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WTO Says U.S. Violated Trade Rules When It Imposed Tariffs on Imports from China

The World Trade Organization (WTO) said that President Trump’s imposition of tariffs on $400 billion worth of imports from China violated international trade rules.

In the September 15 report, the WTO’s dispute settlement panel ruled that the U.S. was unsuccessful in proving that its tariffs on Chinese products were necessary to level the playing field and agreed with China that the tariffs violated WTO rules because:

  1. They applied only to products originating from China, in violation of the most-favored-nation principle which requires WTO members to assess equal tariff rates on imports from all WTO members, and
  2. They exceeded the U.S. bound tariff rates

The panel also rejected the U.S. argument that the Phase 1 Trade Agreement, reached earlier this year with China, effectively resolved the dispute.

While the ruling, which is not legally binding, does not obligate the U.S. to drop its current tariffs, the panel ruled that the U.S. response did not follow the appropriate international trade rules to resolve disputes over unfair trade practices.

U.S. Trade Representative Robert Lighthizer blasted the ruling, saying “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.”  Lighthizer went on to say that “although the panel did not dispute the extensive evidence submitted by the United States of intellectual property theft by China, its decision shows that the WTO provides no remedy for such misconduct…  The United States must be allowed to defend itself against unfair trade practices, and the Trump Administration will not let China use the WTO to take advantage of American workers, businesses, farmers, and ranchers.”

The U.S. has 60 days to respond to the decision.  But the ruling will most likely have little to no immediate effect on the Section 301 tariffs since the U.S. effectively crippled the WTO panel responsible for handling appeals of trade disputes by refusing to appoint new members to the appellate body.  If the U.S. decides to fight the ruling, the case will likely end up in legal limbo, with no resolution in sight.

About the Section 301 Tariffs

Following a Section 301 investigation, the USTR determined that China’s acts, policies, and practices related to technology transfer, intellectual property, and innovation were unreasonable and discriminatory.  In response, the U.S. imposed an additional 25% tariff on $34 billion worth of Chinese goods (List 1).  After China levied retaliatory tariffs against the U.S., the USTR imposed another round of 25% additional tariffs on $16 billion worth of Chinese goods (List 2).  After going a few more rounds with Beijing, the U.S. imposed additional 25% tariffs on $200 billion (List 3) and 15% and 7.5% on almost all remaining goods from China (Lists 4A and 4B, respectively).  The USTR justified the tariffs on the Chinese goods to counter the theft and forced transfer of valuable technology and intellectual property in the hopes that China would strengthen its intellectual property protections and make other changes to its policies that put American workers at a disadvantage.  Most of these tariffs currently remain in place despite the granting of some exclusions and cover more than half of China’s exports to the U.S.

For more information on the Section 301 tariffs, please contact a member of our Compliance Department at Compliance@oceanair.net.

 

 

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Sources:

 

      • Sandler, Travis & Rosenberg, P.A., Section 301 Tariffs on Imports from China Broke WTO Rules, Report Says
      • The Hill, WTO rules Trump tariffs on Chinese goods illegal
      • Bloomberg, U.S. Violated Trade Rules With Tariffs on China, WTO Says
      • The New York Times, T.O. Says American Tariffs on China Broke Global Trade Rules