In 2016, U.S. trade with China surpassed trade with Canada, making China our largest
trading partner. The U.S., on the other hand, has been China’s top trading partner since the 1990s. However, as early as July 2018, Washington imposed the first round of tariffs on $34 billion in Chinese goods, provoking a retaliation from Beijing. As the trade war escalated, China appealed to the World Trade Organization (WTO) and filed a complaint against US tariffs. Now the WTO will scrutinize the U.S., one of the WTO’s founding members, and there is a high chance the WTO will rule in China’s favor.
China’s grievance against the U.S. can help China achieve support for its retaliation and
win sympathy from other countries. The world recognizes China’s violations of intellectual property appropriation and WTO commitments, but the U.S. is also in hot water for the mere principle of imposing tariffs on its greatest trade partner. Broad tariffs will not only harm American companies and consumers, but undermine the global trading system. The United States’ action in prolonging the trade war and disapproval of the WTO shows the nation’s distrust in the international institutions’ responsibility to handle unfair trade lapses.
Critics will argue that the WTO is no longer serving modern states’ needs due to the international institution’s infringing on the sovereignty of nations . Dani Rodrik, a Harvard University professor and author of “Straight Talk on Trade”, argued that the WTO’s predecessor, the General Agreement on Tariffs and Trade (GATT), is a stronger model of looser rules to successfully resolve modern trade issues. The critic’s argument has some merit in supporting looser rules to support a nation’s ability to produce healthy domestic economies and policy. However, the idea of scraping the WTO for an earlier model creates a heavy risk for destabilization and global adjustment to accommodate one country. A more reasonable policy solution requires reform, rather than replacement.
A practical step in the right direction is to maintain strong economic and diplomatic ties
with China while handling China’s transgressions through the WTO. This would protect U.S.
trade and sustain U.S. prosperity and leadership in the international economy. The policy
recommendation is for the U.S. to digress from the trade war and focus on reforming the WTO
in order to punish Chinese trade abuses properly. The WTO is designed to reach agreements
through negotiations in the WTO system and settle differences through a neutral procedure
based on an agreed legal foundation. If the WTO no longer meets those needs, in the case of
the U.S. and China’s trade war, then serious reform is necessary. Rather than harm U.S. domestic companies and farmers through a trade war, the U.S. administration ought to strengthen liberal institutions.
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