By Susan Krause
Washington File Staff Writer

Washington - China stands to benefit greatly from the World Trade Organization's (WTO) Doha Round of negotiations and should play a more active role in securing an agreement, says U.S. Trade Representative (USTR) Susan Schwab.

Schwab, in her first official visit to China as USTR, addressed a gathering of the American Chamber of Commerce and the U.S.-China Business Council in Beijing August 29.

"[I]t is my firm belief … that China has an unprecedented stake in the successful conclusion of a robust agreement, and that a successful Doha Round will only be possible with vigorous and positive Chinese participation," she said.

The Doha negotiations, which began at a WTO ministerial conference in the Qatari capital in 2001, have faced an uphill struggle from the outset.  The talks collapsed in 2003 as parties disagreed on the handling of agricultural subsidies and market access.  They were resuscitated by intensive negotiations in 2004 and 2005, but were suspended indefinitely once again in July 2006 as ministers from the "G-6" major trading entities - the United States, the European Union, Australia, Brazil, India and Japan - deadlocked over reductions in tariffs and subsidies.  (See related article.)

Schwab called the breakdown of the talks a "major disappointment."

"Indeed, the Doha Round is our generation's best opportunity to lift millions of people out of poverty and to raise living standards for millions more," she said.

The USTR expressed hope that Chinese officials would "carry out a clear-eyed assessment of the costs and benefits of a successful Doha Round and conclude that it is in China's long-term self-interest to play an active role in ensuring the Round's ultimate success."

CHINA'S STAKE IN ENFORCING WTO DISCIPLINES

Schwab said the results of China's decision to implement market-oriented reforms and join the rules-based international trading system have been "nothing short of breathtaking."

With annual growth rates averaging nearly 10 percent over the last 20 years, the USTR said, China has experienced a total growth in real gross domestic product (the market value of all final goods and services produced within a country) of more than 500 percent.

"Importantly, the people of China have benefited greatly from China's engagement with the rest of the world, with an estimated 377 million people lifted out of poverty," she said.

China has demonstrated a capacity to play an "influential and constructive" role in the trading system when it wants something to happen, Schwab said.

She pointed out that Beijing hosted a meeting of trade ministers of the member economies of the Asia-Pacific Economic Cooperation (APEC) forum in June 2001, helping to "lay important groundwork" for the WTO Doha Round.  In addition, she said, China hosted an informal trade ministerial in Dalian in July 2005, using the opportunity to push for the elimination of agricultural export subsidies.

"But it is also clear that at present, China is still assessing its role in the WTO and in the [Doha] Round," Schwab said.

She questioned China's continued passive role in the informal international groupings it has joined, including the G-20, a forum on international financial concerns for key industrial and emerging market countries, and the G-33, a group of developing countries seeking continued protection for subsistence farmers in WTO negotiations.

"In both groups, other countries - with trade interests decidedly different from China's - are playing the leading roles," Schwab said.  "Is it really in China's best interest … to have these other countries appearing to speak for China?"

China's interests give it an important stake in supporting an international trade system that is effective in enforcing rules, the USTR said. 

Those interests, she suggested, include gaining the trust of trading partners and promoting increased trade among developing countries that have significant potential as future markets.

"Now is the time for China to play a greater role, commensurate with its status as the third largest trading nation in the world," Schwab said.  She urged China to lead by example, reducing the use of "loopholes that negate cuts in tariffs" and reassuring its trading partners "that they can open their markets to Chinese products and services because Chinese markets will be open and welcoming to their products and services."

China is already a significant beneficiary of the protections and discipline provided under WTO rules, the USTR said.  In an update on U.S.-China bilateral trade relations, she said that, among the 149 WTO members, China is the most frequent initiator as well as most frequent subject of anti-dumping investigations.

"Surely there can be no stronger motivation to strengthen the institution," Schwab said.

NEGATIVE CONSEQUENCES IF DOHA ROUND FAILS

Without an agreement on the Doha objectives, Schwab said, countries will be more likely to resort to punitive measures and litigation in dealing with trade issues.

"In such a scenario, China's commerce could be particularly vulnerable to legal challenges over its compliance with global trading rules," she suggested.

Increased protectionism also could result if the Doha talks fail, the USTR said.

"There are dozens of bills in the U.S. Congress proposed by members who want us to 'get tough' or 'stand up to China,'" she said.  "These … reflect the very real concerns of many Americans about the impact of China's dramatic entry into the trading system.  Responsible actions and leadership by China can help allay those concerns."

Schwab urged China to use its influence as an "export powerhouse" to break the impasse on the negotiations and help them move forward.

"The WTO and its members need a solid Doha outcome to remain an effective force in the global trading system," she said.  "We look forward to working with China as it steps up - into a role of collaborative leadership - to ensure that the world does not retreat from its commitment to progressive and meaningful trade liberalization."

For more information on U.S. policies, see The United States and China and USA and the WTO.

The text (PDF, 7 pages) of Schwab's remarks, as prepared for delivery, is available on the USTR's Web site.