China Trade, WTO Future Cloudy, WITA Panelists Say

Experts disagreed on whether the spread of the coronavirus will make it impossible for China to reach its purchase commitments, or make it more likely that China will wish to please the U.S., as its economy suffers. But one thing most agreed on -- the disease's impact is another reminder, after the tariff war, that companies should diversify instead of being wholly reliant on Chinese factories. The experts were on a panel at the Washington International Trade Association conference Feb. 4 on the future of U.S.-China trade.

Clete Willems, a former Trump White House negotiator with China, and now at Akin Gump, said trade tensions with China are here to stay, even if a Democrat wins in November, so companies should be diversifying.

Wendy Cutler, a former Asia negotiator at the Office of the U.S. Trade Representative, now with the Asia Society Policy Institute, noted that the Canadian trade minister's title was changed to “trade and diversification,” and she thinks more countries may follow suit.

“It’s all about diversification, not only for companies, but for countries,” she said. The chaos of recent trade policy has “woken up many of our trade partners, maybe they’re too dependent on us,” she said. And the coronavirus's impact to Wuhan has underscored the need for multiple vendors in a supply chain.

Ann Lee, author of What the U.S. Can Learn From China, said she doesn't think there's any more diversification coming. “The companies that wanted to move out of China already did,” she said, and said that some electronics companies found when they tried to open factories in other countries that there were not enough ports or enough labor.

Panelists said they think there won't be tariff hikes on Chinese goods in an election year, but they do expect developments on export controls. Willems said he expects to see legislation on the issue. “It’s clear to everyone here, probably, that the entire posture of this town vis a vis China has changed completely in the last three years,” he said. “Democrats, Republicans, Congress and the administration are all competing with each other to see who can be tougher on China.”

The panelists agreed that the trilateral statement on how to confront Chinese subsidies and state-owned enterprises was important, though Cutler thought it was more of an advance than did Willems, who said if Australia joined the group, they might arrive at text to put their ideas into action.

World Trade Organization Director-General Robert Azevedo, who spoke before the China panel, said he understands countries' frustration with gray areas in the subsidy regime at the WTO, but cautioned that the WTO is not designed to take on countries' economic systems.

Azevedo urged attendees to lobby their governments to find a solution to the appellate body impasse. He said that he and USTR Robert Lighthizer “have been thinking and brainstorming about many things” regarding WTO reform, but there need to be concrete proposals to get things moving in Geneva. He said he does think the USTR has “a sense of urgency” about finding a solution. He downplayed the significance of not having a White House meeting during this trip to Washington, noting that the president has a lot going on right now.