Imposition of trade tariffs by the USA on China: implications for the WTO and international trade law

• Pages: 69-84
• DOI: https://doi.org/10.1108/JITLP-01-2019-0003
• Date: 17 April 2020
• Published date: 17 April 2020
• Author: Uchechukwu Nwoke
• Subject Matter: International trade,International economics,Economics

Imposition of trade tarif‌fs by the

USA on China: implications for the

WTO and international trade law

Uchechukwu Nwoke

Department of Commercial and Corporate Law, Faculty of Law,

University of Nigeria (Enugu Campus), Enugu State, Nigeria

Abstract

Purpose –The increased integration of national economies and the belief that international trade is

benef‌icial to societies has led to the formation of the World Trade Organization (WTO), to regulate the

conduct of internationaltrade by national governments. Using US domestic legislation and case laws, as well

as the provisionsof the General Agreement on Tariffs and Trade (GATT) 1994,the purpose of this paper is to

analyze thelegality or otherwise of the recent impositionof unilateral trade tariffs by the USA on China.

Design/methodology/approach –This paper adopts a doctrinalapproach through a critical review of

extant legislationand case laws. Drawing from existing literature in the area of WTO and internationaltrade

law, the paper argues that the impositionof tariffs by the Trump administration is outside the scope provided

for by the WTO rules.

Findings –The paper f‌inds that the imposition of unilateral tariffs by the Trump Government, while in

breach of US domestic legislationand case laws, as well as the country’s obligations under the GATT 1994,

portendsa clear dangerto the continued existence of the WTO and to internationaltrade in general.

Originality/value –This paper is an originalstudy of the author, which extends the body of knowledge in

the area of internationaltrade law, by analyzing the possible implicationsof the imposition of trade tariffs by

the USA on China and offeringsuggestions on how the impasse can be resolved.

Keywords China, WTO, USA, Protectionism, International trade law, Trade tariffs

Paper type Research paper

Introduction

In recent years, the interdependence of nations has become an acceptable and recognizable

characteristic of economicinteraction (Surgiu and Surugiu, 2015). In the course of over 6,000

years of “recorded”humanexistence, the gradual development of a world economy, in which

human actors are interdependent to some degree, has become the def‌ining standard of

international trade (Ikenberry, 2018). As Melder (1940, p. 121) submitted more than six

decades ago, this growing association encapsulates “man’s gradual conquest of the natural

barriers to human intercourse, the water hazards of oceans, rivers, and lakes, the

topographical barriers of mountains and forests, and the communicationbarriers of space.”

In recent years, there has been even more dramatic progress toward a rapid integration of

the world economy (Shangquan, 2000). Advancements in land technology, water and air

transport has greatly helped in the realization of a true world economy and an attendant

shrinking of space for economicactors all over the world (Melder, 1940).

Nevertheless, the shrinking of economic space has elicited different reactions from

different societies across the world. These reactions have generally fallen within the

corresponding categoriesof politics and economics, and are often symbolized by the creation

of artif‌icial impediments to trade. To some degree, these impediments replace the natural

Trade tarif‌fs

by the USA on

China

69

Received10 January 2019

Revised28 May 2019

21June 2019

Accepted23 August 2019

Journalof International Trade

Lawand Policy

Vol.19 No. 2, 2020

pp. 69-84

© Emerald Publishing Limited

1477-0024

DOI 10.1108/JITLP-01-2019-0003

The current issue and full text archive of this journal is available on Emerald Insight at:

https://www.emerald.com/insight/1477-0024.htm

geographical hindrances to human interaction, which man has removed in his development

of the technology of travel, transport and communicationhighlighted above (Melder, 1940).

These responses usually amount to obstacles to free trade and have come to be commonly

identif‌ied as trade barriers(Puig, 2018).

Historically, legal trade barriers as we think of them today accompanied the rise of

modern nation-states as the feudal economic order gave way to an economic order of

“commercial capitalism”(Ricupero, 2008, p. 129). Trade barriers consisting of tariffs1,

import duties, embargoes and navigation acts, were adopted as national politico-economic

policy primarily for the purpose of building strong nation-states. The body of positive

doctrines and principles, which rationalized trade barriers came to be known as

“mercantilism”(Melder,1940).

The principal objective of these doctrines was to enable policymakers to manipulate

trade and resources to maintain an “advantageous”balance of trade in which commodity

exports are in excess of imports. This, in turn, authorized the acquisitionof a net balance of

precious metals. The supposition was that a large reserve of gold and silver is essential to

the strength of a nation-state and tariff duties and embargoes f‌it into this scheme as a

principal method of promoting“advantageous”trade balances, rather than forthe protection

of home industries against the market competition of foreign producers (Barnes, 1934).

However, the modern policy of imposing trade barriers, while enjoying some of the

characteristics of the old state builders, is one, which is primarily concerned with the

building of an economy of self-suff‌iciency,rather than the acquisition of a maximum store of

treasure in the form of preciousmetals.

This paper discusses the unilateral impositionof trade barriers against China by the US

administration under President Trump, and the implication of this action on international

trade. It begins with a highlight of the underlying tensions driving the US–China trade

relations. It then discusses the recent actions of the USA in imposing unilateral tariffs on

other countries, particularly China. It proceeds to look at the economic costs of this policy

directive, before undertaking a criticalanalysis of both US legislation and the provisions of

Article XXI of the World Trade Organization(WTO), to ascertain the legality of the US tariff

imposition.

Through analysis of both the domestic laws (including legislation and case laws) of the

USA and the WTO jurisprudence (including General Agreement on Tariffs and Trade

(GATT) Article XXI and dispute panel decisions),the paper contends that the imposition of

trade tariffs by the USA on China is untenable. Using the recentdecision of the WTO panel

in Russia –Measures Concerning Traff‌ic in Transit (DS512), the paper argues that the US’

insistence that its measures under Article XXI of the GATT cannot be subjected to review

by a dispute panel is no longer acceptable. Based on its f‌indings, the paper makes

recommendations on how the impasse of tariff imposition by the USA against China could

be resolved.

Underlying tensions driving the USA–China relations

Since the 1970s, the People’s Republic of China (PRC)has emerged as an important actor in

global governance. China has acquired membership in various institutions of international

cooperation, most notably the United Nations Security Council in 1971 and the WTO in

2001. According to Ikenberry (2018), China as an emerging great power does not want to

contest the basic rulesand principles of the liberal international order; it wishes to gain more

authority and leadershipwithin it. Indeed, today’s power transition representsnot the defeat

of the post-1945 world order, in which liberalism played a major role, but its ultimate

ascendance (Ikenberry, 2018). Nevertheless, China is not integrating into the liberal

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