WTO rules against US in pre-trade war tariff dispute with China

WTO rules against US in pre-trade war tariff dispute with China

The World Trade Organization has said some US tariffs on Chinese goods do not comply with its rules, opening the door for Beijing to levy retaliatory sanctions.

The ruling from the WTO appellate body late on Tuesday on the case, which predates the current trade war between the two countries, was blasted by the US trade representative office, which claimed the report was undermining its own rules. 

The findings deliver a blow to Washington’s attempts to push back against what it views as unfair state-led pricing for some types of goods, such as piping and solar panel components, and comes at a time when the US and China are already locked in a bitter trade dispute that has seen hundreds of billions of dollars in tariffs imposed on exports on both sides of the Pacific.

The case was originally opened by China in 2012 in response to US tariffs aimed at goods that Washington said were unfairly subsidised by Chinese state-owned enterprises and hurt American jobs and businesses. 

The US has often complained that China’s state-owned companies receive handouts from the government and preferential treatment from state banks and other government entities making it difficult for foreign companies to compete with them.

The WTO appellate body’s final decision on the case accepts the US argument that Chinese state groups subsidised the costs of some materials. But it also stated that the US must accept Chinese pricing — not its own calculations on pricing — when calculating the tariffs.

The ruling would give China the option to respond with retaliatory measures against the US if Chinese pricing is not accepted. 

The office of the US Trade Representative said the report “recognises that the United States has proved that China uses State-Owned Enterprises (SOEs) to subsidise and distort its economy”, while warning that it would continue to protect US interests connected to the dispute.

“The WTO appellate report undermines WTO rules, making them less effective to counteract Chinese SOE subsidies that are harming US workers and businesses and distorting markets worldwide,” the USTR said in a statement. “The United States is determined to take all necessary steps to ensure a level playing field so that China and its SOEs stop injuring US workers and businesses.”

The US also took aim at the functioning of the WTO’s appellate body, stating that the ruling has raised questions on how some members were allowed to serve on appeals past the end of their terms.

The US has blocked all new appointments to the seven-member appellate body in protest, leaving it in danger of collapse as it may not have enough judges to allow it to hear new cases.

China’s Ministry of Commerce welcomed the WTO ruling in a statement on its website and claimed the US’s continued violations of international rules have hurt global trade.

“Regrettably, the US continues to use illegal practices in its implementation of the WTO rules,” the Ministry of Commerce said. “The ruling of the appellate body once again proved that the US violated the WTO rules and repeatedly abused trade remedy measures, which has seriously damaged the fairness and impartial nature of the international trade environment.”

US president Donald Trump said recently that he was in “no hurry” to resolve the current trade dispute with China, saying tariffs have started to have a clear impact on the Chinese economy.

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