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TWN
Info Service on WTO and Trade Issues (May25/21) Yerevan, 16 May (D. Ravi Kanth) — China on 14 May inveighed against the “reciprocal tariffs” imposed by the United States against countries at the 30th anniversary of the World Trade Organization’s Committee on Market Access. China flagged the issue of “reciprocal tariffs” as the most important concern given the uncertainty and unpredictability it has caused to the global trading system, amidst the worsening trade tensions sparked by the Trump administration over the past 90 days, said people familiar with the development. The World Trade Organization’s Director-General, Ms Ngozi Okonjo-Iweala, on 13 May warned about the dangers posed by bilateral trade deals between the US and other countries. Bilateral trade deals, like the one between the US and the United Kingdom, seemingly fail to comply with the core multilateral rules enshrined in the WTO’s rule-book, particularly the condition on covering “substantially all trade”. It is well known that bilateral free trade agreements, which allegedly undermine the most-favoured-nation (MFN) treatment provision in Article I of the GATT 1994, are required to comply with the requirement on covering “substantially all trade”. A joint press release issued by the WTO DG and Japan’s Prime Minister Mr Shigeru Ishiba, at the end of the DG’s visit to Japan on 13 May, emphasized the importance of a rules-based, free and open trading system, with the WTO at its core. The Japanese PM and the DG “shared the view that, in a time of uncertainty and disruption, the value of the multilateral trading system is unquestionable.” Yet, Japan is one of the first countries to enter into negotiations with the US after Washington announced on 2 April that it would impose a reciprocal tariff of 24% on all goods from Japan, which has now been paused for 90 days. China is the only country that seems to have turned the tide over the US reciprocal tariffs, even though it has agreed to a 10% baseline tariff and a 20% tariff on its exports to the US. It is against this backdrop that China listed an item, titled “United States – Reciprocal tariffs and other tariff measures”, on the agenda of a meeting of the WTO’s Committee on Market Access on 14 May. CHINA’S STATEMENT In its statement at the Market Access Committee meeting on 14 May, China said the reciprocal tariffs imposed on all trade partners, while blatantly violating the WTO’s principles, are “seriously undermining the international trade system, disrupting the global industrial chain and supply chain, and causing a huge impact on the world economy.” Emphasizing that it “strongly opposed the measures and [has] firmly taken countermeasures to safeguard not only our own legitimate rights and interests,” China said that it also stood for “international fairness and justice.” Moreover, it said that the “reciprocal tariffs”, while serving no one’s interests, has the potential for “increasing trade costs, reducing economic efficiency and pushing up the level of inflation.” Further, the regime of reciprocal tariffs not only “leads to market fragmentation and trade contraction” but also imposes severe downside risks. Citing the WTO’s trade figures of a likely decline of 1.5% in global goods trade in 2025, China said that “the “reciprocal tariffs” will harm the US itself.” China urged the US “to abide by WTO rules, fully rectify its erroneous practice of imposing “reciprocal tariffs” and work with all members to safeguard the rules-based multilateral trading system.” Highlighting how the bilateral talks between the US and China were convened at the insistence of the “US business community and consumers,” China said the “purpose of this meeting is to seek solutions to the issues triggered by the US reciprocal tariffs through equal-footed dialogue and consultation.” China said that the bilateral meeting with the US has “achieved substantial progress by significantly reducing bilateral tariff levels.” In its response, the US said the announcement of reciprocal tariffs by US President Donald Trump on 2 April was made in the context of “a national emergency under domestic law due to the extraordinary threat to US national economic security arising from a large and persisting annual US goods trade deficit.” At the meeting, the US told China that it did not see any purpose in raising this issue all over again after discussing the same issue in the WTO’s Council for Trade in Goods. The US also drew attention to the discussion on reciprocal tariffs in the WTO’s Committee on Subsidies and Countervailing Measures (SCM). The US said China has already launched trade disputes against the US over the reciprocal tariffs while retaliating against the US, according to people familiar with the discussions. Canada, the European Union, and Norway severely criticized the US for fragmenting global trade through tariffs and increasing global costs, as well as the resulting uncertainty in global trade. They also underlined the importance of a rules-based multilateral trading system, said people familiar with the development. Also at the meeting, Switzerland, Brazil, New Zealand, Australia, the United Kingdom, Japan, Singapore, Korea, and Hong Kong-China spoke on this topic, though some of them did not mention the US directly, said people familiar with the discussions. Switzerland, Brazil and China specifically framed their arguments against the US actions, said people familiar with the discussions. The EU said that the US measures could have a broader spillover effect due to increased trade policy uncertainty. It emphasized the need for dialogue in these times of great uncertainty, transparency, building trust, predictability and fairness in the international market. The EU urged members that have introduced tariffs above their bound rates to notify them to the WTO and engage in discussions with the relevant parties. Canada, another proponent of the agenda item, said the series of unwanted tariffs announced or implemented by the US are severely disrupting global trade, and fundamentally undermining predictability in the international trading system, at great cost to businesses and consumers. Norway expressed grave concern over the recent developments in world trade, particularly the considerably increased tariffs that have been implemented or announced. According to Oslo, these policies have led to a less stable and more unpredictable environment for consumers, workers and businesses. Norway seemingly acknowledged that the status quo is not viable, underscoring the need for reform of the WTO rule-book to catch up with the evolving economic realities. Switzerland also drove home the same message as Norway, emphasizing the reform of the WTO to improve all its functions. Brazil regretted the US tariff actions, suggesting that these measures are extremely prejudicial to the international trading system built over decades of negotiations under the leadership of the US itself, said people familiar with the development. It cautioned against reforming through the bilateral route in a disruptive manner, and ignoring the existing rights and obligations of members, said people familiar with the development. New Zealand emphasized the critical importance of the WTO’s rules-based multilateral trading system, including in respect of the vital role it continues to play in promoting the economic development of all WTO members. Australia expressed dismay over actions that “damage the system that has benefited all members for decades, and by the potential proliferation of unilateral trade measures,” said people familiar with the development. The United Kingdom, which was the first country to settle for a highly controversial agreement with the US, suggested that the fragmentation of the global trading system stemming from unilateral tariffs is a grave concern, according to members who took part in the discussion. Japan said the current disruptions in trade are having a significant impact on the global economy and the entire multilateral trading system, said people familiar with the discussions. Singapore, Korea, and Hong Kong-China highlighted their specific concerns, calling for a stable and predictable trading system. China shared many of the concerns expressed by the previous speakers, insisting that “the so-called reciprocal tariffs put in place by the United States have seriously undermined the multilateral trading system, disrupted the accessibility of global supply chains, as well as the functioning of the world economy,” said people familiar with the discussions. After thanking members for their respective concerns, the US said it will convey them to Washington. JOINT COMMUNICATION ON EUDR Also at the Market Access Committee meeting on 14 May, Brazil, Colombia, Paraguay, and Peru issued a joint communication against the EU’s deforestation regulation (EUDR). In hard-hitting statements, the four South American countries criticized the EU over its regulation, saying that it is not justifiable under the provisions of any existing multilateral environmental agreements, said people familiar with the development. The four countries pointed out that the EU has based the regulation on unilaterally developed concepts, while imposing cumbersome obligations on due diligence. The four countries warned that the EU’s regulation “will severely affect and virtually ban exports of beef, wood, palm oil, soya, coffee, cocoa, and rubber and derived products into the EU market.” The four countries also criticized the EU for imposing a quantitative restriction (QR) on imports, calling on Brussels to notify the EUDR to the Committee on Market Access. Brazil said it has not received any response to its concerns from the EU until now, said people familiar with the discussions. Several farm-exporting countries including Australia, Canada, New Zealand, the US and the Russian Federation also shared the concerns raised by the four South American countries, suggesting that the EU regulation does not take the most trade-facilitative approach to achieve its data-stated objectives. The US called on the EU to delay the implementation of its measure and the subsequent enforcement of penalties until the concerns of stakeholders and trading partners have been addressed through all available administrative, regulatory or legislative mechanisms. The EU said it was limiting its response to claims that the EUDR is a quantitative restriction, while suggesting that the regulation is not a market access measure but rather an internal regulation measure designed in line with the WTO rules, in particular Article III of the GATT on national treatment (namely, rules are applied equally to both domestic products and like imported products). +
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