Washington Insider--Monday

Holding China to WTO Rules

Here’s a quick monitor of Washington farm and trade policy issues from DTN’s well-placed observer.

EPA: Biodiesel Group Has No Grounds to Challenge Argentine Imports

The Environmental Protection Agency (EPA) did not need to seek public comment before it approved an alternate compliance plan for Argentine companies that import biofuels, according to its brief in response to a lawsuit by the National Biodiesel Board (NBB).

The biodiesel board filed a lawsuit March 30 challenging the EPA’s ability to approve alternate renewable biomass tracking requirements. The board argued that the plan that the EPA approved for Camara Argentina de Biocombustibles (CARBIO) was less rigorous than the recordkeeping demands placed on American biodiesel producers. Crops used for renewable fuels by law must be grown on agricultural land that was cleared before Dec. 19, 2007, and is non-forested.

The NBB argued that the EPA’s provision for documentation and third-party surveys to establish that the right kind of land was used should have been subject to a notice and comment period. EPA said no legal provision establishes such a requirement. The agency also told the court that the board failed to establish that the use of the alternative tracking requirement by CARBIO, known as “Group Tracking,” caused its members any “imminent, nonconjectural injury or that vacating the approval would relieve its members’ purported injury.”

“EPA may immediately void or revoke the approved Group Tracking plan if it proves ineffective in ensuring that crop feedstock utilized by CARBIO members was grown on qualified land,” the EPA’s brief said.

Oral arguments in the case in the U.S. Court of Appeals for the District of Columbia Circuit have not been scheduled.


China to Safeguard Food Security Amid Reforms

China will take steps to ensure sufficient food supplies as it pushes forward with land reforms, Xinhua news agency reported, citing a statement from the annual Central Rural Work Conference that ended on Dec. 24.

Beijing has identified food security as one of its biggest challenges over the next decade, with its population still rising and vast tracts of its farmland already swallowed up due to rapid urban and industrial growth. “Food security is the bottom line of agricultural structural reform,” Xinhua said.

China has in recent years unveiled a series of reforms to ease restrictions on the transfer of collectively owned land. The government will protect farmland and ensure grain output in major producing regions, trying to ensure food self-sufficiency, Xinhua reported. The government also will offer preferential policies to large-scale farms, lower production costs, and reduce inventories of farm products, it said.

China said in August that it will launch a pilot program allowing farmers to use their land and property as collateral for loans, in a bid to bolster support for the cash-starved farm sector.


Washington Insider: Holding China to WTO Rules

There is still some sentiment across the United States that countries with large centrally planned sectors like China and Russia do not belong in the WTO. Still, the United States and the West in general have for many years believed that it is better to include these economies in the WTO so that they are subject to trading rules. However, rule enforcement in such cases has never been easy.

Now, some of those tensions can be seen in a new report on WTO rule enforcement in key areas such as intellectual property rights and the protection of trade secrets. The Bureau of National Affairs (BNA) recently reported on a release by the Office of the U.S. Trade Representative to Congress entitled “Report to Congress on China’s WTO Compliance” since its accession to the WTO in 2001.

The report says that China has undertaken a wide-ranging revision of its laws and regulations aimed at protecting the intellectual property rights of domestic and foreign right holders, as required by the WTO under the Trade-Related Aspects of Intellectual Property Rights; the so-called TRIPS Agreement.

However, USTR was not thrilled with what it found. It concluded that “inadequacies in China’s IPR protection and enforcement regime continue to present serious barriers to US exports and investment.”

The 193-page WTO compliance report noted that China was again placed on the Priority Watch List in the 2015 Special 301 report. USTR said a wide range of U.S. stakeholders in China are continuing to report serious obstacles to effective protection of IPR in nearly all forms, including patents, copyrights, trademarks, trade secrets and protection of pharmaceutical test data.

Additionally, the report noted, USTR has once again identified several Chinese markets with major challenges in the global struggle against piracy and counterfeiting in 2014.

While intellectual property was the first “priority issue” cited in the report, the second was the problem of protection and enforcement of trade secrets. USTR said that theft of trade secrets that benefit Chinese companies has been reported frequently both within and outside of China. The report stressed that offenders in many cases continue to operate with impunity.

USTR identified as “most troubling” reports that representatives of the Chinese government and the Chinese military have infiltrated the computer systems of U.S. companies, stealing large amounts of data, including the companies’ intellectual property for the purpose of providing commercial advantages to Chinese firms.

In order to help deal with these problems, the United States has recently won commitments from China not to condone this type of trade secret theft and is urging it to update and amend its own trade secrets-related laws and regulations, particularly the Anti-unfair Competition Law. “The government also is pressing China to consider issuing judicial guidance to strengthen its trade secrets regime,” the report said. In addition, the United States is pressing China hard to take action to address this problem broadly across its state-sponsored firms, and to promote public awareness of this issue.

The report said China announced at the November 2015 bilateral Joint Commission on Commerce and Trade meeting that it is amending this law and intends to issue model or guiding court cases and clarify rules on preliminary injunctions, evidence preservation orders and damages.

China’s reliance on state-owned firms is both a weak aspect of its economy and a threat to the continued western investment China needs to continue its growth. And, while USTR says it has assurance that China is tightening its commercial rules, the continuing flow of reports of government involvement in support of not just favoritism for its GSEs, but actual participation by government agents in illegal support of data and trade secret theft certainly means that much work remains to be done to clamp down on such clandestine efforts.

While it has always been difficult to make China and other centrally planned economies, by the rules, it seems clear that is better to have them in the WTO where there is a better than fair chance of corralling a significant share of their shady practices than it is to struggle to make corrections from afar, Washington Insider believes.

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