United States violated trade rules with tariffs on China: WTO

Andrew Cummings
September 15, 2020

A World Trade Organization panel ruled Tuesday that Trump administration tariffs on $200 billion worth of Chinese goods are illegal, vindicating Beijing even if the United States has all but incapacitated the WTO's ability to hand down a final, binding verdict.

But the United States said it showed that the WTO was "completely inadequate" to the task of confronting China.

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.

The panel was created in January past year to review Trump's decision to hit China with the tariffs in 2018, which marked the beginning of a trade war between the world's two largest economies.

In a statement on Tuesday, China's Commerce Ministry said it hoped the USA would respect the rulings of the World Trade Organisation (WTO) and take practical action to maintain the multilateral trading system.

The tariffs imposed in 2018 marked the beginning of the trade war between the world's two largest economies.

The organisation demanded that the USA bring its tariffs into conformity with the country's obligations as a member of the WTO.

The decision marks the first time the Geneva-based trade body has ruled against a series of tariffs that President Donald Trump's government has imposed on a number of countries, allies and rivals alike.

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

"Although the panel did not dispute the extensive evidence submitted by the USA of intellectual property theft by China, its decision shows that the WTO provides no remedy for such misconduct".

In 72-page report Tuesday, the panel however said that Washington had "not met its burden of demonstrating that its measures were provisionally justified" under global trade rules.

However, Washington can effectively veto the WTO 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.

Trade Representative Robert Lighthizer insisted the USA must be allowed to "defend itself" against unfair trade practices and maintained the ruling would not affect Phase I of the proposed trade agreement between the U.S. and China.

The three-person panel affirmed the tariffs, which Washington has broadened to cover $550 billion in Chinese exports, violated two GATT provisions and stated that the U.S. has not justified their necessity under a third provision.

Washington accuses the court of major overreach and has blocked appointments of new judges, leaving it without the quorum needed to hear cases.

"Recalling Article 3.7 of the DSU that highlights that the aim of the dispute settlement system is to achieve a positive solution to a dispute, the Panel expresses its ongoing encouragement to the parties to pursue further efforts to achieve a mutually satisfactory solution [to their conflict]", the ruling says.

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