US slams WTO as ‘inadequate’ after it sides with China in tariff feud
Hans van Leeuwen

London | The World Trade Organisation has waded into the middle of the US-China trade war, with a ruling that President Donald Trump broke international trade rules with his 2018 tariffs on $US234 billion ($321 billion) of Chinese exports.

The Trump administration immediately struck back, saying the ruling showed up the ineffectiveness of the WTO, and vindicated the US President’s four-year trade war as the only way to combat Chinese trade malfeasance.

The ruling will only confirm Donald Trump’s vocal antipathy to the WTO. Bloomberg

The WTO’s disputes panel stepped into this political minefield by ruling late on Tuesday (AEST) that, in effect, Mr Trump’s repeated tariff fusillades were not a punishment that directly tackled China’s alleged misdemeanour – Chinese state “theft” of technology, intellectual property and commercial secrets.

The panel also rejected the US argument that Mr Trump’s bilateral talks with China, which culminated in the “Phase One” deal at the start of this year, had replaced the two giants’ stoush in the WTO. Instead, the ruling labelled those talks as a “parallel” process.

US Trade Representative Robert Lighthizer immediately went on the front foot, saying the WTO was clearly of no use against Chinese misconduct, and suggesting the Geneva-based body was being manipulated by Beijing.

“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,” he said in a statement.

“The Trump administration will not let China use the WTO to take advantage of American workers, businesses, farmers and ranches.”

Trade experts said Washington would either ignore the ruling, or else lodge an appeal.

The latter action would send the dispute to the WTO’s Appellate Body, which is in suspended animation after Mr Trump vetoed the appointment of any new judges – so the case itself would be kicked into limbo.

The WTO’s finding comes at a politically sensitive time for the organisation, which is in the midst of a drawn-out selection process for a new director-general.

That’s supposed to wrap up in November, but if the Trump administration was in a vengeful or petulant mood it could exercise a veto over any candidate and leave the WTO leaderless.

The US hasn’t initiated any WTO action of its own against China’s own retaliatory tariffs, presumably because Washington wanted to parley with Beijing one-to-one.

The WTO panel noted that its decision came amid “unprecedented global trade tensions”, but said it could only deal with the claim that was in front of it.

In its ruling, the panel “expressed its encouragement to the parties to continue to work for a mutually agreed solution to the matters raised in the dispute”.

Mr Trump began firing off tariffs against Chinese imports into the US in early 2018, saying they were “a response to the unfair trade practices of China over the years” – particularly the alleged heist of intellectual property and commercial secrets, along with enforced technology transfers from American investors.

China began hitting back in June, levying tariffs on more than $US80 billion of US goods and filing its complaint at the WTO.

The feud ebbed towards the end of that year and then escalated into mid-2019, forcing the Trump administration to dole out hefty subsidies to US farmers to compensate them for lost income – subsidies that Australia has joined other countries in attacking at the WTO.

Simon Lester, associate director of the Herbert Stiefel Centre for Trade Policy Studies at the Washington-based Cato Institute, said the WTO ruling wouldn’t have an impact on the tariffs that had come after 2018, or on the Phase One agreement.

“Practically speaking, this has little effect on the now-longstanding trade war,” he said.

Mr Trump has also moved on to other battlefronts, slapping or threatening bans on Chinese telecommunications and technology companies such as Huawei and TikTok.

Hans van Leeuwen covers British and European politics, economics and business from London. He has worked as a reporter, editor and policy adviser in Sydney, Canberra, Hanoi and London. Connect with Hans on Twitter. Email Hans at hans.vanleeuwen@afr.com

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