WTO opens way for Chinese sanctions against US tariffs in Obama-era dispute

Containers trucks arriving in June 2019 at the Port of Los Angeles, where the US-China trade war created logistical havoc following a months-long surge of imports in anticipation of higher tariffs.
Containers trucks arriving in June 2019 at the Port of Los Angeles, where the US-China trade war created logistical havoc following a months-long surge of imports in anticipation of higher tariffs.PHOTO: AFP

GENEVA (REUTERS) - The United States did not fully comply with a World Trade Organisation (WTO) ruling and could face Chinese sanctions if it does not remove certain tariffs that break WTO rules, the WTO's appeals judges said in a ruling on Tuesday (July 16).

China went to the WTO in 2012 to challenge US anti-subsidy tariffs on Chinese exports including solar panels, wind towers, steel cylinders and aluminium extrusions, exports that it valued at US$7.3 billion at the time.

The office of US Trade Representative (USTR) Robert Lighthizer said the WTO ruling recognised that the United States had proved that China used state-owned enterprises (SOEs) to subsidise and distort its economy.

But the ruling also said the United States must accept Chinese prices to measure subsidies, even though USTR viewed those prices as "distorted".

"This conclusion ignores the findings of the World Bank, OECD working papers, economic surveys, and other objective evidence, all cited by the United States," the US statement said.

"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," it added.

Under President Donald Trump, the United States has been blocking the process to appoint or reappoint members of the WTO's Appellate Body, which is effectively the top court for world trade.

The Appellate Body normally has seven members and needs three to consider each case, but from Dec 11 it will have only one judge left, causing at least a temporary collapse, the European Union's trade chief Cecilia Malmstrom said earlier on Tuesday.

The USTR statement said the outcome of its appeal illustrated the concerns it had about the Appellate Body, which it has accused of breaking procedural rules and overstepping its authority.

If China seeks to bring sanctions in the dispute, it would need to enter a new round of legal argument over the value of any damage to its trade.

The dispute centred on 17 investigations carried out by the US Department of Commerce between 2007 and 2012.

The products concerned were solar panels, wind towers, thermal and coated paper, tow-behind lawn groomers, kitchen shelving, steel sinks, citric acid, magnesia carbon bricks, pressure pipe, line pipe, seamless pipe, steel cylinders, drill pipe, oil country tubular goods, wire strand and aluminium extrusions.

Shortly after the WTO ruling was released, US President Donald Trump questioned China's failure to make good what he saw as its promise to buy more US agricultural goods, and said Washington could impose tariffs on an additional US$325 billion (S$440 billion) worth of Chinese goods if it needed to do so.

The world's two largest economies have been fighting over trade issues intensely over the past year, and resumed talks to reach an agreement are moving more slowly than expected.