WTO says American tariffs on China broke global trade rules

Ana Swanson, The New York Times

Posted at Sep 16 2020 07:51 AM

WTO says American tariffs on China broke global trade rules 1
US President Donald Trump addresses a rally at Atlantic Aviation in Moon Township, Pennsylvania on Nov. 6, 2016. Mandel Ngan, AFP/File 

WASHINGTON — A World Trade Organization panel said Tuesday that the United States violated international trade rules by imposing tariffs on China in 2018 in the midst of President Donald Trump’s trade war.

The panel of trade experts sided with a complaint that had been filed by China, which argued that Trump’s tariffs violated several global rules, including a provision that requires all WTO members to offer equal tariff rates among the body’s trading partners.

Trump broke with that tradition. During his trade war with China, the president imposed tariffs on more than $360 billion worth of Chinese products, in an effort to persuade China to strengthen its intellectual property protections and make other changes to policies that Trump said put American workers at a disadvantage. The administration drew on an American legal provision — called Section 301 — to impose the tariffs, which allows the president to restrict foreign commerce that unfairly burdens the United States.

The impact of the ruling remains unclear. The United States and China signed a trade deal in January, but the bulk of the tariffs imposed by the Trump administration remain in place, covering more than half of China’s exports to the United States.

In a statement, Robert Lighthizer, the US Trade Representative, blasted the World Trade Organization for trying to prevent the United States from helping its own workers.

“This panel report confirms what the Trump administration has been saying for four years: The WTO is completely inadequate to stop China’s harmful technology practices,” Lighthizer said. “Although the panel did not dispute the extensive evidence submitted by the United States of intellectual property theft by China, its decision shows that the WTO provides no remedy for such misconduct.”

“The United States must be allowed to defend itself against unfair trade practices, and the Trump Administration will not let China use the WTO to take advantage of American workers, businesses, farmers and ranchers,” he added.

The United States has 60 days to respond to the decision. But the ruling may have little practical effect, since the United States effectively crippled the WTO panel responsible for handling appeals of trade disputes, by refusing to appoint new members to it.

If the United States chooses to fight the organization’s latest decision, the case will end up in a kind of legal limbo, with no resolution in sight.

“Before the Trump administration came along and decimated the WTO Appellate Body, a case like this would be appealed,” said Chad Bown, a senior fellow at the Peterson Institute for International Economics.

If the panel had enough members to function and its members upheld the ruling, the WTO could authorize China to retaliate if the United States did not change its policies or if the United States and China could not agree to some other form of compensation.

“But since the Trump administration has refused to appoint new members to the Appellate Body, the US could appeal this panel report ‘into the void,’” Bown said.

If the United States chooses not to appeal but also makes no changes in response to the ruling, China could ask for the World Trade Organization’s permission to recoup some of its losses by imposing tariffs on the United States.

But Bown said the retaliation issue “is largely moot anyway,” since China responded to America’s tariffs with its own levies beginning in July 2018. Since China did not have WTO permission to retaliate against the United States, those tariffs, too, were arguably a violation of global trade rules.

The Trump administration has continued to play an active role in the World Trade Organization, but many of Trump’s biggest trade offensives over the past three years have bypassed the organization’s rules.

While other countries have criticized the United States for weakening the global trading system, the Trump administration argues that the World Trade Organization is largely ineffective and badly in need of reform, in part because of its failure to police China’s unfair trade practices.

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