U.S. report recommends suspending normal trade relations with China if WTO market access agreement is violated

The U.S. Congress should suspend normal trade relations with China if it determines that Beijing has not complied with the World Trade Organization (WTO) market access agreement it signed decades ago, the U.S.-China Economic and Security Review Commission said in its 785-page annual report. It includes 39 recommendations and covers nearly every aspect of the bilateral relationship. It also called on U.S. lawmakers to study the feasibility of blockading Chinese energy imports in the event of a military conflict involving Beijing, particularly those transiting the Strait of Malacca.

Tensions between Washington and Beijing have increased to their highest level in years, and the report reflects the enormous distrust in Washington towards Beijing on essentially every aspect of the relationship – from trade policy to human rights to the Taiwan question. The report was published just one day after U.S. President Joe Biden and Chinese President Xi Jinping met face-to-face for the first time since Biden took office in early 2021. The two leaders committed to working together on climate change and agreeing to communicate more, but differences remain on almost all other issues. “We’re not going to be able to work everything out,” Biden said after the three-hour meeting. “I’m not suggesting this is kumbaya.”

Biden faces intense pressure from members of both parties in Congress to maintain a hard line against Beijing. Among the issues Biden raised with Xi was China’s “non-market economic practices”, the White House said. The Commission’s report focused heavily on trade policy. “After many years of attempting to engage China and persuade it to abandon its distortive trade practices, it is clear this approach has not been successful,” the report said. In particular, it said the U.S. Trade Representative should assess China’s compliance with the “terms and conditions of the 1999 Agreement on Market Access”, which Beijing and Washington signed before China joined the WTO. If that assessment “concludes that China has failed to comply with the provisions agreed to for its accession to the WTO, Congress should consider legislation to immediately suspend China’s Permanent Normal Trade Relations treatment”, the report said. “Following the suspension of PNTR, Congress should assess new conditions for renewal of normal trade relations with China.”

The Commission, an independent panel set up by Congress in October 2000, reports directly to lawmakers about the national security implications of the U.S.-China trade and economic relationship. The latest report grew out of seven hearings involving 74 experts from government, business and research organizations over the past year. The 12 Commissioners behind this year‘s report are not lawmakers, but are appointed by Congress.

Kurt Tong, a former U.S. Consul General and current Managing Partner at Washington-based risk consultancy The Asia Group, called the Commission’s report “a cataloguing of the year’s bad news about China”. He noted that lawmakers and academics use the report to frame their policy recommendations on China, the South China Morning Post reports.