The World Trade Organization ruled Wednesday that some of the Trump administration’s tariffs against China were imposed in violation of international trading rules, a conclusion that could have no practical consequences because the WTO appellate system currently doesn’t function.
The WTO sided with a complaint filed by China in 2018, which argued that the Trump administration broke WTO rules because of the way it singled out China for separate tariffs than other countries. The Trump administration has long criticized these WTO rules for being inadequate.
“China has demonstrated that the additional duties apply only to products from China and thus fail to accord to products originating in China an advantage granted to the like product originating in all other WTO Members,” the panel said.
The U.S. said that the ruling underscores that the WTO system has no effective mechanism for dealing with Chinese trade practices such as intellectual-property theft or forcing companies to share their technology with Chinese partners to gain access to the market.
The ruling formally pertains to only some of the Trump administration’s tariffs in its multiyear trade war with China—tariffs imposed on $34 billion of goods in June 2018 and $200 billion of goods in September 2018, a large share, but not all, of U.S. tariffs on about $370 billion of Chinese imports. The U.S. imposed the tariffs after publishing a report that highlighted Chinese practices that it said amount to extortion and stealing of American technology.
The Office of the U.S. Trade Representative Robert Lighthizer immediately criticized the WTO’s ruling, saying that it underscored the problems with the Geneva-based WTO’s system. The WTO, founded in 1995, has 164 member countries and was designed to establish global rules of trade. The Trump administration has said the system has failed to adapt to the rise of China’s economy.
“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 Mr. Lighthizer, who is the Trump administration’s top trade negotiator.
“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,” he said. “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.”
The U.S. argued the WTO shouldn’t rule in the case because the U.S. and China struck a deal in January pausing their tariff escalations. China, however, didn’t agree that the trade deal made its WTO case unnecessary, and the WTO went ahead with the ruling.
The ruling doesn’t directly affect the terms agreed to in the U.S.-China deal, and may have no practical impact at all because the WTO isn’t fully functional.
The next step after such a ruling would typically be an appeal to the WTO’s appellate body. The appellate body, however, doesn’t currently have a quorum to operate because the U.S. has blocked the appointment of appellate members, saying the WTO’s operations are overly legalistic, undemocratic and overreach their intended authorities.
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