‘We Are Unable To Fight Equally’: A Frustrated China Files WTO Challenge Against Trump

Donald Trump is no fan of the World Trade Organization, a body which, according to accounts from inside the White House, the President believes is “always f*&$king” America.

Late last month, Axios reported that Trump has “repeatedly told top White House officials he wants to withdraw the United States from the World Trade Organization.”

“He’s [threatened to withdraw] 100 times. It would totally [screw] us as a country,” one source who’s conferred with Trump on the issue reportedly said.

The Axios article kicked off a veritable media firestorm, prompting Steve Mnuchin to show up on Fox News, where he and Maria Bartiromo attempted to play down the WTO speculation as “fake news”.

You're welcome… pic.twitter.com/MUNpopm5mz

— Heisenberg Report (@heisenbergrpt) June 29, 2018

Of course there’s nothing “fake” about the “news” that Donald Trump harbors a deep disdain for multilateral institutions. He’s said so himself on any number of occasions and his behavior at the G-7 summit in Canada last month and at the NATO meeting last week only underscored the notion that the President is actively considering whether to scale back America’s participation in, and cooperation with, the alliances and institutions that have defined the post-War order.

Axios would later publish the details of what it says is a “leaked draft of a Trump administration bill – ordered by the president himself – that would declare America’s abandonment of fundamental World Trade Organization rules.”

Although there’s little chance of that flying on Capitol Hill, it was enough to unnerve markets and cast further doubt on Trump’s commitment to international norms, especially as those norms relate to trade.

Well, in light of the most recent escalation in Trump’s ongoing trade dispute with Beijing, China has now lodged a WTO challenge against the U.S. The move is in response to the USTR’s ill-advised decision to publish a list in conjunction with prospective tariffs on an additional $200 billion in Chinese goods above and beyond the $50 billion in imports that are part and parcel of Trump’s the 301 investigation response.

As AP notes, “the move [by China] is unusually swift”, conveying the urgency of the situation. As a reminder, the problem here is that past a certain point, China can no longer retaliate mechanically.  The fact that there’s a trade deficit means there is, by definition, a point beyond which China will have to get “creative” when it comes to how to strike back.

Tu Xingquan, director of the China Institute for WTO Studies at the University of International Business and Economics in Beijing, told AP the following:

We are unable to fight equally [and] Monday’s decision indicates that we value the role of WTO rules.

This also comes days after the latest Chinese trade numbers showed America’s trade deficit with China is the widest on record. Here’s AP one more time:

China announced it filed a World Trade Organization challenge Monday to President Donald Trump’s latest tariff threat, stepping up its diplomatic efforts to counter U.S. pressure in a spiraling technology dispute.

The Trump administration has criticized the WTO as unable to deal with the problems posed by China, suggesting a challenge there might have little impact in Washington. But it might help Beijing rally support from governments that criticized Trump for going outside the WTO to impose tariffs on Chinese and other imports.

You’re reminded that Trump’s protestations to the contrary, the U.S. does not usually get “f*&$ked” by the WTO. As far as IP disputes go, here’s what Jennifer Hillman, a former member of the WTO’s Appellate Body who also served as a commissioner at the United States International Trade Commission and as general counsel at the Office of the United States Trade Representative, told Goldman, in an April interview:

The WTO has jurisdiction over IP issues through the Trade-Related Aspects of Intellectual Property Rights (TRIPS) agreement, which incorporates most of the major international agreements on patents, trademarks, trade secrets, copyrights, industrial designs, geographical indications, etc. However, some practices that the US takes issue with under Section 301, particularly mandatory technology transfer, doesn’t fall neatly within the TRIPS agreement. The question is whether or not the US has the right to be judge, jury, and executioner on these matters. Section 301 says the United States Trade Representative (USTR) can make a determination and take action accordingly; the WTO rules generally say that you should come to the WTO first. So there is a discrepancy here between US domestic law and WTO norms.

But while the organization may indeed have problems when it comes to dealing with China, the numbers from The “Economic Report of the President” do not support the contention that the WTO is biased against the U.S. – quite the contrary, actually:

The efficacy of WTO dispute settlement mechanism remains an area of active debate. Davis (2012) finds that the United States gets better outcomes via formal WTO adjudication than negotiation, increasing the probability that the complaint will be resolved and decreasing the time it takes to remove the barrier in question. Mayeda (2017) finds that the United States has won 85.7 percent of the cases it has initiated before the WTO since 1995, compared with a global average of 84.4 percent.In contrast, China’s success rate is just 66.7 percent. Most U.S. WTO cases target China (21) and the European Communities (19). When the United States is the respondent, it still wins 25 percent of the time, a rate that is better than the global average rate of 16.6 percent(Mayeda 2017). In comparison, the EU and Japan have won 0 percent of the cases brought against them, while China has won only 5.3 percent of the time (Mayeda 2017). Nonetheless, because countries may initiate or decline to initiate cases based on their perceived probability of obtaining a favorable outcome in the WTO dispute process, comparisons of WTO dispute statements between countries should be taken with at least some skepticism.

“And just who signed off on that report?”, the skeptics/Trump fans among you might well ask.

Well, I’m glad you’re curious and I’m happy to answer that via the following screengrab from page 11):

Nothing further.