ArticlePDF Available

How May China Respond to the U.S. Trade Approach? Retaliatory, Inclusive and Regulatory Responses

Authors:

Abstract

The paper endeavours to conceptualize and provide an analytical framework for China's response to U.S. trade policy. It analyses the following questions: what is the new U.S. trade approach? How might China respond to the United States' trade approach? What are the trends and implications of China's response to the U.S. trade approach? It argues, first, that the U.S. trade approach has not changed regarding most of the U.S.-style regulatory disciplines. However, it has changed in terms of the shift toward managed trade, unilateralism and trade enforcement. Second, China will likely adopt a three-track approach: consisting of retaliatory, inclusive and regulatory responses. Third, these responses exist on a political-legal spectrum that spans from a more political retaliatory response through to an inclusive one, or a more legalized approach (regulatory response). The inclusive response is likely to be given primacy by China over the other two responses, and China’s responses carry profound implications.
1
How May China Respond to the U.S. Trade Approach? Retaliatory, Inclusive and
Regulatory Responses
Heng Wang*
Columbia Journal of Asian Law, Volume 31, Number 2 (forthcoming)
Abstract: The paper endeavours to conceptualize and provide an analytical framework for
China’s response to U.S. trade policy. It analyses the following questions: what is the new
U.S. trade approach? How might China respond to the United States’ trade approach? What
are the trends and implications of China’s response to the U.S. trade approach? It argues,
first, that the U.S. trade approach has not changed regarding most of the U.S.-style regulatory
disciplines. However, it has changed in terms of the shift toward managed trade,
unilateralism and trade enforcement. Second, China will likely adopt a three-track approach:
consisting of retaliatory, inclusive and regulatory responses. Third, these responses exist on a
political-legal spectrum that spans from a more political retaliatory response through to an
inclusive one, or a more legalized approach (regulatory response). The inclusive response is
* Associate Professor and Co-director of CIBEL (China International Business and Economic Law)
Initiative, Faculty of Law, the University of New South Wales; University Visiting Professorial
Fellow, Southwest University of Political Science and Law. The author is thankful to David A. Gantz,
Markus Wagner, Tomer Broude, Wenhua Shan, Qingjiang Kong, Mark Feldman, Gabrielle Appleby,
Daniel Joyce, Pasha L. Hsieh, Ming Du, Benedict Kingsbury, Ka Zeng, Paul Mertenskötter, and the
participants at my talks or conference presentations at the New York University, Columbia
University, the University of Melbourne, the Chinese University of Hong Kong, the American Society
of International Law and the Asian WTO Research Network for very insightful comments. The author
is also immensely grateful to Melissa Vogt for the superb research assistance. Remaining errors are of
the author’s alone. Email: heng.wang1@unsw.edu.au.
2
likely to be given primacy by China over the other two responses, and China’s responses
carry profound implications.
I. INTRODUCTION ............................................................................................................ 3
II. THE NEW U.S. TRADE APPROACH ......................................................................... 6
A. Managed Trade .......................................................................................................8
B. Unilateralism ........................................................................................................11
C. Trade enforcement ...............................................................................................12
D. Summary ...............................................................................................................14
III. THE RETALIATORY RESPONSE ........................................................................... 15
A. The forms ..............................................................................................................15
B. The features ..........................................................................................................19
1. Deterrence against specific measures .................................................................... 19
2. Passive, acute but short-term response ................................................................. 19
3. Possible lose-lose outcome .................................................................................... 20
C. The future .............................................................................................................22
1. Will China adopt a retaliatory response? ............................................................... 22
2. How may China adopt a retaliatory response? ....................................................... 25
IV. THE INCLUSIVE RESPONSE .................................................................................. 27
A. The forms ..............................................................................................................27
1. Multilateral trade system ...................................................................................... 28
2. PTIAs and other initiatives ..................................................................................... 28
B. The features ..........................................................................................................31
1. Focus on engagement with partners ...................................................................... 31
2. A full-range of tools ............................................................................................... 32
3. Flexibility ............................................................................................................... 33
C. The Future .............................................................................................................34
1. Will China adopt an inclusive response? ................................................................ 34
2. How may China adopt an inclusive response?........................................................ 36
V. THE REGULATORY RESPONSE ............................................................................. 39
A. The forms ..............................................................................................................39
1. Domestic reform.................................................................................................... 40
2. High-level PTIAs ..................................................................................................... 41
B. The features ..........................................................................................................42
1. A dichotomy between minor and major regulatory responses ............................... 42
2. Long-term responses ............................................................................................. 44
3. A holistic approach ................................................................................................ 45
C. The future .............................................................................................................46
1. Will China adopt a regulatory response? ............................................................... 46
2. How may China adopt a regulatory response? ....................................................... 49
VI. THE IMPLICATIONS ................................................................................................ 52
A. A political-legal spectrum .....................................................................................52
B. China’s preference for inclusive approach? ..........................................................54
C. Proper responses needed .....................................................................................56
3
D. The shift toward a proactive approach .................................................................58
VII. CONCLUDING REMARKS ..................................................................................... 58
I. INTRODUCTION
The bilateral relationship between the US and China is crucial, since they are the two
biggest economies and most consequential strategic actors in the world.
1
U.S. trade policy
often targets China, including in domestic measures (e.g., President Trump’s Proclamation
concerning tariffs on China’s steel and aluminum exports under Section 232 of the Trade
Expansion Act of 1962 on national security grounds,
2
President Trump’s order of a Section
301 of the 1974 Trade Act investigation into China’s intellectual property practices,
3
and
trade remedies measures), the United States-China bilateral investment treaty (BIT)
negotiations, and disputes at the World Trade Organization (WTO). The United States is
deemed to be the only country that has the power to force China to make systemic
concessions regarding trade policy,
4
and the European Union can do the same at least to a
1
Mark Beeson & Fujian Li, What consensus? Geopolitics and policy paradigms in China and the
United States, 91 INTERNATIONAL AFFAIRS 93, 93 (2015).
2
Presidential Proclamation on Adjusting Imports of Steel into the United States(March 8, 2018),
available at https://www.whitehouse.gov/presidential-actions/presidential-proclamation-adjusting-
imports-steel-united-states/.
3
Presidential Memorandum for the United States Trade Representative(Aug. 14, 2017), at
https://www.whitehouse.gov/the-press-office/2017/08/14/presidential-memorandum-united-states-
trade-representative.
4
Bloomberg News, Trump's Deficit Crusade Overshadows Xi's Investment Treaty Pitch(Apr. 19,
2017), at https://www.bloomberg.com/politics/articles/2017-04-19/trump-s-deficit-crusade-
overshadows-xi-s-investment-treaty-pitch.
4
lesser degree. More broadly, the United States plays “an oversized role in the Chinese legal
imagination and legal politics today.”
5
There is substantial China-United States disagreement on trade. The volume, gravity and
urgency of the issue deserve attention, including President Trump’s likely aggressive trade
policies toward China, and the inadequacy of existing dispute settlement mechanisms.
Historically, China’s WTO accession is arguably a response to the requirements regarding the
MFN treatment in the United States. Nowadays China has quickened the pace in its Belt and
Road initiative (BRI), preferential trade and investment agreements (PTIAs), and free trade
zones (FTZs), among others. Given its economic clout, China’s reaction to the U.S. trade
approach may affect not only the countries’ bilateral relationship (e.g., the possible trade
war
6
), but also other countries and even global economic governance (e.g., possible
retaliation bringing uncertainties in the world trading system and increasing protectionism).
Although China’s interaction with the United States regarding trade has received much
attention,
7
there is insufficient research on the analytical framework of China’s responses to
the United States on trade, which will be explored here.
5
TEEMU RUSKOLA, LEGAL ORIENTALISM: CHINA, THE UNITED STATES, AND MODERN LAW 202
(Harvard University Press. 2013).
6
The U.S. actions and China’s reaction will decide whether a trade war between the two states will
eventually materialize. Marianne Schneider-Petsinger, Trade Policy Under President Trump:
Implications for the US and the World at
https://www.chathamhouse.org/sites/files/chathamhouse/publications/research/2017-11-03-trade-
policy-trump-schneider-petsinger-final.pdf.
7
See, e.g., Ming Du, Explaining China’s Tripartite Strategy Toward the Trans-Pacific Partnership
Agreement, 18 JOURNAL OF INTERNATIONAL ECONOMIC LAW 407, 407-432 (2015).
5
As a work of primary original analysis, the paper discusses several questions: what is the
new U.S. trade approach? What are the possible responses of China to U.S. trade policy?
What are the trends and implications of China’s response to the U.S. trade approach? The aim
of the paper is to develop a conceptual framework that could inform debate over China’s
possible trade strategies and pathways. The paper proceeds as follows: Part II critically
reviews the U.S. trade approach, arguing that the U.S. trade approach remains largely
unchanged regarding U.S.-style regulatory disciplines but has changed in respect of the shift
toward managed trade, unilateralism and trade enforcement. According to the major functions
of different responses, the paper argues that China will likely adopt a multipronged approach:
comprising retaliatory (Part III), inclusive (Part IV) and regulatory responses (Part V).
Retaliation deters or stops the measures of the other party. An inclusive response engages
with partners to liberalize trade without imposing deep regulatory disciplines. Meanwhile, a
regulatory response promotes regulatory protection. Part VI analyses the profound
implications raised by the responses. Importantly, these responses exist on a political-legal
spectrum that spans from a more political retaliatory response through to the inclusive one
and to a more legalized end (a regulatory response). Part VII provides short concluding
remarks, reflecting on the essence of China’s response and open issues.
Before commencing, one point needs to be clarified. It is difficult, if not impossible, to
separate China’s response to the U.S. trade approach (particularly inclusive and regulatory
responses) from China’s efforts to pursue its autonomous trade policies that take into account
a wide range of domestic and international considerations. Therefore, China’s measures
discussed below are largely, but not necessarily fully, attributable to the U.S. trade approach.
6
II. THE NEW U.S. TRADE APPROACH
First it is helpful to sketch the U.S. trade
8
approach to consider how this interacts with
China. The U.S. response to the rise of China
9
has long been to engage and hedge – to draw
China into a rules-based system while refurbishing old alliances as an insurance policy.
10
The
major concerns of the United States regarding its trade with China include trade deficit, RMB
exchange rate, excess capacity, market access (e.g., regarding finance, culture, and
manufacturing), and the protection of intellectual property.
11
Although these are not new
issues, the U.S. trade approach has changed and affected China.
It should be noted that the changed facets of the U.S. trade approach cannot be segmented
from its unchanged aspects. In various aspects, the former develops from the latter.
Therefore, an overview of the unchanged U.S. trade approach will be useful. Essentially The
U.S. unchanged trade approach is to push for strong U.S.-style regulatory disciplines
bolstered by the enforcement of these rules in trade pacts.
12
These disciplines may shape new
generation trade norms, and may affect China indirectly. An example of potential indirect
effect is China’s PTIA negotiation with partners that have concluded FTAs with the United
8
As trade pacts conclude by the United States cover WTO-extra issues such as investment and social
issues, trade is understood in the broad sense here unless otherwise stated.
9
For the analysis of China's rise, see, e.g., DAVID C. KANG, CHINA RISING: PEACE, POWER, AND
ORDER IN EAST ASIA 1-203 (Columbia University Press. 2007).
10
Daniel S. Hamilton & Steven Blockmans, TTIP’s Broader Geostrategic Implications, in RULE-
MAKERS OR RULE-TAKERS? EXPLORING THE TRANSATLANTIC TRADE AND INVESTMENT
PARTNERSHIP 245, (Daniel S. Hamilton & Jacques Pelkmans eds., 2015).
11
Research Report on China-US Economic and Trade Relations. (2017).
12
Trading Up: U.S. Trade and Investment Policy. (2016).
7
States, such as Australia, Korea, and possibly Canada. More broadly, the PTIAs negotiated
by the United States could gradually shape new international rules that will affect China.
The United States is not likely to radically deviate from its previous deep FTAs in terms of
highlighted regulatory requirements on non-tariff measures, and its previous positions such as
the Bipartisan Trade Deal,
13
and the Bipartisan Congressional Trade Priorities and
Accountability Act.
14
Under the Trump Administration’s NAFTA negotiation objectives, the
new NAFTA may ‘look very similar to’ the Trans-Pacific Partnership (TPP) despite some
differences.
15
As recently indicated by the US government, its PTIAs “must adhere to high
standards” in intellectual property, digital trade, agriculture, labour, and the environment.
16
The US trade agreements adopt a ‘conditional’ or ‘hard’ template on labour provisions.
17
The
recent US approach in all of its trade pacts is to link social issues (such as workers’ rights) to
trade.
18
Following the same path, the Trump Administration has further proposed moving
labour rights and environmental standards
19
into ‘the core’ of the NAFTA rather than in a
13
Office of the United States Trade Representative, Bipartisan Trade Deal (2007).
14
Bipartisan Congressional Trade Priorities and Accountability Act of 2015.
15
Simon Lester, The Trump Administration's NAFTA Negotiating Objectives (International
Economic Law and Policy Blog 2017).
16
National Security Strategy of the United States of America. (2017).
17
Ferdi De Ville, et al., Sustainable Development in TTIP: A Highest Common Denominator
Compromise?, 7 EUROPEAN JOURNAL OF RISK REGULATION 290, 291 (2016).
18
Daniel C.K . Chow, How the United States Uses the Trans-Pacific Partnership to Contain China in
International Trade, 17 CHICAGO JOURNAL OF INTERNATIONAL LAW 370, 400 (2016).
19
Trump Administration seems to roll back environment protection particularly in terms of the
renunciation of the Paris Agreement. That said, climate change is usually not addressed under the
previous US FTAs such as the TPP.
8
side agreement and highlighting their enforcement (i.e. enforcement of domestic labour law
in NAFTA parties and enforcement of environment obligations under NAFTA dispute
settlement system).
20
Overall, the United States will probably maintain its current position on
many of key issues including intellectual property, e-commerce and state-owned enterprises
(SOEs), which are largely based on the U.S. domestic law.
For the new U.S. trade policy, its overarching objective is ‘to expand trade in a way that is
freer and fairer for all Americans.’
21
In particular, the U.S. government tends to address
‘unfair foreign trade practices’ through unilateral policies, renegotiation or withdrawal from
pacts, and threats of import protection.
22
As discussed below, the changed aspects of the U.S.
trade approach may develop from the previous one (such as the enforcement of trade rules).
However, with the U.S. trade approach in flux, it is difficult to accurately review its features.
The following part focuses on the most salient aspects of the paradigm shift of the U.S. trade
approach, particularly those related to Sino-US trade relations.
A.
Managed Trade
The United States shifts from trade liberalisation to managed trade, and in particular
further highlights trade deficit with China.
23
As the most noticeable difference from previous
20
Office of the United States Trade Representative, Summary of Objectives for the NAFTA
Renegotiation(Jul. 17, 2017), available at
https://ustr.gov/sites/default/files/files/Press/Releases/NAFTAObjectives.pdf.
21
Office of the United States Trade Representative, 2017 Trade Policy Agenda and 2016 Annual
Report of the President of the United States on the Trade Agreements Program(2017), available at
https://ustr.gov/sites/default/files/files/reports/2017/AnnualReport/AnnualReport2017.pdf.
22
Kyle Handley & Limão Nuno, Trade under T.R.U.M.P. policies, in ECONOMICS AND POLICY IN
THE AGE OF TRUMP 141, (Chad P. Bown ed. 2017).
23
Ministry of Commerce of the People’s Republic of China, 64. 2017.
9
trade practices, the Trump Administration adopts a mercantilist approach anchored in
economic nationalism
24
under the new “America First” trade policy.
25
Reducing the US trade
deficit is a key pillar of Trump’s policy.
26
This explains why there are considerable rhetoric
on bilateral trade relations with China,
27
which attracts more attention than before. Trade
pacts pursued by the US are also “trade balance agreements” or “trade deficit agreements”
rather than free trade agreements.
28
This new approach differs from the United States’
leading role in institutionalizing and advancing the liberalization of trade and flows of
investment since World War II.
29
The primary reasons for the waned support for trade
liberalization are, inter alia, the serious employment and income pressures by affected
sectors.
30
It drives the US trade policy from the support to ambivalence and then to the
doubts of trade liberalization.
24
David P. Fidler, President Trump, Trade Policy, and American Grand Strategy: From Common
Advantage to Collective Carnage, 12 ASIAN JOURNAL OF WTO & INTERNATIONAL HEALTH LAW
AND POLICY 1, 1, 7 (2017).
25
America First Foreign Policy(Dec. 2, 2017), available at https://www.whitehouse.gov/america-
first-foreign-policy.(The US will “put American workers and businesses first when it comes to
trade”);Schneider-Petsinger, 3. 2017.
26
Schneider-Petsinger, 2. 2017.
27
Bridges Negotiation Briefing: A Guide to the WTO’s Eleventh Ministerial Conference. (2017).
28
C. Fred Bergsten, The US Agenda: Trade Balances and the NAFTA Renegotiation, in A PATH
FORWARD FOR NAFTA 17, (C. Fred Bergsten & Monica de Bolle eds., 2017).
29
Fidler, ASIAN JOURNAL OF WTO & INTERNATIONAL HEALTH LAW AND POLICY, 6 (2017).
30
U.S. Trade and Investment Policy. (2011).
10
On a related note, the United States appears to start managing the outflow of its
investment. As reflected in the remarks of the United States Trade Representative (USTR),
31
it is suggested that the U.S. government is no longer responsible for guaranteeing legal
protections for American businesses investing in NAFTA countries.
32
This is probably the
reason why USTR’s NAFTA renegotiation position is to subject new investment provisions
to opt-in provisions: countries would have to “opt-in” to participate in ISDS.
33
This arguably
makes ISDS largely ineffective.
34
If this is the case, the managed outflow of investment could
partially explain why there is lack of incentives to promote the United States-China BIT
negotiations recently.
31
Closing Statement of USTR Robert Lighthizer at the Fourth Round of NAFTA
Renegotiations(2017), available at https://ustr.gov/about-us/policy-offices/press-office/press-
releases/2017/october/closing-statement-ustr-robert.(The US government may not continue to
“encourage and guarantee U.S. companies to invest in Mexico and Canada primarily for export to the
United States.”)
32
Chad P. Bown, et al., US Trade Representative "Surprised and Disappointed" Statement from
Latest NAFTA Talks—Annotated and Explained(Nov. 1, 2017), available at
https://piie.com/blogs/trade-investment-policy-watch/us-trade-representative-surprised-and-
disappointed-statement.
33
Id. at.
34
Jenny Leonard, Sources: USTR considering ISDS proposal that would require NAFTA countries to
opt in, Inside US Trade(Aug. 19, 2017), available at https://insidetrade.com/daily-news/sources-ustr-
considering-isds-proposal-would-require-nafta-countries-opt.
11
B.
Unilateralism
The Trump Administration shifts its trade approach toward unilateralism and probably
bilateralism
35
and away from multilateralism and mega-regionalism (e.g. the TPP). In
particular, the shift away from multilateralism toward unilateralism directly affects China at
the level of the WTO and U.S. domestic law. The United States has historically preferred
multilateral liberalisation over regional and bilateral initiatives.
36
Currently the U.S.
government has not lent much support to the WTO negotiations and dispute settlement. The
U.S. refused to continue talks on global trade reforms in the WTO negotiation.
37
For dispute
settlement, the United States may neglect or derogate from the ruling of multilateral trading
system if such neglect or derogation is in its national interest,
38
and has recently held up the
filling of two Appellate Body vacancies at a time when a heavy case backlog has
accumulated.
39
Notably the Trump Administration increasingly relies on unilateral sanctions, which were
adopted by the U.S. government during the pre-WTO era of the 1970s and 1980s and are of
35
Bilateralism brings less effect on China compared with unilateralism. The U.S. does not have
bilateral FTA negotiations with China. Its current bilateral negotations partners have not proceeded
smoothly or are suspended (such as the United State-China BIT negotiations).
36
U.S. Trade and Investment Policy 35. 2011.
37
Tom Miles, U.S. Gives Davos Trade Meeting No Clues on Ending WTO Crisis(Jan. 26, 2018),
available at https://money.usnews.com/investing/news/articles/2018-01-26/us-gives-davos-trade-
meeting-no-clues-on-ending-wto-crisis.
38
Handley & Nuno, 145. 2017.
39
Rosalind Mathieson, U.S. Block of WTO Appeals Body Compromises System, Director Says(Nov. 9,
2017), available at https://www.bloomberg.com/news/articles/2017-11-08/u-s-block-of-wto-appeals-
body-compromises-system-azevedo-says;China Inc. in the WTO Dock: Tales from a System under
Fire. (2017).
12
uncertain legality under WTO norms.
40
A hallmark of the Trump Administration’s trade
policy statements is its willingness to use trade sanctions and restrictions based on unilateral
determinations of harm to the United States.
41
As discussed below, there are the initiation of
high-profile trade remedy and intellectual property investigations by domestic authorities.
42
That said, two points deserve attention here. One is that the United States still intends to
play a leading role in multilateral institutions such as the WTO, but will call for their reforms
such as making the WTO “a more effective forum to adjudicate unfair trade practices”.
43
The
other is that stringent U.S.-style regulatory norms are likely to remain under the NAFTA or
future U.S. bilateral pacts. As discussed above, the NAFTA renegotiation does not vastly
change the TPP rules.
C.
Trade enforcement
The United States shifts from trade liberalisation to trade enforcement,
44
and adopts a
confrontational trade approach. It highlights the enforcement of trade law, including its
domestic law and WTO norms. The strong tactic could involve more frequent use of
domestic measures or unilateral policy against China,
45
and is likely to continue in view of
the recent National Security Strategy of the United States under which China is regarded as a
40
Blustein, 16. 2017.
41
Fidler, ASIAN JOURNAL OF WTO & INTERNATIONAL HEALTH LAW AND POLICY, VOL. 12, NO. 1,
PP. 1-31, MARCH 2017, 12 (2017).
42
ICTSD, 4. 2017.
43
National Security Strategy of the United States of America 40-41. 2017.
44
Schneider-Petsinger, 25. 2017.
45
For instance, the US has initiated many more trade remedy measures against China's iron and steel
exports to the US altough the export has declined year by year since 2014.Ministry of Commerce of
the People’s Republic of China, 97. 2017.
13
competitor.
46
On the one hand, it reflects a wave of populist and nationalist sentiment,
47
and
overlaps with the shift toward unilateralism. On the other hand, the U.S. government claims
that there are unfair trade practices conducted by China that need to be addressed,
48
including
dumped or subsidized imports, the improper handling of intellectual property rights, and
currency manipulation.
49
The focus on trade enforcement involves various tools, grounds and processes. Regarding
the tools, they range from contingency protection to possible border taxes
50
and investment
review. Among them, making more aggressive use of trade remedies is to be a key pillar of
Trump’s policy.
51
The United States may impose further restrictions on SOE investments
from China.
52
Regarding the grounds, national security is often invoked as a major reason for
these measures. President Trump has signed the proclamation concerning tariffs on China’s
steel and aluminum exports under Section 232 of the Trade Expansion Act of 1962 on
national security grounds.
53
The Trump Administration has also raised investment restrictions
in the United States by legislation introduced to update the Committee on Foreign Investment
46
National Security Strategy of the United States of America 21. 2017.
47
Handley & Nuno, 142. 2017.
48
Id. at.
49
Schneider-Petsinger, 24. 2017.
50
Caroline Freund, Trump's Confrontational Trade Policy, 52 INTERECONOMICS 63(2017).
51
Schneider-Petsinger, 2. 2017.
52
David Dollar, The Future of U.S.-China Economic Relations, in BROOKINGS BIG IDEAS FOR
AMERICA 133-134, (Michael E. O’Hanlon ed. 2017).
53
Presidential Proclamation on Adjusting Imports of Steel into the United States(March 8, 2018),
available at https://www.whitehouse.gov/presidential-actions/presidential-proclamation-adjusting-
imports-steel-united-states/.
14
in the United States (CFIUS) to address national security concerns.
54
Regarding the
processes, the Trump Administration has been more active in self-initiating investigations
than before. The United States has initiated a number of investigations, including the
aforementioned Section 232 investigations and an investigation under Section 301 of the
1974 Trade Act that target China’s handling of technology transfer and intellectual property.
Notably the United States self-initiated antidumping and countervailing duty investigations
against China in aluminium, which is used by the US Department of Commerce for the first
time in 20 years.
55
D.
Summary
To sum up, the changed facets of U.S. trade approach directly affect China through
managed trade (particularly the pressure to reduce bilateral deficit), the shift away from
multilateralism toward unilateralism, and trade enforcement. To a large extent, the unchanged
facets of the U.S. trade approach also indirectly affect China through strong regulatory
disciplines. These facets are often interrelated with or overlap each other (such as trade
enforcement and the shift toward unilateralism). The changed facets may build on or develop
the unchanged ones. Essentially, the emphasis of the U.S. approach to China is probably
54
William Reinsch, What is President Trump Thinking on Trade? (Jan. 11, 2018), available at
https://tradevistas.csis.org/president-trump-thinking-
trade/?utm_source=Members&utm_campaign=eb9b0a139b-
EMAIL_CAMPAIGN_2018_01_12&utm_medium=email&utm_term=0_e842221dc2-eb9b0a139b-
188595225.
55
Lori Ann LaRocco, US launches anti-dumping case against Chinese aluminum producers using
rare aggressive tactic(Nov. 28, 2017), available at https://www.cnbc.com/2017/11/28/us-launches-
antidumping-case-against-chinese-aluminum-sheet.html.(The self-initiated case was reportedly to
shield the businesses from possible retaliation)
15
more on hedging. That said, the United States also adopts a ‘pragmatic and realistic’
approach,
56
with engagement as an important part of U.S. policy toward China to promote
China’s economic reforms and opening up.
57
III. THE RETALIATORY RESPONSE
A.
The forms
First, retaliation
58
can take a wide range of forms. Retaliation and counterretaliation are
not new, and may be reflected in legislation or other measures. Retaliatory legislation
includes discretionary or mandatory retaliatory stipulations. Meanwhile, retaliation usually
does not need to change the law. It often occurs in the enforcement of law and involves the
discretion of various administrative agencies, including customs or financial regulators,
quality inspectors or economic planning bodies.
59
China has enacted wide-ranging trade laws
and regulations, such as those enabling the use of trade remedies.
Retaliation may involve tariff and non-tariff barriers. Other than duties on imports (often
arising from trade remedy investigations), retaliation includes the restriction of imports and
56
Stephan W. Schill, Authority, Legitimacy, and Fragmentation in the (Envisaged) Dispute
Settlement Disciplines in Mega-Regionals 37 (2017).
57
Ricardo Meléndez-Ortiz, Order or Disorder: The Future of Global Economic Integration and
China's Role(2017), at http://cdf-en.cdrf.org.cn/jjh/pdf/en11_1.pdf.(visited Oct. 4, 2017)
58
Here the term ‘retaliation’ is probably more accurate than ‘countermeasure’, since the response
targets measures that are not necessarily illegal. Responsibility of States for Internationally Wrongful
Acts 2001 Article 49.1 (Countermeasures targets internationally wrongful act) (2001).
59
Bloomberg News, China Elevates ‘Good Cop’ on Trade to Counter Trump Barbs(Apr. 12, 2017),
at https://www.bloomberg.com/politics/articles/2017-04-11/the-most-important-chinese-trade-
official-you-ve-never-heard-of.
16
exports,
60
the change of import source,
61
antitrust investigations, currency devaluation,
62
actions based on national security concerns (e.g., cyber security), and foreign investment
regulation.
63
Taking the United States as an example, U.S. non-tariff barriers against its
largest trading partners before 1994 were significantly retaliatory.
64
Less formal measures
could be applied (e.g., imposing delays at the border and additional health and safety
inspections).
65
New retaliation may involve a slowdown in diplomatic and security
60
Tom Phillips, China Threatens to Cut Sales of iPhones and US Cars If ‘Naive' Trump Pursues
Trade War, The Guardian(Nov. 14, 2016), available at
https://www.theguardian.com/world/2016/nov/14/china-threatens-to-cut-sales-of-iphones-and-us-
cars-if-naive-trump-pursues-trade-war.(The U.S. soybean and maize imports could be halted, and
China may limit the number of Chinese students studying in the United States if Chinese
countermeasures are triggered by the U.S. aggressive trade measures)
61
Id. at.('A batch of Boeing orders will be replaced by Airbus' if China adapts the tit-for-tat approach)
62
Seema Mody, Three Ways Beijing Could Retaliate Against Trump's Get-Tough Trade Policies (Jan.
10, 2017), at http://www.cnbc.com/2017/01/10/three-ways-beijing-could-retaliate-against-trumps-
trade-policies.html.
63
Many of which are not necessarily retaliatory, but (within limits) proactive trade policy and/or
justified on other bases.
64
Kishore Gawande, Are U.S. Nontariff Barriers Retaliatory? An Application of Extreme Bounds
Analysis in the Tobit Model, 77 THE REVIEW OF ECONOMICS AND STATISTICS 677, 677 (1995).
65
Rachel Brewster, The Remedy Gap: Institutional Design, Retaliation, and Trade Law Enforcement,
80 GEORGE WASHINGTON LAW REVIEW 102, 136 (2011).
17
cooperation (e.g., linkages between trade disputes and Sino-United States interaction on
North Korea policy).
66
Direct and indirect retaliation are possible. Most of the above measures fall within the
former. In indirect retaliation, states can adopt ‘breach-for-breach’ measures without drawing
a specific link to the target country’s policy (e.g., carbon tariffs of one country against that of
another country).
67
Second, trade remedies are probably the most common form of retaliation. As a source of
the United States-China trade tension, they include antidumping measures,
68
safeguard
investigations.
69
As a strategic motive, retaliation is a significant incentive behind
antidumping filings.
70
66
Fan Zhai, Trade Cooperation and Conflicts between the United States and China: Risks and
Realities, in US-CHINA COOPERATION IN A CHANGING GLOBAL ECONOMY 153, (Adam S. Posen &
Ha Jiming eds., 2017).
67
Brewster, GEORGE WASHINGTON LAW REVIEW, 136 (2011).
68
William Clinton, et al., Possible Unilateral Actions under US Law(Jan. 13, 2017), at
https://www.whitecase.com/publications/article/possible-unilateral-actions-under-us-law (‘China
initiated retaliatory AD investigations of imports of U.S. cars and poultry in response to President
Obama's imposition of new duties on imports of Chinese tries under Section 421 of the Trade Act of
1974’).
69
Id.
70
See, e.g., Robert M. Feinberg & Kara M. Reynolds, The Spread of Antidumping Regimes and the
Role of Retaliation in Filing, 72 877, 877 (2006) (retaliation was a significant motive in explaining
the rise of antidumping filings over the 1995-2003 period).
18
Third, in most if not all cases, retaliatory response does not include the WTO dispute
settlement mechanism (DSM), even if recourse to the DSM may trigger retaliation.
71
Within
the multilateral system agreed by WTO membership, the DSM is essentially inclusive rather
than retaliatory. It provides predictability from a legal perspective, contrasting with the oft-
politicized and unpredictable retaliatory response. It arguably enables one party to engage
with rather than confront the other. Essentially judicial in nature, the disputes usually enable
consultations, presentation of arguments by parties, and responses to the other side’s views.
The DSM may authorize suspension of concessions if there is a violation of WTO rules,
72
which reflects the consensus of the WTO membership. The suspension of concessions is used
in a regulated manner, and limits are set on the extent of allowed retaliation.
73
Moreover, the
DSM performs an important function in restricting threats of counter-retaliation.
74
More
broadly, the WTO disputes are arguably a unifying force that helps fortify the trade
community and supports the governance project.
75
71
Jennifer M Freedman, China Floods the WTO With Tit-for-Tat(Jun. 8, 2012), at
https://www.bloomberg.com/news/articles/2012-06-07/china-floods-the-wto-with-tit-for-tat.
72
World Trade Organization, Understanding on Rules and Procedures Governing the Settlement of
Disputes Article 22.1.
73
E.g., id., Article 22.1, 22.3, 22.6, 23.2(c).
74
Rachel Brewster, Rule-Based Dispute Resolution in International Trade Law, 92 VIRGINIA LAW
REVIEW 251, 258 (2006); Brewster, GEORGE WASHINGTON LAW REVIEW, 141 (2011).
75
Monica Hakimi, Constructing an International Community, 111 AMERICAN JOURNAL OF
INTERNATIONAL LAW, 317, 347 (2017).
19
B.
The features
1.
Deterrence against specific measures
Retaliation seeks to change the target country’s position, which often means to stop
current measures and deter future measures. Accordingly, it may offset the benefits arising
from the target state’s policies. Retaliation or its threat may be used in situations under which
the DSM is lacking or inefficient and other options (e.g., PTIA negotiations) are not easily
available.
76
As a typical example, antidumping action is adopted to deter further use of antidumping
measures and/or to punish trading partners that have used antidumping cases.
77
Therefore, the
theoretical motivations for retaliation are the need to maintain credibility in attempting to
deter future antidumping or part of a disequilibrium movement to the prisoner’s dilemma
outcome.
78
2.
Passive, acute but short-term response
Retaliation is provoked by the target country’s measure (e.g., increased tariffs) or position
(e.g., disregard of WTO rules). Retaliation is essentially a passive response and serves as a
strategic option. Even if antidumping measures are an active action, they are at least a
reactive response in the sense that they are triggered by the target country’s prior act (e.g.,
trade enforcement). It is a country-specific and measure-specific response. On the flip side,
76
For related research, see Alan O Sykes, Constructive Unilateral Threats in International
Commercial Relations: The Limited Case for Section 301, 23 LAW AND POLICY IN INTERNATIONAL
BUSINESS 263, pp. 266-267 (1991-1992).
77
Thomas J. Prusa & Skeath Susan, Modern Commercial Policy: Managed Trade or Retaliation?, in
HANDBOOK OF INTERNATIONAL TRADE: ECONOMIC AND LEGAL ANALYSES OF TRADE POLICY AND
INSTITUTIONS 358, (E. Kwan Choi & James C. Hartigan eds., 2004).
78
Feinberg & Reynolds, 889-890 (2006).
20
retaliation is often a prompt and acute reaction. Retaliation can be threatened quickly,
79
incentivizing the target country to amend its policies or settle the dispute earlier.
80
Retaliation
may involve strong measures, since it usually aims to maximise political costs on the target
country by mobilizing powerful export groups in that state against the disputed measure or
policy.
81
Not surprisingly, retaliation is often adopted as a temporary response given its
strong negative effect on trade. Having said that, retaliatory measures may become part of the
trade policy. The United States’ previous retaliatory measures, for instance, are an increasing
part of the current U.S. approach (e.g., recent Section 301 investigation).
3.
Possible lose-lose outcome
The outcome of retaliation very much depends on the political economy in which the
measures are taken. For the retaliating country, retaliation and its threat may deter measures
of the target country, pry open foreign markets,
82
and have other ancillary benefits (e.g., a
publicity effect and a valve for letting out domestic interest group pressure,
83
possible support
for sectors negatively affected by trade liberalisation). That said, these benefits do not always
79
It is claimed that 45% tariffs on Chinese imports imposed by the United States would trigger
"immediate" retaliation from Beijing. Phillips. Nov. 14, 2016.
80
Brewster, GEORGE WASHINGTON LAW REVIEW, 106 (2011).
81
Jide Nzelibe, The Credibility Imperative: The Political Dynamics of Retaliation in the World Trade
Organization’s Dispute Resolution Mechanism, 6 THEORETICAL INQUIRIES IN LAW 215(2005).
82
Thomas O. Bayard, Comment on Alan Sykes' "Mandatory Retaliation for Breach of Trade
Agreements: Some Thoughts on the Strategic Design of Section 301", 8 BOSTON UNIVERSITY
INTERNATIONAL LAW JOURNAL 325, 326 (1990).
83
Holger Spamann, The Myth of ‘Rebalancing’ Retaliation in WTO Dispute Settlement Practice, 9
JOURNAL OF INTERNATIONAL ECONOMIC LAW, 79 (2006).
21
eventuate. Unilateral action may fail to secure concessions,
84
and trigger counterretaliation
that affect other sectors. Retaliation does not necessarily lead to negotiations, and could entail
significant disruption to economic relations.
From the perspective of global trade, retaliation is a lose-lose situation in most situations
and could bring enormous costs to both sides. It will hurt the target country. Retaliation by
China would create an uncertain global economic environment that would slow the growth of
the United States even if it is presumed that retaliation would not have much direct effect on
the U.S. economy.
85
The target country is left with few options except for counterretaliation.
As a highly adversarial approach, it escalates protection and creates a vicious circle of
retaliatory protectionism. For the retaliating country, retaliation could also incur actual and
reputational costs, as well as counterretaliation, particularly if a significant trading partner is
implicated.
86
A tit-for-tat response is a double-edged sword even if retaliation does not involve
protectionism. The reduction of holdings of American bonds would harm China as American
84
Krzysztof J. Pelc, Will Trump's Unilateral Trade Approach Work? History Says No.(Mar. 7, 2017),
at https://www.washingtonpost.com/news/monkey-cage/wp/2017/03/07/will-trumps-unilateral-trade-
approach-work-history-says-no/?utm_term=.542cf814df14 (‘[D]espite a far more potent threat of
retaliation, the U.S. was 34 percent less likely to secure concessions in the targeted countries when it
opted for the unilateral route’).
85
David Dollar, The Future of U.S.-China Economic Ties, Brookings(Oct. 4, 2016), at
https://www.brookings.edu/research/the-future-of-u-s-china-trade-ties/.
86
Jared R. Silverman, Multilateral Resolution Over Unilateral Retaliation: Adjudicating the Use of
Section 301 before the WTO, 17 UNIVERSITY OF PENNSYLVANIA JOURNAL OF INTERNATIONAL
ECONOMIC LAW 233, 285-287 (1996).
22
bonds are deemed to be stable.
87
Even if protectionism is not involved, indirect retaliation by
reduced holdings of American bonds may negatively affect the position of the U.S. dollar as
the international reserve currency.
Retaliation could complicate rather than solve the problem, and may be
counterproductive. It is potentially arbitrary, discriminatory and excessive. Therefore, the
possibility of retaliation is put into doubt by the success of the GATT, the limitations on
retaliation in the WTO, and observed behaviour of state actors.
88
Retaliation could occur in
areas where the WTO norms are vague and insufficient (e.g., investigations based on national
security concerns), or lacking (e.g., competition law). To sum up, retaliation produces
negative and unpredictable interactions as in the case of beggar-thy-neighbour policies and
previous measures (e.g., Smoot-Hawley Tariff Act of 1930).
C.
The future
1.
Will China adopt a retaliatory response?
Retaliation will probably be used only in exceptional circumstances. Due to geopolitical,
economic and legal considerations, China is cautious about retaliation and is unlikely to
instantiate a trade conflict. China’s willingness to strike the 100-day deal is illustrative of its
reluctance to adopt retaliation. From the geopolitical perspective, retaliation will harm the
United States-China relationship in a way that will be costly and time-consuming to recover.
Notably, its relationship with the United States is of great significance to China. Support can
87
Kirsty Needham, What a Trump v China Trade War Looks Like from Australia, The Sydney
Morning Herald(Jan. 27, 2017), at http://www.smh.com.au/federal-politics/political-news/what-a-
trump-v-china-trade-war-looks-like-from-australia-20170127-gtztpx.html.
88
Spamann, JOURNAL OF INTERNATIONAL ECONOMIC LAW, 78 (2006).
23
be found in Chinese President Xi’s statement that there are ‘a thousand reasons to make the
China-US relationship a success’ and there is ‘not a single reason to break it’.
89
From an economic perspective, retaliation would affect the bilateral relationship and
increase protectionism, working against China’s export of trade and investment. Sino-United
States economic ties are emphasized by China as ‘ballast’ and a ‘propeller’ in bilateral
relations.
90
This helps explain why China reportedly offered concessions (such as ending the
beef import ban, raising the investment ceiling in BIT negotiations) to avert a trade conflict.
91
It is the same with the United States, since retaliation often leads to a lose-lose situation. Both
sides will probably endeavour to avoid retaliation, and use the threat of retaliation as a
negotiation tactic.
From a legal perspective, retaliation does not bring predictability. Retaliation is a largely
political rather than legal response, since the concept often defies legal definition,
92
and
retaliation is largely based on the retaliating country’s own subjective criteria of fairness.
However, the possibility of retaliation cannot be excluded. It is observed that China’s
trade tactics may include ‘a big stick’ that seldom makes it to the negotiating table.
93
Certain
89
China Daily, Meeting Builds on a Thousand Reasons to Be Good Partners(Apr. 15, 2017), at
http://www.chinadaily.com.cn/opinion/2017-04/08/content_28841782.htm.
90
Xinhua, Economic Watch: Economic Ties Serve as Ballast in China-U.S. Relations, Xinhua(Mar.
19, 2017), at http://news.xinhuanet.com/english/2017-03/19/c_136140566.htm.
91
China to Offer Concessions to Avert US Trade War: Report(Apr. 11, 2017), at
http://www.straitstimes.com/world/united-states/china-to-offer-concessions-to-avert-us-trade-war-
report.
92
Thomas J. Schoenbaum, Trade Friction with Japan and the American Policy Response, 82
MICHIGAN LAW REVIEW 1647, 1656, footnote 35 (1984).
93
Bloomberg News, China Elevates ‘Good Cop’ on Trade to Counter Trump Barbs. Apr. 12, 2017.
24
punitive actions of the Unite States against China will probably invite retaliation.
94
These
punitive actions could deal with trade imbalances (e.g., border adjustment tax,
95
and the
declaration of China as a currency manipulator), intellectual property, investment (e.g., a ban
on Chinese SOE investments in the United States
96
), or other issues (e.g., disregard for WTO
rulings that it sees as an affront to U.S. sovereignty,
97
sanctions involving the alleged ‘cyber
theft’ of business trade secrets
98
). As an example, non-market economy (NME) status and
intellectual property are two of the mostly likely areas for major trade friction. The Trump
administration’s disregard of WTO rules could trigger a trade conflict with China
99
if the
WTO ruling deals with China’s major concerns such as NME status. The recent Section 301
probe into China’s intellectural property practices also arguably circumvents the WTO.
94
David Lawder, Trump Packs Trade Team with Veterans of Steel Wars with China(Dec. 13, 2016),
at http://www.reuters.com/article/us-usa-trump-china-trade-analysis-idUSKBN13Y2FI;China Daily,
Move to Protect US Steelmakers Is Against Norms of World Trade(Apr. 24, 2017), at
http://www.chinadaily.com.cn/opinion/2017-04/24/content_29051319.htm.
95
Xinhua, China to Respond If U.S. Introduces Border Tax: Minister (Feb. 21, 2017), at
http://news.xinhuanet.com/english/2017-02/21/c_136074442.htm.
96
David Lawder & Thomas Denny, U.S. Panel Urges Ban on China State Firms Buying U.S.
Companies (Nov. 17, 2016), at http://www.reuters.com/article/us-usa-china-idUSKBN13B1WO.
97
Eric Beech, Trump Administration Would Ignore WTO Rulings It Sees as Anti-U.S.: FT (Mar. 1,
2017), at http://www.reuters.com/article/us-usa-trump-wto-idUSKBN16832U.
98
Wayne M. Morrison, China-U.S. Trade Issues 54 (2017).
99
DW.com, China Warns of Trade War, Urges US to Abide by WTO Rules(Mar. 9, 2017), at
http://www.dw.com/en/china-warns-of-trade-war-urges-us-to-abide-by-wto-rules/a-37876534.
25
2.
How may China adopt a retaliatory response?
If China adopts retaliation, it will be taken in a restrained way. First, China may adopt
retaliatory measures equivalent to the United States’ measures. Generally, China’s stance on
U.S. trade is illustrated as ‘an equal and opposite reaction’ to U.S. action.
100
Specifically, a
wide range of measures may be taken, such as: (i) imposing same duties, quotas or other
restrictions on U.S. exports in goods (e.g., aircrafts, oilseeds, soybeans, pulp and wood
products, and passenger motor vehicles) and services (e.g., tourism, education, and business
services) in which China runs large deficits with the United States, (ii) banning the export of
strategic goods (e.g., rare earth metals as it did for Japan in 2010), (iii) depreciating
Renminbi,
101
or (iv) the change of import source. Taking the change of import source as an
example, it is reported that retaliation may include reducing imports of American aircraft and
agricultural products, targeting U.S. companies with tax investigations and anti-competition
probes, or reducing the holdings of American bonds.
102
China may shift to alternate nations
for products and services. As discussed above, other forms of retaliation could also be
adopted. Retaliation may involve U.S. companies that have an advantage over other countries
(e.g., finance and high-tech).
103
Second, China, as a quick learner, will probably follow and develop on the U.S. practice.
It is observed that the United States has inadvertently taught China how to conduct facial
100
Bloomberg News, When the U.S. Moves on Trade, China Hits Back Fast(Nov. 18, 2016), at
https://www.bloomberg.com/news/articles/2016-11-17/china-hits-back-fast-on-perceived-u-s-trade-
slights-past-shows.
101
Zhai, 151.
102
Needham. Jan. 27, 2017.
103
China Daily. Apr. 24, 2017.
26
implementation without concrete results in the DSM.
104
China may learn from the United
States regarding retaliation. As an example, the rarely used Section 232 investigations have
been initiated twice in a single week by the Trump Administration.
105
They focus on the
vague concept of a national security threat. Such investigations have raised the concerns of
China, and involve the WTO consistency issue.
106
China (and other WTO members) may
take similar measures if the United States actually imposes trade sanctions based on Section
232. Theoretically, China may even retaliate against U.S. exporters or investors, using the
similar justifications regarding WTO applicability that the Trump administration applied in
its Section 301 actions.
107
Third, China would likely take measured retaliation as a temporary tool due to the
potential lose-lose outcome. China will probably confine its retaliation to trade to avoid
endangering the overall bilateral relationship.
108
One may argue that it is possible for China
to adopt similar rules, such as mandatory retaliation provisions in Sections 301-310 of the
Trade Act of 1974 that are deemed by the United States to represent a sensible strategic
104
Gregory Shaffer & Gao Henry, China’s Rise: How it Took On the U.S. at the WTO, 45-46 (2017).
105
Trump Administration’s Second Section 232 Investigation in a Week Focuses on National Security
Threat of Aluminum Imports(May 1, 2017), at http://www.thompsonhine.com/publications/trump-
administrations-second-section-232-investigation-in-a-week-focuses-on-national-security-threat-of-
aluminum-imports.
106
Simon Lester, Would Section 232 Duties on Steel Violate the AD Agreement?(Apr. 21, 2017), at
http://worldtradelaw.typepad.com/ielpblog/2017/04/would-section-232-duties-on-steel-violate-the-ad-
agreement.html.
107
Clinton, et al. Jan. 13, 2017.
108
Zhai, 151-152.
27
response to ‘cheating’ under trade pacts.
109
However, retaliatory legislation is unlikely to
happen in the short term as it may increase tensions. China may respond with focused
displays of retaliatory capacity.
110
IV. THE INCLUSIVE RESPONSE
A.
The forms
An inclusive response aims to engage with partners tactfully to liberalize trade without
imposing stringent regulatory disciplines. It consists of the utilization of the multilateral trade
system, and exploration of PTIAs and other initiatives. It counterbalances or engages with the
United States either in a direct and indirective manner. This echoes with China’s position on
economic globalization that highlights inclusiveness,
111
with regional trade arrangements
112
and BRI
113
being inclusive.
109
Alan O. Sykes, ”Mandatory” Retaliation for Breach of Trade Agreements: Some Thoughts on the
Strategic Design of Section 301, 8 BOSTON UNIVERSITY INTERNATIONAL LAW JOURNAL 301, 303
(1990).
110
A US China Trade War?(Feb., 2017), at https://www.controlrisks.com/en/our-thinking/analysis/a-
us-china-trade-war.
111
Jinping Xi, President Xi's Speech to Davos in Full(Jan. 17, 2017), at
https://www.weforum.org/agenda/2017/01/full-text-of-xi-jinping-keynote-at-the-world-economic-
forum.
112
Wang Yi: China Will Promote the APEC Meeting to Maintain Free Trade System(Oct. 6, 2016), at
http://www.fmprc.gov.cn/mfa_eng/zxxx_662805/t1404248.shtml.
113
Chinese National Development and Reform Commission, et al., Vision and Actions on Jointly
Building Silk Road Economic Belt and 21st-Century Maritime Silk Road(Mar. 28, 2015), at
http://en.ndrc.gov.cn/newsrelease/201503/t20150330_669367.html.
28
1.
Multilateral trade system
China heavily relies on the WTO system and particularly its DSM. Emphasizing
inclusivity,
114
the WTO negotiations could arguably reduce the impacts of the U.S. FTAs and
strengthen the multilateral system that supports an open world market. China is negotiating
the Environmental Goods Agreement (EGA), and is in the process of acceding to the
Agreement on Government Procurement (GPA). The United States is a party to both
agreements. However, for the beleaguered Doha Round negotiations, China has taken a
backseat, not least because of the difficulties in brokering between developed and developing
countries.
115
Other reasons include that negotiations among WTO members are complex, and
China neither wants to demand nor offer substantial concessions in the WTO negotiations. In
contrast, China is one of the most active members in the DSM. Ten out of 15 cases initiated
by China are raised against the United States.
116
2.
PTIAs and other initiatives
Given the United States’ shift away from multilateralism, China may actively seek non-
WTO responses that will be discussed here. PTIAs involving China fall within the category
of inclusive response, except for China’s BIT negotiations with the United States and
European Union that will probably impose new regulatory requirements. China’s plan for
114
General Council: Appointment of the Director-General (Presentation by DG Azevêdo)(Feb. 28,
2017), at https://www.wto.org/english/news_e/spra_e/spra158_e.htm.
115
Gisela Grieger, China's WTO Accession: 15 Years on Taking, Shaking or Shaping WTO
Rules?(Dec., 2016), at
http://www.europarl.europa.eu/RegData/etudes/BRIE/2016/593570/EPRS_BRI(2016)593570_EN.pdf
.
116
World Trade Organization, Disputes by Member, at
https://www.wto.org/english/tratop_e/dispu_e/dispu_by_country_e.htm.(visited Aug. 13, 2017)
29
FTAs appears to emphasize inclusiveness. Through July 2017, China has concluded 15 FTAs
with 23 countries or regions, including the recent China-Korea FTA and China-Australia
FTA (ChAFTA). In the short term, China is committed to speeding up FTAs negotiations
including the Regional Comprehensive Economic Partnership (RCEP).
117
In the long term, it
aims to establish a global free trade zones network ‘reaching the important countries in five
continents’ and ‘realizing the liberalization and facilitation’ of trade and two-way
investment.
118
China’s strategy starts with FTAs with neighbouring countries, and then with
BRI countries and the rest of the world.
119
Other initiatives consist of two categories. One category has until now little involvement
of the United States. The typical example is BRI. BRI targets a large number of countries and
regions,
120
with unimpeded trade as a cooperation priority.
121
The other category involves
direct engagement with the United States, particularly government-to-government dialogues.
The United States and China have a deep comprehensive economic dialogue mechanism
consisting of a large number of committees with a high degree of mutual collaboration. They
include the United States-China Comprehensive Economic Dialogue (CED), the United
117
Chinese Ministry of Commerce, Official of the Department of International Trade and Economic
Affairs of the Ministry of Commerce Interprets the Opinions of the State Council on Speeding up
Implementation of Free Trade Zone Strategy(Dec. 21, 2015), at
http://english.mofcom.gov.cn/article/newsrelease/policyreleasing/201601/20160101228504.shtml.
118
Id.
119
State Council, Opinions on Speeding up the Implementation of Free Trade Area Strategy
paragraph 1.3 (2015).
120
Xinhua, Belt and Road Initiative Makes Fruitful Progress(Dec. 28, 2015), at
http://www.chinadailyasia.com/chinafocus/2015-12/28/content_15364435.html.
121
Chinese National Development and Reform Commission, et al. Mar. 28, 2015.
30
States-China Joint Commission on Commerce and Trade (JCCT), and the 100-day plan for
United States-China trade in 2017. The mechanism serves the interests of both nations. The
United States-China Strategic and Economic Dialogue (S&ED) is not only efficient for the
United States to achieve its goals particularly regarding soft issues, but also accords China
‘big state status’ on par with the United States.
122
Replacing the S&ED, the CED was
established as a new high-level framework for negotiations.
123
The JCCT focuses on bilateral
trade and investment rules.
124
Both sides have reached agreement on various occasions,
including an agreement imposing quotas on Chinese textile exports to the United States.
125
Responding to U.S. concerns, China agreed to eliminate its indigenous innovation products
catalogues under S&ED and then announced in the 2011 JCCT that the State Council issued a
measure requiring governments at the provincial level to eliminate catalogues or other
measures linking innovation policies to government procurement preferences.
126
Through
S&ED, China has committed to developing new legislation and improving the enforcement
of existing laws regarding intellectual property.
127
Recently, a cyber agreement has been
signed to avoid supporting or conducting cyber theft of intellectual property, trade secrets, or
122
Hsieh, ASIAN JOURNAL OF WTO & INTERNATIONAL HEALTH LAW & POLICY, 382-383 (2009).
123
Briefing by Secretary Tillerson, Secretary Mnuchin, and Secretary Ross on President Trump's
Meetings with President Xi of China(Apr. 7, 2017), at https://www.whitehouse.gov/the-press-
office/2017/04/07/briefing-secretary-tillerson-secretary-mnuchin-and-secretary-ross.
124
Morrison, 53. 2017.
125
United States and China Agree on Textile Quotas, 100 THE AMERICAN JOURNAL OF
INTERNATIONAL LAW 472, 472-473 (2006).
126
Id.
127
Simon Lester & Zhu Huan, It’s Time to Negotiate a New Economic Relationship with China 3
(2017).
31
other commercial information, after which there have reportedly been positive changes.
128
After the upgrade of the JCCT, there is bilateral policy communications that seem to cover
many issues, ranging from antitrust law enforcement procedures, to approval of drugs and
medical equipment, and to the access to China Compulsory Certification (3C) services of
foreign-funded enterprises.
129
However, there is also concern. For instance, it was observed
that the S&ED has become ‘too big and formal to be of much use’.
130
B.
The features
1.
Focus on engagement with partners
An inclusive response often serves two major functions here: (i) engaging with the United
States through WTO institutions (in particular DSM) and other initiatives directly and
indirectly; (ii) increasing China’s trade network to offset the lack of PTIA benefits with the
United States. An inclusive response does not focus on creating substantial regulatory
disciplines.
For multilateral trade system, China has not advocated for strong regulatory disciplines in
Doha Round, under which the WTO develops few new stringent regulatory rules. Concerning
the PTIAs and other initiatives, China does not prioritize deep regulatory disciplines, given
the implementation difficulties for China and these disciplines’ possible effect of slowing
down the inclusive process (particularly with developing countries). It is observed that
imposing domestic reforms is usually not the starting point or the motivation for China’s
pursuit of FTAs, and China takes a cautious approach to domestic reform under a FTA due to
128
Id.
129
Ministry of Commerce of the People’s Republic of China, 99. 2017.
130
Dollar. Oct. 4, 2016.
32
the government’s view of economic security and stability that have assumed priority in its
opening up strategy.
131
As a clear illustration, China appealed for economic unity and an all-
inclusive Free Trade Area of the Asia-Pacific (FTAAP) rather than the ‘high standards’
argued by the United States.
132
Not surprisingly, China’s PTIAs and other initiatives do not
feature new and stringent regulatory requirements. Instead, they often focus on the
improvement of political relationships, market liberalization, and investment protection. For
instance, investment and trade cooperation is ‘a major task’ in building BRI.
133
In the same
vein, the thrust of the United States-China 100-day trade talk is to engage both sides at the
negotiation table.
134
2.
A full-range of tools
Inclusive response is a multifaceted category, ranging from short (e.g., 100-day plan for
United States-China trade) to medium (e.g., BRI projects) to long term (e.g., PTIAs) options.
Based on whether China directly interacts with the United States, direct and indirect
responses are possible. Direct responses include interaction in the WTO (i.e. negotiations and
dispute settlement) and other initiatives between the United States and China (e.g., the United
States-China trade talks). Indirect responses include PTIAs, other initiatives with non-U.S.
131
Razeen Sappideen & He Ling Ling, Observations on the Australia-China Free Trade Agreement
Negotiation Process, 38 AUSTRALIAN BUSINESS LAW REVIEW 257, 262 (2010).
132
Shannon Tiezzi, As TPP Leaders Celebrate, China Urges Creation of Asia-Pacific Free Trade
Area (Nov. 19, 2015), at http://thediplomat.com/2015/11/as-tpp-leaders-celebrate-china-urges-
creation-of-asia-pacific-free-trade-area/.
133
Chinese National Development and Reform Commission, et al. Mar. 28, 2015.
134
Bloomberg News, China-U.S. Trade Talks Near 100 Days Jarred by North Korean Test,
Bloomberg (Jul. 7, 2017), at https://www.bloombergquint.com/global-economics/2017/07/06/china-
trapping-u-s-at-trade-table-with-100-day-sweetener-talks.
33
partners, and China’s unilateral measures to liberalise trade. For instance, it is observed that
China ‘has no choice but to accelerate the pace of inking FTAs with more trading partners’
135
given the possible substantial market change initially thought likely to result from the TPP.
The TPP negotiation has been ‘a major driver’ in accelerating the China-Korea FTA
negotiation.
136
It is the same with other PTIAs, including the RCEP, the China-Japan-Korea
FTA, the FTAAP, the United States-China BIT,
137
and the European Union-China BIT.
3.
Flexibility
Among the features of an inclusive response (including conveying soft power and a long-
term commitment), flexibility is a major one. Flexibility is reflected in the choice of
respondents and the pace of WTO dispute settlement. China has never sued developing
countries, probably due to the negative effect on bilateral relationships and the capacity limit.
The United States and European Union are the two members that have been respondents in
WTO disputes with China as the claimants, and the United States has been the respondent in
many more cases than the European Union. For the pace of dispute settlement, China recently
requested the establishment of a WTO panel regarding EU antidumping duty methodology,
138
but not on a similar complaint against the United States that was initiated on the same day.
139
135
Zhong Nan, China Will Speed up Free Trade Talks This Year (Jan. 15, 2015), at
http://usa.chinadaily.com.cn/business/2015-01/15/content_19326150.htm.
136
Dukgeun Ahn, Systemic Issues for the Post MC-9 WTO System, 9 ASIAN JOURNAL OF WTO &
INTERNATIONAL HEALTH LAW & POLICY 367, 374 (2014).
137
Mercurio. Nov. 17, 2016.
138
European Union — Measures Related to Price Comparison Methodologies, DS516,
https://www.wto.org/english/tratop_e/dispu_e/cases_e/ds516_e.htm.
139
United States — Measures Related to Price Comparison Methodologies, DS515,
https://www.wto.org/english/tratop_e/dispu_e/cases_e/ds515_e.htm.
34
China’s PTIAs and other initiatives also vary with partners. China’s FTAs feature
malleable rules. It is observed that China prefers to work off the draft FTA provisions of
partners including Peru or Pakistan.
140
Responding to partners’ demands to a certain extent,
China has, for instance, accepted comprehensive investment rules.
141
Given the differences
among partners and the (non-)existence of PTIAs, BRI will probably utilize soft law to
engage more parties. In contrast, the government-to-government dialogues between China
and the United States may aspire for binding commitments.
C.
The Future
1.
Will China adopt an inclusive response?
China will likely promote an inclusive response given its geopolitical, economic and legal
implications. Regarding geopolitical implications, PTIAs help to ‘lock up’ trading partners in
a close relationship. Economic considerations (e.g., enhancing market access) have taken a
back seat to political considerations in shaping China’s FTA calculations.
142
BRI also
involves geopolitical considerations.
143
140
Nargiza Salidjanova, China's Trade Ambitions: Strategy and Objectives behind China's Pursuit of
Free Trade Agreements, U.S.-CHINA ECONOMIC AND SECURITY REVIEW COMMISSION STAFF
RESEARCH REPORT, 22 (2015).
141
Axel Berger, Investment Rules in Chinese Preferential Trade and Investment Agreements: Is China
Following the Global Trend Towards Comprehensive Agreements? at https://www.die-
gdi.de/uploads/media/DP_7.2013.pdf.(visited Oct. 2, 2017)
142
Ka Zeng, China’s Free Trade Agreement Diplomacy, 9 CHINESE JOURNAL OF INTERNATIONAL
POLITICS 277, 279 (2016).
143
Jiayi Zhou, et al., The Trouble With China's 'One Belt One Road' Strategy(Jun. 26, 2015), at
http://thediplomat.com/2015/06/the-trouble-with-the-chinese-marshall-plan-strategy/.
35
Concerning economic implications, an inclusive response may increase market opening.
China’s FTA partners account for around one-third of China’s total exports.
144
The potential
of its FTA coverage could be explored, which fits with China’s aim of generating ‘greater
FTA-driven prosperity’.
145
BRI may help to address, among other aspects, overproduction in
China.
146
Concerning legal implications, China supports the development and clarification of WTO
rules through adjudication and negotiations. The development of WTO rules, such as the
Agreement on Trade Facilitation, provides more predictability in a rule-based system. It may
partly explain why China has compromised in the Information Technology Agreement and
EGA.
147
The recourse to the DSM could help line up with other economies to jointly rebuff
the Trump administration for violating multilateral norms.
148
Dispute resolution through a
legal mechanism lowers political costs compared with retaliation. Even if China loses a
dispute, conceding to legitimate multilateral challenges reveals China to be a good global
144
Salidjanova, U.S.-CHINA ECONOMIC AND SECURITY REVIEW COMMISSION STAFF RESEARCH
REPORT, 13 (2015).
145
Keqiang Li, WE WANT TO WORK WITH YOU FOR PROGRESS AND PEACE, THE
AUSTRALIAN, Mar 22. 2017.
146
Zhou, et al. Jun. 26, 2015.
147
Sean Miner, US Should Support China’s Inclusion in the Trade in Services Agreement(Nov. 3,
2016), at https://piie.com/blogs/trade-investment-policy-watch/us-should-support-chinas-inclusion-
trade-services-agreement.
148
Jiming Ha & Posen Adam S., Creating a Basis for China-US Economic Cooperation under the
New US Administration, in US-CHINA COOPERATION IN A CHANGING GLOBAL ECONOMY 8, (Adam
S. Posen & Ha Jiming eds., 2017).
36
citizen.
149
However, there is a limit on the utilization of the DSM due to the coverage of
WTO law (e.g., difficulties in addressing WTO-extra issues such as competition and cyber
issues), the capacity of China (e.g., increasingly complex and resource-demanding WTO
cases), and the limits of the WTO dispute settlement body (‘no spare capacity [of the WTO
system] to respond to any future rise in cases
150
).
2.
How may China adopt an inclusive response?
China will likely utilize its expertise and enormous economic clout to foster an inclusive
response. First, an inclusive response will build on norms that China is familiar with (in
particular, WTO law and investment rules). China will bring WTO cases against the United
States regarding its unilateral measures, since it is one of the very few legal means for
addressing Sino-United States trade disputes. It will arguably move toward Asian aggressive
legalism.
151
These cases would often target trade remedies. For instance, China will likely
have recourse to the DSM if the United States applies a ‘particular market situation’ as
justification for ratcheting up duties and disregarding home market prices or costs of
production when calculating dumping margins.
152
These disputes may involve other measures
149
Krzysztof J. Pelc, Will Trump's Unilateral Trade Approach Work? History Says No.(Mar. 7, 2017),
at https://www.washingtonpost.com/news/monkey-cage/wp/2017/03/07/will-trumps-unilateral-trade-
approach-work-history-says-no/?utm_term=.542cf814df14.
150
General Council: Appointment of the Director-General (Presentation by DG Azevêdo). Feb. 28,
2017.
151
Saadia M. Pekkanen, Aggressive Legalism: The Rules of the WTO and Japan’s Emerging Trade
Strategy, 24 WORLD ECONOMY 707, 707-737 (2001).
152
Adam Behsudi, Commerce Takes 'Unprecedented' Step in Trade Case (Apr. 12, 2017), at
http://www.politico.com/tipsheets/morning-trade/2017/04/commerce-takes-unprecedented-step-in-
trade-case-219738.
37
(e.g., Section 337 actions,
153
and even the WTO-consistency of a specific measure under an
FTA). However, the WTO negotiations will remain difficult for China as discussed above.
China will use its experience to pursue FTA upgrades and larger FTAs besides negotiating
bilateral FTAs. China’s FTAs will probably be modelled on the WTO norms, but will make
limited effort to establish advanced rules beyond these norms. FTA upgrades deepen China’s
engagement with partners. Larger FTAs help China to expand inclusiveness and shape future
trade rules. The RCEP negotiations could show China’s capacity to ensure the conclusion of
a mega FTA, which may improve China’s negotiation position with the United States. This
helps to explain why China highlights the importance of concluding the negotiations of the
RCEP and China-Japan-Korea FTA,
154
endeavors to press the FTAAP,
155
and join the Trade
in Services Agreement (TiSA). However, the prospect of many of these FTAs (e.g., the
FTAAP) remain unclear. BRI and other initiatives may rely on trade rules to the extent
possible.
Second, China’s inclusive response outside the WTO may attach more importance to
developed countries including the United States. China will probably seek to upgrade or
negotiate PTIAs to recalibrate its trade approach without unintended regulatory outcomes.
This finds support from the fact that China is pursuing FTA upgrading with nearly all of its
developed-country FTA parties (e.g., New Zealand, Singapore, Australia, and Switzerland),
although these agreements were concluded not long ago. China also engages with developed
153
William Clinton, et al., Implications of the 2016 US Presidential Election for Trade Policy, White
& Case LLP (Jan. 2017), at
https://www.whitecase.com/sites/whitecase/files/files/download/publications/2016-us-presidential-
election-implications-on-trade-policy-updated.pdf.
154
Tiezzi. Nov. 19, 2015.
155
Id.
38
countries through negotiating (e.g., Japan, Israel, and Norway) or exploring (i.e. Canada and
potentially the UK
156
) FTAs.
Why would China likely engage more with developed countries? From a geopolitical
perspective, interaction with developed countries reduces confrontation and improves
political relationships. Moreover, China seeks to demonstrate its capacity to conclude pacts
with developed countries and to strengthen cooperation. Meanwhile, the FTAs with some
developing countries (e.g., India) will not be easy partly due to concerns over the impact of
China’s exports.
157
From an economic perspective, engagement with developed countries could bring
economic benefits if properly managed. For instance, China could reduce the impact of the
U.S. PTIAs by receiving preferential treatment in other developed countries who may have
PTIAs with the United States. Importantly, these countries are usually among China’s major
economic partners, and are likely to bring more effects in terms of trade volume.
From a legal perspective, this engagement may avoid or delay the imposition of stringent
regulatory disciplines. In China’s view, the 100-day plan for the United States-China trade
will focus initially on ‘easy issues while making continued efforts on the harder issues’.
158
The focus appears to be enhanced market access rather than strict regulatory standards. China
156
Kamal Ahmed, UK Explores Multi-Billion Pound Free Trade Deal with China(Jul. 24, 2016), at
http://www.bbc.com/news/business-36877573.
157
Iain Marlow & Srivastava Shruti, India May Water Down China-Championed Asia Trade Pact
(Apr. 3, 2017), at https://www.bloomberg.com/politics/articles/2017-04-02/go-slow-india-may-water-
down-china-championed-asia-trade-pact.(India hesitates to expose its manufacturers to competition
from China, which runs a $52 billion surplus with India.)
158
Bloomberg News, Trump's Deficit Crusade Overshadows Xi's Investment Treaty Pitch. Apr. 19,
2017.
39
is also working to engage with the United States in BRI.
159
These initiatives mainly address
trade imbalance or expand investment rather than set high regulatory requirements in the
short term.
V. T H E R E G UL A TO R Y R E S P O N S E
A.
The forms
A regulatory response deals with regulatory improvement and protection, which largely
responds to the U.S. approach to behind-the-border regulatory issues. It aligns China more
closely with developed countries, especially the United States. FTAs are a typical example
here. Legally enforceable WTO-extra provisions of U.S. FTAs all deal with regulatory issues
(including those concerning environment and labour standards) and recent FTAs often
involve the treatment of regulatory measures.
160
The FTAs of the United States stimulate
deep integration beyond WTO norms, which target regulatory impediments to trade (e.g.,
regulation of services production, product standards, customs procedures, regulation of
investment, competition, intellectual property, and government procurement).
161
For BITs,
159
Bloomberg News, China Says Trump Open to Cooperating on Silk Road Projects(Jun. 23, 2017),
at https://www.bloomberg.com/news/articles/2017-06-23/china-says-u-s-is-willing-to-work-on-belt-
and-road-initiative.
160
Henrik Horn, et al., Beyond the WTO? An Anatomy of EU and US Preferential Trade Agreements,
33 WORLD ECONOMY, 1587, 1570ff (2010).
161
David Evans, et al., Assessing Preferential Trading Agreements Using the Sussex
Framework(March 2007), at
https://www.sussex.ac.uk/webteam/gateway/file.php?name=cariswp01.pdf&site=261.
40
strengthened protection of its investors largely through BIT negotiations is important part of
the U.S. trade approach.
162
Moreover, the United States highlights an increasingly high level of regulatory protection,
including regulators’ ability to protect their citizens
163
and the removal of regulatory
barriers.
164
For instance, the U.S. FTA approach to regulatory coherence is developing from
WTO-based one with a number of transparency and cooperation mechanisms, to an
increasing focus on regulatory good practice, particularly on pushing adoption and
recognition of international standards.
165
More broadly, FTAs have undergone ‘legalisation’:
moving from agreements that mainly dealt with tariffs and related restrictive regulations
(such as origin rules) to pacts that cover a wide range of regulatory policies.
166
These
regulatory disciplines affect China directly (through the United States-China BIT
negotiations) and indirectly in the race to shape new generation trade norms.
1.
Domestic reform
Domestic reform could produce regulatory improvements. Examples include establishing
FTZs, reforming the forex settlement of foreign-invested enterprises (FIEs), allowing
162
Trading Up: U.S. Trade and Investment Policy 16. 2016.
163
Peter Chase & Jacques Pelkmans, This Time It's Different: Turbo-Charging Regulatory
Cooperation, in RULE-MAKERS OR RULE-TAKERS? EXPLORING THE TRANSATLANTIC TRADE AND
INVESTMENT PARTNERSHIP 17, (Daniel S. Hamilton & Pelkmans Jacques eds., 2015).
164
Lester & Huan, 2.
165
Phoenix X. F. Cai, Regulatory Coherence and Standardization Mechanisms in the Trans-Pacific
Partnership, 5 BRITISH JOURNAL OF AMERICAN LEGAL STUDIES 505, 515 (2016).
166
Bernard M. Hoekman & Petros C. Mavroidis, WTO ‘à la carte’ or ‘menu du jour’? Assessing the
Case for More Plurilateral Agreements, 26 EUROPEAN JOURNAL OF INTERNATIONAL LAW, 324
(2015).
41
multinational companies to set up cash pooling in RMB and foreign currency, and revising
the Foreign Investment Catalogue to reduce the number of restrictive measures, and issuing
documents to promote opening-up,
167
many of which aim to enhance the utilisation of foreign
investment.
168
A number of these measures are also regarded by the Chinese Ministry of
Commerce as a kind of response to the United States’ concerns over market access.
169
Domestic reform can be made nationwide (including law amendment such as the recent
reform of investment law) or within a region (including FTZs). It may lead to the amendment
of national law when needed. Given the difficulties with regulatory improvements, major
domestic reform often takes a top-down approach.
2.
High-level PTIAs
China could negotiate or join deep PTIAs that set stringent WTO-plus and WTO-extra
regulatory obligations, which contrast with China’s existing FTAs that largely follow WTO
norms with few developments in regulatory disciplines. One option is ‘regulatory’ PTIAs
with non-U.S. partners (e.g., the European Union-China BIT). The RCEP is probably not a
regulatory response, since it can hardly impose stringent regulatory requirements due to the
different positions and development level of parties. The other option is PTIAs involving the
United States, either involving only the United States and China (the United States-China
BIT), or involving the United States and other parties (e.g., the TiSA). The TiSA is a typical
167
For instance, the State Council of China has issued the Circular of Several Measures for the
Expansion of Opening-up and the Active Use of Foreign Investments in 2017. Ministry of Commerce
of the People’s Republic of China, 81-82 2017.
168
PwC, China Unveils 20 Measures to Further Open up the Economy to Foreign Investment (Feb.
2017), at https://www.pwc.com.au/tax/taxtalk/assets/alerts/china-measures-economy-feb17.pdf.
169
Ministry of Commerce of the People’s Republic of China, 81-82 2017.
42
example. Concerning regulatory issues such as data flows and new services,
170
the TiSA may
impose regulatory disciplines resembling the FTAs that the United States and European
Union negotiated (e.g., the TPP, the Korea-United States FTA, and CETA).
171
China’s entry
to the TiSA was blocked by the United States as it thought China might ‘drag its feet’ in the
negotiations.
172
China has not concluded high-level PTIAs, and it is negotiating BITs with the
United States and European Union respectively.
B.
The features
1.
A dichotomy between minor and major regulatory responses
There is a distinction between minor and major regulatory responses. Minor regulatory
responses (i) often deal with specific issues (e.g., the application processing time under
regulatory transparency); (ii) can be implemented by administrative agencies without
changing domestic law; and (iii) are more likely to involve WTO-plus obligations.
China’s regulatory response is often a minor one. China’s PTIAs contain few new
regulatory obligations, and usually do not need the amendment or enactment of national law.
China prefers a soft law approach in new regulatory requirements. Even when regulatory
obligations are imposed, they can be addressed by administrative agencies. For instance,
regulatory transparency in the ChAFTA requires regulators to make administrative decisions
on a completed application of a financial service provider within 180 days, and to notify the
decision to the applicant.
173
170
Miner. Nov. 3, 2016.
171
Sherry Stephenson, et al., Implications of the Trade in Services Agreement (TiSA) for Developing
Countries 37 (2016).
172
Miner. Nov. 3, 2016.
173
ChAFTA Annex 8-B, Article 5 (2015).
43
Domestic reform progresses more on market opening and trade facilitation,
174
rather than
stringent regulatory requirements. Experiments in intellectual property and social issues are
weak in the FTZs,
175
and domestic reform has been slow in thorny regulatory issues such as
reducing the role of SOEs.
176
The innovations in FTZs are mainly procedural (e.g., simplified
procedure, reduced processing time) instead of policy or systematic ones.
177
Major regulatory responses have several features. First, they often deal with deep and
systematic issues. The negative list is an example of a systematic issue. To prepare the
negative list for United States-China investment treaty talks, China established an inter-
ministerial mechanism in the State Council and ‘reviewed tens of thousands of’ rules
governing foreign investment in China.
178
Second, they require legal modification or
enactment by the national legislature to bring systemic regulatory changes. The oft-required
amendment of domestic law is the hallmark of major regulatory response. The legal
amendment could indicate the depth of regulatory requirements, although not every legal
174
Dong Liu, Xiao Lin: Substantial Difference Between the Innovation of Free Trade Zones and
International Rules(Oct. 15, 2016), at
http://m.21jingji.com/article/20161015/herald/0c380e7a68d915a732b80adc1547e3dc.html.(Obvious
progress has been made in FTZs concerning trade facilitation in which there is competition)
175
Id.
176
Bloomberg News, Trump's Deficit Crusade Overshadows Xi's Investment Treaty Pitch. Apr. 19,
2017.
177
Bin Sheng, How to Develop the Upgraded Free Trade Zones?, Shanghai Securities News(Mar. 28,
2017), at http://news.cnstock.com/paper,2017-03-28,796736.htm.
178
Xinhua, China, US Commitment to New Negative List Offers Underpins Optimism in Investment
Treaty Talks(Jun. 28, 2015), at
http://english.gov.cn/news/international_exchanges/2015/06/28/content_281475136101020.htm.
44
modification means a major regulatory response. Third, they often involve WTO-extra
obligations (e.g., investment, and environment) and require more regulatory efforts.
Major regulatory responses occur mainly in investment, and are slow or lacking in other
areas such as social issues (e.g., labour and environment), intellectual property, and SOEs.
China’s regulatory improvements in investment appear to relate to China’s BIT negotiations
with the United States and European Union. China and the United States agreed to conduct
negotiations on the basis of pre-establishment national treatment with a negative list
approach.
179
This negative list approach is to be adopted nationwide in China from 2018,
180
and therefore four laws are to be modified to adopt the record-filing regime for the
establishment or change of most FIEs.
181
Moreover, China amended the Legislation Law to
improve transparency, requiring public comments on the draft law to be collected for at least
30 days, and the occurrence of public comment collection to be publicized.
182
It is the first
time public comment collection has been provided for as an obligation of the legislature.
183
2.
Long-term responses
Regulatory responses directly address the concerns of the United States. The U.S. trade
approach highlights regulatory requirements and is about much more than just trade. Besides
179
Xinhua, China, US Commitment to New Negative List Offers Underpins Optimism in Investment
Treaty Talks. Jun. 28, 2015.
180
HKTDC, China to Expand FTZ Negative List Model Nationwide(Sept. 6, 2016), at
http://hkmb.hktdc.com/en/1X0A7BW7/hktdc-research/China-to-Expand-FTZ-Negative-List-Model-
Nationwide.
181
China Reforms Her Foreign Direct Investment Regulatory Regime. (Sept. 2016).
182
Legislation Law of the People's Republic of China Article 37 (2015).
183
Zhang Yuanan, Wang Yang: Sino-US Cooperation is the Only Right Choice, Caixin(Nov. 23,
2016), at http://international.caixin.com/2016-11-23/101010192.html.
45
market opening, regulatory protections are a concern of the United States. Regulatory
response could directly lead to regulatory improvement.
Regulatory response has the far-reaching effect of ameliorating regulatory standards. It is
probably the most effective way to address barriers to trade and investment. For instance, the
negative list approach and pre-establishment national treatment will bring a fundamental
change in the regulation of investment in China.
3.
A holistic approach
Domestic reform and high-level PTIAs are a holistic approach. On the one hand, domestic
reform represents a testing ground. It is not only an integral part of China’s FTA strategy,
184
but also serves for the BIT negotiations (e.g., the Shanghai Free-Trade Zone (SFTZ)
influenced by the United States-China BIT negotiations
185
). For instance, the negative list
approach is tested in FTZs before its nationwide expansion.
On the other hand, deep PTIA negotiations could build on and even move faster than
domestic reform. The pressure to negotiate PTIAs helps to overcome vested interests and
accelerate domestic reform.
186
As a major reform in recent years, the reform in investment is
arguably triggered by the United States-China BIT negotiations and is linked to China’s
efforts to join the TiSA negotiations. China recently called for fair participation in
184
State Council. 2015.
185
Armstrong Teasdale LLP, China Opens Experimental Free-Trade Zone in Shanghai(Oct. 18,
2013), at http://www.armstrongteasdale.com/china-opens-experimental-free-trade-zone-in-shanghai-
10-18-2013/.
186
Sean Miner, Why China Wants a BIT with the United States(Jun. 18, 2015), at
https://piie.com/blogs/trade-investment-policy-watch/why-china-wants-bit-united-states.
46
government procurement by domestically-invested enterprises and FIEs,
187
which probably
relates to China’s process of acceding the GPA. In China’s United States-China BIT negative
list offer until November 2016, China’s openness in a number of areas (e.g., banking and
securities) is higher than that in FTZs.
188
C.
The future
1.
Will China adopt a regulatory response?
China is ambivalent about a regulatory response as discussed below, and there is
considerable uncertainty about the future of any regulatory response. China wants to ensure
there are no unintended consequences, but regulatory responses often involve sensitive
behind-the-border issues (e.g., SOEs and labour). However, regulatory responses could be
consistent with China’s long-term plan for reform, and PTIA negotiations may promote
regulatory reform at home.
On the one hand, China may have the incentive to gradually pursue deep PTIAs for
geopolitical, economic and legal considerations. Geopolitically, high-level PTIAs will help
China develop close relationships with developed countries, since regulatory response
alleviates their concerns regarding regulatory protection. Regulatory response will save China
from being an outlier of new generation rules. For instance, the United States-China BIT
could ‘build on China’s efforts to become a leader in global affairs’.
189
187
Circular of State Council Concerning Measures on Expanding the Opening Up and the Active
Utilization of Foreign Capital Article 11 (2017).
188
Yuanan, Nov. 23, 2016.
189
Morrison, 25.
47
If properly managed, regulatory response may bring economic benefits despite the
possible impact on Chinese industries arising out of market opening. It should boost investor
confidence in China. By offering regulatory protection requested by the partners, China could
leverage more accession from other partners including enhanced market access and better
treatment of China’s outbound investment. Deep FTAs help to gain preferential access to
major economies representing over one third of global GDP.
190
The benefits of the United
States-China BIT include the investment of China’s SOEs in the United States, the access to
U.S. intellectual property, and the shift of manufacturing operations to the United States to
avoid the U.S. border measures.
191
From a legal perspective, regulatory response will promote good governance, and
enhance the predictability of economic relationships (such as the treatment available to
traders and investors). For instance, the United States-China BIT could improve the review of
the Committee on Foreign Investment in the United States regarding enhanced transparency
and clarity of criteria.
192
It may help to address the concerns over China’s market economy
status perhaps in a side agreement.
193
All these factors are likely part of explanation as to why China preferred speeding up the
United States-China BIT negotiations before the new U.S. administration took office, and
190
Mark Wu, The "China, Inc." Challenge to Global Trade Governance, 57 HARVARD
INTERNATIONAL LAW JOURNAL 261, 315 (2016).
191
Daniel C.K. Chow, Why China Wants a Bilateral Investment Treaty with the United States, 33
BOSTON UNIVERSITY INTERNATIONAL LAW JOURNAL 421, 439-455 (2015).
192
Miner, Why China Wants a BIT with the United States. Jun. 18, 2015.
193
Id.
48
urges the new U.S. administration to advance BIT negotiations.
194
China is willing to take
more regulatory commitments at least under these BITs.
On the other hand, many challenges exist. Domestic reform involves a variety of
stakeholders, and the overhaul of the regulatory system is challenging. Investment is a good
example, since it is an area that China prioritizes. The draft Foreign Investment Law of China
was released in January 2015 and has not been submitted to the legislature for first reading at
the time of writing.
195
This slow process is probably due to the complexity of relevant issues,
and the fundamental reform of investment regulation can hardly be undertaken in the short
term.
196
Thorny issues include national security review, variable interest entities through
which foreign entities invest in sectors restricted by China to foreign investment, the scope of
investment, and the treatment of FIEs compared with domestic enterprises.
197
FTZs also face
challenges such as coordination with ministries and approval to deviate from national law.
As the game changer, high-level PTIAs are challenging in negotiations, interpretation and
implementation given their depth and width. For instance, FTA negotiations are ‘extremely
resource intensive and often involve highly technical and specialised discussions’.
198
A
194
Louise Radnofsky & Page Jeremy, U.S., China Make Limited Headway During Summit, (2017).
195
MOFCOM, Regular Press Conference of the Ministry of Commerce (March 2 2017)(Mar. 4,
2017), at http://english.mofcom.gov.cn/article/newsrelease/press/201703/20170302529366.shtml.
196
Qing Ren, The "Small" Reform Is Not So Small: China's Foreign Invstment Law Enters the Era of
Negative List(Aug. 30, 2016), at http://opinion.caixin.com/2016-08-30/100983287.html.
197
Feng Wang, First Step Taken for the Amendment of Foreign Investment Law, the Determination of
VIE Enterprises "To Be Further Studied"(Sept. 1, 2016), at http://epaper.21jingji.com/html/2016-
09/01/content_45980.htm.
198
David Evans, Bilateral and Plurilateral PTAs, in BILATERAL AND REGIONAL TRADE
AGREEMENTS: COMMENTARY AND ANALYSIS 59, (Simon Lester, et al. eds., 2016).
49
regulatory gap between China and developed countries also exists, which is the biggest
challenge in the TiSA.
199
As an example, TPP SOEs rules may match some of China’s
domestic reforms, but it will be a wide canyon to cross on such strict SOE disciplines given
‘the strength of the vested interests there’.
200
China would not take the TPP-style rules
without fully understanding the political and economic implications since ‘[a]t root it is a
fundamental challenge of politics and governance’.
201
2.
How may China adopt a regulatory response?
First, a regulatory response, if taken by China, will probably take an incremental
approach: from BITs to FTAs, from investment to other issues, and from soft law to hard law.
China may start with high-level BITs and incrementally move to FTAs with more regulatory
requirements than before. This is mainly because BITs have narrower scope and contain
fewer regulatory requirements than FTAs that cover wide-ranging issues (e.g., trade and non-
trade concerns). China’s BITs focus on investment protection and progressively move
towards liberalization.
202
Meanwhile, China has not received as strong external negotiation
pressure in FTAs as in the BIT negotiations. China’s BIT negotiations with the United States
and European Union and deep FTAs (e.g., the TPP) could serve as the basis for China’s
possible high-level FTA negotiations with partners such as Canada.
199
Stephenson, et al., 36. 2016.
200
Sean Miner, Commitments on State-Owned Enterprises, in ASSESSING THE TRANS-PACIFIC
PARTNERSHIP, VOLUME 2: INNOVATIONS IN TRADING RULES 98, (Jeffrey J. Schott & Cimino-Isaacs
Cathleen eds., 2016).
201
Du, JOURNAL OF INTERNATIONAL ECONOMIC LAW, 431 (2015).
202
Heng Wang, The RCEP and Its Investment Rules: Learning from Past Chinese FTAs, 3 CHINESE
JOURNAL OF GLOBAL GOVERNANCE 160, 163 (2017).
50
Investment takes centre stage in regulatory response in the short and medium term, which
is supported by the negotiation plan in China’s FTAs with Korea and Australia and domestic
reform to introduce a fair competition review system in policies concerning foreign
investment to forbid arbitrary restrictions on FIEs.
203
Regulatory response may gradually
expand to other areas such as the environment. Concerning the environment, China has
incentives to address pollution and faces external pressure from the Paris Agreement and
PTIAs (e.g., China’s BIT negotiations with the United States and European Union, and the
China-Korea FTA). In other areas, there is arguably less strong pressure at least from an
agreement like the Paris Agreement, while China may lack strong incentive to promote major
regulatory improvements.
China may first adopt soft law regulatory obligations in PTIAs and gradually move to hard
law. It is worth noting that U.S. practice has taken the same approach, in the context of
investment provisions on labour and the environment (which have evolved from non-binding
to binding language). For reasons discussed above, it could happen in social issues in BITs
and environment issues in FTAs. However, the progress may be rather limited for sensitive
areas such as SOEs.
Second, the prospects for China to join the TPP or its successor (i.e. the Comprehensive
and Progressive Agreement for Trans-Pacific Partnership (CPTPP)) are low in the short term,
and China will prefer to be an original rather than new PTIA member. The absence of the
United States in the TPP substantially reduces the geopolitical and economic attractiveness of
this pact. Even if China wants to join the TPP, there is uncertainty about other TPP countries’
positions. Japan was cool to inviting China into the TPP.
204
In contrast, PTIA negotiations
203
PwC, 2. Feb. 2017.
204
Linda Sieg & Nakagawa Izumi, Japan Cool to Inviting China into TPP as Abe Repeats Free Trade
Mantra(Jan. 25, 2017), at http://www.reuters.com/article/us-japan-tpp-idUSKBN1590O0.
51
avoid the humiliating and time-consuming accession process and TPP-plus conditions. In a
‘face saving’ manner, PTIA negotiations with the United States may help China engage with
the global market to climb the manufacturing value chain, and take advantage of the
complementariness of American and Chinese interests.
205
From a legal perspective, TPP
accession is much more complex than WTO accession or negotiating PTIAs due to stringent
TPP-plus regulatory requirements. China prefers to shape PTIA rules and avoid the circle of
accessions after its WTO entry.
Third, China is likely to selectively adapt high-level regulatory requirements proposed by
partners largely due to its capacity limit. China has adopted high-level regulatory rules in
selected areas (e.g., the negative list approach and pre-establishment national treatment for
investment). Again, the selective adaptation of high-level rules would probably happen first
in investment for internal and external conditions discussed above.
206
Overall, China is more
likely to be affected by the U.S.-style rules due to the strong, albeit fading, negotiation power
of the United States, but may also adapt the rules of other developed economies. As an
example of selective adaptation, the China-Canada BIT models a number of innovative
features of the North American Free Trade Agreement countries’ approach, but lacks a
commitment to investment liberalisation.
207
That said, the European Union-China BIT
negotiations have covered the European Union text proposals on SOEs, domestic regulation,
205
Lester & Huan, 3-4.
206
For the analysis of selective adaptation, see, e.g. Pitman Potter, China and the International Legal
System: Challenges of Participation, 191 THE CHINA QUARTERLY 699, 699-715 (2007).
207
Berger, 6, footnote 9.
52
sustainable development, and procedural fairness in competition related procedures and
standard setting.
208
VI. THE IMPLICATIONS
A.
A political-legal spectrum
This part will discuss the implications of these responses to help deepen understanding of
U.S.-China trade relations. Critically, three kinds of responses exist on a political-legal
spectrum, and reflect some kind of continuum. Retaliatory, inclusive and regulatory
responses deter against specific measures, engage with partners, and improve regulatory
protection respectively. These three responses are likely to remain possibilities regardless of
changes in the U.S. trade approach. However, the utilisation of different responses may
change with the rise of China as China gains more capacity to design its own trade path.
Retaliation and regulatory responses exist at the end of the political-legal spectrum,
whereas inclusive response occupies some kind of middle ground. Retaliation is the most
political among the three responses. It is a largely political rather than legal response, and
may elevate trade issues to sensitive political ones.
209
As discussed above, this is not least
because the concepts in retaliation often defy legal definition. Retaliation involves areas in
which multilateral rules are vague or lacking. Retaliatory response is largely based on the
retaliating country’s own subjective criteria of fairness. Therefore, it is dependent on future
events and political choices. Through retaliation against unilateral measures, use of this
208
EU-China Investment Agreement: Report of the 12th Round of negotiations, Brussels 26-30
September 2016(2016), at http://trade.ec.europa.eu/doclib/docs/2016/october/tradoc_155061.pdf.
209
Pasha L. Hsieh, China-United States Trade Negotiations and Disputes: The WTO and Beyond, 4
ASIAN JOURNAL OF WTO & INTERNATIONAL HEALTH LAW & POLICY 369, 377 (2009).
53
strategy mainly responds to the shift toward unilateralism and trade enforcement. Although
retaliation may respond to measures related to trade imbalances (e.g., border adjustment tax,
and the declaration of China as a currency manipulator), the highly politicized and
adversarial approach underpinning retaliation suggests that it can hardly address trade deficit
issues. Retaliation is not likely to bring normative developments that promote good
governance, and can hardly address regulatory concerns.
Occupying the middle ground, an inclusive response is legally regulated but is more of a
devolution into political responses. Inclusive responses provide predictability from a legal
perspective, and contrast with the oft-politicized and unpredictable retaliation. As an
illustration, WTO dispute settlement involves complicated legal issues and may lead to
changes in municipal law. At the same time, inclusive response involves political
considerations. For instance, China believes that the market openness level depends on
national conditions and is closely related to the political and economic system, the
development level and regulatory capacity.
210
If properly managed, inclusive responses could
partially respond to trade deficit issues (such as through the U.S.-China trade dialogues and
arrangements), the shift away from multilateralism toward unilateralism (such as increasing
China’s negotiation power through building a BRI-related trade network), and trade
enforcement (such as WTO disputes initiated by China against U.S. measures).
Regulatory response appears to be the most legalized approach among the three responses,
although political considerations do play a role. Regulatory response is often reflected in new
domestic rules. Major regulatory response not only requires the change of municipal law but
also carries systematic and legal implications (e.g., obligations for administrative agencies).
Through measures such as those to promote good governance, regulatory responses could
210
Ministry of Commerce of the People’s Republic of China, 80. 2017.
54
address regulatory concerns underlying stringent U.S.-style regulatory disciplines, and may
partially address the unfair trade practice issues in trade enforcement.
B.
China’s preference for inclusive approach?
Different responses may overlap with each other, and China is likely to give the inclusive
approach primacy over the others. The three types of responses may be deployed
simultaneously and are often complementary strategies based on their different functions. For
instance, a regulatory response may overlap with an inclusive response. High-level PTIAs
promote market access, which is intertwined with regulatory requirements (such as the
negative list that is closely related to the regulation of investment under United States-China
BIT negotiations, and the relationship between domestic regulation and discriminatory
licensing requirements in the market access offers in the European Union-China BIT
negotiations
211
). Therefore, China’s FTAs largely fall within an inclusive response, while a
very limited number of their components are regulatory responses. These components include
a hybrid approach in the Agreement on Trade in Services under the Mainland and Hong
Kong Closer Economic Partnership Arrangement (CEPA),
212
the envisaged negative list
approach for investment and services trade in China’s FTAs with Korea
213
and Australia,
214
and the negative list approach in the CEPA Investment Agreement.
211
EU-China Investment Agreement: Report of the 12th Round of negotiations, Brussels 26-30
September 2016. 2016.
212
Mainland and Hong Kong Closer Economic Partnership Arrangement (CEPA): Further
Liberalisation in 2015(2016), at
https://www.tid.gov.hk/print/english/cepa/further_liberal.html.(visited Sept. 19, 2017)
213
China-Korea FTA Annex 22-A, para 3 (2015).
214
ChAFTA Article 8.24.3, 9.9.3(c). 2015.
55
China prefers inclusive responses over the other two responses. Retaliation is largely a
reactive response. It will likely only be utilized when the United States initiates punitive
actions and other options (particularly recourse to the DSM) are not effective. Since
retaliation brings negative interactions and is a short-term response, it is not likely to be
commonly used. Although the threat of retaliation can be used as a negotiation strategy,
retaliation can hardly reduce trade deficit or address regulatory issues, two core concerns of
the United States.
Although regulatory responses are proactive, China will likely be ambivalent about
adopting any regulatory response given the difficulties in accepting stringent regulatory
disciplines. Regulatory response usually involves long-term measures but is less flexible
given the sensitive nature of regulatory disciplines. It is demanding in practice, requiring a
holistic approach and close domestic coordination. Based on previous practice, two
conditions seem to be crucial to adopting a regulatory response: internally, China has an
interest in it, and externally, there is strong negotiation pressure. The typical example is
investment in which China has an interest in enhanced regulatory protection, given its
increased outbound investment and the need to attract investment. Meanwhile, China faces
BIT negotiation pressure from the United States and European Union. In reality, it is not easy
to meet both conditions.
In contrast with the reactive and short-term retaliation, China could proactively adopt a
long-term inclusive response, and generally produce positive outcomes. Essentially, it avoids
confrontation and could convey soft power (e.g. the BRI). It relieves certain concerns of the
United States (e.g., China’s recent domestic measures on market opening in the financial
sector) or offsets the lack of PTIA benefits with the United States (e.g. increasing China’s
negotiation power and opening new markets by developing the BRI). Compared with
regulatory response, inclusive response is more feasible in practice. In interacting with
56
partners, inclusive response is the most flexible amongst these responses and adopts wide-
ranging devices. PTIAs could promote China-style rules while avoid undertaking regulatory
obligations. However, there is a limit to inclusive response in narrowing the huge gap
between, and addressing some genuine problems in, the U.S. and Chinese trade approaches.
To sum up, an inclusive response could respond to most aspects of the U.S. trade approach
except for U.S.-style regulatory disciplines. It arguably responds to more U.S. trade measures
than regulatory responses and retaliation. China’s preference towards inclusive response is
also because China’s trade strategy aims to create a favourable trade environment, but China
does not intend to adopt stringent regulatory obligations in the short term. China may not
benefit from confrontation, and therefore will generally prefer inclusion. For instance, China
now seems to be engaging more actively with the United States, such as by highlighting the
‘common circle of friends’ of both countries.
215
C.
Proper responses needed
China’s responses will profoundly affect global economic governance, and proper
responses may move the bilateral relationship forward and strengthen global trade. For
instance, inclusive response involves international and regional governance. The former
includes the WTO and the G20. For the latter, China has attached a lot of attention to the
development of relevant institutions or mechanisms under the BRI, including the Asian
Infrastructure Investment Bank, and the Belt and Road Forum for International Cooperation.
215
Kor Kian Beng, Let's Cultivate Circle of Friends - Not Cliques, China Tells US(Jun. 7, 2016), at
http://www.straitstimes.com/asia/lets-cultivate-circle-of-friends-not-cliques-china-tells-us.
57
The framework of such institutional development covers input (participation), throughput
(deliberation), or output (material results).
216
Regulatory and inclusive responses could be useful indicators for China’s possible role
change from a rule follower to a rule maker. Inclusive response engages more countries, and
may theoretically help China to become a rule maker. However, such role change arguably
requires normative development. The reliance on inclusive response means that China is
unlikely to develop new trade norms in the short term. Judging from the limited progress
regarding regulatory response, it seems it will be a long way before China becomes a leader
in regulatory disciplines.
Inclusive and regulatory responses are better than a retaliatory response in avoiding
unilateralism and maintaining international legal order as well as security in global economic
relations. Each country’s response to the other’s policy should be rationalized within a rule-
based system, and trade should be a positive sum game rather than a zero-sum one. Reliance
on coercion alone is costlier than through consent, and it leads to a less stable global order.
217
For instance, dispute resolution through a rule-based WTO mechanism lowers political costs
compared with retaliation.
In the long run, regulatory response and direct engagement between the two states under an
inclusive response are a possible solution for U.S.-China trade frictions, and, if managed
properly, may increase the convergence of the U.S. and Chinese trade approaches. Retaliation
and other inclusive responses may bring divergence. That said, the advantages of inclusive
216
Gregory Shaffer, Transnational Legal Process and State Change, 37 LAW & SOCIAL INQUIRY 229,
250 (2012).
217
Krzysztof J. Pelc, Will Trump's Unilateral Trade Approach Work? History Says No.(Mar. 7, 2017),
at https://www.washingtonpost.com/news/monkey-cage/wp/2017/03/07/will-trumps-unilateral-trade-
approach-work-history-says-no/?utm_term=.542cf814df14
58
response should not be exaggerated as one may argue that some of these responses (e.g.
PTIAs) can be considered exclusionary to outsiders. In any case, cooperation between the
United States and China regarding trade will promote world peace and development.
D.
The shift toward a proactive approach
China’s reaction to the U.S. trade approach is more than pure responses, and China may
shift to a proactive trade approach during this process. This is not least because China has an
independent domestic growth policy and an overarching strategy of power-accumulation,
which does not necessarily aim at the U.S. policy. More than selective adaptation, China may
selectively innovate trade norms or pursue the favourable interpretation of existing rules. For
instance, different views exist between the United States and China regarding issues such as
trade remedies (e.g. zeroing, NME). Through an inclusive response, China could use PTIAs
(as is the case with China’s FTAs with Korea on trade remedies) and the BRI to affect trade
rules or their interpretation.
VII. CONCLUDING REMARKS
Retaliatory, inclusive and regulatory responses enable China to interact with the United
States in a direct or indirect way. Essentially, China is likely to take a flexible, pragmatic and
adaptive approach to its trade relationship with the United States. China both
counterbalances
218
and engages with the United States. China uses a regulatory response and
some elements of an inclusive response (e.g., the governmental dialogue) to deal with the US
218
Bryan Mercurio, China's Trade Strategy: Work in Progress(Nov. 17, 2016), at
https://cpianalysis.org/2016/11/17/chinas-trade-strategy-work-in-progress/.
59
strategy of engaging Beijing. Meanwhile, China adopts retaliatory and other forms of
inclusive response (e.g., the FTAs and BRI) to address the U.S. strategy of hedging Beijing.
Both the new U.S. administration’s China policy and China’s response are in the process
of shaping and adjustment, and one could affect the other.
219
Significant uncertainties exist in
the interaction between the two states. They include high trade tensions and a yawning gap
between the United States and China on sensitive issues (e.g., state subsidies and SOEs
220
),
the burden on the DSM, the capacity limit of negotiating PTIAs simultaneously while
managing trade policy in the WTO and other fora,
221
and the complexity of institutional,
regulatory, linguistic, legal, cultural, informational, and political factors involved in trade.
222
As another example, China is concerned about the unpredictability arising from the unclear
aspects of the United States’ negative list in the BIT negotiations (e.g., fundamental
infrastructure, important technology, and national security).
223
China’s response, such as via
retaliatory measures and WTO disputes, may in turn affect the U.S. position. Additionally, it
needs to be observed whether there will be new potential routes between the United States
and China regarding trade. In this process, it is crucial to understand the strategic elements
219
For the analysis of the United States' response to China, see, e.g., WARREN COHEN, AMERICAS
RESPONSE TO CHINA: A HISTORY OF SINO-AMERICAN RELATIONS 1-292 (Columbia University Press
Fifth edition ed. 2010).
220
Clinton, et al., 29. Jan. 2017.
221
The availability of time and human resource is even a question for the United State. See, e.g., Free
Trade Agreements: Impact on U.S. Trade and Implications for U.S. Trade Policy. (2014).
222
Robert Z. Lawrence, The United States and the WTO Dispute Settlement System, at
https://www.cfr.org/sites/default/files/pdf/2007/03/WTO_CSR25.pdf (visited Oct. 12, 2017), at 4.
223
Jingwei Zhang, How to Break Through Barriers in the US-China BIT?, China.org.cn(Sept. 26,
2016), at http://www.china.org.cn/chinese/2016-09/26/content_39371606.htm.
60
underlying each side’s moves with reference to moves that the other has made or might take,
and take into account China’s increasingly proactive trade policy as well as the global trade
landscape.
These three types of response could constitute China’s counter-model to the United States’
deep FTAs in shaping future trade governance. In the past, economic cooperation has not
always been able to defuse tensions or avert war, and the Sino-US relationship is “of a type
that is particularly difficult to manage, and prone to breakdown.”
224
Therefore, these
responses are crucial. These responses, such as the nations’ interactions at the WTO and
elsewhere, will have important implications both domestically and for the partners worldwide
of the United States and China. More broadly, it remains to be seen whether they present a
threat to the coherence and integrity of the international legal order or instead offer a
liberating opportunity for innovation.
Office of the United States Trade Representative, Bipartisan Trade Deal (2007).
Bipartisan Congressional Trade Priorities and Accountability Act of 2015 (2015).
Simon Lester, The Trump Administration's NAFTA Negotiating Objectives (International
Economic Law and Policy Blog 2017).
Bloomberg News, Trump's Deficit Crusade Overshadows Xi's Investment Treaty Pitch(Apr.
19, 2017), at https://www.bloomberg.com/politics/articles/2017-04-19/trump-s-deficit-
crusade-overshadows-xi-s-investment-treaty-pitch.
224
Eric A. Posner & John Yoo, International Law and the Rise of China, 7 CHICAGO JOURNAL OF
INTERNATIONAL LAW 1, 1 (2006).
61
Bryan Mercurio, China's Trade Strategy: Work in Progress(Nov. 17, 2016), at
https://cpianalysis.org/2016/11/17/chinas-trade-strategy-work-in-progress/.
Ming Du, Explaining China’s Tripartite Strategy Toward the Trans-Pacific Partnership
Agreement, 18 JOURNAL OF INTERNATIONAL ECONOMIC LAW 407(2015).
Responsibility of States for Internationally Wrongful Acts 2001 (2001).
Alan O. Sykes, ”Mandatory” Retaliation for Breach of Trade Agreements: Some Thoughts
on the Strategic Design of Section 301, 8 BOSTON UNIVERSITY INTERNATIONAL LAW
JOURNAL 301(1990).
Bloomberg News, China Elevates ‘Good Cop’ on Trade to Counter Trump Barbs(Apr. 12,
2017), at https://www.bloomberg.com/politics/articles/2017-04-11/the-most-important-
chinese-trade-official-you-ve-never-heard-of.
Seema Mody, Three Ways Beijing Could Retaliate Against Trump's Get-Tough Trade
Policies(Jan. 10, 2017), at http://www.cnbc.com/2017/01/10/three-ways-beijing-could-
retaliate-against-trumps-trade-policies.html.
Kishore Gawande, Are U.S. Nontariff Barriers Retaliatory? An Application of Extreme
Bounds Analysis in the Tobit Model, 77 THE REVIEW OF ECONOMICS AND STATISTICS
677(1995).
Rachel Brewster, The Remedy Gap: Institutional Design, Retaliation, and Trade Law
Enforcement, 80 GEORGE WASHINGTON LAW REVIEW 102(2011).
Presidential Memorandum for the United States Trade Representative(Aug. 14, 2017), at
https://www.whitehouse.gov/the-press-office/2017/08/14/presidential-memorandum-united-
states-trade-representative.
Fan Zhai, Trade Cooperation and Conflicts between the United States and China: Risks and
Realities, in US-CHINA COOPERATION IN A CHANGING GLOBAL ECONOMY (Adam S. Posen &
Ha Jiming eds., 2017).
62
William Clinton, et al., Possible Unilateral Actions under US Law(Jan. 13, 2017), at
https://www.whitecase.com/publications/article/possible-unilateral-actions-under-us-law.
Robert M. Feinberg & Kara M. Reynolds, The Spread of Antidumping Regimes and the Role
of Retaliation in Filing, 72 877(2006).
Jennifer M Freedman, China Floods the WTO With Tit-for-Tat(Jun. 8, 2012), at
https://www.bloomberg.com/news/articles/2012-06-07/china-floods-the-wto-with-tit-for-tat.
World Trade Organization, Understanding on Rules and Procedures Governing the
Settlement of Disputes.
Rachel Brewster, Rule-Based Dispute Resolution in International Trade Law, 92 VIRGINIA
LAW REVIEW 251(2006).
Alan O Sykes, Constructive Unilateral Threats in International Commercial Relations: The
Limited Case for Section 301, 23 LAW AND POLICY IN INTERNATIONAL BUSINESS 263(1991-
1992).
Thomas J. Prusa & Skeath Susan, Modern Commercial Policy: Managed Trade or
Retaliation?, in HANDBOOK OF INTERNATIONAL TRADE: ECONOMIC AND LEGAL ANALYSES OF
TRADE POLICY AND INSTITUTIONS (E. Kwan Choi & James C. Hartigan eds., 2004).
Bruce A. Blonigen & Chad P. Bown, Antidumping and Retaliation Threats, 60 JOURNAL OF
INTERNATIONAL ECONOMICS 249(2003).
Jide Nzelibe, The Credibility Imperative: The Political Dynamics of Retaliation in the World
Trade Organization’s Dispute Resolution Mechanism, 6 THEORETICAL INQUIRIES IN LAW
215(2005).
Thomas O. Bayard, Comment on Alan Sykes' "Mandatory Retaliation for Breach of Trade
Agreements: Some Thoughts on the Strategic Design of Section 301", 8 BOSTON UNIVERSITY
INTERNATIONAL LAW JOURNAL 325(1990).
63
Holger Spamann, The Myth of ‘Rebalancing’ Retaliation in WTO Dispute Settlement
Practice, 9 JOURNAL OF INTERNATIONAL ECONOMIC LAW (2006).
Krzysztof J. Pelc, Will Trump's Unilateral Trade Approach Work? History Says No.(Mar. 7,
2017), at https://www.washingtonpost.com/news/monkey-cage/wp/2017/03/07/will-trumps-
unilateral-trade-approach-work-history-says-no/?utm_term=.542cf814df14.
David Dollar, The Future of U.S.-China Economic Ties, Brookings(Oct. 4, 2016), at
https://www.brookings.edu/research/the-future-of-u-s-china-trade-ties/.
Jared R. Silverman, Multilateral Resolution Over Unilateral Retaliation: Adjudicating the
Use of Section 301 before the WTO, 17 UNIVERSITY OF PENNSYLVANIA JOURNAL OF
INTERNATIONAL ECONOMIC LAW 233(1996).
Kirsty Needham, What a Trump v China Trade War Looks Like from Australia, The Sydney
Morning Herald(Jan. 27, 2017), at http://www.smh.com.au/federal-politics/political-
news/what-a-trump-v-china-trade-war-looks-like-from-australia-20170127-gtztpx.html.
China Daily, Meeting Builds on a Thousand Reasons to Be Good Partners(Apr. 15, 2017), at
http://www.chinadaily.com.cn/opinion/2017-04/08/content_28841782.htm.
Xinhua, Economic Watch: Economic Ties Serve as Ballast in China-U.S. Relations,
Xinhua(Mar. 19, 2017), at http://news.xinhuanet.com/english/2017-03/19/c_136140566.htm.
China to Offer Concessions to Avert US Trade War: Report(Apr. 11, 2017), at
http://www.straitstimes.com/world/united-states/china-to-offer-concessions-to-avert-us-trade-
war-report.
Thomas J. Schoenbaum, Trade Friction with Japan and the American Policy Response, 82
MICHIGAN LAW REVIEW 1647(1984).
Pasha L. Hsieh, China-United States Trade Negotiations and Disputes: The WTO and
Beyond, 4 ASIAN JOURNAL OF WTO & INTERNATIONAL HEALTH LAW & POLICY 369(2009).
64
David Lawder, Trump Packs Trade Team with Veterans of Steel Wars with China(Dec. 13,
2016), at http://www.reuters.com/article/us-usa-trump-china-trade-analysis-
idUSKBN13Y2FI.
China Daily, Move to Protect US Steelmakers Is Against Norms of World Trade(Apr. 24,
2017), at http://www.chinadaily.com.cn/opinion/2017-04/24/content_29051319.htm.
Xinhua, China to Respond If U.S. Introduces Border Tax: Minister(Feb. 21, 2017), at
http://news.xinhuanet.com/english/2017-02/21/c_136074442.htm.
David Lawder & Thomas Denny, U.S. Panel Urges Ban on China State Firms Buying U.S.
Companies(Nov. 17, 2016), at http://www.reuters.com/article/us-usa-china-
idUSKBN13B1WO.
Eric Beech, Trump Administration Would Ignore WTO Rulings It Sees as Anti-U.S.: FT(Mar.
1, 2017), at http://www.reuters.com/article/us-usa-trump-wto-idUSKBN16832U.
Wayne M. Morrison, China-U.S. Trade Issues (2017).
DW.com, China Warns of Trade War, Urges US to Abide by WTO Rules(Mar. 9, 2017), at
http://www.dw.com/en/china-warns-of-trade-war-urges-us-to-abide-by-wto-rules/a-
37876534.
Bloomberg News, When the U.S. Moves on Trade, China Hits Back Fast(Nov. 18, 2016), at
https://www.bloomberg.com/news/articles/2016-11-17/china-hits-back-fast-on-perceived-u-
s-trade-slights-past-shows.
Gregory Shaffer & Gao Henry, China’s Rise: How it Took On the U.S. at the WTO, (2017).
Trump Administration’s Second Section 232 Investigation in a Week Focuses on National
Security Threat of Aluminum Imports(May 1, 2017), at
http://www.thompsonhine.com/publications/trump-administrations-second-section-232-
investigation-in-a-week-focuses-on-national-security-threat-of-aluminum-imports.
65
Simon Lester, Would Section 232 Duties on Steel Violate the AD Agreement?(Apr. 21, 2017),
at http://worldtradelaw.typepad.com/ielpblog/2017/04/would-section-232-duties-on-steel-
violate-the-ad-agreement.html.
A US China Trade War?(Feb., 2017), at https://www.controlrisks.com/en/our-
thinking/analysis/a-us-china-trade-war.
Jinping Xi, President Xi's Speech to Davos in Full(Jan. 17, 2017), at
https://www.weforum.org/agenda/2017/01/full-text-of-xi-jinping-keynote-at-the-world-
economic-forum.
Wang Yi: China Will Promote the APEC Meeting to Maintain Free Trade System(Oct. 6,
2016), at http://www.fmprc.gov.cn/mfa_eng/zxxx_662805/t1404248.shtml.
Chinese National Development and Reform Commission, et al., Vision and Actions on Jointly
Building Silk Road Economic Belt and 21st-Century Maritime Silk Road(Mar. 28, 2015), at
http://en.ndrc.gov.cn/newsrelease/201503/t20150330_669367.html.
General Council: Appointment of the Director-General (Presentation by DG Azevêdo)(Feb.
28, 2017), at https://www.wto.org/english/news_e/spra_e/spra158_e.htm.
Gisela Grieger, China's WTO Accession: 15 Years on Taking, Shaking or Shaping WTO
Rules?(Dec., 2016), at
http://www.europarl.europa.eu/RegData/etudes/BRIE/2016/593570/EPRS_BRI(2016)593570
_EN.pdf.
World Trade Organization, Disputes by Member, at
https://www.wto.org/english/tratop_e/dispu_e/dispu_by_country_e.htm.
Chinese Ministry of Commerce, Official of the Department of International Trade and
Economic Affairs of the Ministry of Commerce Interprets the Opinions of the State Council
on Speeding up Implementation of Free Trade Zone Strategy(Dec. 21, 2015), at
66
http://english.mofcom.gov.cn/article/newsrelease/policyreleasing/201601/20160101228504.s
html.
State Council, Opinions on Speeding up the Implementation of Free Trade Area Strategy
(2015).
Xinhua, Belt and Road Initiative Makes Fruitful Progress(Dec. 28, 2015), at
http://www.chinadailyasia.com/chinafocus/2015-12/28/content_15364435.html.
Briefing by Secretary Tillerson, Secretary Mnuchin, and Secretary Ross on President
Trump's Meetings with President Xi of China(Apr. 7, 2017), at
https://www.whitehouse.gov/the-press-office/2017/04/07/briefing-secretary-tillerson-
secretary-mnuchin-and-secretary-ross.
Simon Lester & Zhu Huan, It’s Time to Negotiate a New Economic Relationship with China
(2017).
Shannon Tiezzi, As TPP Leaders Celebrate, China Urges Creation of Asia-Pacific Free
Trade Area(Nov. 19, 2015), at http://thediplomat.com/2015/11/as-tpp-leaders-celebrate-
china-urges-creation-of-asia-pacific-free-trade-area/.
Razeen Sappideen & He Ling Ling, Observations on the Australia-China Free Trade
Agreement Negotiation Process, 38 AUSTRALIAN BUSINESS LAW REVIEW 257(2010).
Bloomberg News, China-U.S. Trade Talks Near 100 Days Jarred by North Korean Test,
Bloomberg(Jul. 7, 2017), at https://www.bloombergquint.com/global-
economics/2017/07/06/china-trapping-u-s-at-trade-table-with-100-day-sweetener-talks.
Zhong Nan, China Will Speed up Free Trade Talks This Year(Jan. 15, 2015), at
http://usa.chinadaily.com.cn/business/2015-01/15/content_19326150.htm.
Dukgeun Ahn, Systemic Issues for the Post MC-9 WTO System, 9 ASIAN JOURNAL OF WTO
& INTERNATIONAL HEALTH LAW & POLICY 367(2014).
67
Nargiza Salidjanova, China's Trade Ambitions: Strategy and Objectives behind China's
Pursuit of Free Trade Agreements, U.S.-CHINA ECONOMIC AND SECURITY REVIEW
COMMISSION STAFF RESEARCH REPORT (2015).
Axel Berger, Investment Rules in Chinese Preferential Trade and Investment Agreements: Is
China Following the Global Trend Towards Comprehensive Agreements? at
https://www.die-gdi.de/uploads/media/DP_7.2013.pdf.
Ka Zeng, China’s Free Trade Agreement Diplomacy, 9 CHINESE JOURNAL OF
INTERNATIONAL POLITICS 277(2016).
Jiayi Zhou, et al., The Trouble With China's 'One Belt One Road' Strategy(Jun. 26, 2015), at
http://thediplomat.com/2015/06/the-trouble-with-the-chinese-marshall-plan-strategy/.
Keqiang Li, WE WANT TO WORK WITH YOU FOR PROGRESS AND PEACE, THE
AUSTRALIAN, Mar 22. 2017.
Sean Miner, US Should Support China’s Inclusion in the Trade in Services Agreement(Nov.
3, 2016), at https://piie.com/blogs/trade-investment-policy-watch/us-should-support-chinas-
inclusion-trade-services-agreement.
Jiming Ha & Posen Adam S., Creating a Basis for China-US Economic Cooperation under
the New US Administration, in US-CHINA COOPERATION IN A CHANGING GLOBAL ECONOMY
(Adam S. Posen & Ha Jiming eds., 2017).
Saadia M. Pekkanen, Aggressive Legalism: The Rules of the WTO and Japan’s Emerging
Trade Strategy, 24 WORLD ECONOMY 707(2001).
Adam Behsudi, Commerce Takes 'Unprecedented' Step in Trade Case(Apr. 12, 2017), at
http://www.politico.com/tipsheets/morning-trade/2017/04/commerce-takes-unprecedented-
step-in-trade-case-219738.
William Clinton, et al., Implications of the 2016 US Presidential Election for Trade Policy,
White & Case LLP(Jan. 2017), at
68
https://www.whitecase.com/sites/whitecase/files/files/download/publications/2016-us-
presidential-election-implications-on-trade-policy-updated.pdf.
Kamal Ahmed, UK Explores Multi-Billion Pound Free Trade Deal with China(Jul. 24,
2016), at http://www.bbc.com/news/business-36877573.
Iain Marlow & Srivastava Shruti, India May Water Down China-Championed Asia Trade
Pact(Apr. 3, 2017), at https://www.bloomberg.com/politics/articles/2017-04-02/go-slow-
india-may-water-down-china-championed-asia-trade-pact.
Bloomberg News, China Says Trump Open to Cooperating on Silk Road Projects(Jun. 23,
2017), at https://www.bloomberg.com/news/articles/2017-06-23/china-says-u-s-is-willing-to-
work-on-belt-and-road-initiative.
Peter Chase & Jacques Pelkmans, This Time It's Different: Turbo-Charging Regulatory
Cooperation, in RULE-MAKERS OR RULE-TAKERS? EXPLORING THE TRANSATLANTIC TRADE
AND INVESTMENT PARTNERSHIP (Daniel S. Hamilton & Pelkmans Jacques eds., 2015).
Henrik Horn, et al., Beyond the WTO? An Anatomy of EU and US Preferential Trade
Agreements, 33 WORLD ECONOMY (2010).
David Evans, et al., Assessing Preferential Trading Agreements Using the Sussex
Framework(March 2007), at
https://www.sussex.ac.uk/webteam/gateway/file.php?name=cariswp01.pdf&site=261.
Bernard M. Hoekman & Petros C. Mavroidis, WTO ‘à la carte’ or ‘menu du jour’? Assessing
the Case for More Plurilateral Agreements, 26 EUROPEAN JOURNAL OF INTERNATIONAL LAW
(2015).
PwC, China Unveils 20 Measures to Further Open up the Economy to Foreign
Investment(Feb. 2017), at https://www.pwc.com.au/tax/taxtalk/assets/alerts/china-measures-
economy-feb17.pdf.
69
Sherry Stephenson, et al., Implications of the Trade in Services Agreement (TiSA) for
Developing Countries (2016).
ChAFTA (2015).
Dong Liu, Xiao Lin: Substantial Difference Between the Innovation of Free Trade Zones and
International Rules(Oct. 15, 2016), at
http://m.21jingji.com/article/20161015/herald/0c380e7a68d915a732b80adc1547e3dc.html.
Bin Sheng, How to Develop the Upgraded Free Trade Zones?, Shanghai Securities
News(Mar. 28, 2017), at http://news.cnstock.com/paper,2017-03-28,796736.htm.
Xinhua, China, US Commitment to New Negative List Offers Underpins Optimism in
Investment Treaty Talks(Jun. 28, 2015), at
http://english.gov.cn/news/international_exchanges/2015/06/28/content_281475136101020.h
tm.
Chinese Ministry of Commerce, Spokesman of the Ministry of Commerce Sun Jiwen
Comments on the Interim Record Management Measures for the Establishment and Change
of Foreign Invested Enterprises (Draft)(Sept. 5, 2016), at
http://english.mofcom.gov.cn/article/newsrelease/policyreleasing/201609/20160901395575.s
html.
HKTDC, China to Expand FTZ Negative List Model Nationwide(Sept. 6, 2016), at
http://hkmb.hktdc.com/en/1X0A7BW7/hktdc-research/China-to-Expand-FTZ-Negative-List-
Model-Nationwide.
China Reforms Her Foreign Direct Investment Regulatory Regime. (Sept. 2016).
Legislation Law of the People's Republic of China (2015).
Zhang Yuanan, Wang Yang: Sino-US Cooperation is the Only Right Choice, Caixin(Nov. 23,
2016), at http://international.caixin.com/2016-11-23/101010192.html.
70
Armstrong Teasdale LLP, China Opens Experimental Free-Trade Zone in Shanghai(Oct. 18,
2013), at http://www.armstrongteasdale.com/china-opens-experimental-free-trade-zone-in-
shanghai-10-18-2013/.
Sean Miner, Why China Wants a BIT with the United States(Jun. 18, 2015), at
https://piie.com/blogs/trade-investment-policy-watch/why-china-wants-bit-united-states.
Circular of State Council Concerning Measures on Expanding the Opening Up and the Active
Utilization of Foreign Capital (2017).
Mark Wu, The "China, Inc." Challenge to Global Trade Governance, 57 HARVARD
INTERNATIONAL LAW JOURNAL 261(2016).
Daniel C.K. Chow, Why China Wants a Bilateral Investment Treaty with the United States,
33 BOSTON UNIVERSITY INTERNATIONAL LAW JOURNAL 421(2015).
Louise Radnofsky & Page Jeremy, U.S., China Make Limited Headway During Summit,
(2017).
MOFCOM, Regular Press Conference of the Ministry of Commerce (March 2 2017)(Mar. 4,
2017), at
http://english.mofcom.gov.cn/article/newsrelease/press/201703/20170302529366.shtml.
Qing Ren, The "Small" Reform Is Not So Small: China's Foreign Invstment Law Enters the
Era of Negative List(Aug. 30, 2016), at http://opinion.caixin.com/2016-08-
30/100983287.html.
Feng Wang, First Step Taken for the Amendment of Foreign Investment Law, the
Determination of VIE Enterprises "To Be Further Studied"(Sept. 1, 2016), at
http://epaper.21jingji.com/html/2016-09/01/content_45980.htm.
David Evans, Bilateral and Plurilateral PTAs, in BILATERAL AND REGIONAL TRADE
AGREEMENTS: COMMENTARY AND ANALYSIS (Simon Lester, et al. eds., 2016).
71
Sean Miner, Commitments on State-Owned Enterprises, in ASSESSING THE TRANS-PACIFIC
PARTNERSHIP, VOLUME 2: INNOVATIONS IN TRADING RULES (Jeffrey J. Schott & Cimino-
Isaacs Cathleen eds., 2016).
Heng Wang, The RCEP and Its Investment Rules: Learning from Past Chinese FTAs, 3
CHINESE JOURNAL OF GLOBAL GOVERNANCE (2017).
Linda Sieg & Nakagawa Izumi, Japan Cool to Inviting China into TPP as Abe Repeats Free
Trade Mantra(Jan. 25, 2017), at http://www.reuters.com/article/us-japan-tpp-
idUSKBN1590O0.
EU-China Investment Agreement: Report of the 12th Round of negotiations, Brussels 26-30
September 2016(2016), at
http://trade.ec.europa.eu/doclib/docs/2016/october/tradoc_155061.pdf.
Stephan W. Schill, Authority, Legitimacy, and Fragmentation in the (Envisaged) Dispute
Settlement Disciplines in Mega-Regionals (2017).
Ricardo Meléndez-Ortiz, Order or Disorder: The Future of Global Economic Integration and
China's Role(2017), at http://cdf-en.cdrf.org.cn/jjh/pdf/en11_1.pdf.
Mainland and Hong Kong Closer Economic Partnership Arrangement (CEPA): Further
Liberalisation in 2015(2016), at
https://www.tid.gov.hk/print/english/cepa/further_liberal.html.
China-Korea FTA (2015).
Jingwei Zhang, How to Break Through Barriers in the US-China BIT?, China.org.cn(Sept.
26, 2016), at http://www.china.org.cn/chinese/2016-09/26/content_39371606.htm.
Kor Kian Beng, Let's Cultivate Circle of Friends - Not Cliques, China Tells US(Jun. 7, 2016),
at http://www.straitstimes.com/asia/lets-cultivate-circle-of-friends-not-cliques-china-tells-us.
Free Trade Agreements: Impact on U.S. Trade and Implications for U.S. Trade Policy.
(2014).
72
Robert Z. Lawrence, The United States and the WTO Dispute Settlement System, at
https://www.cfr.org/sites/default/files/pdf/2007/03/WTO_CSR25.pdf (visited Oct. 12, 2017).
Eric A. Posner & John Yoo, International Law and the Rise of China, 7 Chicago Journal of
International Law 1(2006).
Mark Beeson & Fujian Li, What consensus? Geopolitics and policy paradigms in China and
the United States, 91 INTERNATIONAL AFFAIRS 93(2015).
Presidential Proclamation on Adjusting Imports of Steel into the United States (March 8,
2018), available at https://www.whitehouse.gov/presidential-actions/presidential-
proclamation-adjusting-imports-steel-united-states/.
TEEMU RUSKOLA, LEGAL ORIENTALISM: CHINA, THE UNITED STATES, AND MODERN LAW
(Harvard University Press. 2013).
Marianne Schneider-Petsinger, Trade Policy Under President Trump: Implications for the US
and the World at
https://www.chathamhouse.org/sites/files/chathamhouse/publications/research/2017-11-03-
trade-policy-trump-schneider-petsinger-final.pdf.
DAVID C. KANG, CHINA RISING: PEACE, POWER, AND ORDER IN EAST ASIA (Columbia
University Press. 2007).
Daniel S. Hamilton & Steven Blockmans, TTIP’s Broader Geostrategic Implications, in
RULE-MAKERS OR RULE-TAKERS? EXPLORING THE TRANSATLANTIC TRADE AND INVESTMENT
PARTNERSHIP (Daniel S. Hamilton & Jacques Pelkmans eds., 2015).
Research Report on China-US Economic and Trade Relations. (2017).
Trading Up: U.S. Trade and Investment Policy. (2016).
National Security Strategy of the United States of America. (2017).
Ferdi De Ville, et al., Sustainable Development in TTIP: A Highest Common Denominator
Compromise?, 7 EUROPEAN JOURNAL OF RISK REGULATION 290(2016).
Daniel C.K . Chow, How the United States Uses the Trans-Pacific Partnership to Contain
China in International Trade, 17 CHICAGO JOURNAL OF INTERNATIONAL LAW 370(2016).
Office of the United States Trade Representative, Summary of Objectives for the NAFTA
Renegotiation(Jul. 17, 2017), available at
https://ustr.gov/sites/default/files/files/Press/Releases/NAFTAObjectives.pdf.
Office of the United States Trade Representative, 2017 Trade Policy Agenda and 2016
Annual Report of the President of the United States on the Trade Agreements
Program(2017), available at
https://ustr.gov/sites/default/files/files/reports/2017/AnnualReport/AnnualReport2017.pdf.
Kyle Handley & Limão Nuno, Trade under T.R.U.M.P. policies, in ECONOMICS AND POLICY
IN THE AGE OF TRUMP (Chad P. Bown ed. 2017).
David P. Fidler, President Trump, Trade Policy, and American Grand Strategy: From
Common Advantage to Collective Carnage, 12 ASIAN JOURNAL OF WTO & INTERNATIONAL
HEALTH LAW AND POLICY 1(2017).
America First Foreign Policy(Dec. 2, 2017), available at
https://www.whitehouse.gov/america-first-foreign-policy.
73
Bridges Negotiation Briefing: A Guide to the WTO’s Eleventh Ministerial Conference.
(2017).
C. Fred Bergsten, The US Agenda: Trade Balances and the NAFTA Renegotiation, in A PATH
FORWARD FOR NAFTA (C. Fred Bergsten & Monica de Bolle eds., 2017).
U.S. Trade and Investment Policy. (2011).
Closing Statement of USTR Robert Lighthizer at the Fourth Round of NAFTA
Renegotiations(2017), available at https://ustr.gov/about-us/policy-offices/press-office/press-
releases/2017/october/closing-statement-ustr-robert.
Chad P. Bown, et al., US Trade Representative "Surprised and Disappointed" Statement from
Latest NAFTA Talks—Annotated and Explained(Nov. 1, 2017), available at
https://piie.com/blogs/trade-investment-policy-watch/us-trade-representative-surprised-and-
disappointed-statement.
Jenny Leonard, Sources: USTR considering ISDS proposal that would require NAFTA
countries to opt in, Inside US Trade(Aug. 19, 2017), available at
https://insidetrade.com/daily-news/sources-ustr-considering-isds-proposal-would-require-
nafta-countries-opt.
Tom Miles, U.S. Gives Davos Trade Meeting No Clues on Ending WTO Crisis(Jan. 26,
2018), available at https://money.usnews.com/investing/news/articles/2018-01-26/us-gives-
davos-trade-meeting-no-clues-on-ending-wto-crisis.
Rosalind Mathieson, U.S. Block of WTO Appeals Body Compromises System, Director
Says(Nov. 9, 2017), available at https://www.bloomberg.com/news/articles/2017-11-08/u-s-
block-of-wto-appeals-body-compromises-system-azevedo-says.
China Inc. in the WTO Dock: Tales from a System under Fire. (2017).
Caroline Freund, Trump's Confrontational Trade Policy, 52 INTERECONOMICS 63(2017).
David Dollar, The Future of U.S.-China Economic Relations, in BROOKINGS BIG IDEAS FOR
AMERICA (Michael E. O’Hanlon ed. 2017).
U.S. Department of Commerce, Section 232 Investigation on the Effect of Imports of
Aluminum on U.S. National Security, available at https://www.commerce.gov/page/section-
232-investigation-effect-imports-aluminum-us-national-security.
William Reinsch, What is President Trump Thinking on Trade?(Jan. 11, 2018), available at
https://tradevistas.csis.org/president-trump-thinking-
trade/?utm_source=Members&utm_campaign=eb9b0a139b-
EMAIL_CAMPAIGN_2018_01_12&utm_medium=email&utm_term=0_e842221dc2-
eb9b0a139b-188595225.
Lori Ann LaRocco, US launches anti-dumping case against Chinese aluminum producers
using rare aggressive tactic(Nov. 28, 2017), available at
https://www.cnbc.com/2017/11/28/us-launches-antidumping-case-against-chinese-aluminum-
sheet.html.
Tom Phillips, China Threatens to Cut Sales of iPhones and US Cars If ‘Naive' Trump
Pursues Trade War, The Guardian(Nov. 14, 2016), available at
https://www.theguardian.com/world/2016/nov/14/china-threatens-to-cut-sales-of-iphones-
and-us-cars-if-naive-trump-pursues-trade-war.
Monica Hakimi, Constructing an International Community, 111 AMERICAN JOURNAL OF
INTERNATIONAL LAW (2017).
United States and China Agree on Textile Quotas, 100 THE AMERICAN JOURNAL OF
INTERNATIONAL LAW 472(2006).
Phoenix X. F. Cai, Regulatory Coherence and Standardization Mechanisms in the Trans-
Pacific Partnership, 5 BRITISH JOURNAL OF AMERICAN LEGAL STUDIES 505(2016).
Pitman Potter, China and the International Legal System: Challenges of Participation, 191
THE CHINA QUARTERLY 699(2007).
74
Gregory Shaffer, Transnational Legal Process and State Change, 37 LAW & SOCIAL INQUIRY
229(2012).
WARREN COHEN, AMERICAS RESPONSE TO CHINA: A HISTORY OF SINO-AMERICAN
RELATIONS (Columbia University Press Fifth edition ed. 2010).
Eric A. Posner & John Yoo, International Law and the Rise of China, 7 CHICAGO JOURNAL
OF INTERNATIONAL LAW 1(2006).
... Selective engagement appears to focus on the preferences of the parties, and the sector regulatory disciplines could lead to certain regulatory responses by China. 79 Selective engagement has advantages including efficiency and flexibility. The Phase One agreement avoids many complex processes. ...
Preprint
Full-text available
The US-China economic interactions will have profound ramifications for the world. The article explores the following questions: what is the path forward for US-China economic interactions? What are its implications? It argues that selective engagement is the possible future path for US-China economic interactions. Selective engagement involves selective focuses, which currently are an unprecedented emphasis on market access, and delegalized implementation. Selective engagement contrasts sharply with deep free trade agreements that focus on regulatory disciplines and legalized dispute settlement. Selective engagement carries profound implications, ranging from rule vacuum and inconsistency, increased protection and economic disintegration, to the marginalization of multilateralism. Essentially, selective engagement is a "different animal" from previous trade practices, and could be a game changer in international economic order. The US-China interaction is highly mutable, and selective engagement may change over time.
Article
As a candidate for president of the United States, Donald J. Trump promised to abandon longstanding U.S. approaches to trade and pursue strategies anchored in protectionism and nationalism. This article examines President Trump’s trade policy ideas and proposals and highlights the extent to which he intends to disrupt traditions of U.S. policymaking on trade. The article also analyzes whether domestic and international politics might shift the Trump administration away from a radical approach back towards trade policies that approximate how the United States has managed trade for decades. If such a shift does not occur, the Trump administration’s trade policy could produce political and economic damage on a global scale, and this collective damage will forever be remembered as “Made in America”.
Chapter
Protectionist rhetoric during the 2016 presidential campaign stressed the damage that trade with China has done to the U.S. economy and domestic employment rates over the past decade. Rather than simply retreat from competition and further demonize U.S.-Chinese economic relations, however, the incoming presidential administration should use a combination of incentives and restrictions to rebalance its approach to China and to encourage China itself to show greater openness in its trade and investment policies both at home and abroad.
Article
In this short piece, we speculate about the possible outcomes of the negotiations on 'Trade and Sustainable Development' in the Transatlantic Trade and Investment Partnership (TTIP) between the European Union (EU) and the United States (US). We focus primarily on labour provisions . However, our conclusions to large extent also apply to environmental provisions in TTIP. We first explain that the EU and the US have different approaches to the inclusion of labour provisions in free trade agreements (FTAs). We then argue that these two approaches can be integrated in a lowest common denominator or a highest common denominator way (this should rather be seen as a continuum of potential outcomes), and we outline what we already know about TTIP in this area. We conclude that if the negotiators want to live up to their promise that TTIP will have beneficial social and environmental effects they should integrate the EU and US approaches at the highest level.
Article
This article assesses the relative importance of political and economic factors in shaping China’s free trade agreement (FTA) strategy since the country’s accession to the World Trade Organization (WTO) in 2001. Event history analysis of the time lapse before China signed an FTA with a given partner country lends substantial support to arguments emphasizing the political motivations behind China’s choice of FTA partner. The Chinese leadership has undoubtedly signed more FTAs with countries that have similar state preferences. However, there is far less overwhelming evidence to suggest that China’s FTAs are motivated by economic considerations. While Beijing has indeed signed more FTAs with countries on which it depends heavily for imports, there is scant evidence to show that China’s FTAs are designed to enhance market access abroad, or to secure essential supplies of raw materials. Finally, the study analyses the importance of multilateral and regional trade liberalization in shaping China’s FTA policy choices, and finds that, as a major trading nation, China may not be significantly influenced by the competitive dynamics of regional trade liberalization when formulating its FTA strategy.
Article
The post MC-9 WTO system needs to live with a mega FTA system. This situation raises several unprecedented issues for the multilateral trading system. When mega FTAs such as the TPP, EU-Japan FTA, TTIP, CJK FTA and TISA are concluded, market access negotiation under the Doha Round and the WTO system in general will become much more difficult since only very controversial issues between developed and developing countries remain before the WTO. Despite this problem, the importance of the WTO will be highlighted in other areas. For example, the role of the WTO in terms of devising multilateral trade rules that, in turn, are the basis of FTA rules will continue to increase even when FTA negotiations explode. Also, while recent mega FTAs are more likely to cause their own trade disputes, the role of the WTO dispute settlement system will be further strengthened in order to resolve various trade disputes caused by diverse trade relationships. Enhanced roles of the WTO, however, require restructuring of the current rules and practices related to decision making among members. In addition, trade rule makings by the committees should be enhanced in the future so that the amendment of trade rules can be continuous and more flexible. After all, the WTO needs to focus on its own comparative advantage.