US Violated Trade Rules With Tariffs on China — WTO

Daniel Fowler
September 16, 2020

The World Trade Organisation has ruled that the United States violated the trade rules of the organisation by introducing high tariffs against Chinese goods as a part of its trade war against the Asian country.

China also alleged the tariffs violated a key dispute settlement rule that requires countries to first seek recourse from the WTO dispute settlement body before imposing retaliatory tariffs against another country.

In the wake of the WTO ruling's publication, Beijing has expressed hope that the USA will respect its recommendations and return to compliance with the global body's regulations.

But the WTO's three-person panel said the US duties broke trading rules because they applied only to China and were above maximum rates agreed by the United States.

Trump threatened tariffs on $500 billion worth of goods during his two year trade war with China, before signing a "Phase 1" trade deal with Beijing early this year.

China's representative told the organisation at the time that the tariffs imposed were "a blatant breach of the United States' obligations under the WTO agreements and is posing a systemic challenge to the multilateral trading system". Washington has imposed levies on US$400 billion in Chinese exports.

In particular, it rejected the USA argument that the tariffs were applied to products it said had benefitted from practices that the United States considers are contrary to "public morals", like theft, misappropriation and unfair competition.

In its decision, the WTO's dispute settlement body ruled against the USA government's argument that China has wrongly engaged in practices harmful to us interests on issues including intellectual property theft and technology transfer.

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"The panel found, accordingly, that the USA had not met its burden of demonstrating that the measures are provisionally justified", it said.

"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 in a statement.

The Trump administration, which has repeatedly criticised the WTO, may appeal the decision.

But that process has been complicated since the WTO Appellate Body, sometimes called the supreme court of world trade, stopped functioning in December after years of relentless United States opposition.

But the case could then enter a legal paralysis because Washington has blocked the appointment of judges to the appellate body, preventing it from convening the minimum number required to hear cases.

Noting "unprecedented global trade tensions", the three-person panel encouraged the two sides to work to resolve the overall dispute.

It called on the United States and China to "pursue further efforts to achieve a mutually satisfactory solution" to their dispute.

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