Apparel Sourcing Intelligence - Worldwide

US Congressional committee claims China “violates the spirit and the letter of its international trade obligations”

A US Congressional committee prepared a report before the November 8 elections savagely attacking China’s good faith as a trading partner.

The US-China Economic and Security Review Commission (composed only of members of America’s two Houses of Congress) published on November 16 its 2016 Annual Report – prepared on October 9 – which takes a markedly more pessimistic attitude to China’s international economic policies than it has since first set up in 2002. The criticisms affect other countries planning closer links to China almost as much as they affect the US. They make especially depressing reading for:

  • countries like Australia seriously reviewing alternatives to the TPP
  • Other countries around the Pacific being pursued by China to join its Free Trade Area of Asia-Pacific
  • Countries outside the Pacific – such as Britain – where it is seriously argued that closer links with China might substitute for current trade alliances.

The Commission found that China:

  • pursues import substitution policies,
  • imposes forced technology transfers
  • engages in cyber-enabled theft of intellectual property
  • obstructs the free flow of information and commerce.
  • is becoming a less welcoming market for foreign investors with a host of restrictions and anticompetitive laws that proscribe foreign participation in broad swathes of the economy and promote domestic companies.
  • extensively subsidises favoured local companies and sectors,  putting international competitors wishing to export to China at a distinct disadvantage.

“It has become all too apparent,” the report states, “that the CCP [Chinese Communist Party] has no intention of opening up what it considers key sectors of its economy to significant U.S. or foreign competition and control.”

The commission describes America’s relationship with China as strained based on China’s “ongoing failure to uphold its World Trade Organization commitments, ineffective efforts to cut industrial overcapacity, and unfair treatment of US companies.”

American companies are finding it increasingly difficult to operate in China, the report notes, citing unclear laws and inconsistent regulatory enforcement, policies that favour domestic competitors, and industrial overcapacity. According to the American Chamber of Commerce in China’s 2016 Business Climate Survey, more than three-quarters of surveyed US companies reported that they felt foreign businesses are less welcome in China than in years past.

The report also attacks US policies making Chinese investment in the US too easy – as it has frequently in the past.

But it concludes that  China’s leaders appear to “have decided the time has come for China to leave behind its long-held strategy, espoused by Deng Xiaoping, of ‘hide your strength, bide your time.’” Instead, it believes, “China is showing itself to the world now, and the outcome is not what many had hoped for 15 years ago when the country was welcomed into the WTO and the global economic system”