China wins WTO case to sanction $3.6 billion in U.S. trade

Brendan Murray and Shawn Donnan
Bloomberg News

China secured the World Trade Organization’s go-ahead to impose $3.6 billion in sanctions against the U.S., in a case that predates the tariff war between the world’s two largest economies but may add a layer of tension to ongoing talks.

The damages awarded, in a document released Friday on the Geneva-based organizations’ website, are the third highest in WTO history. The amount is about half of what was requested by China, which argued that some U.S. anti-dumping rules were illegal.

The case began before the 18-month-old trade war between the two nations, which has led to tit-for-tat tariffs covering some $500 billion in goods going in both directions.

In this Aug. 6, 2019, file photo, a man walks past a money exchange shop decorated with different banknotes at Central, a business district in Hong Kong. The Trump administration is discussing ways to limit U.S. portfolio flows into China, which would affect billions of dollars in investment.

While the ruling deals with matters outside current negotiations to conclude phase one of a comprehensive trade deal, it gives Beijing a new — and legal — weapon to slap the Trump administration if it opts to do so.

The ruling also comes as the U.S. is mounting an assault on the WTO’s dispute resolution system, with the current terms of two of the final three judges on its appellate body due to expire in December and Washington blocking new appointments. The Trump administration is likely to cite the case as an example of what it sees as the overreach of the WTO’S dispute system.

China now can ask the WTO’s dispute settlement body to authorize retaliatory tariffs on U.S. goods. Such requests are typically granted.

The next steps for the U.S. include amending its illegal anti-dumping restrictions on the Chinese products in question, or resolving the dispute directly with China — a move that theoretically could happen as part of the broader trade-war talks between Washington and Beijing.

At issue in the case were U.S. anti-dumping duties imposed on 13 imported Chinese products including machinery, electronics, metals and minerals.

It was brought by China in 2013 and a WTO panel ruled in Beijing’s favor in 2016. The point of contention was the methodology that the U.S. uses to calculate anti-dumping tariffs, and in particular, how Washington uses the controversial method of “zeroing” in those calculations.

Zeroing refers to the practice of assigning the value of “zero” to any export prices that are higher than domestic prices in China in anti-dumping cases brought by U.S. companies. It therefore skews calculations of anti-dumping tariffs by inflating the difference in prices, critics charge.

U.S. Trade Representative Robert Lighthizer, a former anti-dumping lawyer for the steel industry, has been a longtime defender of the use of zeroing.