A Due Regard for Multilateralism

A World Trade Organization (WTO) arbitrator on January 26 ruled on the case of the United States—Countervailing Duty Measures on Certain Products From China, determining that China may impose trade retaliations against the U.S. with respect to trade in goods in the amount of $645 million annually given the U.S. failure to comply with a WTO ruling in force. China now urges the U.S. to take immediate action to right its wrongs in trade remedy investigations targeting China.

This WTO verdict sends four messages: First, U.S. countervailing measures it has been imposing on China during past decades violated WTO rules; second, the U.S. must correct its wrong conducts; third, China is authorized to impose trade retaliations against the U.S.; fourth, the authority of the multilateral trading system must be safeguarded.

The ruling further implies that economic bullying is unacceptable and legal international trade should be protected under a fairer and strengthened multilateral trading system.

For China, this was a hard win. The U.S. has spent the past 10 years trying to interfere with WTO investigations, reviewing and ruling by means of coercion, inducement and postponement. The good news is that its stonewalling has failed to tip the balance in its favor.

China’s hard victory also reflects the difficulty facing the international community to safeguard the authority of the multilateral trading system.

On May 25, 2012, China requested a consultation with the U.S. over the latter’s countervailing duty investigations against China within the WTO’s Dispute Settlement Body (DSB). A panel was established on November 26 that year, which issued its report in July 2014. That same year, the WTO Appellate Body (AB) delivered a revised version thereof. Both were adopted by the WTO in January 2015. The panel and the AB demanded the U.S. correct its measures, as 15 countervailing investigations and rulings against China violated the WTO countervailing agreement, yet the U.S. refused to implement the ruling.

At the request of China, Honorary Professor of International Law and then Chairman of the AB Georges M. Abi-Saab was appointed by the WTO Director General Roberto Azevedo in July 2015 to mediate this case through the arbitration tribunal, and the Award of the Arbitrator was circulated to members on October 9 that year, determining the American violation of certain WTO countervailing terms; the reasonable period of time for the U.S. would expire on April 1, 2016.

Once again, the U.S. did not implement the decision. On May 13, 2016, China requested consultations in connection with the alleged U.S. failure to implement the DSB recommendations and rulings in this dispute. On October 17, 2019, China requested the WTO to grant it rights to retaliate against the U.S., as the latter had failed to comply with DSB recommendations and rulings within the reasonable period of time. On January 26, 2022, the WTO arbitration tribunal granted China the authority to impose up to $645 million per year in tariffs against the U.S.

Despite the complicated procedures and the current result, the dispute will continue due to the U.S. disregarding the authority of the WTO multilateral trading system. China may have to protect its legitimate rights by turning to WTO-granted retaliations.

International trade should be based on international rules, or rather, WTO rules, instead of U.S. domestic guidelines.

The U.S. always professes it upholds a market economy. However, the dispute suggests it is the U.S. which is sabotaging it by breaching WTO rules, abusing remedy measures and refusing to implement WTO rulings and obligations.

Yet trade retaliation is never China’s intention. It attaches great importance to the international rule of law in stabilizing the international economic and trade orders and regulating international economic and trade relations. It will take firm actions to safeguard the authority of the WTO multilateral trading system.