“It reaffirms that the U.S. is the outlier in the WTO,” said John Veroneau, a partner at Covington & Burling and a former U.S. trade negotiator in the administration of President George W. Bush.
The administration said its tariffs were needed to curb years of trade cheating by China. But in a 66-page report, the panel rejected that claim.
“The United States has not met its burden of demonstrating that the measures” are justified, the panel concluded.
Robert E. Lighthizer, the U.S. trade representative, issued a statement criticizing the decision, saying it showed that the WTO was unable to prevent Chinese policies from distorting global trade and harming the U.S. economy. The president imposed the tariffs on Chinese goods following an investigation by Lighthizer’s office that concluded China routinely engaged in unfair trade practices, including compelling foreign firms to transfer technology secrets and violating intellectual property safeguards.
“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 said.
The U.S. can effectively stall any further action by appealing Tuesday’s ruling. The administration has blocked for months the appointment of new members to the WTO’s appellate body, leaving the organization unable to fulfill its assigned role of adjudicating trade spats. The panel acknowledged its ruling comes amid “unprecedented global trade tensions.”
Wendy Cutler, vice president of the Asia Society, said the verdict illustrated the weakness of the global trading regime established in 1995 with U.S. support.
“In another era, this ruling would have been the talk of the town in the trade community. But, the finding comes as no surprise and without a fully operating appellate body it won’t have a consequential impact,” said Cutler, a former trade negotiator.
China petitioned the WTO within weeks of the first U.S. tariffs, arguing that the Trump administration had breached global trade rules by unilaterally imposing the import levies.
The two countries subsequently negotiated a partial trade deal, which was unveiled at a White House ceremony in January. The so-called “phase one” deal called for China to buy an additional $200 billion from U.S. suppliers, but left many of the administration’s broader complaints about Chinese state subsidies and trade practices for future negotiations.