China will propose WTO reforms, but don't try to trap us: Beijing's WTO envoy

GENEVA (Reuters) - China plans to propose reforms of the World Trade Organization, China’s ambassador to the WTO Zhang Xiangchen said, while warning fellow WTO members against seeing reform as a chance to put China in a straitjacket.

Xiangchen Zhang Chinese Ambassador to the WTO looks on before the start of the General Council meeting at the World Trade Organization (WTO) in Geneva, Switzerland, July 26, 2018. REUTERS/Denis Balibouse

Zhang was speaking at a lunch during a WTO conference in Paris on Friday, where diplomats and officials discussed ideas about reforming the WTO, largely driven by U.S. complaints that the WTO has failed to police suspected Chinese rule-breaking.

With support from Brussels and Tokyo, Washington wants the WTO to crack down on subsidies for state-backed enterprises, overcapacity in steel and other basic industries, and on the practice of forcing investors to hand over valuable technology.

China is its chief suspect on all three counts.

But the United States has parted with its allies by blocking appointments to the WTO’s Appellate Body, whose judges it blames for hampering the U.S. war on unfair trade practices.

The rest of the WTO fears the United States is undermining a global check on protectionism. The EU and Canada have both launched reform initiatives to deal with the U.S. concerns.

Zhang said China had decided to co-sponsor the EU’s proposal on reforming the Appellate Body, and China and the EU had set up a high-level working group.

“We will also put forward China’s WTO reform proposal soon,” he said, according to a copy of his remarks provided to Reuters.

Zhang said he had listened carefully and humbly to comments and complaints about China at the Paris conference.

“We will study them carefully, and to see if some of them could be taken into account in the process of domestic institutional reform,” he said.

He added that China was willing to discuss the root causes of problems such as excess capacity but it would not have views forced upon it. The problem needed to be correctly diagnosed before a rush to make prescriptions.

The WTO needed reform because it was not keeping up with changes in business, it was losing the battle against unilateralism and protectionism, and had not made any meaningful cut in rich countries’ agricultural subsidies, he said.

Zhang said WTO reform should liberalize trade and facilitate investment, but step-by-step and without reinventing the wheel or “moonshot targets”. And the WTO must not be used to suit particular countries’ needs, he said.

“Excuse me for being a bit blunt here, but if someone wishes, in the name of reform, put China in a tailor-made straitjacket of trade rules to constrain China’s development, I think they will be very much disappointed,” he said.

“If it is a real reform, we’ll go ahead with it, if it is a trap, it’s best for all of us to stay away from it.”

(The story corrects to remove erroneous reference to U.S. involvement in EU-China working group in seventh paragraph.)

Reporting by Tom Miles; Editing by Toby Chopra