DigitTrade Digest # 102

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China issues its first report on U.S. WTO compliance.

CGTN: China’s Ministry of Commerce has unveiled its inaugural "Report on United States’ WTO Compliance," mirroring the U.S. Trade Representative’s annual Congress-submitted report on China’s WTO adherence. Notably, the Report emerges amid ongoing Sino-U.S. discord within the WTO.“[S]ince 2017, pursuing the policy of ‘America First,’ the U.S. has persistently been blocking the appointments of the Appellate Body members, which led to the paralysis of the Appellate Body. The U.S. has also arbitrarily raised tariffs on imports, abused trade remedy and export control measures, granted discriminatory subsidies, instigated decoupling and fragmenting industrial and supply chains, and imposed economic coercion and sanctions of all kinds,” the report says. “These actions have seriously undermined the core values and basic principles of the WTO, violated U.S. international obligation of complying with WTO rules, which severely challenged the multilateral trading system and harmed WTO members’ shared interests.”

The Report states “As an important member of the WTO, theU.S. should have taken the lead in complying with WTO rules, upholding the basic principles and core values of the WTO, and enhancing the authority and efficacy of the WTO, with a view that this organization can play a more active role in maintaining a free and open international trade order, promoting global economic recovery from the pandemic, and ensuring peace, development and stability in the world. Regrettably, the U.S. did just the contrary. It is hoped that this Report will help urge the U.S. to fulfill its commitments, abide by the rules, and truly return to the community of the rules-based, open, transparent, inclusive and non-discriminatory multilateralism as soon as possible, playing its due role in safeguarding the authority, integrity and efficacy of the multilateral trading system. China will continue to closely monitor the U.S. fulfillment of its obligations under the WTO. Meanwhile, China will, as always, work closely with all WTO members, firmly uphold the multilateral trading system, fully and deeply participate in WTO reform, and collectively advance the multilateral trading system to play a greater role in global economic governance.”

The 69-page report broadly argues that the U.S. is undermining the WTO by not living up to its obligations or flouting norms in a variety of ways. The report raises specific concerns about U.S. measures in key areas,”including “tariff and non-tariff barriers, industrial subsidies, agricultural subsidies, trade remedies, standards and technical regulations, trade in services, intellectual property rights, export controls and economic sanctions, investment review mechanism, ‘Buy America’ policy, and discriminatory arrangements in international economic and trade cooperation.”

Beijing has harsh words for Washington in its report, calling the U.S. at points a “destroyer” of the multilateral system, a “manipulator,” and a “unilateralist and bullying hegemonist.” It cites as evidence the ongoing U.S. block on filling Appellate Body vacancies, its “selective implementation” of dispute panel reports, “abuse” of the national security exception, U.S. export controls and what China called a “double standard” on industrial policy.

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Biden signs law implementing first part of U.S. trade pact with Taiwan

Reuters: U.S. President Joe Biden signed legislation on Monday implementing the U.S. and Taiwan’s “21st-Century Trade First Agreement Implementation Act”, trade initiative.

Following the signing of the bill, President Biden issued a statement highlighting its provisions that raise constitutional concerns, particularly citing section 7 of the bill. President Biden emphasized that if the requirements of section 7 were to infringe upon his constitutional authority to negotiate with a foreign partner, his administration would regard them as non-binding.

The bill secured unanimous consent in the Senate last month and passed the House via a voice vote in June. Having been presented to the President on July 27, it was poised to take effect this week even without his approval, unless he chose to veto it

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US investors flag retaliation risks after Biden’s China tech curbs

Reuters: While the market mostly shrugged off President Joe Biden’s move to prohibit some U.S. technology investments in China, U.S. investors said they were worried Beijing would retaliate or pull back from buying American technology.

Aiming to protect national security and prevent U.S. capital and expertise from aiding China’s military modernization, Biden this week issued an executive order barring some new U.S. investments in China in sensitive technologies including computer chips, while regulating others.

U.S. investors were unfazed by the initial news, saying that the restrictions, at first blush, were more limited than feared and unlikely to extend to passive investments in public Chinese stocks. But several portfolio managers said the bigger worry was whether China would strike back, as it has in the past.

"Much depends on how China decides to react to that. The very significant technology war between the countries is a big negative and the administration seemed to be trying to make that announcement without making too many waves with China," said Rick Meckler, partner at Cherry Lane Investments in New Jersey.

In response to Biden’s executive order, China’s commerce ministry said it was "gravely concerned" and reserved the right to take counter-measures. Some China analysts said Beijing’s options are limited and would unlikely escalate the matter

China in May targeted U.S. chip maker Micron Technology after Washington imposed a series of export controls on American components and chipmaker tools to China, and the U.S. has accused Beijing of penalizing other U.S. companies amid growing tensions between the two global economic powerhouses.

"It is naïve to think that there won’t be some type of retaliation from China," said Tom Plumb, CEO of mutual fund Plumb Funds. China could restrict exports of rare earths used in consumer electronics, electric vehicles, and other components, or target other U.S. technology companies, Plumb said.

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Tech Giants Trigger Generative AI Investment Boom

VIP: Major technology companies, including Microsoft, Google, Amazon and Meta Platforms, have begun placing massive bets on gen AI. In early 2023, for instance, Microsoft invested $10 billion in OpenAI, a leading developer of the new generation of AI models, and began incorporating its technology into Microsoft products. Also in early 2023, Google invested $300 million in gen AI developer Anthropic and significantly ramped up its own internal development of the technology. Facebook parent Meta, which changed its name in 2021 to reflect a major shift to developing metaverse applications, quietly pivoted away from that initiative in 2023 to turn its attention to generative AI, releasing its own tool called LLaMA. In a post on Facebook in late February 2023, Mark Zuckerberg announced, “We’re creating a new top-level product group at Meta focused on generative AI to turbocharge our work in this area.”

Amazon Web Services has partnered with StabilityAI, a consortium of AI research institutions and a leading developer of AI-powered image generators. And more recently in April, Amazon announced Bedrock, which is a new service that allows developers to build generative AI applications on AWS.

Venture capital and private equity investors, who had long eschewed the sector, have also changed their view of the technology’s commercial prospects of late and begun to put money into generative AI.