United States-China Trade War: Signs of Protectionism in a Globalized Economy?

By Loridas, Kara | Suffolk Transnational Law Review, Summer 2011 | Go to article overview
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United States-China Trade War: Signs of Protectionism in a Globalized Economy?


Loridas, Kara, Suffolk Transnational Law Review


I. INTRODUCTION

China and the United States have waged an ongoing legal battle over trade policies since 2006, using the World Trade Organization (WTO) dispute settlement system as a forum. (1) Despite negotiation talks during the Doha Development Round of the WTO and continuous WTO litigation, there are signs that the relationship continues to deteriorate. (2) As recently as September 2009, China filed a complaint with the WTO in response to the United States' announcement of plans to increase tariffs on tires from China, and in September 2010, a U.S. Congress committee approved a bill imposing duties on China. (3) The future of the US-China trade relationship is extremely important to the economies of both countries because China is the second largest trading partner of the United States. (4)

This Note will examine the conformity of United States-China trade policies with the WTO agreement and the possibility of a resolution to the current conflicts. (5) Part II of this Note will provide a history of the WTO agreement and the failure of the most recent round of WTO multilateral trade negotiations, the Doha Development Round. (6) Part III of this Note will explain the recent trade disputes between the United States and China. (7) In Part IV, this Note will discuss the ways in which each country's trade policies conform with and violate the WTO rules. (8) Part V will argue that the best hope for a cooperative United States-China trade relationship is a resumption of multilateral negotiations with the goal of completing the Doha Development Agenda. (9)

II. HISTORY: TRADE LAW

A. World Trade Organization

1. Purpose and Functions of the WTO

Established on January 1, 1995, the WTO replaced the General Agreement on Tariffs and Trade (GATT) as the international trading system. (10) The WTO is a negotiating forum whose overall mission is to promote free trade globally by way of multilateral negotiations among the 153 member countries. (11) Member countries must conform their trade laws to the terms of the sixteen different agreements comprising the WTO rules. (12) If one Member country believes that another Member's law violates the WTO rules, it can file a complaint with the WTO's dispute settlement system. (13) Consistent with its emphasis on negotiating conflicts, the dispute settlement system encourages private negotiations between the complainant and respondent prior to establishing a formal panel to litigate the dispute. (14) To create a stable system of free trade, the WTO seeks to achieve multilateral agreements that reduce trade barriers, encourage trade development, and provide predictable rules. (15)

2. WTO Rules

To achieve its goals of free trade and economic development, the WTO focuses on limiting trade barriers and eliminating discrimination in international trade. (16) The goal is to level the playing field in the international trading system for all WTO members. (17) In order to eliminate discrimination, member countries adopted the Most Favored Nation (MFN) concept and the national treatment concept as core principles of the WTO rules. (18) MFN requires a member country to give equal treatment to all other member countries with whom it trades. (19) Essentially, a member country cannot give special treatment either positive or negative--to another member country without doing the same for all other member countries. (20) While there are exceptions to MFN, these exceptions only apply to strictly defined circumstances. (21) In addition, the national treatment concept--also aimed at eliminating discrimination--requires that imported goods be treated equally to domestic goods once the imported goods enter the domestic market. (22)

The WTO goal of limiting trade barriers is accomplished via bound tariff rates. (23) These bound rates set limits on the tariff rates that a member country may impose on a certain import. (24) While not every type of import has a bound rate, the number of imports to which a bound rate applies has increased since the establishment of the WTO.

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