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MNI POLICY: U.S. Rejects China Sanctions After WTO Ruling

MNI (London)
-- Washington Seeks WTO Dispute Settlement, Despite Block On New Judges
By Brooke Migdon
     WASHINGTON (MNI) - The U.S. said Monday it would reject sanctions imposed
by China stemming from a World Trade Organization ruling on an Obama-era
dispute, although the case will likely stall as Washington continues to block
the reappointment of new WTO appeals judges.
     The WTO Appellate Body ruled in July that the U.S. had failed to comply
with a 2012 ruling concerning the imposition of tariffs on Chinese solar panels
and steel products. Earlier this month, China announced it would respond with
$2.4 billion in compensatory sanctions, which the U.S. objected to on Monday
during a meeting of the WTO Dispute Settlement Body (DSB) in Geneva,
     Under a WTO statute, the filing of an objection automatically sends the
matter to WTO arbitration, and under a related mandate, although each party may
agree on an arbitrator, members of the original WTO panel or Appellate Body
report are typically appointed. The results of the arbitration are then approved
by the DSB.
     The U.S. announced last year that it would block the reappointment of
further WTO Appellate Body members serving as appeals judges within the WTO's
dispute settlement arm. Now only three -- the minimum amount for the system to
function -- of the standard set of seven remain appeals judges remain in
position, and the terms of two of them end in December.
     Factoring in the time it will likely take to appoint an arbitrator, reopen
the case, and render a decision, there won't be a "functioning" Appellate Body
by the time the arbitration concludes, according to Gary Hufbauer, a senior
fellow at the Peterson Institute for International Economics and former Deputy
Assistant Secretary for International Trade and Investment Policy of the U.S.
     "Assuming the U.S. doesn't like what the arbitrator says, it will appeal
the case to the non-existent Appellate Body," he said, adding that the U.S. will
likely use the absence of the Appellate Body to prevent the tariffs from coming
into force.
     But Hufbauer said China will likely impose the tariffs regardless.
     "The wheels are coming off the system," he said. "The whole role of the WTO
in limiting unilateral measures has broken down."
     Despite the potential to backfire, the U.S. also said Monday that it would
continue to block the appointment of new members, citing the Appellate Body's
alleged "disregard" for recognized rules.
     "The systemic concerns that we have identified remain unaddressed," a
Geneva-based U.S. trade representative said in a statement following the
meeting. "If WTO Members say that we support a rules-based trading system, then
how can we permit the WTO Appellate Body to break the rules we agreed to in
     WTO member nations should not expect the U.S. to budge anytime soon -- at
least not before the 2020 U.S. presidential election, Hufbauer said.
     "There will not be an Appellate Body resurrection for a while," he said. "I
don't think the outcome of a single case will change the United States' view --
not with Trump as president or Lighthizer as the USTR."
--MNI Washington Bureau; +1 202 371 2121; email:
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MNI London Bureau | +44 203-865-3812 |

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