This decision is likely to further inflame the Trump administration’s antipathy toward the global trade body.
The World Trade Organisation gave China the go-ahead on Friday to impose sanctions on up to $3.6 billion of American goods in a fight over unfairly cheap Chinese goods, a decision that is likely to further inflame the Trump administration’s antipathy toward the global trade body.
The ruling is the final decision in a case China brought against the United States nearly six years ago that stemmed from levies placed on more than 40 Chinese goods. The duties were imposed during the Obama administration, but the practice they were intended to curb remains one of the Trump administration’s biggest economic concerns about China.
At issue are subsidies that the United States has accused China of providing to its companies so that they can sell goods more cheaply overseas. To stop China from flooding the US market with dozens of low-cost Chinese products—including solar panels, furniture, shrimp, steel pipe, tires and washing machines—the United States imposed “anti-dumping duties” on those goods.
A 2017 decision by the World Trade Organisation found that the United States had not followed the global trade body’s rules in the way it imposed the duties. On Friday, the WTO gave China the green light to try to recoup some of the losses it sustained by imposing enough tariffs on American goods to block $3.6 billion worth of American exports to China.
China has not yet indicated which American products it will hit with tariffs and it is unclear whether the United States would retaliate. Under the WTO rules, China can keep the tariffs in place until the United States changes its behavior or the two countries agree to some type of resolution.
A Trump administration official said that the United States was “disappointed” by the decision, saying that it overstated the financial effect on China and used an approach that “has no foundation in economic analysis.” He added that the United States did not plan to change the practices that the WTO had objected to, including how it determines the level of duties it should impose on Chinese goods. That means any tariffs China imposes could remain in place indefinitely.
The case is separate from President Donald Trump’s trade war with China, which has taken place outside of World Trade Organisation rules and resulted in the United States placing tariffs on $360 billion worth of Chinese goods.
But it could further complicate relations between the world’s two largest economies as they try to reach an agreement to end their yearlong trade fight. China has already retaliated against the United States with tariffs on roughly $100 billion worth of American products and Trump has dangled the possibility of additional tariffs if Beijing does not agree to the administration’s demands. Both sides have already suffered economic pain from the tit-for-tat tariffs.
Beijing could use the threat of these tariffs as a source of leverage in trade negotiations. But China, which imports far fewer American goods than it exports to the United States, has been reluctant to increase the tariffs it has already imposed, because it could raise costs for essential products like medical devices and food.
“We do not believe the arbitrator’s decision will have any impact on continuing trade discussions between the United States and China,” the Trump administration official said.
The ruling could have bigger consequences for the future of the WTO. The administration has already criticised the global trade body, including its inability to write rules that deter China from providing generous subsidies to its industries.
In part through the use of state-owned enterprises, China has built giant industries to manufacture steel, aluminum, solar panels and other products that have flooded global markets with low-cost products and put American competitors out of business. The country threatens to do the same in emerging industries like new-energy vehicles and semiconductors, US officials say. But the WTO defines subsidies narrowly, for example excluding cheap inputs from Chinese state-owned firms.
The Trump administration has been blocking new appointments to the part of the WTO that considers
appeals on trade disputes, in what the United States says is an effort to persuade the body to make certain changes. As of 10 December, the so-called appellate body will no longer have enough members to hear cases, leaving some trade disputes without a final
verdict.
Trump administration officials say privately that the shuttering of the appellate body will be no great loss. But others do not share that opinion. The concern, says Jennifer Hillman, a former WTO appellate body member and an expert at the Council on Foreign Relations, is that countries may begin taking matters into their own hands.
If countries turn away from the WTO system and impose tariffs on each other outside of global trade rules, that increases the risk of damaging trade wars and protectionism that could weigh on the economy.
“Immediately you have the crisis of what to do about all the pending appeals that will no longer ever be completed, and whether the parties to those appeals are going to start taking
unilateral action,” Hillman said.
© 2019 The New York Times