of China’s compliance with WTO rules also are rife with misjudgement. The Trump administration’s trade officials often repeated the claim that China has actively evaded its WTO obligations much more frequently than other member countries. Because China is not bound by the organisation’s rules, the argument goes, the US must use tactics outside the WTO system, such as import tariffs, to address Chinese transgressions. The WTO, according to this view, is useless or worse.

In fact, China’s WTO compliance record, while imperfect, is broadly comparable to that of other member countries. The WTO system has been generally effective in ensuring that China remains as open as it promised to be when it joined in 2001.

So it seems like those claims are articulated by some U.S. NGOs and the Trump administration, but it seems like arguably the U.S. is a worse offender. China seems to respect most of its obligations under the WTO and while it doesn't have a perfect record, other countries seem to not have as much of a problem than Western aligned countries.

WTO data on trade disputes — in particular, the number of legal complaints brought by other member countries against China — provides some objective support for this conclusion. Since 2001, there have been 47 complaints lodged against China, accounting for 12.2 per cent of all WTO dispute cases during that time. Over the same period, there were more than twice as many complaints against the US, accounting for 28.4 per cent of the total. In other words, other WTO members regard China as only half as likely as the US to have violated its obligations under the organisation’s rules.

China also has a reasonable record of complying and modifying its policies when a WTO dispute panel rules against it. One indication of non-compliance is when the original complainants must file a second WTO case against a country on the same or a similar issue. Out of the 47 cases against China, only two required a second filing. By the same measure, the US appears to have ignored 15 rulings against it.

The data therefore do not support the notion that China is an off-the-chart violator of its WTO commitments and unchecked by the body’s processes. China’s trade policies and practices often are challenged at the WTO, but not more frequently than those of some other large economies. And the country’s record of complying with WTO rulings is not that of a rogue outlier.

  • The vast majority of disputes at the WTO are not about intellectual property, so this another case of whataboutism as an "answer". The US has higher wages, so it's entirely plausible it's more likely to use protectionist measures like tariffs, so to have more cases brought against it. The fact that most of the cases against the US were brought by the EU is another aspect.
    – Fizz
    Sep 18 at 0:05
  • "The overwhelming majority of the cases the U.S. lost involved its use of trade remedies. If any aspect of the WTO was overtly worker un-friendly, it was these lost cases. They resulted in the removal of relief for workers and industries that exhaustive domestic proceedings had shown definitively were due to import-related injury." piie.com/commentary/speeches-papers/…
    – Fizz
    Sep 18 at 0:42
  • "From a U.S. perspective, in recent years the effectiveness of trade remedies has been further impaired by the Appellate Body's difficulty in finding subsidies in China where state-owned enterprises were involved." Which why the US decided (in Obama's time) to start sabotaging/blocking the Appellate Body appointments. That much is undisputed. That PIIE writeup also claim that "No argument is to be found in Brussels against this last point." I'm skeptical the latter bit is quite like that since the EU did collaborate with China on an alternate appeals process.
    – Fizz
    Sep 18 at 0:46

Not the answer you're looking for? Browse other questions tagged .