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1、 2 20 02 23 3 R RE EP PO OR RT T T TO O C CO ON NG GR RE ES SS S O ON N C CH HI IN NA A S S WWT TO O C CO OMMP PL LI IA AN NC CE E U UN NI IT TE ED D S ST TA AT TE ES S T TR RA AD DE E R RE EP PR RE ES SE EN NT TA AT TI IV VE E F FE EB BR RU UA AR RY Y 2 20 02 24 4 2023 REPORT TO CONGRESS ON CHINAS

2、WTO COMPLIANCE UNITED STATES TRADE REPRESENTATIVE FEBRUARY 2024 2023 USTR REPORT TO CONGRESS ON CHINAS WTO COMPLIANCE TABLE OF CONTENTS FOREWORD.1 EXECUTIVE SUMMARY.2 INTRODUCTION.8 ASSESSMENT OF CHINAS WTO MEMBERSHIP.8 Chinas WTO Accession .8 Expectations of WTO Membership .9 Chinas WTO Compliance

3、Record .10 Adoption of Market-Oriented Principles .11 Compliance with WTO Rules.14 PAST EFFORTS TO ADDRESS THE CHINA CHALLENGE.16 WTO-Focused Strategies .16 Strategies Outside the WTO .18 TODAYS CHINA CHALLENGE .19 U.S.TRADE POLICY TOWARD CHINA.23 Domestic Investment.23 Bilateral Engagement.24 Enfor

4、cement.24 Domestic Trade Tools.24 Allies and Partners.26 SPECIFIC TRADE CONCERNS .28 Industrial Plans.28 State-Owned Enterprises.30 Technology Transfer.32 Indigenous Innovation.33 Subsidization .34 Industrial Subsidies .34 Excess Capacity.35 Agricultural Domestic Support.36 Fisheries Subsidies.37 Im

5、port Policies .38 Trade Remedies.38 Tariff-Rate Quota Administration for Agricultural Commodities .39 VAT Rebates and Related Policies for Agricultural Commodities.39 2023 USTR REPORT TO CONGRESS ON CHINAS WTO COMPLIANCE TABLE OF CONTENTS Environmental Policies.39 Import Ban on Scrap Materials.39 Im

6、port Ban on Remanufactured Products.40 Labor.40 Sanitary and Phytosanitary Measures.42 Overview.42 Agricultural Biotechnology Approvals.42 Food Safety Law .43 Poultry .43 Pork .44 Beef .44 Technical Barriers to Trade.45 Standards.45 Cosmetics.46 Investment Restrictions.47 Competition Policies.48 Exp

7、ort Policies.49 Export Restraints .49 VAT Rebates and Related Policies.50 Intellectual Property Rights .51 Overview.51 Trade Secrets.51 Bad Faith Trademark Registration.53 Online Infringement.53 Counterfeit Goods.54 Pharmaceuticals and Medical Devices .55 Pharmaceuticals.55 Medical Devices.57 Servic

8、es.58 Overview.58 Banking Services .59 Securities,Asset Management and Future Services.59 Insurance Services .59 Electronic Payment Services .60 Internet-Enabled Payment Services .61 Telecommunications Services .61 Internet Regulatory Regime .61 Voice-Over-Internet Protocol Services .62 Cloud Comput

9、ing Services .62 Audio-visual and Related Services .62 Theatrical Films .63 2023 USTR REPORT TO CONGRESS ON CHINAS WTO COMPLIANCE TABLE OF CONTENTS Services(continued)Online Video and Entertainment Services .63 Legal Services .63 Express Delivery Services .64 Digital Trade and Electronic Commerce Po

10、licies .64 Data Restrictions .64 Secure and Controllable ICT Policies.64 Encryption .66 Government Procurement .66 Administrative Process .68 Administrative Licensing.68 Transparency .68 Overview.68 Publication of Trade-Related Measures .68 Notice-and-Comment Procedures .68 Translations .69 Inquiry

11、Point .69 Social Credit System .70 Other Non-Tariff Measures .72 2023 USTR REPORT TO CONGRESS ON CHINAS WTO COMPLIANCE ABBREVIATIONS ACFTU All China Federation of Trade Unions CBIRC China Banking and Insurance Regulatory Commission CED U.S.-China Comprehensive Economic Dialogue CFDA China Food and D

12、rug Administration CNIPA Chinas National Intellectual Property Administration GACC General Administration of Customs of China ISO International Organization for Standardization JCCT U.S.-China Joint Commission on Commerce and Trade MIIT Ministry of Industry and Information Technology MARA Ministry o

13、f Agriculture and Rural Affairs MOF Ministry of Finance MOFCOM Ministry of Commerce MOST Ministry of Science and Technology NBC National Biosafety Committee NDRC National Development and Reform Commission NMPA National Medical Products Administration PBOC Peoples Bank of China SAC Standardization Ad

14、ministration of China SAIC State Administration for Industry and Commerce SAMR State Administration for Market Regulation SASAC State-owned Assets Supervision and Administration Commission SAT State Administration of Taxation SCLAO State Councils Legislative Affairs Office SED U.S.-China Strategic E

15、conomic Dialogue S&ED U.S.-China Strategic and Economic Dialogue WTO World Trade Organization 2023 USTR REPORT TO CONGRESS ON CHINAS WTO COMPLIANCE 1 F FO OR RE EWWO OR RD D This is the 22nd report prepared pursuant to section 421 of the U.S.-China Relations Act of 2000(P.L.106-286),22 U.S.C.6951(th

16、e Act),which requires the United States Trade Representative(USTR)to report annually to Congress on compliance by the Peoples Republic of China(China)with commitments made in connection with its accession to the World Trade Organization(WTO),including both multilateral commitments and any bilateral

17、commitments made to the United States.The report covers calendar year 2022.It also incorporates the findings of the Overseas Compliance Program,as required by section 413(b)(2)of the Act,22 U.S.C.6943(b)(2).In preparing this report,USTR drew on its experience in overseeing the U.S.Governments monito

18、ring of Chinas WTO compliance efforts.USTR chairs the Trade Policy Staff Committee(TPSC)Subcommittee on China,an inter-agency body whose mandate is,inter alia,to assess Chinas efforts to comply with its WTO commitments.This TPSC subcommittee is composed of experts from USTR,the Departments of Agricu

19、lture,Commerce,Labor,Justice,State and Treasury,the Environmental Protection Agency,theFederal Trade Commission and the U.S.Patent and Trademark Office,among other agencies.Members of the TPSC subcommittee work closely with State Department economic officers,Foreign Commercial Service officers,Enfor

20、cement and Compliance officers and Intellectual Property Attachs from the Commerce Department,Foreign Agricultural Service officers,Customs and Border Protection attachs and Immigration and Customs Enforcement attachs at the U.S.Embassy and Consulates General in China,who are active in gathering and

21、 analyzing information,maintaining regular contacts with U.S.industries operating in China and maintaining a regular dialogue with Chinese government officials at key ministries and agencies.The TPSC subcommittee meets in order to evaluate and coordinate U.S.engagement with China in the trade contex

22、t.To aid in its preparation of this report,USTR as chair of the TPSC published a notice in the Federal Register on August 17,2023.The notice asked interested parties to submit written comments.A number of written comments were received from interested parties.These written comments are available at

23、www.regulations.gov under docket no.USTR-2023-0008.2023 USTR REPORT TO CONGRESS ON CHINAS WTO COMPLIANCE 2 E EX XE EC CU UT TI IV VE E S SU UMMMMA AR RY Y In this report,we provide an updated assessment of Chinas WTO membership.This assessment reveals the unique and very serious challenge that China

24、s state-led,non-market approach to the economy and trade continues to pose for the global trading community.While the United States and other like-minded WTO Members have pursued various WTO-focused strategies over the years to address the many problems created by China,it remains clear that new and

25、 more effective strategies including strategies that involve taking actions outside the WTO where necessary are critically needed to address those problems.When China acceded to the WTO in 2001,it voluntarily agreed to embrace the WTOs open,market-oriented approach and to embed it in Chinas economic

26、 and trading system and institutions.China also agreed to take on the obligations set forth in existing WTO rules,while also making numerous China-specific commitments.As we previously documented,and as remains true today,Chinas record of compliance with these terms has been poor.As has been previou

27、sly documented,China has a long record of violating,disregarding and evading existing WTO rules.China has also sought to frustrate WTO oversight and accountability mechanisms,such as through its poor record of adhering to its WTO transparency obligations.In addition,and more critically,after more th

28、an two decades of WTO membership,China still embraces a state-led,non-market approach to the economy and trade,despite other WTO Members expectations and Chinas own representations that China would transform its economy and pursue the open,market-oriented approach endorsed by the WTO.In fact,Chinas

29、embrace of a state-led,non-market approach to the economy and trade has increased rather than decreased over the past decade,and the mercantilism that it generates has harmed and disadvantaged U.S.companies and workers,as well as companies and workers of other WTO Members,often severely.The vast maj

30、ority of the harm that China inflicts upon other WTO Members is attributable not to Chinas periodic non-compliance with existing WTO rules,but rather to the daily impact of Chinas state-led,non-market approach to the economy and trade,which relies heavily on interventions in the market by the Chines

31、e government and,increasingly in recent years,the Chinese Communist Party(CCP or the Party).As is well-documented,the Chinese government and the CCP routinely intervene in the market using a wide array of non-market policies and practices,both to provide artificial competitive advantages to Chinese

32、industries and enterprises and to actively disadvantage foreign industries,enterprises and workers.Chinas decision to continue pursuing a state-led,non-market approach to the economy and trade after acceding to the WTO takes on significantly added importance because China is the second largest econo

33、my in the world and the largest trader among WTO Members.As a result,as time has borne out,the policies and practices that it pursues can have a tremendous impact on bilateral and global trade.As is now more than clear,Chinas approach to the economy and trade,which is characterized by a routine reli

34、ance on non-market policies and practices,undermines fair,market-oriented decisions made by foreign enterprises and distorts market outcomes in significant ways.Observers have coined various terms to describe Chinas economic system,from“state capitalism”to“China,Inc.,”and,more recently,“CCP,Inc.”Wha

35、tever terminology is used in an attempt to capture the essence of Chinas economic system,the unique challenge posed for the global trading community is clear.Foreign enterprises are competing not only against Chinese enterprises but also the Chinese state.As a result,the playing field is simply not

36、level.It is heavily skewed against foreign enterprises2023 USTR REPORT TO CONGRESS ON CHINAS WTO COMPLIANCE 3 wherever they seek to compete against Chinese enterprises,whether it is in Chinas market or in other markets around the world.It is important to highlight,moreover,that China has not simply

37、continued to pursue what it termed a“socialist market economy”when it joined the WTO.Chinas so-called“socialist market economy”has turned decidedly predatory.In other words,China no longer relies on central planning simply to direct and guide the business decisions of Chinese industries and enterpri

38、ses.Rather,China is now using its state-led,non-market approach to the economy and trade in ways designed to secure the dominance of Chinese enterprises,both in the China market and in global markets.As part of this pursuit of international dominance,China is targeting both traditional industries an

39、d emerging industries,not only by providing its own industries with unprecedented financial and regulatory support but also by actively pursuing policies and practices that are calculated to disadvantage and ultimately displace foreign competitors.Over the years,the non-market policies and practices

40、 that China has deployed as it seeks to achieve and maintain the dominance of Chinese industries and enterprises are myriad.They are also constantly evolving.While the particular combination of non-market policies and practices that China deploys in pursuit of securing dominant market shares for Chi

41、nese businesses domestically and globally can vary from industry to industry,any list of the most common non-market policies and practices that the Chinese state currently deploys is long and includes:adopting and pursuing industrial plans that target specific industries for domination by Chinese en

42、terprises,including by establishing capacity,production and export levels or market share targets;directing,pressuring or otherwise acting to ensure that Chinese enterprises adhere to the objectives set forth in the states industrial plans;placing CCP officials in state-owned enterprises and private

43、 Chinese enterprises in management positions in order to monitor,direct,pressure or otherwise influence commercial decision making;deploying massive and frequently non-transparent subsidies relentlessly in pursuit of industrial plan objectives,including via policy banks,state-owned commercial banks

44、and government investment and guidance funds at all levels of government;transferring risk to the state through loan guarantees and loan rollovers for Chinese enterprises in targeted industries;failing to publish final central level and provincial level measures that provide subsidies or other finan

45、cial support to Chinese enterprises;directing,pressuring or otherwise acting to ensure that foreign enterprises operating in China not make business decisions that conflict with the objectives of the states industrial plans,including in some cases by embedding CCP officials in those enterprises;acco

46、rding special regulatory and other preferences and competitive advantages to state-owned enterprises;directing or allowing government regulatory authorities to exercise their authority in a discriminatory manner,including by treating Chinese enterprises more favorably than foreign or foreign-investe

47、d enterprises;directing or sponsoring the theft of intellectual property rights,trade secrets and confidential business information for commercial use;2023 USTR REPORT TO CONGRESS ON CHINAS WTO COMPLIANCE 4 engaging in forced or pressured technology transfer;directing,pressuring or otherwise acting

48、to ensure that Chinese enterprises pursue acquisitions of foreign enterprises whose technologies are needed to achieve the states industrial plan objectives;directing,pressuring or otherwise acting to ensure that Chinese enterprises purchase Chinese-made products over imported products in accordance

49、 with the states industrial plan objectives;directing,pressuring or otherwise acting to ensure that Chinese enterprises invest in and secure access to raw materials outside of China for the sole use of Chinese enterprises producing downstream products in accordance with the states industrial plan ob

50、jectives;retaliating against foreign enterprises when they offend the Chinese state or otherwise act in a manner that displeases the Chinese state,thereby creating a chilling business environment for all foreign enterprises,especially ones with business operations located in China;using selective or

51、 arbitrary application or enforcement of intellectual property law to achieve the states industrial plan objectives;using selective or arbitrary application or enforcement of competition law to achieve the states industrial plan objectives;pursuing unique national standards when international standa

52、rds already exist in order to leverage the economic power of Chinas market to promote or compel the adoption of those standards in global markets;using unfair labor practices,such as forced labor,restrictions on labor mobility,institutional constraints on the extent to which wage rates are determine

53、d through free bargaining between labor and management,the denial of the rights of workers to associate and to organize and collectively bargain,and a prohibition on the formation of independent trade unions to represent workers,which artificially lower labor costs for Chinese enterprises,especially

54、 in industrial sectors;condoning lax enforcement of environmental laws and regulations,which artificially lowers labor costs for Chinese enterprises,especially in industrial sectors;creating or maintaining persistent non-market excess capacity in industries through state-owned enterprises and privat

55、e Chinese enterprises,to the detriment of competing foreign enterprises in the China market and in global markets around the world;directing the judiciary to render decisions that serve the states industrial plan objectives;and failing to publish all central level and provincial level laws,regulatio

56、ns and other measures that impact the rights and obligations of enterprises and individuals.It is evident that China does not deploy these non-market policies and practices in isolation or only in a few industries.China resorts to some combination of these non-market policies and practices in many i

57、ndustries.Chinas efforts are also relentless.China has shown every indication that it will continue to intervene in the market in any way that it deems necessary to achieve the states industrial plan objectives.China does not act with moderation.An example of the magnitude of Chinas efforts can be s

58、een in a review of how China pursues one type of non-market policy or practice,namely,Chinas practice of directing or sponsoring the theft of intellectual property rights,trade secrets and 2023 USTR REPORT TO CONGRESS ON CHINAS WTO COMPLIANCE 5 confidential business information for commercial use.In

59、 recent public remarks,intelligence and law enforcement officials from the Five Eyes countries Australia,Canada,New Zealand,the United Kingdom and the United States characterized the scale of the Chinese states pursuit and sponsorship of this type of theft as unprecedented in human history.They adde

60、d that it is the biggest of any country in the world and,indeed,bigger than every other country in the world combined.In the United States alone,in 2023,there were approximately 2,000 active investigations into apparent state-sponsored theft by China covering a diverse array of industries,from aviat

61、ion to biotechnology to robotics,among many others.The Five Eyes officials noted that while all countries engage in clandestine activities for national security purposes,China is different in that the Chinese state steals information and then uses it for commercial advantage.Plainly,Chinas approach

62、is far different from the open,market-oriented approach envisioned by the WTO membership and pursued by the United States and almost all other WTO Members.China routinely deploys economic and trade policies and practices that promote unfair competition and state-directed outcomes rather than fair co

63、mpetition and market-based outcomes.China often does not enable or allow enterprises to make their own commercial decisions,nor does it treat all enterprises engaged in commercial activities equally or allow private actors to determine the allocation of resources.China also does not require its regu

64、latory authorities to administer in a fair,transparent,impartial and reasonable manner all laws,regulations and other measures pertaining to or affecting trade in goods,trade in services,investment and trade-related aspects of intellectual property rights.In addition,China does not maintain an indep

65、endent judiciary,nor does it publish all laws,regulations and other measures that impact the rights and obligations of enterprises and individuals.At present,moreover,there are no indications that China is considering taking meaningful steps toward the adoption of the open,market-oriented economicsy

66、stem that the WTO membership has endorsed and expects of all WTO Members.In fact,China continues to take steps designed to increase,not decrease,the role of the Chinese state in the market.Critically,the WTO has been unable to effectively address Chinas continued pursuit of a state-led,non-market ap

67、proach to the economy and trade.While some of the non-market policies and practices pursued by China are disciplined by existing WTO rules,resort to WTO dispute settlement has proven ineffective in changing or discouraging Chinas behavior in any fundamental way.For the most part,however,it has becom

68、e clear that Chinas non-market policies and practices are not effectively disciplined by existing WTO rules.Indeed,when WTO Members developed and agreed on the existing WTO rules,they simply did not contemplate that a WTO Member would ever pursue many of the policies and practices that now emanate f

69、rom Chinas state-led,non-market approach to the economy and trade.In short,Chinas approach is fundamentally at odds with the multilateral trading system.It is now more than two decades since China joined the WTO,and it is clear that China has not lived up to the bargain that it struck with WTO Membe

70、rs when it acceded to the WTO,as recounted above.With existing WTO disciplines having proved to be ineffective,or simply not designed to discipline many of the types of harmful non-market policies and practices deployed by the Chinese state,it is also clear and has been clear for some time that solu

71、tions independent of the WTO are needed.While the WTO can still play a role in addressing certain aspects of the unique challenge that China poses for the global trading community,the United States believes,realistically,that other strategies are needed.For that reason,the United States has been pur

72、suing a multi-faceted approach that accounts for the current realities in the U.S.-China trade relationship and the many problems that China generates for the United States and other trading2023 USTR REPORT TO CONGRESS ON CHINAS WTO COMPLIANCE 6 partners,both now and likely in the future.As the U.S.

73、Trade Representative previously announced,the U.S.approach includes four principal components.First,it is critical that the United States take steps domestically to invest in,and build policies supportive of,the industries of today and tomorrow.Important steps taken to date include the passage of th

74、e CHIPS and Science Act,the Inflation Reduction Act and the Infrastructure Investment and Jobs Act,as well as the many subsequent efforts to implement those Acts.Second,the United States is continuing to pursue bilateral engagement with China.China is an important trading partner,and every avenue fo

75、r obtaining real change in its economic and trade regime must be utilized.We are focused on the United States most fundamental concerns with Chinas state-led,non-market approach to the economy and trade,enumerated above,rather than on resuming dialogues focused on isolated issues that leave the core

76、 China challenge unaddressed.At the same time,the United States will continue to work to hold China accountable for its existing commitments.Third,it is clear that domestic trade tools including updated or new domestic trade tools reflecting todays realities will be necessary to secure a more level

77、playing field for U.S.workers and businesses.The United States continues to explore how best to use and improve domestic trade tools to achieve that end.Finally,it is equally critical for the United States to work intensely and broadly with allies and like-minded partners in order to build support f

78、or solutions to the many significant problems that Chinas state-led,non-market approach to the economy and trade has created for the global trading community.The United States recognizes that each trading partner may be impacted differently by the many types of non-market policies and practices that

79、 China pursues,but we all must work together if we are to be able to find viable solutions.This work is ongoing and is taking place in bilateral,regional and multilateral fora,including the WTO.Importantly,among U.S.trading partners,there is a growing convergence about the need to approach trade rel

80、ations with China with more realism,like the United States has been doing.Chinas increased use of economic coercion in recent years has certainly played a role in this convergence.As its economic power has grown,the Chinese government more and more has resorted to the threat or use of measures affec

81、ting trade and investment in an abusive,arbitrary or pretextual manner to pressure,induce or influence a foreign government into taking,or not taking,a decision or action in order to achieve a strategic political or policy objective,or to prevent or interfere with the foreign governments exercise of

82、 its legitimate sovereign rights or choices.It is particularly troubling to witness an authoritarian government using economic coercion to influence the policies being pursued by democratic countries.However,even so,the more significant factor in this convergence of thinking is the incontrovertible

83、evidence of the significant harm being caused by Chinas state-led,non-market and predatory approach to the economy and trade.Indeed,this harm is not confined to the advanced market economies,as emerging and developing economies tend to be particularly adversely impacted by Chinas non-market policies

84、 and practices.At the same time,despite Chinas rhetoric,the United States does not view“decoupling”from China as the solution to the many problems posed by Chinas state-led,non-market approach to the economy and trade.Indeed,if the United States were to decouple from China,it would not address those

85、 problems.The United States has taken targeted actions,including on export controls and outbound investment,to protect our national security,consistent with our approach to the U.S.-China economic and trade relationship,which is more 2023 USTR REPORT TO CONGRESS ON CHINAS WTO COMPLIANCE 7 appropriat

86、ely characterized as one of de-risking and diversifying,not decoupling.Because the Chinese government continually intervenes in the market and actively seeks to advantage Chinese enterprises and disadvantage foreign enterprises,the United States is not in a position to rely on the good will of the C

87、hinese state when it comes to supply chains,especially for critical minerals.Similarly,U.S.companies with operations in China are not able to have confidence that they will be treated fairly by the Chinese state,and they increasingly are re-evaluating the degree of their dependence on the China mark

88、et.Nevertheless,the United States still seeks to trade with China,just as the United States seeks to do with other countries.But the terms of competition must be fair.U.S.companies and workers need to be able to compete on a level playing field with Chinese companies and workers,whether in the U.S.m

89、arket,Chinas market or other markets around the world.For two-way trade to expand,both the United States and China need to be committed to it.But questions remain about Chinas commitment,as China itself appears to be pursuing a decoupling strategy and not just from the United States.Chinas“dual circ

90、ulation”strategy,in place since 2020,touts the importance of China continuing to participate in international trade,while simultaneously seeking to become self-sufficient domestically.What this means in reality is that,for now,China will continue to export to the world(often at predatory prices),inc

91、luding the negative externalities from its industrial policies,and China will continue to welcome foreign companies operating in China and continue to import products needed by Chinese companies,especially intechnology products.However,once Chinese companies are capable of displacing the foreign com

92、petition in any particular industry in the China market,the Chinese state will no longer welcome foreign companies and their products.Another by-product of Chinas drive for domestic self-sufficiency,of course,is the non-market excess capacity that it inevitably creates,to the detriment of foreign pr

93、oducers and efficient investment around the world.Indeed,in 2022,China accounted for the largest global trade surplus in the history of the world,totaling$877.6 billion,which was more than three times the total for the country with the next largest global trade surplus,Russia.Whatever term might bes

94、t describe Chinas“dual circulation”strategy,it is plainly not a strategy ever envisioned by,or condoned by,the WTO membership.The autarky that this strategy envisions runs counter to the WTOs goal of developing an integrated,more viable and durable multilateral trading system.In other words,this str

95、ategy is best viewed as further evidence of Chinas broader intent to re-shape the international order and move the world away from rules-based engagement premised on market-based competition.The United States,in contrast,remains committed to the WTO and the shared values upon which it is based,inclu

96、ding openness,fair competition,non-discrimination,reciprocity and transparency as well as adherence to the rule of law.But serious challenges threaten those core values,most notably the challenge posed by the policies and practices that emanate from Chinas state-led,non-market and predatory approach

97、 to the economy and trade.2023 USTR REPORT TO CONGRESS ON CHINAS WTO COMPLIANCE 8 I IN NT TR RO OD DU UC CT TI IO ON N In this report,we first provide a broad assessment of Chinas WTO membership to date.Next,we discuss past strategies that have been used,without success,in an attempt to address the

98、many problems that Chinas state-led,non-market approach to the economy and trade creates for the United States and other WTO Members.We then describe the nature of the China challenge as it exists today and explain how the United States trade policy is dealing with it.Lastly,we catalogue,on a topic-

99、by-topic basis,the many specific trade concerns generated by Chinas outlier behavior.A AS SS SE ES SS SMME EN NT T O OF F C CH HI IN NA A S S WWT TO O MME EMMB BE ER RS SH HI IP P In assessing Chinas WTO membership below,we first recall the terms of Chinas accession to the WTO.As explained below,the

100、se terms included commitments to adhere to the rules and principles set forth in the WTO agreements as well as an unprecedented number of China-specific commitments intended to facilitate Chinas intended transition to a market economy.These terms also included an expectation that China would pursue

101、an open and market-oriented approach to the economy and trade,like other WTO Members.After reviewing the terms of Chinas accession to the WTO,we then review Chinas record of compliance,which has been poor.CHINAS WTO ACCESSION In July of 1986,China applied for admission to the WTOs predecessor,the Ge

102、neral Agreement on Tariffs and Trade(GATT).The GATT formed a Working Party in March of 1987,composed of all interested GATT contracting parties,to examine Chinas application and negotiate terms for Chinas accession.For the next eight years,negotiations were conducted under the auspices of the GATT W

103、orking Party.Following the formation of the WTO on January 1,1995,pursuant to the Marrakesh Agreement Establishing the World Trade Organization(WTO Agreement),a successor WTO Working Party,composed of all interested WTO Members,took over the negotiations.Like all WTO accession negotiations,the negot

104、iations with China had three basic aspects.First,China provided information to the Working Party regarding its trade regime.China also updated this information periodically during the 15 years of negotiations to reflect changes in its trade regime.Second,each interested WTO Member negotiated bilater

105、ally with China regarding market access concessions and commitments in the goods and services areas,including,for example,the tariffs that would apply on industrial and agricultural goods and the commitments that China would make to open up its market to foreign services suppliers.The most trade lib

106、eralizing of the concessions and commitments obtained through these bilateral negotiations were consolidated into Chinas Goods and Services Schedules and apply to all WTO Members.Third,overlapping in time with these bilateral negotiations,China engaged in multilateral negotiations with Working Party

107、 members on the rules that would govern trade with China.Throughout these multilateral negotiations,U.S.leadership in working with China was critical to removing obstacles to Chinas WTO accession and achieving a consensus on appropriate rules commitments.These commitments are set forth in Chinas Pro

108、tocol of Accession and an accompanying Report of the Working Party.WTO Members formally approved an agreement on the terms of accession for China on November 10,2001,at the WTOs Fourth Ministerial Conference,held in Doha,Qatar.One day later,China signed the agreement and deposited its instrument of

109、ratification with the Director-General of the WTO.China became the 143rd member of the WTO on December 11,2001.Chinas Protocol of Accession,accompanying Working Party Report and Goods and 2023 USTR REPORT TO CONGRESS ON CHINAS WTO COMPLIANCE 9 Services Schedules are available on the WTOs website(www

110、.wto.org).To accede to the WTO,China agreed to take concrete steps to remove trade barriers and open its markets to foreign companies and their exports from the first day of accession in virtually every product sector and for a wide range of services.Supporting these steps,China also agreed to under

111、take important changes to its legal framework,designed to add transparency and predictability to business dealings.Like all acceding WTO Members,China also agreed to assume the obligations of more than 20 existing multilateral WTO agreements.Areas of principal concern to the United States and Chinas

112、 other trading partners,as evidenced by the accession negotiations,included core principles of the WTO,such as most-favored nation treatment,national treatment,transparency and the availability of independent review of administrative decisions.Other key concerns arose in the areas of agriculture,san

113、itary and phytosanitary measures,technical barriers to trade,trade-related investment measures,customs valuation,rules of origin,import licensing,antidumping,subsidies and countervailing measures,trade-related aspects of intellectual property rights and services.For some of its obligations,China was

114、 allowed minimal transition periods,where it was considered necessary.Through its membership in the WTO,China also became subject to the same expectations as other WTO Members,as set forth in the Marrakesh Declaration issued in April 1994 at the conclusion of the Uruguay Round negotiations.There,amo

115、ng other things,WTO Members expressly affirmed their view that the WTO Member economies would participate in the international trading system based on“open,market-oriented policies.”Even though the terms of Chinas accession agreement are directed at the opening of Chinas market to WTO Members,Chinas

116、 accession agreement also includes provisions designed to address issues related to any injury that U.S.or other WTO Members industries and workers might experience based on import surges or unfair trade practices,particularly during what was envisioned to be a time of transition for China from a no

117、n-market economy to a market economy.These mechanisms include:(1)a special textile safeguard mechanism(which expired on December 11,2008,seven years after Chinas WTO accession);(2)a unique,China-specific safeguard mechanism allowing a WTO Member to take action against increasing Chinese imports that

118、 disrupt its market(which expired on December 11,2013,12 years after Chinas WTO accession);(3)an expression of the ability of WTO Members to use an antidumping methodology that is not based on a strict comparison with domestic prices or costs in China if the producers under investigation cannot clea

119、rly show that market economy conditions prevail in the industry producing the like product with regard to the manufacture,production and sale of that product;and(4)an expression of the ability to use methodologies for identifying and measuring subsidy benefits to Chinese enterprises that are not bas

120、ed on terms and conditions prevailing in China.With Chinas consent,the WTO also created a special multilateral mechanism for reviewing Chinas compliance on an annual basis.Known as the Transitional Review Mechanism,this mechanism operated annually for eight years after Chinas accession.A final revie

121、w,looking back over the first 10 years of Chinas WTO membership,took place in 2011.EXPECTATIONS OF WTO MEMBERSHIP For all WTO Members,the expectations of WTO membership are clearly set forth in the Marrakesh Declaration issued in April 1994 at the conclusion of the Uruguay Round negotiations.There,W

122、TO Members expressly affirmed their view that the establishment of the WTO ushers in a“new era of global economic cooperation”that“reflects the widespread desire to operate in a fairer and more open multilateral trading system.”WTO Members 2023 USTR REPORT TO CONGRESS ON CHINAS WTO COMPLIANCE 10 fur

123、ther made clear their determination that their economies would participate in the international trading system,based on both“open,market-oriented policies”and“the commitments set out in the Uruguay Round Agreements and Decisions.”As this language makes clear,it was not contemplated that any WTO Memb

124、er would reject market-based policies in favor of a state-led trade regime.It also was not contemplated that any WTO Member would pursue mercantilist outcomes instead of policies promoting a fairer and more open multilateral trading system.Rather,it was expected that each WTO Member would pursue ope

125、n,market-oriented policies.The pursuit of open,market-oriented policies means not only adhering to the agreed rules but also observing in good faith the fundamental principles that run throughout the many WTO agreements,which include non-discrimination,openness,reciprocity,fairness and transparency.

126、When China acceded to the WTO in 2001,it agreed to embrace the WTOs open,market-oriented approach and embed it in its trading system and institutions.Through Chinas commitments and representations,WTO Members understood that China intended to dismantle existing state-led,mercantilist policies and pr

127、actices,and they expected China to continue on its then-existing path of economic reform and successfully complete a transformation to a market-oriented economy and trade regime.Chinas protocol of accession to the WTO sets out Chinas obligations under the WTO agreements as well as numerous additiona

128、l China-specific commitments made necessary because of the need for China to transform its approach to the economy and trade.China itself acknowledged“the evolving nature of its economy,”and it confirmed that“a socialist market economy system was applied”in China.Similarly,WTO Members highlighted th

129、at“China was continuing the process of transition towards a full market economy.”WTO Members noted,for example,that“the special features of Chinas economy,in its present state of reform,still created the potential for a certain level of trade-distorting subsidization.”For these reasons,it was agreed

130、 that special safeguard-like provisions would be included among the terms of Chinas protocol of accession as protective measures while China completed its transformation into a market economy.As noted above,for example,Chinas protocol of accession included a China-specific safeguard mechanism,specia

131、l antidumping rules and special methodologies for identifying and measuring subsidy benefits.It also created a unique,10-year review mechanism designed to monitor Chinas progress in implementing its many WTO commitments and to secure updated information on the use of industrial plans by China.CHINAS

132、 WTO COMPLIANCE RECORD As has been catalogued in prior reports,China has a poor record when it comes to complying with WTO rules and observing the fundamental principles on which the WTO agreements are based non-discrimination,openness,reciprocity,fairness and transparency.Too often,China flouts the

133、 rules to achieve industrial domination objectives.In addition,and of serious concern to the United States and other WTO Members,China has not made sufficient progress in transitioning toward a market economy.China continues to embrace a state-led,non-market and mercantilist approach to the economy

134、and trade.This approach results in sophisticated and expansive policies and practices that often evade effective WTO disciplines and cause serious harm to markets,workers and industries in the United States and other WTO Members.At the same time,China has used the benefits of WTO membership includin

135、g its guarantee of open,non-discriminatory access to the markets of other WTO Members to become the WTOs largest trader,while resisting calls for further liberalization of its trade regime by claiming to be a“developing”country.2023 USTR REPORT TO CONGRESS ON CHINAS WTO COMPLIANCE 11 ADOPTION OF MAR

136、KET-ORIENTED POLICIES Since last years report,our assessment of Chinas record in terms of transitioning to a market economy has not changed.More than two decades after its accession to the WTO,China has still not embraced open,market-oriented policies.The state remains in control of Chinas economy,a

137、nd it heavily intervenes in the market to achieve anticompetitive industrial policy objectives.Indeed,the states already sizable role continues to grow,not recede.As we detailed in prior reports,China pursues a wide array of continually evolving interventionist policies and practices.It offers subst

138、antial government guidance,resources and regulatory support to domestic industries,including Chinas state-owned enterprises and numerous other domestic companies.At the same time,it also seeks to limit market access for imported goods and services and restrict the ability of foreign manufacturers an

139、d services suppliers to do business in China in various ways.The benefits that Chinas industries realize from these non-market policies and practices largely come at the expense of Chinas trading partners and their workers and companies,as markets all over the world are distorted,and the playing fie

140、ld is heavily skewed against foreign companies that seek to compete against Chinese companies,whether in Chinas market or markets outside of China.This situation has worsened over the past decade.Since new leaders assumed power in China in 2013,the states role in the economy effectuated by the Chine

141、se government and,increasingly,the CCP has grown.While China has repeatedly signaled in recent years that it is pursuing“economic reform,”Chinas concept of“economic reform”differs from the type of change that a country would be pursuing if it were embracing open,market-oriented policies.For China,“e

142、conomic reform”appears to mean deepening the management of the economy by the government and the Party and strengthening state-owned and state-invested enterprises.Meanwhile,as the states role in the economy has increased in recent years,the depth and breadth of challenges facing U.S.and other forei

143、gn companies doing business in China or competing with favored Chinese companies in markets outside of China have similarly increased.To fully appreciate the challenges presented by Chinas non-market economy,it is vital to understand the extent to which the state still maintains control over economi

144、c decision-making in China.As we catalogued in prior reports,a thorough examination of Chinas Constitution,relevant directives and pronouncements by Chinas leadership,legislative and regulatory measures issued by the Chinese government,Chinas industrial plans and the actions of the Chinese governmen

145、t and the CCP leave no doubt that the state maintains a tight grip on virtually all economic activity.Indeed,the government and the Party have constitutional mandates to develop a“socialist market economy with Chinese characteristics.”To fulfill these mandates,the framework of Chinas economy is set

146、by the government and the Party,which exercise control directly and indirectly over the allocation of resources through instruments such as government ownership and control of key economic actors and innumerable government directives.The government and the Party also direct and channel economic acto

147、rs to meet the states planning targets.The government and the Party permit market forces to operate only to the extent that they accord with Chinas industrial policy objectives,which typically target industries for domination by Chinese companies.When there is conflict between market outcomes and th

148、e states objectives,the government and the Party intervene to ensure that the states objectives prevail.Aside from the role of the government and the Party in managing the economy,there are also serious concerns over how the government and the Party exercise influence over the operations and investm

149、ent decisions of state-owned and state-invested enterprises and private enterprises,including foreign-invested enterprises.This2023 USTR REPORT TO CONGRESS ON CHINAS WTO COMPLIANCE 12 influence continues to grow,as the Party is increasing its control over key actors in Chinas economy and not,as had

150、been hoped,enabling Chinas transition to a market economy.China claims that its state-owned and state-invested enterprises make business decisions independently of the state and based on market principles.However,the government and the Party continue to exercise control over state-owned and state-in

151、vested enterprises.Among other things,they appoint and control key executives through the Chinese Communist Party Organization Department.They also provide state-owned and state-invested enterprises with preferential access to important inputs(such as land and capital)and other competitive advantage

152、s unavailable to private Chinese companies.State-owned and state-invested enterprises,in turn,play an outsized role in Chinas economy.For example,state-owned and state-invested enterprises outstrip private Chinese companies in terms of their share of total credit,their market dominance in key indust

153、ries and their share of total market capitalization on Chinas stock market.Both state-owned and state-invested enterprises and private Chinese companies also host internal Party committees capable of exercising government and Party influence over their corporate governance and business decisions.Thi

154、s arrangement is codified in Chinese law under Article 19 of the Company Law,which applies to both state-owned and state-invested enterprises and private Chinese companies.In recent years,moreover,the Party has taken steps to increase the strength and presence of Party committees within all of these

155、 companies.For example,state-owned and state-invested enterprises and private Chinese companies are being pressured to amend their articles of association to ensure Party representation on their boards of directors,usually as the Chairman of the Board,and to ensure that important company decisions a

156、re made in consultation with Party cells.Increasingly in recent years,China has also taken“golden shares”in large private Chinese companies.Under this type of arrangement,the Chinese government via a government guidance fund or other state-backed entity purchases a small stake in the company in exch

157、ange for a seat on the board of directors or veto rights.The result is stronger Chinese government oversight and control of the companys operations.As we explained in prior reports,U.S.industry associations report that the Party is also taking steps to influence the managerial and investment decisio

158、ns of foreign-invested enterprises in China through the insertion of Party cells.According to these reports,these efforts,in some cases,are beginning to affect the decision-making processes of some Chinese-foreign joint ventures in China.Further reinforcing the Partys influence over enterprises in C

159、hina is the Social Credit System,a tool endorsed by the Party that the government is increasingly using to monitor,rate and condition not only the conduct of all individuals in China,but also all domestic and foreign companies in China.This system has become operational,but so far there is no fully

160、integrated national system for assigning comprehensive social credit scores for companies,and the social credit system remains highly fragmented,as local governments experiment with their own pilot social credit schemes.In any event,it appears that the government will use the threat of poor ratings

161、and corresponding adverse consequences under the Social Credit System,among other things,to ensure that all economic actors in China operate in accordance with Chinas industrial policy objectives and do not cross political redlines on sensitive matters like human rights.Separate from these various m

162、echanisms used to control company behavior,the government and the Party continue to control or otherwise influence the prices of key factors of production.The result is that the means of production in China are not allocated2023 USTR REPORT TO CONGRESS ON CHINAS WTO COMPLIANCE 13 or priced according

163、 to market principles.For example,all land in China is property of the state,as either state-owned urban land or collectively owned rural land.The state also exerts a high degree of control over energy and other input prices.In addition,there are significant institutional constraints on the extent t

164、o which wage rates are determined through free bargaining between labor and management,contrary to International Labor Organization principles.China denies workers the right of association and the right to organize and collectively bargain.China prohibits the formation of independent trade unions to

165、 represent workers,and workers do not have the legal right to strike,which is an important lever in collective action and negotiation with management over wages in market economies.In addition,government restrictions on labor mobility continue to inhibit and guide labor flows,causing distortions on

166、the supply side of the labor market.The government and the Party also exercise strong control over the financial sector.Five large commercial banks that are majority state-owned entities operate large branch networks on a nationwide basis and account for nearly half of total commercial bank assets.T

167、here are also three large state-owned policy banks,as well as scores of city commercial banks and credit unions under local government control.In addition to the ownership of these banks by the government,the state exercises other forms of influence over banking decisions.The Party,through its Organ

168、ization Department,appoints executives in state-owned banks and other state-owned financial institutions.Chinas central bank,the Peoples Bank of China(PBOC),also meets frequently with large banks in China to ensure that their lending decisions align with PBOC and government objectives.In addition,th

169、e Law on Commercial Banks provides that“commercial banks are to conduct their business of lending in accordance with the needs of national economic and social development and under the guidance of the industrial policies of the state.”Similarly,Chinas legal system continues to function as an instrum

170、ent by which the government and the Party can secure discrete economic outcomes,channel broader economic policy and pursue the states industrial policy objectives.Key legal institutions,such as the courts,are structured to respond to the Partys direction,both broadly and on a case-specific basis.As

171、a general matter,to the extent that companies and individuals seek to act independently of government or Party direction,the legal system does not provide a venue for them to achieve these objectives on a systemic or consistent basis.In addition,companies and individuals continue to face challenges

172、in obtaining impartial outcomes,either because of protectionism or corruption.The larger issue of Chinas restrictions on the freedom of information also impacts Chinas economic system.For example,while Chinas Internet firewall and the Partys regular censorship of audio-visual and print media have ma

173、ny negative effects outside Chinas economic system,they also create distortions in Chinas economy,and these distortions affect the ability of foreign companies to operate and compete effectively in Chinas market.In March 2021,China finalized and issued the 14th Five-Year Plan(2021-2025)for National

174、Economic and Social Development,which runs from 2021 through 2025.Like its predecessor,the 14th Five-year Plan covers all sectors of Chinas economy and is not limited to one overarching plan,but instead will include hundreds of sub-plans.In this regard,various institutions participate in plan formul

175、ation and execution,including central government bodies with legislative and regulatory authority,thousands of provincial and local government authorities,various organs of the Party and key Chinese companies.When compared to the industrial plans of other WTO Members,Chinas industrial plans are not

176、merely more extensive.They are also fundamentally2023 USTR REPORT TO CONGRESS ON CHINAS WTO COMPLIANCE 14 different in kind.In several significant ways,Chinas industrial plans go well beyond traditional approaches to guiding and supporting domestic industries:First,adherence to the objectives of Chi

177、nas industrial plans is effectively mandatory.Chinese companies have little discretion to ignore them,even when market forces would dictate different commercial behavior.Second,the financial support that the state provides to domestic industries in pursuit of Chinas industrial plan objectives is mas

178、sive,relentless and highly market-distorting.Indeed,this financial support is provided on a scale never before seen in the world,and much of it is not transparently provided.As previously noted,this financial support often leads to severe excess capacity in China followed by Chinas widespread dumpin

179、g of the inevitable excess production into the markets of other WTO Members,which not only depresses global prices but also distorts investment decisions by market actors in markets around the world.This assault on global markets causes serious harm to other WTO Members industries,companies and work

180、ers,while the WTO does not provide effective mechanisms for addressing this problem.Third,Chinas industrial planning is more comprehensive and complex than in any other country,as it is made up of hundreds of plans across industries and at all levels of government.Fourth,in pursuit of its industrial

181、 plan objectives,China goes well beyond merely guiding or supporting the development of domestic industries as it actively seeks to impede,disadvantage and harm the foreign competition by skewing the playing field against imported goods and services and foreign manufacturers and services suppliers.I

182、ndeed,China actively targets entire industries for domination by Chinese companies,often by explicitly setting market share goals that it pursues through a wide array of non-market policies and practices.In other words,Chinas approach to industrial planning is fundamentally predatory in nature.When

183、combined with the large size of Chinas economy and Chinas large share of global trade,the policies and practices that China pursues in support of its industrial plans transform China into a unique and pressing challenge for the United States and other market economies as well as for the WTO and the

184、multilateral trading system.Moreover,this troubling situation is not static.China continues to develop and implement new policies and practices to maintain and enhance the states control over the economy and trade.COMPLIANCE WITH WTO RULES Since last years report,our assessment of Chinas record in t

185、erms of complying with WTO rules and observing the fundamental principles on which the WTO agreements are based has not changed.Chinas record remains poor.As we detailed in prior reports,Chinas economic and trade regime has generated many WTO compliance concerns over the years.Too often,WTO Members

186、have had to resort to the WTOs dispute settlement mechanism to change problematic Chinese policies and practices.The United States,for example,has brought 27 cases against China at the WTO covering a wide range of important policies and practices,such as:(1)discriminatory requirements in the automob

187、ile sector;(2)discriminatory taxes in the integrated circuit sector;(3)hundreds of prohibited subsidies in a wide range of manufacturing sectors;(4)inadequate intellectual property rights enforcement in the copyright area;(5)significant market access barriers in copyright-intensive industries;(6)sev

188、ere restrictions on foreign suppliers of financial information services;(7)export restraints on 2023 USTR REPORT TO CONGRESS ON CHINAS WTO COMPLIANCE 15 numerous raw materials;(8)a denial of market access for foreign suppliers of electronic payment services;(9)repeated improper use of trade remedies

189、;(10)excessive domestic support for key agricultural commodities;(11)the opaque and protectionist administration of tariff-rate quotas for key agricultural commodities;and(12)discriminatory regulations on technology licensing.Even though the United States prevailed in these WTO disputes,as other WTO

190、 Members have done in their disputes against China,they take years to litigate,consume significant resources and often require further efforts when China fails to comply with WTO rules.In addition,China has often taken steps to obscure its actions to make it more difficult for trading partners to ev

191、en challenge them in the WTOs adjudicative system.The WTOs dispute settlement mechanism was designed to facilitate the resolution of disagreements over whether an action breaches a WTO obligation,but where the action is so obscured that it is difficult to demonstrate it as a factual matter,the dispu

192、te settlement mechanism can fail to be an effective disciplinary tool.In this regard,as USTR has explained in prior reports,China disregards many of its WTO transparency obligations,which places its trading partners at a disadvantage and often serves as a cloak for China to conceal unfair,non-market

193、 and distortive trade policies and practices from scrutiny.For example,during the first 15 years of its WTO membership,China failed to notify any sub-central government subsidies to the WTO,despite the fact that most subsidies in China are provided by provincial and local governments.The magnitude a

194、nd significance of this problem is illustrated by the five WTO cases that the United States has brought challenging prohibited subsidies maintained by China.While those cases involved hundreds of subsidies,most of the subsidies were provided by sub-central governments.The United States was able to b

195、ring those cases only because of its ownextensive investigatory efforts to uncover Chinas opaque subsidization practices.Most other WTO Members lack the resources to conduct the same types of investigations.Despite these efforts,China continued to shield massive sub-central government subsidies from

196、 the scrutiny of other WTO Members,while in recent years also obscuring massive central government subsidies provided through a newer vehicle known as“government guidance funds.”While China claims that these government guidance funds are wholly private,the facts plainly reveal that the funds are run

197、 by government agencies and state-owned enterprises and provide state capital to Chinese companies.Together with other complimentary non-market practices,the massive and relentless subsidization provided by Chinas central government and sub-central governments distorts global markets and contributes

198、 to the serious excess capacity problems that have been plaguing industries like steel,aluminum,solar panels and fishing and have been devastating foreign competitors.Similar results can be expected in other industries now being targeted by China for dominance.In sum,the WTOs dispute settlement mech

199、anism has not been effective in addressing the serious issues that arise from a WTO Members state-led,non-market approach to the economy and trade that systematically disadvantages that Members trading partners and broadly conflicts with the fundamental,market-oriented underpinnings of the WTO syste

200、m.The value of the dispute settlement mechanism is also undermined where a WTO Member does not operate in good faith.As a result,over time,despite the enforcement efforts of the United States and other WTO Members,China was able to continue to pursue its predatory non-market policies and practices,w

201、hich WTO rules and the dispute settlement mechanism have proven unable to discipline effectively.2023 USTR REPORT TO CONGRESS ON CHINAS WTO COMPLIANCE 16 P PA AS ST T E EF FF FO OR RT TS S T TO O A AD DD DR RE ES SS S T TH HE E C CH HI IN NA A C CH HA AL LL LE EN NG GE E In the past,the United State

202、s has intensively pursued both WTO-focused strategies and strategies outside the WTO in an effort to address the unique challenge posed by China.Other WTO Members have also made similar efforts.Those strategies have been unsuccessful in securing fundamental changes in Chinas state-led,non-market app

203、roach to the economy and trade.WTO-FOCUSED STRATEGIES For many years following Chinas accession to the WTO,a variety of bilateral and multilateral efforts were pursued by the United States and other WTO Members to address the unique challenges presented by Chinas WTO membership.However,even though t

204、hese efforts were persistent,they did not result in meaningful changes in Chinas state-led,non-market approach to the economy and trade.The United States itself pursued a dual track approach in an effort to resolve the many concerns that arose in our trade relationship with China.One track involved

205、using high-level bilateral dialogues,and the other track focused on enforcement at the WTO.The United States approached its bilateral dialogues with China in good faith and put a great deal of effort into them.These dialogues were intended to push China toward complying with and internalizing WTO ru

206、les and principles and making necessary market-oriented changes.However,they only achieved isolated,incremental progress.At times,the United States did secure broad commitments from China for fundamental shifts in the direction of Chinese policies and practices,but China repeatedly failed to follow

207、through on them.Moreover,over time,commitments from China became more difficult to secure.Meanwhile,at the WTO,the United States brought 27 cases against China,often in collaboration with like-minded WTO Members.The United States secured victories in every one of its cases that was decided.Other WTO

208、 Members were also successful in many cases that they brought against China.Still,even when China changed the specific practices that had been challenged,it did not typically change the underlying policies,and meaningful reforms by China remained elusive.As has become clear,the WTOs dispute settleme

209、nt mechanism is of only limited value in addressing a situation where a WTO Member is dedicated to a state-led economic and trade regime that prevails over market forces.The WTOs dispute settlement mechanism is designed to address good faith disputes in which one Member believes that another Member

210、has adopted a measure or taken an action that breaches a WTO obligation.This mechanism is not designed to address a trade regime that broadly conflicts with the fundamental underpinnings of the WTO system.No amount of WTO dispute settlement by other WTO Members would be sufficient to remedy this sys

211、temic problem.Indeed,many of the most harmful policies and practices being pursued by China are not even directly disciplined by WTO rules.Overreaching by the WTOs Appellate Body in deciding WTO dispute settlement cases has also shielded Chinas non-market policies and practices from discipline and h

212、as affirmatively undermined the efforts of the United States and other WTO Members to protect our workers and businesses from the harmful impacts of Chinas predatory non-market economic system.The Appellate Bodys erroneous substantive interpretations have undermined core values,such as the ability t

213、o protect workers and businesses from non-market economic harms,to promote democracy and human rights or to protect human health or the environment.At the same time,China has sought to use the WTO dispute settlement system to subject2023 USTR REPORT TO CONGRESS ON CHINAS WTO COMPLIANCE 17 U.S.nation

214、al security measures to review,pursuing a strategy that would convert the WTO into a permanent venue for national security disagreements.As a result,the United States has been clear that fundamental reform is needed to ensure a well-functioning WTO dispute settlement system that supports WTO Members

215、 in the resolution of their disputes and in doing so limits the needless complexity and interpretive overreach seen in recent years.Among the objectives for reform,the United States has been clear that the dispute settlement system should preserve the policy space in WTO rules for WTO Members to add

216、ress their critical societal interests and to support,rather than undermine,the WTOs role as a forum for discussion and negotiation.Most critically,fundamental reform must ensure that the WTO respects the essential security interests of WTO Members,including the United States.Over the years,in addit

217、ion to pursuing WTO dispute settlement cases,the United States has actively participated in meetings at the WTO addressing Chinas adherence to its WTO obligations.For example,the United States took on a leading role in the numerous China-specific Transitional Review Mechanism meetings from 2002 thro

218、ugh 2011,which involved annual meetings of most WTO committees and councils.However,China consistently approached these meetings in ways that frustrated WTO Members efforts to secure a meaningful assessment of Chinas compliance efforts.The United States also raised,as it continues to do,China-relate

219、d issues at regular meetings of WTO committees and councils,including the WTOs General Council.Among other things,the United States sought to highlight how Chinas trade-disruptive economic model works,the costs that it exacts from other WTO Members and the benefits that China receives from it.While

220、these efforts raised awareness among WTO Members,they did not lead to meaningful changes in Chinas approach to the economy and trade.In theory,the WTO membership could have adopted new rules expressly requiring members like China to abandon non-market economic systems and state-led,mercantilist trad

221、e regimes.For two basic reasons,however,Members have not pursued any negotiation of new WTO rules that would change Chinas problematic approach to the economy and trade in a meaningful way.First,new WTO rules disciplining China would require agreement among all WTO Members,including China.China has

222、shown no willingness at the WTO to consider fundamental changes to its economic system or trade regime.Given the extent to which China has benefited and continues to benefit from the current state of affairs,it was not realistic to expect that China would agree to effective new WTO disciplines on it

223、s behavior.Indeed,China has been using its WTO membership to develop rapidly albeit largely in an anticompetitive manner that comes at the expense of others.China is now the second largest economy in the world,and it is also the largest goods trader and the largest exporter among WTO Members.It is t

224、herefore highly unlikely that China would agree to new WTO disciplines targeted at its policies and practices.In fact,in connection with ongoing discussions at the WTO relating to needed WTO reform,China has stated that it would not alter its state-led,non-market approach to the economy and trade.Se

225、cond,China has a long record of not pursuing ambitious outcomes at the WTO.Past agreements,even relatively narrow ones,have been difficult to achieve,and even when an agreement is achieved,it is significantly less ambitious because of Chinas participation.As these experiences make clear,it is unreal

226、istic to believe that actions at the WTO alone will be sufficient to force or persuade China to make fundamental changes to its economic system or trade regime.The WTOs trading system was designed for countries that are truly committed to fair competition based on market principles,not for an econom

227、ically powerful country determined to maintain a state-led,non-market approach to the 2023 USTR REPORT TO CONGRESS ON CHINAS WTO COMPLIANCE 18 economy and trade,and China has demonstrated no willingness to change its approach in any meaningful way.STRATEGIES OUTSIDE THE WTO In recent years,it became

228、 evident to the United States that new strategies were needed to deal with the many problems generated by Chinas state-led,non-market approach to the economy and trade,including solutions independent of the WTO.For example,in August 2017,the United States launched an investigation into Chinas acts,p

229、olicies and practices relating to technology transfer,intellectual property and innovation under Section 301 of the Trade Act of 1974.The findings made in this investigation in March 2018 led to,among other things,substantial U.S.tariffs on imports from China as well as corresponding retaliation by

230、China.Against this backdrop of rising tensions,in January 2020,the two sides signed what is commonly referred to as the“Phase One Agreement.”This Agreement included commitments from China to improve market access for the agriculture and financial services sectors,along with commitments relating to i

231、ntellectual property and technology transfer and a commitment by China to increase its purchases of U.S.goods and services.Many of the commitments in the Phase One Agreement reflected changes that China had already been planning or pursuing for its own benefit or that otherwise served Chinas interes

232、ts,such as the changes involving intellectual property protection and the opening up of more financial services sectors.Other commitments to which China agreed reflected a political calculation,as evidenced by the attention paid to the agriculture sector in the Phase One Agreement and the novel comm

233、itments relating to Chinas purchases of U.S.goods and services ostensibly as a means to reduce the bilateral trade deficit.Given these dynamics,and given Chinas interest in a more stable relationship with the United States,China followed through in implementing some provisions of the Phase One Agree

234、ment.At the same time,China has not yet implemented some of the more significant commitments that it made in the Phase One Agreement,such as commitments in the area of agricultural biotechnology and the required risk assessment that China is to conduct relating to the use of ractopamine in cattle an

235、d swine.Intellectual property is another area where China still must take a number of actions to implement its commitments.In addition,China fell far short of implementing its commitments to purchase U.S.goods and services in 2020 and 2021.The reality is that this Agreement did not meaningfully addr

236、ess the more fundamental concerns that the United States has with Chinas state-led,non-market policies and practices and their harmful impact on the U.S.economy and U.S.workers and businesses.Chinas government continues to employ extensive industrial policies of a kind not found in market economies.

237、It provides substantial government guidance,massive financial resources and favorable regulatory support to domestic industries across the economy,often in pursuit of specific targets for capacity and production levels and dominant market shares.In furtherance of its industrial policy objectives,Chi

238、nas government has also limited market access for imported goods and services and restricted the ability of foreign manufacturers and services suppliers to do business in China.It has also used various,often illicit,means to secure foreign intellectual property and technology to further its industri

239、al policy objectives.The principal beneficiaries of these non-market policies and practices are Chinas state-owned and state-invested enterprises and numerous nominally private domestic companies.The benefits that Chinese industries receive largely come at the expense of Chinas trading partners,incl

240、uding their workers,businesses and consumers.As a result,markets all over the world have faced distorted signals,and the playing field is heavily skewed2023 USTR REPORT TO CONGRESS ON CHINAS WTO COMPLIANCE 19 against foreign businesses that seek to compete against Chinese enterprises,whether in Chin

241、a,in the United States or globally.The industrial policies that flow from Chinas predatory non-market economic system have systematically distorted critical sectors of the global economy such as steel,aluminum,solar and fisheries,devastating markets in the United States and other countries.At the sa

242、me time,as is their design,Chinas industrial policies are increasingly responsible for displacing companies in new,emerging sectors of the global economy,as the Chinese government and the CCP powerfully intervene in these sectors on behalf of Chinese companies.Companies in economies disciplined by t

243、he market cannot effectively compete with both Chinas domestic companies and the Chinese state.T TO OD DA AY Y S S C CH HI IN NA A C CH HA AL LL LE EN NG GE E Like many other WTO Members,the United States expects,and seeks to ensure,that its trading partners economic and trade regimes promote fair,m

244、arket-oriented conditions for competition.Market orientation implies the freedom for enterprises and individuals to pursue their interests and goals on a level playing field.Indeed,in establishing the WTO,members agreed that“open,market-oriented policies”were at the foundation of the multilateral tr

245、ading system.In the case of China,more than two decades after its accession to the WTO,it has still not embraced a market-oriented approach to the economy and trade.Instead,unlike the market-oriented approaches found in the United States and other WTO Members,China continues to pursue a state-led,no

246、n-market approach to the economy and trade,which is decidedly predatory in nature.China heavily relies on market-distorting industrial plans covering virtually every sector of the economy,and these industrial plans are typically designed to provide substantial competitive advantages to Chinese enter

247、prises and to impose substantial competitive disadvantages on competing foreign enterprises,as China seeks to secure dominant market shares for Chinese companies,both in China and globally.Under Chinas approach,control and direction of all aspects of the economy is retained by the Chinese government

248、 and the CCP,facilitated by a reliance on rule by law rather than rule of law.The mere fact that decisions in the marketplace are often made based on the objectives of the state,rather than based on commercial considerations,distorts Chinas economy and,in turn,the global economy in ways that can dam

249、age and weaken the economies of Chinas trading partners.This damage is exacerbated by the overriding objective of the Chinese states intervention in the market,which is to secure dominant positions for Chinese enterprises in numerous targeted industries.It is also exacerbated,of course,because China

250、 is the second largest economy in the world and the largest trader among WTO Members.A host of harmful policies and practices currently emanate from Chinas predatory non-market economic and trade regime.Key examples include:numerous industrial plans that target specific industries for domination by

251、Chinese enterprises;the placement of CCP officials in state-owned enterprises and private Chinese enterprises in order to control commercial decision making;massive and relentless subsidization of domestic industries(including financial support to and through state-owned enterprises and other state

252、entities at multiple levels of government and a banking system dominated by state-owned banks favoring state-owned enterprises and targeted industries);discriminatory regulatory practices;investment and market access restrictions;import substitution;the creation and maintenance of persistent non-mar

253、ket excess capacity in industrial sectors;forced or pressured technology transfer;state-sponsored theft of intellectual property,trade secrets and confidential business information;state-directed acquisitions of foreign companies with valuable technologies;continued gaps in intellectual property 202

254、3 USTR REPORT TO CONGRESS ON CHINAS WTO COMPLIANCE 20 protection and enforcement;violations of internationally recognized labor rights(including forced labor);lax or unenforced environmental standards;increased adoption of unique Chinese national standards(including reportedly through the China Stan

255、dards 2035 plan,which seeks to set the global standards for next-generation technologies);overly broad cybersecurity regulation designed to favor domestic companies;unwarranted data localization requirements and cross-border data transfer restrictions;the misuse of competition policy for industrial

256、policy objectives;purposeful obfuscation of trade and economic policies,especially with regard to Chinas subsidization practices;and inadequate regulatory transparency.As has become evident to the United States and Chinas other trading partners,one of the more problematic manifestations of Chinas pr

257、edatory non-market economic and trade regime is the creation of non-market excess capacity that is,capacity that would not have been created and would not persist if market forces were operating properly.In the past,China itself has acknowledged excess capacity in several industries,including steel,

258、cement,electrolytic aluminum,flat glass and shipbuilding.Numerous other excess capacity industries have been identified by industry associations in the United States and other countries.Some of the Chinese industries most likely to inflict the disastrous consequences of severe excess capacity on the

259、 world in the future can be found in the Made in China 2025 industrial plan.Through that plan,the Chinese government is seeking to create dominant Chinese companies in 10 broad sectors,including advanced information technology,robotics and automated machine tools,aircraft and aircraft components,mar

260、itime vessels and marine engineering equipment,advanced rail equipment,new energy vehicles,electrical generation and transmission equipment,agricultural machinery,new materials and pharmaceuticals and medical devices.By some estimates,the Chinese government is making available more than$500 billion

261、of financial support to these sectors,oftenusing large government guidance funds that China attempts to shield from scrutiny by claiming that they are wholly private.Based on the recent history of the steel and aluminum industries,Chinas non-market distortions in these newer sectors will likely resu

262、lt in oversupply,leading to loss of jobs and production in market economies and,in some cases,less choice,lower quality,less innovation and higher prices for consumers over time.Another example of the harm that can be caused by Chinas predatory non-market economic and trade regime involves forced or

263、 pressured technology transfer.In USTRs Section 301 investigation into Chinas unfair acts,policies and practices related to technology transfer,intellectual property and innovation,USTR issued two extensive factual reports that detailed how the Chinese government uses foreign ownership restrictions,

264、such as formal and informal joint venture requirements,to require or pressure technology transfer from U.S.companies to Chinese entities.The reports also explained how China imposes substantial restrictions on,and intervenes in,U.S.companies investments and activities,including through restrictions

265、on technology licensing terms.In addition,the reports analyzed how the Chinese government directs and unfairly facilitates the systematic investment in,and acquisition of,U.S.companies and assets by Chinese entities to obtain cutting-edge technologies and intellectual property and to generate large-

266、scale technology transfer in industries deemed important by the states industrial plans.Finally,the reports illustrated how the Chinese government has conducted or supported cyber intrusions into U.S.commercial networks,with the targets being intellectual property and sensitive commercial informatio

267、n held by U.S.firms.While these reports focused on the harm caused to U.S.interests,it is not a problem borne solely by the United States.As in the case of non-market excess capacity,Chinas unfair policies and practices relating to forced or pressured technology transfer also affect other WTO Member

268、s whose companies have developed or are developing advanced technologies.2023 USTR REPORT TO CONGRESS ON CHINAS WTO COMPLIANCE 21 Closely related to its pursuit of forced or pressured technology transfer,China also sponsors and engages in the theft of intellectual property rights,trade secrets and c

269、onfidential business information for commercial use.As noted earlier in the report,intelligence and law enforcement officials from the Five Eyes countries Australia,Canada,New Zealand,the United Kingdom and the United States have publicly characterized the Chinese states sponsorship and pursuit of t

270、his type of theft as being on a scale unprecedented in human history.In the United States alone,in 2023,there were approximately 2,000 active investigations into apparent Chinese theft covering a diverse array of U.S.industries,from aviation to biotechnology to robotics,among many others.In addition

271、 to non-market excess capacity,forced or pressured technology transfer and state-sponsorship of the theft of intellectual property rights,trade secrets and confidential business information,Chinas predatory non-market economic and trade regime also causes serious harm to industries,companies and wor

272、kers in the United States and other WTO Members in other ways.For example,Chinese companies use the artificial competitive advantages provided to them by the extensive interventionist policies and practices of the Chinese state to undersell their foreign competition,both in China and around the worl

273、d.To some extent,the harm to foreign manufacturers is reflected in the very large number of antidumping and countervailing duty investigations that have been initiated against China by the investigating authorities of WTO Members.Since China joined the WTO in 2001,it has been the number one target f

274、or both antidumping and countervailing duty investigations.At the same time,many types of interventionist policies and practices are not capable of being addressed by antidumping and countervailing duty regimes,so the harm caused by China is only partially reflected in those antidumping and counterv

275、ailing duty investigations.In sum,Chinas approach to the economy and trade has not moved toward a stronger embrace of open,market-oriented principles and instead has seen a doubling-down on state capitalism“with Chinese characteristics.”The state remains in control of Chinas economy,and it heavily i

276、ntervenes in the market to achieve Chinas industrial policy objectives,which typically target industries for domination by Chinese companies.Along the way,the state subsidizes industries that would not otherwise form or thrive,directs activities that a private business would not choose to undertake

277、and seeks access to foreign technologies often through nefarious ways,among many other problematic policies and practices.The evidence is clear,moreover,that when a trading partner with Chinas size China is the second largest economy in the world and the largest goods trader among WTO Members routin

278、ely pursues these types of non-market policies and practices,the distortions that it creates impose substantial costs on its trading partners.The Chinese states decisions in the marketplace are not driven by market factors,but their effects on markets push U.S.and international companies out of sect

279、ors,such as steel,aluminum,solar panels and fisheries.Once Chinas dominance is established,barriers to entry can lock-in Chinas dominance over the long term.As a result,markets all over the world are less fair and well-functioning than they should be,and the playing field is heavily skewed against U

280、.S.and other foreign companies that seek to compete against Chinese companies,whether in Chinas market or markets outside of China.In the United States,it is widely accepted that the existing WTO rules do not,and cannot,effectively discipline many of Chinas most harmful policies and practices.It is

281、similarly evident to us that China has become quite adept at circumventing the existing rules,as well as the attempted enforcement of those rules,by obscuring state involvement in the economy in ways that the WTO rules did not anticipate at the time of their negotiation.These problems are exacerbate

282、d by Chinas long record of flouting the transparency obligations that it undertook when it joined the WTO.At the same 2023 USTR REPORT TO CONGRESS ON CHINAS WTO COMPLIANCE 22 time,there is no expectation that China would agree to new WTO rules disciplining its problematic behavior.As a result,in the

283、 United States view,while the WTO still has a significant role to play,enforcement of WTO rules has become less significant and solutions independent of the WTO are necessary,including solutions pursued through bilateral engagement and the use of domestic trade tools,to counter the harm caused by Ch

284、inas unfair and anticompetitive policies and practices.In recent years,it has become apparent that the views of other WTO Members have also been evolving toward the United States view regarding the limits of the WTO when it comes to addressing the China challenge.While the WTO remains a strong focus

285、 for the United States and many of the United States trading partners,there is a growing awareness that it may be necessary to pursue solutions outside the WTO in order to avoid the severe harm that will likely continue to result from Chinas predatory non-market economic and trade regime.For example

286、,some of the United States trading partners are now exploring or adopting possible new domestic trade tools to address the challenges posed by Chinas state-led trade regime.These and other like-minded trading partners have also begun working with the United States sometimes confidentially in pursuit

287、 of new joint strategies to address Chinas harmful non-market policies and practices.Many of these same trading partners have also intensified their work on deterring and responding to Chinas increasing use of economic coercion,including through joint and coordinated strategies.It is also noteworthy

288、 that,in recent years,many of Chinas trading partners have also become increasingly skeptical of Chinas rhetoric.For example,China often touts its strong commitment to win-win outcomes in international trade matters,but its actions plainly belie its words.Through state-led industrial plans like Made

289、 in China 2025,which targets 10 strategic emerging sectors,China pursues a zero-sum approach.It first seeks to develop and dominate its domestic markets.Once China develops,acquires or steals new technologies and Chinese enterprises become capable of producing the same quality products in those indu

290、stries as the foreign competition,the state suppresses the foreign competition domestically and then supports Chinese enterprises as they“go out”and seek dominant positions in global markets.Countries with industries like steel,aluminum,solar panels and fisheries have experienced this reality,and th

291、ey know that a new wave of severe and persistent non-market excess capacity can be expected in industries like those targeted by Made in China 2025,to the detriment of Chinas trading partners.As Chinas economy grew over the years since its accession to the WTO,every country in the world has witnesse

292、d China become a regular user of economic coercion,directed not only against foreign companies but also increasingly foreign governments,including in democratic countries.Indeed,China no longer hesitates to take on foreign governments whose policies or practices are perceived to undermine either Chi

293、nas economic and trade interests or Chinas political interests.Chinas coercive economic measures in this context have taken a variety of forms,including,for example,import restrictions,export restrictions,restrictions on bilateral investment,regulatory actions,state-led and state-encouraged boycotts

294、,and travel bans.Many countries have been directly subjected to this economic coercion.At the same time,one intended by-product of this economic coercion is broader in scope,as China seeks to create an environment that mutes international objections to Chinas non-market policies and practices,even w

295、hen China blatantly flouts the WTOs rules-based international trading system.Finally,it has also not gone unnoticed among Chinas trading partners particularly the democratic market economies that Chinas leadership appears confident in its state-led,non-market approach to the economy and trade and fe

296、els no need to conform to global norms.Chinas leadership also demonstrates confidence in its ability to quiet dissenting voices.Indeed,it has become increasingly 2023 USTR REPORT TO CONGRESS ON CHINAS WTO COMPLIANCE 23 evident that Chinas leadership is seeking to establish new global norms that bett

297、er reflect and support not only Chinas approach to the economy and trade but also Chinas governance model,providing a potentially attractive alternative for other authoritarian regimes around the world.In sum,the reality confronting the United States and other WTO Members is not simply that China ha

298、s chosen to pursue an economic and trade regime that conflicts in significant and harmful ways with the market-oriented approach endorsed by the WTO membership,to the detriment of our workers and businesses.China also does not hold the same core values as other WTO members,especially the democratic

299、market economies.China plainly does not embrace our core values,which,like the fundamental principles of the WTO,include openness,fair competition,non-discrimination,reciprocity and transparency as well as adherence to the rule of law.U U.S S.T TR RA AD DE E P PO OL LI IC CY Y T TO OWWA AR RD D C CH

300、 HI IN NA A As a starting point,any U.S.trade policy toward China must account for current realities in the U.S.-China trade relationship and the many problems that Chinas state-led,non-market approach to the economy and trade creates for the United States and other trading partners,both now and lik

301、ely in the future.Given that Chinas problematic approach has evolved and become more sophisticated,our strategies also need to evolve and become more sophisticated.We also need to find ways to address and to protect ourselves against the many non-market policies and practices routinely generated by

302、Chinas state-led,non-market approach to the economy and trade.Those policies and practices directly harm American workers,farmers,businesses and consumers,threaten our technological edge,weaken the resiliency of our supply chains and undermine our national interest.They also inflict similar harms on

303、 many of our trading partners.Given these circumstances,it is clear that any strategic approach pursued by the United States must focus not only on the near-term,but also on the longer term,if the United States is to compete effectively with China and build resilience against the harms caused by Chi

304、nas predatory behavior.Any strategic approach should also be pursued in coordination with our many important,like-minded trading partners around the world.Looking back over the first 22 years of Chinas WTO membership,and observing Chinas current leadership and clear policy direction,it would be appr

305、opriate to assume that the problems currently created by China will be with us for some time.We cannot expect that China will willingly make fundamental changes to its state-led,non-market approach to the economy and trade in the near-term or even the medium-term.It is also clear that effective stra

306、tegies for dealing with China need to be flexible.The United States must be prepared to adapt and adjust its strategic approach over time as Chinas non-market policies and practices evolve and as global trade patterns shift and alliances and interests change.For all of these reasons,the United State

307、s is now pursuing a multi-faceted strategic approach as it seeks to address the China challenge.This approach involves the pursuit of strategic domestic investment,bilateral engagement of China,enforcement actions,the deployment of domestic trade tools and close coordination with allies and partners

308、.DOMESTIC INVESTMENT The United States has been working to ensure that we are taking the steps domestically to invest in,and build policies supportive of,the industries of today and tomorrow.We therefore have been working to strengthen our economy,our supply chains,our infrastructure,our workers,our

309、 farmers and our 2023 USTR REPORT TO CONGRESS ON CHINAS WTO COMPLIANCE 24 businesses and to lay a solid foundation for us to continue to innovate and maintain our technological edge.Important steps taken to date include the passage of the CHIPS and Science Act,the Inflation Reduction Act and the Inf

310、rastructure Investment and Jobs Act,as well as the many subsequent efforts to implement those Acts.BILATERAL ENGAGEMENT The United States continues to pursue bilateral engagement with China.China is an important trading partner,and every avenue for obtaining real change in its approach to the econom

311、y and trade must be utilized.The United States focus is on addressing the most fundamental problems emanating from Chinas state-led,non-market approach to the economy and trade,rather than seeking isolated,incremental changes in Chinas trade policies and practices.Of particular concern are Chinas in

312、dustrial plans,which target specific industries for dominance and are pursued through a wide array of non-market policies and practices,such as discriminatory regulation,forced or pressured technology transfer,state-sponsored theft of intellectual property,the non-market activities of state-owned an

313、d state-invested enterprises,massive,unrelenting and often non-transparent subsidization,market access restrictions and repression of internationally recognized labor rights,including the use of forced labor,among other harmful policies and practices.Chinas increasing use of economic coercion is ano

314、ther significant concern.At the same time,it is clear that prior U.S.efforts have not led to fundamental changes in Chinas approach to the economy and trade.Ultimately,it will be up to China to decide whether and to what extent it is willing to work constructively with the United States to address t

315、hese significant concerns.ENFORCEMENT It is important for the bilateral relationship to demonstrate that China must honor its promises.We therefore have been working to ensure that China lives up to its existing trade commitments,including its WTO commitments and the ones that China made in the Phas

316、e One Agreement.DOMESTIC TRADE TOOLS The use of domestic trade tools is also a key focus of U.S.trade policy toward China.To the extent that Chinas unfair,non-market and distortive policies and practices persist,the United States is prepared to use domestic trade tools strategically as needed in ord

317、er to achieve a more level playing field with China for U.S.workers and businesses.It is also apparent that existing trade tools need to be strengthened,and new trade tools need to be forged.China pursues unfair policies and practices that were not contemplated when many of the U.S.trade statutes we

318、re drafted decades ago,and we are therefore exploring ways in which to work with the Congress to update our trade tools to counter them.In one significant action to date,as previously discussed,USTR pursued an investigation under the authority of Section 301 of the Trade Act of 1974 into Chinas unfa

319、ir acts,policies and practices related to technology transfer,intellectual property and innovation.In March 2018,after a thorough review and analysis of the evidence,USTR issued a detailed report,finding that China had engaged in a range of unfair and harmful conduct:First,USTR found that China uses

320、 foreign ownership restrictions,including joint venture requirements,equity limitations and other investment restrictions,to require or pressure 2023 USTR REPORT TO CONGRESS ON CHINAS WTO COMPLIANCE 25 technology transfer from U.S.companies to Chinese entities.USTR also found that China uses adminis

321、trative review and licensing procedures to require or pressure technology transfer,which,inter alia,undermines the value of U.S.investments and technology and weakens the global competitiveness of U.S.companies.Second,USTR found that China imposes substantial restrictions on,and intervenes in,U.S.co

322、mpanies investments and activities,including through restrictions on technology licensing terms.These restrictions deprive U.S.technology owners of the ability to bargain and set market-based terms for technology transfer.As a result,U.S.companies seeking to license technologies must do so on terms

323、that unfairly favor Chinese recipients.Third,USTR found that China directs and facilitates the systematic investment in,and acquisition of,U.S.companies and assets by Chinese companies to obtain cutting-edge technologies and intellectual property and to generate large-scale technology transfer in in

324、dustries deemed important by Chinese government industrial plans.Fourth,USTR found that China conducts and supports unauthorized intrusions into,and theft from,the computer networks of U.S.companies.These actions provide the Chinese government with unauthorized access to intellectual property,trade

325、secrets and confidential business information,such as technical data,negotiating positions and sensitive and proprietary internal business communications.The purpose of these actions is to support Chinas strategic development goals,including its science and technology advancement,military modernizat

326、ion and economic development.Based on these findings,the United States took a range of responsive actions.These actions included the successful prosecution of a WTO dispute settlement case challenging Chinese measures that deny foreign patent holders the ability to enforce their patent rights agains

327、t a Chinese joint venture partner after a technology transfer contract ends and that impose mandatory adverse contract terms that discriminate against and are less favorable for imported foreign technology as compared to Chinese technology,as well as the imposition of substantial additional tariffs

328、on imports of Chinese goods.Over time,as has been previously reported,these tariffs eventually covered$370 billion of Chinese imports,with additional tariffs of 25 percent on$250 billion of Chinese imports and additional tariffs of 15 percent on a further$120 billion of Chinese imports,while China r

329、esponded through the imposition of retaliatory tariffs on various imports of U.S.goods.In December 2019,after one year of negotiations,the United States announced that the two sides had finalized the text of an economic and trade agreement,which was later signed in January 2020.This agreement,common

330、ly referred to as the“Phase One Agreement,”included commitments from China on intellectual property,technology transfer,agriculture,financial services,currency and foreign exchange,and the purchase of U.S.goods and services.The commitments varied in ambition,and in effectiveness.For example,some com

331、mitments related to financial services reflected reforms that China was already contemplating or pursuing,as China had begun easing foreign investment restrictions in some financial services sectors in 2017.In addition,in the area of intellectual property rights,while China committed to make a numbe

332、r of changes to its laws and regulations,China saw many of these changes as now needed by its domestic businesses,given their own increasing efforts at innovation.It also remains unclear how faithfully and fairly China will actually enforce the changes to its laws and regulations.Meanwhile,other2023

333、 USTR REPORT TO CONGRESS ON CHINAS WTO COMPLIANCE 26 commitments that China made,such as in the area of technology transfer,are difficult to verify given the tactics that China takes to obscure its activities.Notably,the Phase One Agreement did not address many of the U.S.concerns that the United States had been seeking to address in its negotiations with China.The unresolved issues included criti