Trump threatens a great upheaval in foreign policy and global trade relations. Especially in U.S. trade relations with China. But is it somewhat consistent with the Obama’s tough enforcement policy against China in the WTO’s dispute resolution system.
Over the last 15 years, since China’s accession to the WTO, U.S-China trade relations have largely been conducted within a framework of international law rather than open trade warfare. One of the great achievements of the past 15 years has been the role of multilateral rules in containing arguments. China, whose leaders initially seemed to regard being sued in the WTO as a personal affront, has come to recognise international litigation as a routine way of doing business.
Then what happened recently since Trump’s election?
On December 10th the day before the 15th anniversary of China’s accession to the WTO, the Obama administration decided it was not going to grant China ‘market-economy status.’ Most legal experts believe this was intended to be automatic on December 11th, 2016. Fifteen years from the date of the Accession Protocol of 2001 under Article 15(d).
Two days later, one day after the 15th anniversary, Beijing marked the anniversary by filing a new WTO case against the United States and Europe. China alleged that they failed to treat it as a market economy and therefore not utilizing a more favorable calculation of anti-dumping duties on Chinese goods. Since they would continue to use third-country cost (and not China’s lower actual costs). Of course, which allows for a finding of a larger margin of dumping and consequently a larger antidumping duty.
The Obama administration two days later filed a new case against China contesting its agricultural duties relying on ‘tariff rate quotas’ mechanism’ (TRQ). This continues a hardline approach by the Obama administration against China in the WTO dispute resolution system in which it has filed 15 cases. This has been a very tough enforcement approach since his inauguration. More aggressive than an also tough Bush administrations.
But now the question arises why China’s immediate response to this case and not all the other times during the Bush – Obama years?
My take ………….. It was probably Trump’s consistent threats (trade, tariffs, TPP, Taiwan, South China Sea) against China. If it wasn’t for them China probably would have waited until dumping or subsidy cases were actually determined and then ask for WTO review. That has been the general practice.
But of course China has the option to go directly to the WTO when a country has restrictive legislation or other practices or policies in place. It doesn’t have to wait until a case is actually decided. It’s China’s option. And China decided to take a rather unusual and aggressive step.
My guess is to send a broader message to the U.S. ‘Don’t mess with us. If you want confrontation then you get confrontation.’ This is unfortunate for both countries. A new administration allows a natural inflection point to allow for new diplomatic initiative to allow peaceful resolution of disputes. Not more aggressive actions. At least not usually.
We’ll see how this plays out.
But this is not a good beginning to U.S. – China trade or diplomatic relations in the Trump era.
“U.S. and China — 15 Yrs. of WTO and Litigation.” Financial Times (December 10, 2016).
“U.S. Denies Market Economy Status to China.” Wall Street Journal (December 10, 2016).
“China Launches WTO Case Against U.S. & EU over ‘Non-Market Economy’ Status.” Reuters (12.12.16).
“China’s Push for ‘Market Economy Status’.” Financial Times [Lead Editorial] (12.14.16).