The European Union, Japan and the United States proposed new global subsidy rules on Tuesday, clearly pointing at China’s state-supported economic model.
During a Trilateral meeting held in Washington, D.C., Robert Lighthizer, the U.S. Trade Representative, Hiroshi Kajiyama, Japan’s Economy Minister and EU’s trade Commissioner, Phil Hogan, focused on strengthening existing World Trade Organisation (WTO) rules with the aim of curbing subsidies among WTO members they say they are distorting the worldwide economy.
In a joint statement issued on the same day, the three partners said that the existing (WTO) rules were insufficient to tackle market distortions from subsidies.
They proposed adding four banned subsidy types, namely unlimited guarantees, subsidies to ailing enterprises without a credible restructuring plan and to enterprises unable to obtain long-term financing, and certain direct forgiveness of debt.
They also mentioned the need to end “unfair practices” of forced technology transfer which China has been exploiting, and which “are inconsistent with an international trading system based on market principles and undermines growth and development,” according to their statement.
The agreement came after two years of trilateral negotiations and one day before the US and China sign a “phase 1″ trade agreement, that will lead to the latter buying more products from the US.
The partners plan to bring their proposals to WTO and involve as many countries as possible, if not all WTO members, hoping to convince China to see the coalition’s advantages.
“This joint statement is an important step toward addressing some of the fundamental issues distorting global trade,” said Hogan, adding that “it is also a symbol of a constructive strategic collaboration between three major players in global trade.”
Brussels has long been warning about WTO’s “critical situation” and after the WTO appellate body’s paralysis, it has been seeking a wider reform of WTO rules to rescue the multi-lateral trading system.