BOFIT Viikkokatsaus / BOFIT Weekly 2017/50

At 11th Ministerial Conference of the WTO this week, the EU, Japan and the US announced plans for closer cooperation on the trade policy front to deal with trade-distorting policies of certain countries. Their joint communique stated that the function of global trade was harmed by state-subsidized overcapacity and large subsidies to state and private firms. The three condemned mandatory technology transfers and demands that a percentage of a given product is produced locally. The alliance announced it would seek cooperation in eliminating the unfair conditions mentioned above as well as other distortionary and protections models.

While the communique did not name countries, it was clear China was the main culprit. Advanced economies are unhappy with China's failure to modify its bad behaviour despite negotiations. Notably, media reports suggest the cooperation came at Japan's initiative. Through cooperation, the parties hope to command greater authority and reduce the risk of unilateral action by the US.