Trump’s China tariffs violate global trade rules, WTO says

Source: By David J. Lynch, Washington Post • Posted: Tuesday, September 15, 2020

Ruling isn’t expected to have immediate impact on U.S. policy but shows how White House moved on its own terms to try and crack down on Beijing.

U.S. President Donald Trump and John McEntee, director of the White House presidential personnel office, right, walk to the Oval Office of the White House in Washington, D.C., U.S., on Friday, Sept. 11, 2020, Trump is reviving his 2016 campaign playbook on attacking China, but running as the incumbent means defending a record of only limited success in rewriting the economic relationship with Beijing. Photographer: Chris Kleponis/Polaris/Bloomberg
U.S. President Donald Trump and John McEntee, director of the White House presidential personnel office, right, walk to the Oval Office of the White House in Washington, D.C., U.S., on Friday, Sept. 11, 2020, Trump is reviving his 2016 campaign playbook on attacking China, but running as the incumbent means defending a record of only limited success in rewriting the economic relationship with Beijing. Photographer: Chris Kleponis/Polaris/Bloomberg (Chris Kleponis/Bloomberg)

The World Trade Organization Tuesday struck at the core of President Trump’s trade war on China, ruling that the tariffs he imposed in 2018 on $234 billion worth of Chinese goods ran afoul of U.S. commitments under global trading rules.

The ruling will have no immediate impact on U.S. customs officials’ ability to collect the import taxes from American importers, but it represents a diplomatic dent in the president’s “America First” approach.

“It reaffirms that the U.S. is the outlier in the WTO,” said John Veroneau, a partner at Covington & Burling and a former U.S. trade negotiator in the administration of President George W. Bush.

The administration said its tariffs were needed to curb years of trade cheating by China. But in a 66-page report, the panel rejected that claim.

“The United States has not met its burden of demonstrating that the measures” are justified, the panel concluded.

Robert E. Lighthizer, the U.S. trade representative, issued a statement criticizing the decision, saying it showed that the WTO was unable to prevent Chinese policies from distorting global trade and harming the U.S. economy. The president imposed the tariffs on Chinese goods following an investigation by Lighthizer’s office that concluded China routinely engaged in unfair trade practices, including compelling foreign firms to transfer technology secrets and violating intellectual property safeguards.

“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,” Lighthizer said.

In a separate announcement, Lighthizer said the administration was dropping a 10 percent tariff it had imposed on Canadian aluminum in August.

The U.S. move followed consultations with the Canadian government and came just hours before Canadian officials were expected to unveil retaliatory tariffs on U.S. goods. Lighthizer said the U.S. had scrapped its tariff plans based on “expectations” that Canadian shipments of the industrial metal would decline by 50 percent from levels during the first half of this year.

The U.S. reserves the right to reimpose the import levies if imports exceed expected levels, he said.

The U.S. Chamber of Commerce, which has been critical of the administration’s tariff diplomacy, welcomed the move.

“What American manufacturers need now is certainty that these tariffs won’t make another reappearance. Setting aside these threats once and for all will allow American job creators to focus on economic recovery,” said Myron Brilliant, executive vice president of the U.S. Chamber.

In the case of the China tariffs, the U.S. can effectively stall any further action by appealing Tuesday’s ruling. The administration has blocked for months the appointment of new members to the WTO’s appellate body, leaving the organization unable to fulfill its assigned role of adjudicating trade spats. The panel acknowledged its ruling comes amid “unprecedented global trade tensions.”

Wendy Cutler, vice president of the Asia Society, said the verdict illustrated the weakness of the global trading regime established in 1995 with U.S. support.

“In another era, this ruling would have been the talk of the town in the trade community. But, the finding comes as no surprise and without a fully operating appellate body it won’t have a consequential impact,” said Cutler, a former trade negotiator.

China petitioned the WTO within weeks of the first U.S. tariffs, arguing that the Trump administration had breached global trade rules by unilaterally imposing the import levies.

The two countries subsequently negotiated a partial trade deal, which was unveiled at a White House ceremony in January. The so-called “phase one” deal called for China to buy an additional $200 billion from U.S. suppliers, but left many of the administration’s broader complaints about Chinese state subsidies and trade practices for future negotiations.

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