July 18, 2019– The world’s litigation body for trade disputes dealt a new blow to a multiyear effort by U.S. representatives to counteract pricing impacted by state-owned enterprises.
The decision impacts a wide range of products, including solar panels and aluminum. More striking, it weighs in on the mounting tension in the global economy between competing economic systems.
What: This Week’s Action
Late Tuesday, a World Trade Organization appellate body upheld a decision by a lower panel regarding U.S. tariffs on a series of mostly industrial products imported from China that U.S. officials believe to be subsidized and under priced.
Products impacted include solar panels, wind towers, steel cylinders and sinks, kitchen shelving, lawn groomers, aluminum extrusions and a series of industrial goods, including drill pipes, print graphics, seamless pipes, magnesia bricks, wire strands, oil country tubular, thermal papers, pressure pipes, line pipes and citric acid.
The China Price
The WTO appellate body’s final decision accepted the U.S. case that China subsidized the price of materials used to produce goods. However, it also said U.S. officials must accept Chinese prices when determining its trade-remedy measures.
The decision is a major setback for U.S. trade representatives who argued against allowing a state government use subsidies to impact prices.
Trade Reps Respond
China’s Ministry of Commerce welcomed the news, saying that U.S. anti-subsidy measures have “severely hampered normal exports of Chinese products,” according to a China Daily report on the decision.
In contrast, the U.S. Trade Representative complained that the appellate body’s report “undermines WTO rules, making them less effective to counteract” subsidies by state-owned enterprises that “are harming U.S. workers and businesses and distorting markets worldwide.”
In-Country Versus Market Prices
One point at issue in the WTO appellate body was the burden of proof regarding government intervention distorted the price of goods. The five-page summary of their decision said “the investigating authority has to establish and adequately explain how price distortion actually results from government intervention.” Meanwhile, a separate one-page statement summarizes the legal aspects of the case.
Another factor related to whether “public bodies” engaged in business are owned or controlled by the government.
The Seven-Year Battle
The case predates U.S. President Donald Trump and his ongoing trade war with China. In fact, it dates back to 2012, when China asked for WTO consultations over a series antidumping and countervailing duties the U.S. Commerce Department imposed on Chinese imports. The anti-subsidy tariffs targeted viewed as being subsidized and sold at less than fair-market value.
The new ruling opens the possibility that China could now retaliate if the United States does not adjust its tariff schedule.
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