GENEVA (REUTERS, BLOOMBERG, AFP) – The World Trade Organisation ruled on Tuesday (Sept 15) that additional tariffs imposed by the United States against China in 2018 were inconsistent with global trading rules.
Washington has imposed levies on US$400 billion (S$545 billion) in Chinese exports.
A panel of three WTO trade experts said in its report “that the United States had not met its burden of demonstrating that the measures are provisionally justified”.
“China also hopes that the United States will fully respect the rulings of the expert group and the rules-based multilateral trading system, and take practical actions to meet China and other WTO members to jointly maintain the multilateral trading system and promote the stable and healthy development of the world economy,” it added.
But the US responded defiantly, blasting the organisation as “completely inadequate” in holding Beijing accountable.
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,” US Trade Representative Robert Lighthizer said in a statement.
The panel was created in January last 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.
Beijing and Washington reached a partial truce earlier this year with the signing of their “phase one” trade deal.
Mr Lighthizer said the WTO verdict would have “no effect on the… agreement between the United States and China, which includes new, enforceable commitments by China to prevent the theft of American technology”.
Tuesday’s announcement marks one of the first in a series of anticipated panel rulings over complaints filed by a long line of countries over Trump’s decision to slap them with steep tariffs on steel and aluminum imports.
However, Washington can effectively veto the WTO decision by lodging an appeal at any point in the next 60 days. That is because the Trump administration has already paralysed the WTO’s appellate body, a tactic that has rendered toothless the world’s foremost arbiter of trade.
The dispute centres on the Trump administration’s use of a 1970s-era US trade law to unilaterally launch its commercial conflict against China in 2018.
China claimed the tariffs violated the WTO’s most-favoured treatment provision because the measures failed to provide the same treatment to all WTO members.
China also alleged the duties broke a key dispute-settlement rule that requires countries to first seek recourse from the WTO before imposing retaliatory measures against another country.
The US tariffs against China were authorised under Section 301 of the Trade Act of 1974, which empowers the president to levy tariffs and other import restrictions whenever a foreign country imposes unfair trade practices that affect US commerce.
The Trump administration has claimed the tariffs were necessary to confront China’s widespread violations of intellectual property rights and forced technology transfer policies.
Though the use of Section 301 is not unprecedented, the provision largely fell out of favour in the 1990s after the US agreed to first follow the WTO’s dispute settlement process before it triggered any retaliatory trade actions.
While the European Union has so far been spared US levies based on the controversial Section 301, the 27-nation bloc may breathe a sigh of relief over Tuesday’s WTO verdict. That is because the Trump administration has threatened to use Section 301 to hit European goods with levies in retaliation over the taxation of digital companies in the EU.