U.S.-China Trade Plan Hinges on Beijing's Compliance

By William Mauldin Features Dow Jones Newswires

The U.S.-China pact on greater access to the Asian giant's economy relies in part on Beijing's pledge to open markets in two areas -- beef and electronic payments -- that it has repeatedly promised to open before, only to continue blocking American firms.

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The trade plan, which so far has no provision for settling disputes, puts a spotlight on broader complaints about Beijing's record of compliance with trade agreements. The U.S. and other major economies say China hasn't followed through with all of the commitments it made when it joined the World Trade Organization 15 years ago.

Like other developing economies, China has used bureaucratic hurdles to block imports from the U.S. and other countries.

The Obama administration brought more than a dozen WTO challenges against Beijing. Most cases take years to go through dispute resolution, including appeals, at the Geneva-based body.

U.S. lawmakers have recently called on the Trump administration to step up enforcement of international and U.S. law against Beijing.

China's ban on U.S. beef was imposed in 2003 over "mad-cow" disease concerns. Premier Li Keqiang promised in September to resume imports "soon," but the vague timing left U.S. exporters uncertain about if and when it would happen. And China's state bank-card issuer, China UnionPay Co., continues to dominate the electronic-payments market despite a U.S. win at the WTO in 2012.

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The Chinese government on Friday touted the plan as a sign that it is willing to further open its own markets, as President Xi Jinping casts himself as a driving force for globalization.

The formal free-trade agreements the U.S. has with South Korea and other economies include detailed arbitration systems to resolve disputes, including through retaliation against the other country's imports. A less-involved type of pact the Obama administration was trying to negotiate with Beijing -- known as a bilateral investment treaty, or BIT -- also has provisions for settling disputes.

But the agreement the Trump administration worked out with Beijing, part of what the administration hopes will be a bigger pattern of opening Chinese markets, appears to be just an understanding between the two governments.

One country could fail to honor the plan, or a political shift could undermine it -- with no spelled-out repercussions. "None of these are enforceable in the same sense as a WTO type of case," said Chad Bown, a trade expert at the Peterson Institute for International Economics, which backs trade liberalization.

Still, according to Mr. Bown, President Donald Trump has one very powerful tool to ensure that Beijing holds up its end of the bargain: tariffs.

Robert Lighthizer, Mr. Trump's pick for U.S. trade representative, who is expected to be sworn in next week, has argued that Washington should consider backing out of its trade obligations and potentially retaliating with unilateral tariffs against China if it fails to uphold its obligations.

"Trump seems to be the type of president who may retaliate outside the WTO system," Mr. Bown said.

Write to William Mauldin at william.mauldin@wsj.com

(END) Dow Jones Newswires

May 12, 2017 17:11 ET (21:11 GMT)