The New York Times and other news organizations are reporting this week that a World Trade Organization panel found Tuesday that the U.S. violated its rules by imposing tariffs on China in 2018. The Times said the finding drew an “angry response from the administration.”
The WTO panel of trade experts sided with a complaint that China had filed, which argued that the administration'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.
The Trump administration broke with that tradition. During its trade war with China, the U.S. imposed tariffs on more than $360 billion worth of Chinese products in an effort to force China to better protect foreign intellectual property — and to change other policies that the U.S. administration claimed 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 effect of the ruling remains unclear, the Times said. The United States and China signed a trade deal in January, but the bulk of the tariffs imposed by the U.S. administration remain in place covering more than half of China's exports to the United States.
Robert Lighthizer, the United States Trade Representative, blasted the WTO 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 has effectively crippled the WTO panel responsible for handling appeals of trade disputes by refusing to appoint new members to it, the Times said.
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.
The report noted that if the panel had enough members to function and its members upheld the ruling, the WTO could authorize China to retaliate if the U.S. did not change its policies – or if the U.S. and China could not agree to some other form of compensation.
“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.
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. China did not have WTO permission to retaliate against the United States so they, too, were arguably a violation of global trade rules.
The administration has continued to play an active role in the WTO although many of its biggest trade offensives over the past three years have bypassed the formal organization rules.
While other countries have criticized the United States for weakening the global trading system, the administration argues that the WTO is largely ineffective and badly in need of overhaul, in part because of its failure to police China's unfair trade practices.
So, we will see. There is broad suspicion regarding the WTO on both sides of the U.S. political aisle because it promotes policies that are accused of undercutting “national sovereignty.” And, by working to promote “equitable trade,” the organization's policies can increase competitive pressures from overseas producers.
Still, a rules-based international trading system is highly valued by many who believe that tariff-based approaches significantly raise prices for consumers and have, in the past, sharply amplified international tensions.
Clearly, trade policy debates are vitally important to producers and should be watched closely as they intensify, Washington Insider believes.