A decision last week by the World Trade Organization has authorized China to impose punitive tariffs on $3.6 billion worth of U.S. goods annually in an anti-dumping dispute Beijing brought against Washington in 2013.
The amount of retaliation allowed by the WTO arbitrator is roughly half of what China had been seeking in the dispute, which largely centres around the controversial “zeroing” methodology employed by the U.S. government to calculate the value of damages caused by the injurious dumping of Chinese products including diamond sawblades, furniture, shrimp, solar panels, automotive tires, and various steel products.
Because the zeroing method ignores foreign product prices above what is charged in the exporter’s home market, China and many other U.S. trading partners such as Brazil, Japan, Korea and Mexico have long decried the practice as unfair owing to it “almost always” increasing the exporter’s margin of dumping and thus the amount of offsetting additional duties that must be paid.
The arbitrator’s ruling in this case allows China to levy higher tariffs against those U.S. products and sectors it might eventually want to target than would normally be permitted under WTO rules. Whether China opts to retaliate remains to be seen, but the threat alone could provide added leverage in talks with Washington, that saw Beijing this week demand a rollback of U.S. tariffs in exchange for a “phase one” trade deal.
WTO and the U.S.
The decision also comes as the Trump administration is increasingly discontent with the WTO’s appellate body, which it has accused of going beyond the scope of existing WTO agreements as it adjudicates cases, particularly those challenging how the U.S. applies trade enforcement measures to protect American companies against foreign dumping.
Despite following in the wake of a high-profile $7.5 billion win at the WTO for the U.S. in its long running battle with the European Union concerning subsidies given to Airbus, the latest reverse over the U.S. government’s “WTO-inconsistent methodologies” is sure to add to Washington’s mounting frustration with the global trade body.
Last year, President Trump threatened to pull the U.S. out of the WTO altogether if it didn’t “shape up,” describing the agreement to establish the organization as “the single worst trade deal ever made.” The Office of the U.S. Trade representative under Trump has continued the previous administration’s practice of blocking new appointments to the dispute resolution panel, thereby threatening to force it to shut down next month as the terms of two of the final three judges remaining are due to expire next month.
Need More Information?
An in-depth look at the U.S. government policy of “zeroing” can be found in a 2008 Department of Justice discussion paper. To learn more about the Trump administration’s dispute with the WTO and what it bodes for the trade body’s relevance in future, a recent article from the Yale Journal of International Law by Duke University law professor Rachel Brewster provides an excellent overview of the issues at stake.