Editorial: US-China Trade War Undermines WTO
I provide an editorial of the Economist's report on the escalating US-China trade war and how I believe this chaotic tit for tat is undermining orderly, rules-based, and transparent WTO-trade-dispute-resolution: https://www.economist.com/finance-and-economics/2018/09/20/america-and-china-are-in-a-proper-trade-war.
My Editorial: For several months now, the two countries have been trading blows to each others' (and their own) private industries ("private industry" is used loosely when referencing China) by raising taxes (aka tariffs) on hundreds of billions of dollars of products. See for example the impacts of most recent 10% tax hike on $189bn of imported products assessed by the U.S. government: "More than three-quarters of the products that will be affected on September 24th are intermediate and capital goods, which means the most immediate impact will be to push up American businesses’ costs. Mr Trump’s announcement triggered complaints from industry representatives including the US Chamber of Commerce, the American Chemistry Council and the American Apparel and Footwear Association, all of which warned that Americans would end up footing the tariff bill, and pleaded for a different approach."
These chaotic and unilateral skirmishes between the two countries represents a total abandonment of the orderly WTO dispute resolution process. This abandonment is accompanied by a missing of the opportunity to improve the WTO: "America is simultaneously weakening the system by which the WTO’s rules are enforced, blocking the appointment of judges to the body’s court of appeals. From October, only three will be left—the minimum needed to rule on a case."
"On September 18th Cecilia Malmström, the European Union’s trade commissioner, unveiled a “concept paper” outlining reforms that could plug some of the gaps in the WTO’s rules, as well as ways to reform dispute settlement." This proposal has so far been ignored.
This is unfortunate when you look at how the WTO process can work successfully to resolve disputes without collateral damage to private industry and perhaps also to inform officials and the public about corrupt arrangements through studied scrutiny within the WTO process. See the following example:
"In 2012, for example, the American government complained to the WTO that the Chinese government was breaking the rules by restricting the export of rare-earth elements. China’s dominance in their global supply meant that this hurt American manufacturers by pushing up prices for their inputs. After the WTO’s judges sided with the Americans, the Chinese government dropped the measures."