Trump’s Trade Fight with China Takes Center Stage at WTO

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By Bryce Baschuk

World Trade Organization members the week of April 23 will delve into some of the core issues at the heart of a U.S.-China trade conflict that’s threatened the global trade body like never before.

WTO officials told Bloomberg Law they’re concerned that the failure to address the systemic implications of their collective concerns could undermine and ultimately displace the WTO’s role in the global trading system.

WTO members April 23 will ask the U.S. to address their concerns about President Donald Trump’s tariffs on steel, aluminum, washing machines,and solar products—which are ostensibly aimed at China but have ensnared American allies as well.

Next up are the U.S., European Union, and Japan, who on April 24 will press China to address the extent to which Beijing’s state subsidies are contributing to overcapacity in global steel and aluminum markets.

Finally, there will be a meeting April 27 of the WTO dispute settlement body to discuss the Trump administration’s continued block on new appellate body nominees.

Trump’s Tariff Battle

America’s allies and foes will try to coax the U.S. into offering compensation, in the form of trade concessions, for Trump’s various tariffs at an April 23 meeting of the WTO safeguards committee.

Trump’s 25 percent and 10 percent tariffs, respectively, on steel and aluminum imports have raised the ire of many WTO members, particularly those who haven’t retained temporary or permanent exemptions.

China and a handful of other countries said the measures are safeguards, which are temporary trade restrictions that help countries protect their domestic producers from a sudden surge of imported products.

The U.S., meanwhile, disagrees and said the measures are aimed at protecting U.S. national security and are permitted under WTO rules.

China filed WTO dispute consultations over the matter and pledged to impose $611.5 million worth of retaliatory tariffs on 128 U.S. goods.

India, Russia, and Thailand have asked to join China’s dispute consultations, and the European Union separately pledged to slap tariffs on iconic American goods worth 6.4 billion euros ($7.9 billion).

In addition, China, the European Union, Japan, Malaysia, the Philippines, South Korea, and Taiwan have asked the U.S. to offset trade losses stemming from its tariffs on washing machines and solar products.

The WTO safeguards agreement requires countries to provide the opportunity for consultations with any substantially affected WTO members about the possibility of compensation in the form of trade concessions equal to the amount of trade affected by their safeguard measures.

Though the U.S. agrees that its solar and washer tariffs are indeed safeguard measures, it has declined to compensate the affected parties and consultations remain ongoing.

Chinese Metal Subsidies

The U.S. and its allies will discuss the role that China’s government-backed subsidies have in exacerbating global excess capacity in steel and aluminum markets during their April 24 meeting of the WTO’s subsidies and countervailing measures committee.

Specifically, the U.S., Canada, EU, Japan, and Mexico will ask WTO members whether they would consider strengthening Article 3 of the WTO Subsidies Agreement to prohibit certain below-market financing by government-related entities.

The group submitted a paper this month that criticized state-owned banks in “some countries” for offering cheap credit to struggling steel and aluminum manufacturers without demanding meaningful changes to the way they do business, the joint document said.

These financing deals “very often allow struggling companies to remain in business and to continue producing instead of cutting capacity or entering the bankruptcy and exiting the market,” the paper said. “This clearly exacerbates the overcapacity problem.”

Though the paper did not explicitly single out China for its role in contributing to the global glut of cheap steel and aluminum, the signatories have been pushing China to curb its metal subsides for several years.

Appellate Body Crisis

WTO members will be watching to see if the recent arrival of Dennis Shea, the U.S. ambassador to the WTO, will move the needle on a months-long disagreement over appointments to the WTO appellate body.

The U.S. for the past eight months has blocked appellate body nominees, saying the adjudicative forum has overstepped its bounds and failed to live up to its mandates.

A third of the WTO membership in March said they’re fed up with U.S. obstruction of the panel and urged the U.S. to offer a specific proposal to address its concerns.

Meanwhile, WTO members are discussing alternative avenues for dispute arbitration that could replicate the core functions of a typical WTO appellate body if the U.S. ultimately stymies the dispute settlement system.

Ambassadors will formally discuss the appellate body issue during the WTO’s dispute settlement meeting, scheduled for April 27.

To contact the reporter on this story: Bryce Baschuk in Geneva at correspondents@bloomberglaw.com

To contact the editor responsible for this story: Jerome Ashton at jashton@bloomberglaw.com

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