The U.S. trade disputes have entered the substantial stage.
On the early morning of April 2, approved by the State Council of the People’s Republic of China, the Customs Tariff Commission of the State Council decided to suspend tariff reduction obligations on 7 categories of 128 imported products originating from the United States, taking effect from April 2, 2018.
The website of the Ministry of Finance of China stated, “In order to safeguard China’s interests and balance the losses caused by the U.S. 232 measures (additional tariffs on imported steel and aluminum products from China), China will suspend the tariff reduction obligations on 7 categories of 128 imported products originating from the United States, taking effect from April 2, 2018. An additional tariff rate of 15% will be imposed on 120 items of imported goods from the U.S. A tariff of 25% will be levied on eight imported products, such as pork and other products. The current policy on bonded and tax deductions will remain unchanged.”
China is the first country in the world to implement countermeasures against the U.S. 232 measures. People close to the Sino-U.S. negotiations told the Chinese Business Network that with as the negotiations continue, this is only the beginning. Compared with 232 measures, the tailor-made measures based on the 301 investigation for China are the key to the development of the trade war.
Wei Jianguo, Vice Chairman of China Center for International Economic Exchanges and former Vice Minister of Commerce, told the Chinese Business Network that more actions will be taken and negotiations will accompany this long-term battle. More serious measures will depend on the progress of the negotiation between the two parties.
Judging from the list, Tu Xinquan, dean of the China WTO Academy at the University of International Business and Economics, told the Chinese Business Network that China is still relatively restrained.
China is still restrained
China is still more restrained
Before China’s counteractions took place, the United States has already launched “232 measures” against many countries and released series of unilateral measures on China based on the “301 investigations.”
On March 8, 2018, the US President Trump signed an announcement confirming that the imported steel and aluminum products threatened the US national security and decided to impose tariffs (known as the 232 measures) from March 23. China believes that the U.S. has abused the “safety exception’ clause of the WTO, which in essence constitutes a safeguard measure. This measure is targeted at only a few countries and seriously violates the principle of non-discrimination, the cornerstone of the multilateral trading system. It also seriously infringed the interests of China.
According to the spokesperson of China’s Ministry of Commerce, on March 26, China submitted a trade compensation consultation request to the United States under the “Agreement on Safeguards”, but the United States refused to reply. Having considered that there is no possibility of reaching an agreement between the US and China, on March 29, China informed the WTO of the suspension of the concession list and decided to impose tariffs on certain products imported from the United States in order to balance the loss caused by the US 232 measures.
On the morning of April 2, the spokesperson of the Ministry of Commerce said that many people expressed their support for these measures and the product lists by telephone, e-mail, etc., and agreed that the government should take measures to safeguard the interests of China and its industries. Some people also suggested that additional measures should be taken. After proper evaluation, it was decided to implement the above measures on 128 products imported from the United States.
People who are close to the negotiations believe that this is only the first countermeasure taken by China. In response to the “301 investigations” that may bring far-reaching negative impact on China and the world, it is likely that China will tougher countermeasures. The situation will become more intensified if the US announces the list of products which worth nearly US$60 billion.
In the past week, CBN reporters learned from different sources that the time for the U.S. to release the list was originally on the early morning of March 28 or 29th, but things have changed. At an interview on March 28, the U.S. Trade Representative Lighthizer said that the public consultation period of the tariff list will be extended from 30 to 60 days. In other words, the United States will not increase tariffs on other Chinese products before this June. He also stated that it is hopeful that China and the United States can avoid this tariff war through negotiations. At present, various sources show that the US will not release the list before April, so that it will have enough time to lay the foundation for “higher quotations” in the official Sino-U.S. dialogue.
“From the list of tariff reduction obligations issued by the Chinese side, we can see that China is still restrained and leaving enough space for negotiations,” said Tu Xinquan to CBN.
According to a number of experts, this list tries avoids the agricultural products, automobiles and the amount is modest.
Confrontation Goes with Dialogue
In the past eight days, China and the United States have had confrontations in the bilateral and multilateral fields.
According to the official website of WTO, on the day the 232 measure came into force, more than 40 WTO members (including 28 EU members) attending the Goods Trade Conference in Geneva expressed their concern over the tariff imposed by the United States on imported steel and aluminum. However, the United States insisted on that this measure is necessary to eliminate the threat to the national security of the United States.
Last week, the United States confirmed the countries that would receive a temporary exemption from the additional tariffs on steel and aluminum products and Trump issued two statements, indicating that the United States will conduct additional negotiations with Australia, Argentina, Brazil, South Korea, the European Union, Canada and Mexico. This document also states that other countries can also obtain similar exemptions, provided that they can prove they can eliminate damage to the US national security. However, the United States did not exempt China, Japan, Russia, South Africa, Turkey and other members. For those countries that have not been exempted, they will be subject to an ad valorem duty of 25% on their steel imports, and a 10% tariff on aluminum products.
China and Russia believe that the U.S. measures were inconsistent with the safeguards agreement of the GATT and the WTO. China said that the U.S. measures do not show how the steel and aluminum affect the national security, and implied that China will take necessary measures to protect their legal rights. Russia considered the tariffs introduced by the United States have breached the WTO rules. These measures show that some WTO members will be exempted, but more clarifications are needed to explain how these exemptions were made and whether these measures have complied with WTO rules.
The EU, which has already been exempted, is also not satisfied, saying that the exception to the national security under the WTO rules does not allow the rules are being used to support domestic industry.
As the largest trading partner of the United States, the European Commission issued an announcement on March 26, saying that it will launch a safeguard investigation on imported steel products. At the EU Council meeting held on March 22-23, the EU Council leaders stated in the meeting’s summary document that the European Commission regrets the decision of the United States to levy tariffs on imported steel and aluminum products. These measures cannot be justified by national security because the protection of the entire industry is an inappropriate trading remedy. Actually, the problem can be attributed to overcapacity, and the EU has carried out comprehensive cooperation with the United States in a number of forums, including the global forum for excess steel production capacity. They urged Trump to ensure that the EU can be permanently waived not just until the May 1, the deadline for the negotiations.
On March 23, Roberto Azevêdo, Director-General of the WTO said at the conference that the positive aspect is that some conflicting members still use the WTO as a platform to discuss these issues. On March 30, however, he announced that if a full-scale trade war breaks out between China and the United States, it will have a serious impact on the global economy. For the trade conflicts between China and the United States, Azevedo warned that the current global economic growth is facing a rapid decline and the WTO is experiencing the most difficult times.
At the same time, the U.S.-China Dialogue Has Not Been Suspended.
The spokesperson of China’s Ministry of Commerce stated that as a member of the WTO, China has legitimate right to suspend some of its obligations. We hope that the United States will withdraw the measures that violate the rules of the WTO as soon as possible, so that the trade between China and the United States will return to normal. As the two largest economies in the world, cooperation between China and the United States is the only right choice. The two sides should resolve their problems through dialogue and consultation, achieve common development, and avoid further actions that will cause greater damage to the overall U.S.-China cooperation.
Not long ago, the Minister of Commerce Mr. Zhong Shan said at a press conference of the 13th National People’s Congress on March 11 that there have been some ups and downs in U.S.-China economic and trade relations. Whether a trade war between China and the United States will break out has become a global concern. Some people suspect that the comprehensive economic dialogue between China and the United States has been suspended, this is not true. The talks continue and the channels for cooperation and exchange between China and the United States have not been interrupted.