WTO to probe Trump’s steel, aluminum tariffs
The World Trade Organization agreed Wednesday to investigate the legality of U.S. tariffs on steel and aluminum imports based on national security concerns, a decision the U.S. says could undermine the legitimacy of the Geneva-based trade body.
Members including the European Union and China asked the WTO to examine the U.S. levies, which they say don’t bolster security but further U.S. economic interests.
Any review of America’s essential security interests “would undermine the legitimacy of the WTO’s dispute settlement system and even the viability of the WTO as a whole,” the American delegation said at a Wednesday meeting of the WTO dispute settlement body, according to prepared remarks seen by Bloomberg.
The WTO has long avoided this politically fraught confrontation. If the trade organization decides in favor of the U.S., the decision could entice the body’s 164 members to use the national security justification to impose protectionist measures for economic gain; if it rules
against the U.S., President Donald Trump could decide to leave the WTO entirely.
In applying the tariffs, Washington relied on a rarely-used WTO national security exemption, which permits governments to take “any action which it considers necessary for the protection of its essential security interests.”
Separately, the U.S. blasted the “hypocrisy” of Canada, China, the EU and Mexico for their unilateral retaliation against U.S. goods in response to Trump’s steel and aluminum tariffs.
“Just as these members appear to be ready to undermine the dispute settlement system by ignoring the plain meaning of” the WTO’s national security exemption, “so too are they ready to undermine the WTO by pretending to follow its rules while imposing measures that blatantly disregard them,” according to the U.S. remarks.
Seven WTO members — Canada, China, the EU, India, Mexico, Russia, and Turkey — have imposed retaliatory levies on more than $25 billion worth of U.S. goods in response to the American tariffs.
Also on Wednesday, the U.S. accused China of continuing a state-backed campaign of intellectual property and technology theft as the WTO said it would establish a dispute panel to rule on the complaint.
The new accusations came in a detailed 53-page report released by U.S. Trade Representative Robert Lighthizer’s office just 10 days before President Donald Trump is scheduled to meet Chinese President Xi Jinping on the sidelines of a Nov. 30-Dec. 1 Group of 20 summit in Buenos Aires.
“China fundamentally has not altered its acts, policies, and practices related to technology transfer, intellectual property, and innovation, and indeed appears to have taken further unreasonable actions in recent months,” the report said.
In a separate action Wednesday, WTO agreed to initiate a dispute investigation into the U.S. allegations. The Geneva-based trade organization will task a panel of three experts to determine whether China’s policies violate WTO terms. A decision could be rendered as soon as next year.
In the USTR report, the U.S. accused China of continuing a state-backed campaign of cyber-attacks on American companies that were both intensifying and growing in sophistication.
Attacks by possible “Chinese state-sponsored entities” against companies in cloud computing, artificial intelligence and other technologies increased since mid-2017, according to Lighthizer. The attacks include a “sharp rise” in hacking against manufacturers in the three months up to September — “a type of attack that has been frequently tied to Chinese economic espionage,” Lighthizer said.
China is, along with the United States and Russia, regarded as a leading power in military cyber spying.
In response to questions about the report, a spokesman for China’s foreign ministry on Wednesday said U.S. officials should read a white paper published by the government in September that claims China ‘firmly protects’ intellectual property rights.
As an example, it cited an October 2018 report by experts from the U.S. Naval War College and Tel Aviv University that found that China Telecom may be engaging in a ‘malicious’ campaign to ‘hijack Internet traffic and direct it through Mainland Chinese servers for possible collection and analysis.”
The report accused China of responding to the U.S. government’s concerns over its “Made in China 2025” policy to lead the world in sectors such as artificial intelligence and robotics by waging a propaganda campaign to play down its significance rather than making substantive changes.
“Despite this transparent attempt to de-emphasize Made in China 2025 in public, China continues to implement this industrial policy on a large scale,” the report said.
According to the updated USTR report, China had made only incremental changes to its restrictions on foreign investment in certain sectors in China since the U.S. first released an original March report used to justify the tariffs on $250 billion in Chinese imports imposed by the Trump administration.
The report also said while Chinese foreign-direct investment in the U.S. had fallen in 2018, there were signs that it was becoming more focused on the sort of tech startups that the Trump administration was eager to protect. “In particular, Chinese [venture capital] investment in U.S. technology centers such as Silicon Valley has intensified in recent months,” its authors wrote.
Derek Scissors, a China expert at the conservative American Enterprise Institute, said the report’s release appeared to be an effort by Lighthizer to influence negotiations ahead of the G-20. “USTR is trying to take some issues entirely off the table for the G-20, in case the Chinese want something in exchange for ‘canceling Made in China 2025’,” Scissors said.
A USTR official told Bloomberg that the report’s release was meant only to document China’s continuing practices and indicated the U.S. still hopes to make progress at the G-20 summit.
“This reflects the thinking of the hawkish in the Trump’s trade team, and they are trying to raise their concerns,’ said Henry Wang, at the Center for China and Globalization, a Beijing-based think tank. But there are also the dovish voices like Mnuchin and Kudlow, so this is not necessarily going to derail the summit, he said. ‘What’s important is what the two leaders will say. That will eventually set the tone,” Wang said.
Also on Wednesday, the U.S. accused China of continuing a state-backed campaign of intellectual property and technology theft as the WTO said it would establish a dispute panel to rule on the complaint.