March 22, 2018 / 3:09 PM / 6 months ago

Exclusive: China to respond to U.S. tariffs, resist protectionism - WTO envoy

GENEVA (Reuters) - China is preparing a range of responses to planned U.S. tariffs and will stand up to protectionism, but still hopes for dialogue, Beijing’s ambassador to the World Trade Organization (WTO) said on Thursday.

Xiangchen Zhang, Chinese Ambassador to the World Trade Organization (WTO) attends an interview with Reuters in Geneva, Switzerland March 22, 2018. REUTERS/Denis Balibouse

Zhang Xiangchen said China was considering a WTO complaint against the package of tariffs that President Donald Trump was expected to announce later on Thursday.

“This is a legitimate right for China to do that. But I would not exclude other options because, if the flood approaches, you have to bank up to keep it out,” he told Reuters.

Zhang spoke before a senior White House official said Trump would sign a memorandum later on Thursday to potentially slap tariffs on $50 billion of Chinese imports over forced transfer of intellectual property.

The announcement is the first in a string of U.S. trade restrictions to be aimed squarely at China.

U.S. Trade Representative Robert Lighthizer said on Wednesday the tariffs would target China’s high-technology sector and could also include restrictions on Chinese investments in the United States.

Trump’s protectionist trade policies have already caused a global outcry this year.

In January, he slapped steep import tariffs on solar panels and washing machines and this month worldwide steel and aluminum tariffs have followed, justified by a claim to “national security” under a Cold War-era law.

The European Union, Canada, Mexico, Australia, Brazil and South Korea won exemptions from the steel and aluminum tariffs, Canada and Mexico, Lighthizer said on Thursday.

Asked about the exemptions, Zhang said that “appeasement of protectionism” would not work. “If you surrender to protectionism, you will lose your credibility.”

The United States hopes that the national security claim will make the steel and aluminum tariffs immune to a challenge, but Zhang said they failed to pass the WTO test of being “essential” for national security.

Xiangchen Zhang, Chinese Ambassador to the World Trade Organization (WTO) attends an interview with Reuters in Geneva, Switzerland March 22, 2018. REUTERS/Denis Balibouse

“No one has seen the essential national security rationale behind the U.S. measures,” he said. “Even the senior officials of the United States fail to hide the real reasons.”

‘A FLAVOR OF TRADE WAR’

Thursday’s tariffs, under Section 301 of the 1974 Trade Act, would be even more difficult to defend, Zhang said, because in a previous ruling Washington promised to deploy them only with authorization from the WTO.

“The U.S. commitment is still there. But it seems that today they would like to ignore it. This issue can be brought back to the WTO and it will be challenged again.”

China and other WTO members might also retaliate against the solar tariffs with their own tariffs on U.S. goods, Zhang said.

“My colleagues in the capital have been preparing those options and this response. We still cherish the multilateral trading system very much, although there’s a flavor of trade war in the air.”

Asked about a possible U.S. WTO complaint about currency manipulation, Zhang said China had been prepared for such an argument since Trump mentioned it during his election campaign.

China is already under U.S. pressure at the WTO for its industrial overcapacity and its cyber security law.

Asked if China would invoke national security to avoid a WTO dispute over cyber security, Zhang said China would exercise self-restraint.

As well as deploying tariffs, the United States has undermined the WTO’s ability to cope with disputes by vetoing the appointment of new appeals judges.

“If the United States has the intention to paralyze the system no one can stop this,” he said, adding that China would keep trying to persuade Trump to unblock the system, although some in Geneva were talking about a plan B for the dispute settlement mechanism.

Zhang said he hoped for good relations with new U.S. ambassador Dennis Shea, who he said had promised to discuss the issue, and he did not want to consider a scenario of the WTO without the United States.

Reporting by Tom Miles; Editing by John Stonestreet

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