WTO finds US tariffs on China breach global trade rules

By Monitoring Desk

Geneva: The World Trade Organization undercut the main justification for President Donald Trump’s trade war against China, saying that American tariffs on Chinese goods violate international rules.

A panel of three WTO trade experts on Tuesday said the US broke global regulations when it imposed tariffs on Chinese goods in 2018. Washington has imposed levies on $400 billion in Chinese exports.

A panel of experts set up by WTO´s Dispute Settlement Body ruled the tariffs "inconsistent" with global trade rules, and recommended that the United States "bring its measures into conformity with its obligations".

The panel was created in January last year to review US President Donald Trump´s decision to hit China with tariffs on a quarter of a trillion dollars´ worth of goods.

The panel said in its report “that the United States had not met its burden of demonstrating that the measures are provisionally justified.”

While the ruling bolsters Beijing’s claims, Washington can effectively veto the decision by lodging an appeal at any point in the next 60 days. That’s because the Trump administration has already paralyzed the WTO’s appellate body, a tactic that has rendered toothless the world’s foremost arbiter of trade.

Tariffs, by percentage rate, imposed by the U.S. and China on each other since March 2018.

The US responded defiantly to the WTO report criticizing President Donald Trump´s tariffs on China, blasting the organization as "completely inadequate" in holding Beijing accountable.

"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," US Trade Representative Robert Lighthizer said in a statement.

China said it hoped the United States would respect the rulings of the WTO and take practical actions to maintain the multilateral trading system, the country’s commerce ministry said.

The panel found that the duties were inconsistent with trading rules because they applied only to China and were above the maximum rates to which the United States had committed.

It also found that the United States had not adequately explained the choice of products hit by the tariffs, or why the measures were necessary based on what Washington saw as Chinese companies’ misappropriation and unfair competition.

“...The Panel recommends that the United States bring its measures into conformity with its obligations...,” the report said.

The panel added that it had only looked into the U.S. measures and not China’s retaliation, which Washington has not challenged at the WTO. Noting “unprecedented global trade tensions”, the three-person panel encouraged the two sides to work to resolve the overall dispute.

Tuesday´s announcement marks one of the first in a series of anticipated panel rulings over complaints filed by a long line of countries over Trump´s decision to slap them with steep tariffs on steel and aluminium imports.

The dispute centers on the Trump administration’s use of a 1970s-era U.S. trade law to unilaterally launch its commercial conflict against China in 2018.

China claimed the tariffs violated the WTO’s most-favored treatment provision because the measures failed to provide the same treatment to all WTO members. China also alleged the duties broke a key dispute-settlement rule that requires countries to first seek recourse from the WTO before imposing retaliatory measures against another country.

China´s representative told the organization 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 meanwhile slammed China´s complaint as "entirely hypocritical", pointing to the "discriminatory duties on over $100 billion in US exports" imposed in parallel by China.

The U.S. tariffs against China were authorized under Section 301 of the Trade Act of 1974, which empowers the president to levy tariffs and other import restrictions whenever a foreign country imposes unfair trade practices that affect U.S. commerce.

The Trump administration has claimed the tariffs were necessary to confront China’s widespread violations of intellectual property rights and forced technology transfer policies.

Though the use of Section 301 isn’t unprecedented, the provision largely fell out of favor in the 1990s after the U.S. agreed to first follow the WTO’s dispute settlement process before it triggered any retaliatory trade actions.

While the European Union has so far been spared U.S. levies based on the controversial Section 301, the 27-nation bloc may breathe a sigh of relief over Tuesday’s WTO verdict. That’s because the Trump administration has threatened to use Section 301 to hit European goods with levies in retaliation over the taxation of digital companies in the EU.