Trade War: US Hits China With New Wave Tarrifs, Essay Example

Donald Trump, the current American president continues to confront the China’s unfair trade policies that have been in play over the last few decades. He has promulgated that “From now on, we expect trading relationships to be fair and to be reciprocal” (Trump, as cited by the White House, 2018). As a result of nullification or impairment, the United States will be liable for violating the GATT 1994/WTO rules since it recognises China as on its MFN for violation complaints by China due to the failure of the United States to carry out its obligations as stated in Article XXIII:1(a) of GATT 1994. Moreover, the U.S. would be taken to a dispute settlement panel assembled by the WTO as well as appellate body that would hear the case.

In the middle of 2018, Trump finally imposed sweeping tariffs on the Chinese for the aforementioned trade practices. Since then, the United States and its Chinese counterparts have been embroiled in various negotiations, including a tit-for-tat trade war with the imposition of tariffs (Wong $ Koy, 2020). Thus, as the relations between China and the United States remain increasingly fraught, various issues pertaining to international law have become quite significant and illuminate broader patterns. Two of the most illuminating and salient domains are maritime rights, which relate to security problems; and in trade as it relates to economic issues. President Xi of China and President Trump have touted divergent and conflicting positions when it comes to the content of these legal precepts, with the U.S. not playing its typical role as the main patron of an order that is legally-based and multilateral.

The World Trade Organization agreements are extremely long and complex since the legal scripts cover a broad array of enterprises, including textiles, agriculture, banking, clothing, telecommunications, product safety, government purchase, intellectual property, etc. Nonetheless, there are foundational precepts related to a multilateral trading system that pertain to the recent sanctions and tariffs that Trump put on China due to its unfair trading practices. Yet, the most important principle of the WTO and international law is that “countries cannot normally discriminate between their trading partners” (WTO). In other words, if there are low tariffs like they are in the U .S., then that commensurate lower rate must be ascribed to China and other nations belonging to the WTO.

The WTO administered a General Agreement on Tariffs and Trade does include one caveat when national security issues are in play, which is what Trump seems to be depending on to evade the potential liabilities of his blatant violation of international in accordance with the principle articulated above. Article XXI proclaims that “shall not prevent any contracting party from taking any action which it considers necessary for the protection of its essential security interests.” Other subsections provide clarification in terms of a member nation retaining the ability to invoke that particular section for certain matters such as implements used in war, nuclear assets, etc., in international law.

It remains equivocal that there is any emergency in this case. Trump continues to threaten to impose tariffs on auto parts and automobiles from Germany, Japan, and other countries for the sake of enhancing national security. However, it will be difficult to see that there is any valid justification in that case, so the United States is potentially liable here in light of recent court cases that involve Section 201 and Section 232 tariffs within the U.S. legal code.

Such developments have greatly fortified widespread concern that China has chosen to challenge the legal precepts that have hitherto severed in the best security interests of America and its allies within that region. Within this area, the actions and choices made by the United States have further expanded China’s options, especially with the Trump administration. The legal dimensions of the trade war between the United States and China remain at the fore of this simmering conflict, especially with regards to global economic relations. Trump continues to proclaim that China is taking full advantage and oppressing the American economy as well as comporting itself in wars that are illegal and unfair in international trade and economic relations overall. China has failed to live up to its legal obligations as proscribed by international law, particularly those linked with its membership in the World Trade Organization . There have been legal questions over China’s manipulation of its currency and access to its market; both of these issues are cognizable under World Trade Organization law.

Trade without discrimination is one of its fundamental principles, which can be discerned in this case. The United States nonetheless is putting itself in a position in which it may be liable for imposing tariffs on a Most Favoured Nation like China. This clause promotes reciprocity in trading, meaning that Country 1, the United States, when in an economic agreement, cannot lower barriers for Country 2, or China. One example of this is that Country 1 may come to an agreement and lower tariffs on Chinese goods from Country 2 in exchange for “reciprocal concessions” (Britannica, 2020). Unfortunately, case law has exacerbated the interpretive issues rather than solving them as discerned in Anglo-Iranian Oil Co. (U.K. v. Iran), Judgment on Jurisdiction, 1952 I.C.J. 93 (July 22). Disputes over the MFN clause within case law sheds light on how parties need to articulate the intended scope of the MNF clause in clear and coherent manner so as to make their intentions known.

In other words, countries are prevented from normally discriminating between their various trading partners. If a party grants a partner a special favor, such as lower custom tax rate for a certain good, then that party must offer that favor to all of its other parties who belong to the World Trade Organization. The most-favored-nation clause is so important in the World Trade Organization’s eyes that it is the very first article within the General Agreement on Tariffs and Trade, or GATT, which is responsible for governing the trade of goods. The United States honours the MFN status of China, yet it blatantly violated the rights afforded to China when Trump imposed punitive tariffs in addition to erecting trade barriers; in doing so, China is note treated equally to other American trading partners that belong to the WTO.

The WTO is often framed as being a “free trade” entity, yet that is not completely accurate. The imposition of tariffs on all Chinese goods or imports is fair when it comes to dumping because of the unfair trading practices that Chinese have done and continue to do if the United State can show clear evidence of unfair trading practices and thus subsequently impose and anti-dumping duty (Kenton & Scott, 2020). In the U.S., the International Trade Commission refers to autonomous government entity that places and enforces these aforementioned tariffs predicated on the investigations and consequent recommendations from its Department of Commerce (Kenton & Scott, 2020).

These duties typically are more than 100% of the goods’ value, which seems quite punitive. These duties are fair if another country like China is taking advantage of the U.S. economy by imposing oppressive tariffs on crude oil. The WTO does have a mandate that regulates global anti-dumping, which can be used to support the fairness of the punitive tariffs. This mandate is concerned countries and their reaction to dumping practices. From this posturing, the World Trade Organization agreement allows for its members’ government to “act against dumping where there is genuine (material) injury to the competing domestic industry” (WTO, as cited by Kenton & Scott, 2020). There are some cases in which the WHO does intervene to blunt anti-dumping measures.

Because the WTO seeks to uphold its free-market principles, there are some cases in which it intervenes in halting anti-dumping tariffs since they essential distort the free market; the justification for this is that governments are not able to fairly determine what constitutes a “fair” market price for certain products without overt bias. Ultimately, what all of this signals is that the WTO rules have come under massive threat, as the United States has evolved from just underwriting the rules for the past seven decades to emerging as their greatest threat.

References

BBC. (2019). Trade war: US hits China with new wave tarrifs. BBC. Retrieved from https://www.bbc.com/news/business-49505781

Cebi, P., and Ludema, R. (2002). The rise and fall of the Most-Favoured-Nation Clause. Office of Economics Working Paper. Retrieved from https://www.usitc.gov/publications/332/ec0206b.pdf

Chatzky, A. (2019). The truth about tariffs. Council of Foreign Relations. Retrieved from https://www.cfr.org/backgrounder/truth-about-tariffs

Chow, D. (2017).  Can the United States Impose Trade Sanctions on China for Currency Manipulation?, 16 Wash. U. Global Stud. L. Rev. 295.

Diamond, J. (2016).  Trump: “We Can’t Continue to Allow China to Rape Our Country.’ CNN. Retrieved from https://www.cnn.com/2016/05/01/politics/donald-trump-china-rape/index.html

Encyclopedia Brittanica. (2020). Most-favoured-nation treatment. Britannica. Retrieved from https://www.britannica.com/topic/most-favored-nation-treatment

Horowitz, J. (2018). Tariffs, Trump, and trade wars: Here’s what it all means. CNN Business. Retrieved from https://money.cnn.com/2018/03/08/news/economy/tariff-explainer/index.html

Kenton, W. & Scott, G. (2020> Anti-dumping duty. Investopedia. Rertrieved from https://www.investopedia.com/terms/a/anti-dumping-duty.asp

White House. (2018). President Donald J. Trump is Confronting China’s Unfair Trade Policies. White House. Retrieved from https://www.whitehouse.gov/briefings-statements/president-donald-j-trump-confronting-chinas-unfair-trade-policies/

Wong, D. and Koty, A.C. (2020). The US-China trade war: A timeline. Times. Retrieved from https://www.china-briefing.com/news/the-us-china-trade-war-a-timel ine/