China’s New Dispute at the WTO Against US Tariffs
In recent months, the USTR announced steps for implementing 15 percent[1] tariffs on approximately $300 billion worth of goods imported from China.[2] The USTR listed a wide variety of goods that would be subject to the tariff effective September 1, 2019.[3] The list includes food, clothing, steel, electronics, and more.[4] The tariff implementation will be delayed until December 15, 2019 for certain products.[5]
As promised, this past Sunday Sept 1st the U.S. began implementing the 15 percent tariffs. On Monday, a spokesperson for the Chinese Ministry of Commerce announced that China filed a complaint against the US under the World Trade Organization (WTO) dispute settlement system.[6] The spokesperson stated that the US tariffs are “seriously contrary to the consensus” reached by the US and Chinese leaders earlier this summer at the G-20 Summit in Osaka, where President Trump and Chinese President Xi reportedly agreed to hold off on new tariffs.[7]
The title of China’s dispute is “United States – Tariff measures on certain goods from China III” (DS587).[8] China cited Art. I:1, II:1(a) GATT 1994, and Art. 23.2, 32.1 Dispute Settlement Understanding.[9] Beyond the agreements cited China’s request for consultation, details of the complaint have not yet been publicized by China or the WTO.[10] At this point, China and the United States have entered a 60-day “consultation” period.[11] After that, a panel will be set up.[12] Ideally, without an appeal the whole process should take a year and with an appeal the process will be completed within 15 months.[13] However, the dispute settlement process can take much longer than the timeline prescribed by the Dispute Settlement Understanding (DSU). One study found that it took 28 months, for request for consultations to adoption of the Dispute Settlement Body’s (DSB) recommendations.[14]
Yet, regardless of the WTO’s timeline, it is clear that China intends to use several tools at its disposal to push back against the US tariffs. As Beijing stated previously, it will fight “to the end” in the trade war.[15] Besides utilizing the WTO dispute system, China’s arsenal includes letting its currency weaken[16], reducing its holdings of US treasury bonds[17], and raising its own tariffs against US goods, such as soybeans.[18] The Chinese State Council has already announced new tariffs of 5 to 10 percent that will affect approximately $75 billion worth of US goods, in addition to a 25 percent tariff on U.S. cars and 5 percent on auto parts.[19]
This post will be updated to reflect new information on China’s WTO filing. Future posts may also examine the actual and potential economic impacts of the dispute.
[1] Originally, the tariffs on the Chinese goods worth approximately $300 billion was 10%. See “USTR Announces Next Steps on Proposed 10 Percent Tariff on Imports from China”, USTR, last modified August 13, 2019, accessed September 3, 2019, https://ustr.gov/about-us/policy-offices/press-office/press-releases/2019/august/ustr-announces-next-steps-proposed. On August 23, 2019, the USTR released a statement that President Trump instructed the USTR to increase tariffs by 5%. The additional 5% were due to China’s attempts to impose tariffs on US products. Therefore, 25% tariffs on approximately $250 billion worth of Chinese imports, became 30%. The 10% tariffs on approximately $300 billion worth of Chinese goods became 15%. See “USTR Statement on Section 301 Tariff Action Regarding China”, USTR, last modified August 23, 2019, accessed September 3, 2019, https://ustr.gov/about-us/policy-offices/press-office/press-releases/2019/august/ustr-statement-section-301-tariff .
[2] “USTR Announces Next Steps on Proposed 10 Percent Tariff on Imports from China”, USTR, last modified August 13, 2019, accessed September 3, 2019, https://ustr.gov/about-us/policy-offices/press-office/press-releases/2019/august/ustr-announces-next-steps-proposed.
[3] “Notice of Modification (List 4)”, USTR, accessed September 4, 2019, https://ustr.gov/sites/default/files/enforcement/301Investigations/Notice_of_Modification_%28List_4A_and_List_4B%29.pdf .
[4] Id.
[5] Id.
[6] “A spokesperson for the Ministry of Commerce spoke on China’s WTO prosecution against US taxation measures for US $300 billion in Chinese exports to the US”, Ministry of Commerce of the People’s Republic of China, last modified September 2, 2019, accessed September 3, 2019, http://www.mofcom.gov.cn/article/ae/ag/201909/20190902895699.shtml
[7] Everett Rosenfeld, “Trump says he agreed with Xi to hold off on new tariffs and to let Huawei buy US products,” CNBC, last modified June 29, 2019, accessed September 3, 2019, https://www.cnbc.com/2019/06/29/us-china-trade-war-trump-and-xi-meet-at-g-20-summit-in-osaka.html .
[8] “DS587: United States – Tariff Measures on Certain Goods from China III”, WTO,Accessed September 4, 2019, https://www.wto.org/english/tratop_e/dispu_e/cases_e/ds587_e.htm . SeeFind disputes, WTO, accessed September 4, 2019, https://www.wto.org/english/tratop_e/dispu_e/find_dispu_cases_e.htm .
[9] Id.
[10] Id.
[11] “Understanding the WTO: Settling Dispute”, accessed September 3, 2019, https://www.wto.org/english/thewto_e/whatis_e/tif_e/disp1_e.htm .
[12] Id.
[13] Id.
[14] 28 months was the span of time it took for disputes started in 2007 to 2011, according to a working paper published by the European University Institute Department of Law. The author commented that the length of time is growing. Arie Rich, “The Effectiveness of the WTO Dispute Settlement System: A Statistical Analysis”, European University Institute Department of Law, Accessed September 3, 2019, https://cadmus.eui.eu/bitstream/handle/1814/47045/LAW_2017_11.pdf?sequence=1&isAllowed=y .
[15] Nectar Gan and Laura Zhou, “China vows to fight ‘to the end’ as it raises tariffs on US$60 billion of US goods in trade war escalation”, South China Morning Post, https://www.scmp.com/news/china/diplomacy/article/3010055/china-raise-tariffs-us60-billion-us-goods-june-1.
[16] Ana Swanson, Alexandra Stevenson and Jeanna Smialek, “China’s Currency Moves Escalate Trade War, Rattling Markets”, NY Times, last updated August 5, 2019, accessed September 3, 2019, https://www.nytimes.com/2019/08/05/business/economy/us-china-yuan-renminbi-trump.html .
[17] According to reporting by the South China Morning Post, Ren Zeping, chief economist with Evergrande Group, and Zhou Shijian, a senior researcher at Tsinghua University’s department of international relations stated that Beijing could reduce its holdings of US treasury bonds, as a tool to help China in the trade war. See Mimi Lau, “Bejing has more weapons to use against US in a trade war, Chinese Analysts Say”, South China Morning Post, last updated March 24, 2018, accessed September 3, 2019, https://www.scmp.com/news/china/diplomacy-defence/article/2138763/china-has-more-weapons-use-against-us-trade-war .
[18] Id.
[19] Yun Li, “China Will Retaliate with Tariffs on $75 Billion More of US Goods and Resume Auto Tariffs”, CNBC, last updated August 23, 2019, accessed September 3, 2019, https://www.cnbc.com/2019/08/23/china-to-retaliate-with-new-tariffs-on-another-75-billion-worth-of-us-goods.html .
