WTO Panel: US tariffs on China violate trade rules

A World Trade Organization panel established in January 2019 to examine U.S. tariffs on goods from China has found that the tariffs were not justifiable under WTO rules.

The tariffs, the first set of which was imposed in July 2018, covered USD 234 billion (EUR 197.8 billion) in Chinese goods, including hundreds of seafood products. Those initial tariffs sparked a trade war that has continued to this day – with some relaxations between the two countries in the wake of a “Phase One” trade deal initiated in January.

The new ruling by the panel – established at the request of China – has found that the justification the U.S. used for the tariffs was inadequate, and that the tariffs break international trade rules. The U.S. had used a “public morals objective” to justify the tariffs, citing that China had misappropriated intellectual property and engaged in unfair competition.

The WTO Panel found that for both List 1 and List 2 of goods the U.S. imposed tariffs on, the country’s justification fell short.

“In summary, the panel concluded that the United States had not provided an explanation demonstrating how the imposition of additional duties on the selected imported products in List 1 and List 2 was apt to contribute to the public morals objective invoked, and, following on from that, how they were necessary to protect public morals,” a WTO release announcing the panel’s findings states. “The panel found, accordingly, that the United States had not met its burden of demonstrating that the measures are provisionally justified.”

The ruling found that because the U.S. solely imposed the tariffs on goods from China, and no other trade partners, the tariffs were in violation of international trade rules.

U.S. Trade Representative Robert Lighthizer said in the statement the ruling effectively proved the justifications for the tariffs.

“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 said. “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.”

Lighthizer went on to point out that the Phase One trade deal will not be affected by the new ruling.

“It is important to note that this report has no effect on the historic Phase One Agreement between the United States and China, which includes new, enforceable commitments by China to prevent the theft of American technology,” he said.

The ruling would technically allow China to impose its own retaliatory tariffs on billions of dollars of U.S. goods. However, according to AP News, the U.S. government has effectively stymied the WTO’s appeals courts by refusing to accept any new members, and the board currently does not have enough members to operate.

China has already had retaliatory tariffs in place, including on millions of dollars of seafood products. Some of those products have had their tariffs made eligible for exclusion, as the two countries continue to negotiate an end to the ongoing trade conflict.    

Photo courtesy of Michael Candelori/Shutterstock


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