Heading toward correcting unfair trade practices and keeping China in mind, Japan, the United States and the European Union are to start formulating new rules for the World Trade Organization to regulate government subsidies to major domestic industries, government sources said.
The three parties plan to reach an agreement on the new WTO rules during their trade ministers' meeting late this month and include the agreement in a joint statement to conclude the meeting. The three parties will then call for the WTO members to open negotiations for new WTO rules this year.
Government subsidies have become an important topic of discussion for WTO agreements. For instance, if each country lowers tariffs on a certain import item, it would be difficult to secure fair competition if a certain country grants subsidies to its domestic companies.
The United States especially regards China's subsidy practices as problematic. Recently, Chinese subsidies caused the overproduction of aluminium and steel in the country, creating a severe blow to steel and other industries in the United States amid inexpensive exports from China.
Specifically, the three parties see that not only the subsidies of central governments, but also that of local governments and governmental financial institutions should be regulated by new WTO rules. They are considering including loans with extremely low interest and investments in which returns are not expected as effectively subsidies. They aim to come up with new blanket rules to cover public subsidies.
There are concerns that similar issues could occur and expand mainly in emerging countries, besides China. Japan, the United States and the EU will reflect such concerns in the new rules to secure fair competitive trade environments.
Meanwhile, Japan, the United States and the EU will seek to form a working group to formulate global rules on intellectual property rights infringement, such as forcing foreign companies to transfer their technologies.
The trade ministers' meeting of Japan, the United States and the EU was launched in November 2017, with the aim of strengthening coordination for correcting unfair trade practices by emerging countries such as China.
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