WTO finds U.S. tariffs on China breach trading rules

The WTO said the US duties broke trading rules because they applied only to China and were above maximum rates agreed to by the US

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.

The US on Tuesday slammed the decision - and the WTO itself - as "completely inadequate" in holding China "accountable" for its alleged trade transgressions.

The US said the duties were a response to China's state-sanctioned technology theft, subsidies and other "unfair practices" and allowed under 1970s-era trade rules. It also claimed the Trump administration had violated a dispute-resolution provision that requires countries to appeal to the WTO to settle disputes before slapping retaliatory tariffs on another country.

The WTO's ruling clarified that not only do Washington's actions go against the regulations set forth by the global trade body, but that the U.S. had also failed to properly justify the economic measures imposed against Beijing, as required by the WTO charter.

The panel was created in January past year to review US President Donald Trump's decision to hit China with tariffs on a quarter of a trillion dollars' worth of goods. However, it did not attempt to resolve the "dispute" through the WTO before kicking off what has become a grueling two-year trade war.

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".

The decision marks the first time the Geneva-based trade body has ruled against a series of tariffs that President Donald Trump's government has imposed on a number of countries, allies and rivals alike.

"The panel found, accordingly, that the USA had not met its burden of demonstrating that the measures are provisionally justified", it said. The U.S. argued that China's actions had amounted to "state-sanctioned theft" and "misappropriation" of U.S. technology, intellectual property and commercial secrets. 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 US tariffs against China were authorized 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.

Since the Trump administration has refused to appoint new members to the WTO's appellate body, the next step could involve the USA simply appealing this panel report "into the void", effectively ending the legal nature of this dispute, said Chad Bown, a senior fellow at the Peterson Institute for International Economics. "The United States, China and especially the WTO are all losers".

The three-person panel affirmed the tariffs, which Washington has broadened to cover $550 billion in Chinese exports, violated two GATT provisions and stated that the USA has not justified their necessity under a third provision.

"Recalling Article 3.7 of the DSU that highlights that the aim of the dispute settlement system is to achieve a positive solution to a dispute, the Panel expresses its ongoing encouragement to the parties to pursue further efforts to achieve a mutually satisfactory solution [to their conflict]", the ruling says.

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