China is warning of increased trade tension during this Presidential election season. It is now considering reciprocal trade actions to combat a string of recent U.S. actions it considers more aggressive and targeted against China.
China points to the following four items:
… The recent filing of the Rare Earth case by the U.S. in the WTO;
… The preliminary decision of the U.S. Dept. of Commerce imposing countervailing duties on imports of solar panels from China (case brought by SolarWorld Industries America);
… The new U.S. legislation allowing countervailing duties on imports from nonmarket economies (China);
… The establishment of the International Trade Enforcement Center (ITEC),
What’s my assessment? Here it is:
… A trade war between China and the U.S. is not very likely.
… The Rare Earth case in the WTO is not easy to win. GATT Article XX(g) allows for trade measures to conserve natural resources.
… The SolarWorld Industries case is highly dependent on the facts. The Chinese government payments may not be too unlike those made by the U.S. government to solar panel manufacturers in the United States.
… There is a great hurdle to argue successfully that subsidies ought to be allowed against goods coming from nonmarket economies. Provisions of GATT article VI and China’s accession agreement tend to be contrary to that view.
… The establishment of ITEC is fair enough. But along with Section 301 procedures that are still in place, they raise potentially difficult issues concerning the WTO restrictions on unilateral trade actions in non-trade remedy cases (those focusing on foreign market access.)