MNI POLICY: EU's Hogan Says US-China Deal May Skirt WTO Rules

--Hogan Says EU May Challenge Phase One After Reviewing Text

By Brooke Migdon

     WASHINGTON (MNI) - EU Trade Commissioner Phil Hogan said the U.S.-China

agreement may violate WTO rules and President Donald Trump's preference for

bilateral deals makes it harder to settle disputes with his region.

     "It will be interesting to see if the deal is WTO compatible," he said

Thursday in Washington, where he was due to meet his U.S. counterpart Robert

Lighthizer. "But the WTO appellate body is frozen, so maybe that was part of the

tactic."

     WTO rules prohibit numeric restrictions on imported or exported goods, and

the Phase One deal Trump signed Wednesday sets quotas like a $40-50 billion

increase in China's purchases of American agricultural goods. China has not said

how it will meet that goal without cutting back on imports from other nations.

     "We haven't analyzed the document in detail, but we will. And if there is a

WTO compliance issue, of course well will take a case," Hogan said. "We have to

stand up for our own economic interests."

     The prospect of a new trade fight between the EU and the U.S. could hurt

the world economy again after last year was defined by the China dispute that

forced central banks around the world to cut rates. Trump appeared to be easing

tensions with the EU last year when he called off auto tariffs and won a major

case at the WTO over EU aircraft subsidies. The EU is also competing with the

U.S. to become a major exporter to China of food and factory products. 

     Hogan said the U.S. has not taken a "global view" regarding trading with

China. "The U.S. has struck out on its own because it wants the benefits of

whatever they can get from China for themselves."

     The China deal's enforcement mechanism, which eliminates the ability to

challenge an action in the WTO, could have significant global ramifications

should either side have complaints in the future, Hogan said. 

     The WTO's primary dispute settlement arm was paralyzed in December when the

terms of two of the three remaining judges expired. Trump's administration

refuses to appoint new members to the appellate body, alleging biased decisions.

     "I don't understand how the United States is reluctant to have a global

referee on these issues," Hogan said.

     Reforming the WTO is high on Hogan's agenda in his new role as EU trade

chief. The U.S., EU and Japan released a joint statement Tuesday promising to

work together on revamping the 25-year-old trading system. But Trump has long

criticized the WTO and other international trade agreements for cheating

American workers.

     Hogan said U.S. administration officials are beginning to realize the WTO's

value as they struggle to reach a compromise with France over its tax on digital

services. The U.S. alleges that tax discriminates against American companies.

     "If we exploit the full potential of this dialogue that's going on in the

WTO on e-commerce and reach an agreement this year and take into account the

trilateral process that we've launched this week, we can do an enormous amount

together to set the rules and disciplines for the future," he said.

     France has said it will scrap its own tax if a global solution is reached

in the Organization for Economic Cooperation and Development. Other countries

like the UK and Canada are also considering their own digital service taxes.

     Hogan said he plans to return to Washington in February and March to

fast-track "concrete" action on both sides and avoid the possibility of

years-long negotiations.

--MNI Washington Bureau; +1 202 371 2121; email: brooke.migdon@marketnews.com

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