Leibowitz: Tariff Foes Reach Out to WTO

China is treating the tariff decisions as “safeguard” measures rather than as national security measures. First, China maintains that national security is not the real reason for the U.S. tariffs, which they believe are motivated by protectionist impulses. Second, if the tariffs are safeguard measures, there is an immediate right to “adjust” concessions to compensate trading partners. Compensation means that the country imposing safeguard measures to restrict imports must make additional concessions in other sectors.

The U.S. responded April 4 in Geneva with a general denial that the Section 232 tariffs were safeguard measures and therefore consultations in response to the Chinese request were inappropriate. The U.S. invited China to engage in “discussions” about the national security tariffs. The U.S. asserted that China’s announced retaliatory tariffs were contrary to WTO rules if they were not related to a safeguard measure. This is legalese for claiming the Chinese acted too fast to impose retaliatory tariffs.

Further, the U.S. seems to be saying that tariffs imposed for national security reasons may not be subject to compensation or retaliation. Game on!

As reported earlier, China responded to the more extensive U.S.-proposed tariffs related to the Section 301 investigation into China’s trade practices, alleged theft of intellectual property and investment restrictions with tariffs of its own. Neither the U.S. nor the Chinese tariffs are effective immediately.

China has also requested consultations on the Section 301 tariffs, initiating a WTO dispute settlement case. China cites the General Agreement on Tariffs and Trade’s “most favored nation” principle. China also accuses the U.S. of violating the Dispute Settlement Understanding of the WTO, which requires parties to resort to dispute settlement procedures before taking action on alleged violations of the agreements. Again, game on.

China is also seeking concessions for tariff increases on solar panels. The U.S. imposed tariffs on solar goods in January under a safeguard measure that is generally agreed to be a true safeguard measure. These discussions so far have gone nowhere. China could impose additional tariffs in response to the safeguard tariffs soon.

Steel and aluminum users, as well as other sectors of the economy hit by the tariff slinging, are weighing in publicly. Little action is likely in Congress any time soon, but all interested groups are putting their concerns out in public. If there is a negotiated settlement to all this, the groups that yell the loudest hope they will get special attention. The following sectors and industries are prominent: agriculture (pork, soybeans, dairy, fruit, nuts); aircraft; automotive (cars, trucks, parts); construction; metal fabrication; and wine.

The European Union has initiated a safeguard investigation on increased steel imports due to the U.S. tariffs. Steel produced overseas needs an outlet. The Trump tariffs will cause other countries to protect their industries, too, but none is likely to rely on the national security theory. Safeguards are the likely basis for action. The Canadian press has published several stories about the difficulties Canadian exporters will face trying to convince other countries that their goods are not American.

Countries currently in line for a permanent exemption from the U.S. steel tariffs include: Korea (a revised KORUS deal replaces tariffs with quotas); Australia (whose trade minister asserted yesterday that a post-May 1 exemption is already in hand); plus, Canada and Mexico. The list for aluminum exemptions is similar but not identical.

Other countries seeking post-May 1 exemptions include: Turkey, Japan, Brazil, the EU and India. Germany has an initiative separate from the EU’s. India has a delegation in Washington this week.

Lewis Leibowitz

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