March 27, 2018 / 5:39 PM / a month ago

U.S. and China tussle at WTO over legality of Trump tariffs

GENEVA (Reuters) - The United States sparred with China at the World Trade Organization (WTO) on Tuesday over the legality of U.S. tariffs in response to alleged theft of U.S. intellectual property.

FILE PHOTO - A World Trade Organization (WTO) logo is pictured on their headquarters in Geneva, Switzerland, June 3, 2016. REUTERS/Denis Balibouse

U.S. President Donald Trump signed a presidential memorandum last week proposing tariffs on up to $60 billion of Chinese goods over what his administration says is misappropriation of U.S. intellectual property. The tariffs would follow a 30-day consultation period that starts once a list of targets is published.

Chinese officials raised the U.S. move at a meeting of the WTO’s dispute settlement body and indicated that China strongly opposed the unilateral action, according to a trade official who attended the meeting.

The U.S. tariff plan is based on Section 301 of the 1974 Trade Act that was the subject of a European Union complaint to the WTO two decades ago.

In its 1999 ruling on that dispute, a WTO panel said that economically powerful countries must not threaten others with unilateral action.

“Merely carrying a big stick is, in many cases, as effective a means to having one’s way as actually using the stick,” the WTO ruling said.

However, the panel also said the U.S. law conformed to WTO rules because the United States had “explicitly, officially, repeatedly and unconditionally” confirmed it would only employ Section 301 tariffs based on the outcome of a WTO dispute.

China told Tuesday’s WTO meeting that if the United States repudiated the pledge it made during the 1999 dispute hearings, its laws may no longer be in conformity. Current U.S. actions could have profound implications for the WTO system, the Chinese official said.

On Monday China’s ambassador called on other WTO members to join opposition to the Section 301 tariffs and “lock this beast back into the cage of the WTO rules”.

Last week he told Reuters that China was considering a WTO complaint and other options against the U.S. tariffs.

A U.S. official at Tuesday’s meeting responded by noting that the United States launched a WTO complaint last week about Chinese licensing practices that the U.S. says appeared to violate the WTO’s intellectual property agreement.

The other U.S. accusations against China - including unfair support of investment in U.S. assets to obtain technology - did not seem to involve the WTO, the U.S. official told the meeting.

Only two other WTO members weighed in to the debate, the trade official said.

The official said Pakistan warned that use of Section 301 could have serious consequences for developing countries and lead to an escalation of current tensions, while Japan agreed with the U.S. view of the importance of intellectual property protection but that trade measures must be in line with the WTO.

Reporting by Tom Miles; Editing by David Goodman

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