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            september 23, 2019

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US, EU and Japan seek agreement to curb China's state subsidies


The US, EU and Japan are pushing for an agreement on measures to curb state-support of industries with the aim to eventually limiting how much China backs its private companies, according to people familiar with the negotiations.
The move on industrial subsidies is expected to top the agenda at meetings between trade ministers from the three economies in Paris this week. It's part of an effort to modernise global trade rules that the US and others claim have failed to address China's rise as a global economic power.
If the talks advance, people close to the discussions say, they would become the most significant attempt to rewrite WTO rules since the ultimately unsuccessful Doha Round of trade negotiations was launched in 2001.
US Trade Representative Robert Lighthizer is due to meet his European Union counterpart, Cecilia Malmstrom, and Japan's Hiroshige Seko on the sidelines of an OECD meeting. People close to the negotiations caution that the three have not yet fully agreed on how to proceed or on when and whether to include China in the discussions.
But they have agreed to begin opening the discussions to other World Trade Organization members with Australia, Canada, Norway and Taiwan, with all said to be interested, Bloomberg reported.
The goal, according to people close to the discussions, is to pursue a negotiation among a small group of nations that might eventually be opened to the WTO's broader membership. Such "plurilateral" negotiations have become common at the WTO in recent years and are seen by some members as a way around the institution's cumbersome negotiating rules, which require consensus among all 164 members.
An agreement on industrial subsidies, though it could still take years to negotiate, would be consequential. According to researchers at the Global Trade Alert, which tracks subsidies around the world, roughly 64 per cent of global exports compete with subsidised rivals. In 2017 that trade would have been worth US$11.3 trillion.
About 17 per cent of trade around the world has been hit by tariff increases as a result of tariff wars of the past year.
The US, EU and Japan published a scoping paper a year ago that called for "clarified and improved" WTO rules on industrial subsidies to "ensure that certain emerging developing members do not escape its application."
Among their goals is crafting new rules that would require timely notification of subsidies to the WTO and a clearer definition of what constitutes a "public body," with the US eager to see state-owned banks included.
A key question is whether and how to encourage the participation of China. Targeting Beijing's state-led industrial policies has been a priority for the Trump administration, which blames China for the decline in America's manufacturing base over the past decade and a half.
In its latest review of the Chinese economy, the WTO said the state retains a majority share in all but one of China's 100 largest publicly listed companies.

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