China Responds After WTO Finds US Tariffs Breach Trading Rules

(Source: France 24)

China said it supports the multilateral trading system and hopes the US would do the same and respect the ruling of the World Trade Organization (WTO), the country’s commerce ministry said Tuesday.

The WTO ruled on Tuesday that tariffs imposed by the US on more than $200 billion of Chinese products in 2018, triggering a trade war, were inconsistent with international trade rules.

“China appreciates the objective and fair ruling made by the WTO expert panel,” China’s Ministry of Commerce said in a statement. “China also hopes that the US can fully respect the rulings of the expert panel and the rule-based multilateral trading system, and take practical actions to maintain the multilateral trading system.” 

A three-person panel said the US duties broke trading rules because they applied only to products from China and were applied in excess of the rates agreed to by the US. Washington had not then demonstrated why its measures were justified, the panel concluded.

“The WTO decision is indeed very exciting,” said Wang Yiwei, director of the Institute of International Affairs at Renmin University. “This also proves that the trend of globalization and multilateralism is ongoing and cannot be changed.”

Hu Xingdou, a Beijing-based independent economist, said that the WTO ruling shows that Trump’s trade war argument is untenable. “The US has taken advantage of China’s cheap labor and lack of human rights, and China’s depletion and destruction of environmental resources. China only gained a profit of less than 5% of the entire processing chain, but Trump insisted that the US suffered a loss in the US-China trade. Doesn’t he understand free trade or does he want to confuse people?”

The decision prompted US President Trump to say in Washington that he had to “do something about the WTO because they’ve let China get away with murder.”

Robert Lighthizer, a US trade representative, said in a statement that the US “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.” 

“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,” he said.

The WTO panel said its role was not to draw any legal conclusions or make recommendations on any matters other than those it had been specifically tasked to deal with. The panel added that it had only looked into the US measures and not China’s retaliation, which Washington has not challenged at the WTO.

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Noting “unprecedented global trade tensions”, the panel encouraged the two sides to find a mutually agreed solution to solve the dispute. 

China has been consistent in its support of the WTO and the current international trade system, said Feng Chucheng, a political risk analyst and partner at the independent research firm Plenum. “This is also in line with the interest of European states, with whom China attempts to be on the same ticket amidst the de-globalization trend led by US President Trump.”

The US may appeal Tuesday’s ruling. But the case could then end up in a legal limbo because Washington has blocked the appointment of judges to the appellate body, preventing it from convening the minimum number required to hear cases.

A United States Trade Representative issued a Section 301 report in 2018 documenting how China had engaged in unfair forced technology transfer practices, such as exploiting its foreign ownership and administrative requirements to extort US intellectual property rights or supporting commercial cyber theft from US entities. 

Since April 4, 2018, China had initiated four consultation requests with the US through the WTO on the US 301 tariff measures against China, and conducted two consultations with the US in August and October in 2018, but both failed.

China then requested the establishment of a WTO panel ruling in this case and in January 2019, the WTO established a dispute settlement panel around this case.

The dispute covers two of the trade actions in the Section 301 investigation of China’s Acts, Policies, and Practices Related to Technology Transfer, Intellectual Property, and Innovation: the $34 billion trade action announced in June 2018, and the $200 billion trade action announced in September 2018.