Follow the WTO Ruling

A World Trade Organization (WTO) panel report regarding the case brought by China to challenge the U.S. Section 232 tariffs on steel and aluminum, or DS544, ruled on December 9 that the tariffs violate WTO rules and do not qualify for the national security exception.

Unfortunately, the Office of the United States Trade Representative has rejected this report. Western media reported that the Joe Biden administration may make a fresh move to impose new tariffs on Chinese steel and aluminum on the grounds of “tackling climate challenges.”

“China hopes the U.S. will respect the ruling of the WTO expert panel, follow the WTO rules, correct its wrongdoings as soon as possible, and work with China and other WTO members to jointly safeguard the multilateral trading system,” the Ministry of Commerce of China said on December 10, criticizing America’s unilateral and protectionist practices that have caused serious damage to the rules-based multilateral trading system.

According to WTO rules, if the U.S. refuses to comply with the ruling, countries that lodged appeals have the right to impose punitive tariffs on U.S. products.

In 2018, the Donald Trump administration began to selectively impose additional tariffs on steel and aluminum products from some WTO members, pushing tariffs on steel to 25 percent and aluminum to 10 percent. These tariffs were put in place on the grounds of the national security exception in WTO laws, but were in fact meant to pursue unilateralism and protectionism.

In response, on March 26, China requested consultations with the U.S. side under the WTO’s Agreement on Safeguards, and on April 5, it referred the tariffs dispute to the WTO settlement mechanism. The tariffs were not only widely condemned by WTO members, but also incurred criticism from U.S. domestic businesses and its allies. In late April 2018, the European Union requested to join China in consultations on steel and aluminum tariffs with the U.S. under the WTO dispute settlement mechanism.

The WTO panel pointed out that the “national security concerns” claimed by the U.S. do not justify its practice of unilateralism and protectionism. It urged the U.S. to respect WTO rules and the panel’s rulings, and stop practices that contravene them in order to maintain the fairness of the global trading environment.

China’s steel and aluminum industry can by no means pose a threat to U.S. national security. The China Iron and Steel Association (CISA) pointed out that China’s exports of steel and aluminum products accounted for only a small percentage of that imported by the U.S. China’s steel and aluminum industries have always had the core goal of meeting domestic demand and achieving high-quality development, according to the CISA.

To a large extent, the trade in steel and aluminum between the two countries is based on strong complementarity. Thanks to supply-side structural reform since 2016, the Chinese steel and aluminum industry has eliminated outdated capacity and there is also ceiling for the capacity. China’s efforts have greatly promoted sound and sustainable development of the world steel and aluminum industry.

Additionally, according to the CISA, all the trade agreements are completely in line with fair market-oriented principles.

The U.S. needs to show due respect to the authority of the WTO as a platform to settle trade disputes among member states. As for the U.S. Section 232 tariffs, China offered to consult with the U.S., but the consultations led to nowhere. In an effort to safeguard the authority of the WTO and protect multilateralism, China then decided to work together with other countries, demanding the establishment of a WTO panel on DS544. The panel report has already revealed that the U.S. Section 232 tariffs on steel and aluminum violate WTO rules and demands that the U.S. side respect WTO authority.

The current Joe Biden administration is obligated to correct unreasonable policies adopted by its predecessor and return to the correct path of multilateral trade, instead of discrediting the WTO’s fairness by claiming that it’s necessary for the WTO to undergo reforms.

As a major power, the U.S. needs to take the lead in abiding by international rules and regulations instead of practicing unilateralism and trade protectionism. By no means should it continue to trample WTO rulings and flout WTO authority.