In a significant development, the World Trade Organization found that U.S. trade tariffs on China were in breach of global trading rules.
In a statement, the Trump administration said, its more than $200 billion trade tariffs on China was justified since China was stealing intellectual property and forcing U.S. companies to tech transfers in exchange for access to its markets.
In a ruling, the WTO’s three-member panel said, U.S. duties were in breach of trading rules since it applied only to China and were above maximum rates agreed to by the United States. The United States had not sufficiently supported its trade actions against China, said the panel.
“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,” said U.S. Trade Representative Robert Lighthizer in response.
In a statement, China’s Commerce Ministry stated, it supports the multilateral trading system and respected WTO rules and rulings.
However, the WTO ruling will have little impact on the U.S. trade tariffs and represents just a start of a legal process that could take years to play out; ultimately it is likely to lead to the WTO approving retaliatory measures, if it is upheld, moves that Beijing has already taken.
Since Washington is likely to appeal the ruling, it will put the case into a legal vacuum since Washington has already blocked the appointment of judges to the WTO’s appellate body, preventing it from convening the minimum number required to hear cases.
The 3 member WTO panel was aware it was stepping into a grey zone while noting that it had looked only into the U.S. measures and not China’s retaliation, which Washington has not challenged at the WTO.
“The panel is very much aware of the wider context in which the WTO system currently operates, which is one reflecting a range of unprecedented global trade tensions,” concluded the 66-page report.
In the past, Trump has ascribed the global trade body as “horrible” and biased towards China, and has often threatened to quit. He has also commented that he would “have to do something about the WTO because they’ve let China get away with murder.”
“I’m not a big fan of the WTO – that I can tell you right now. Maybe they did us a big favor,” said Trump.
Trump’s move is likely to fuel speculation that Washington made decide to leave the WTO; it also underpins U.S. arguments which call for reforming the 25-year-old trade body, said Margaret Cekuta, a former USTR official who helped write a crucial report on China’s intellectual property abuses that preceded Trump’s tariffs.
“It gives the administration ammo to say the WTO is out of date,” said Cekuta, now a principal with the Capitol Counsel lobbying firm.
U.S. officials could potentially argue that the WTO’s inability to rule on intellectual property rights left it ill-prepared to deal with the global economy.