WTO paves way for China to seek sanctions against U.S.

GENEVA (Reuters) - The World Trade Organization (WTO) on Thursday adopted final findings against U.S. duties imposed on a range of Chinese imports, effectively giving Beijing a green light to seek compensatory sanctions.

FILE PHOTO: The World Trade Organization (WTO) headquarters are pictured in Geneva, Switzerland, July 26, 2018. REUTERS/Denis Balibouse/File Photo

The case turned on U.S. calculation of countervailing duties in 17 investigations begun by the Department of Commerce, which found that Chinese state-owned and state-invested enterprises provided steel and other inputs to domestic firms for less than adequate remuneration. Washington deems them illegal subsidies.

The world’s two largest economies are locked in a wider trade dispute but are seeking to reach a deal to lessen simmering tensions.

The U.S. delegation said it did not view the WTO findings as valid and was not joining a consensus on the Dispute Settlement Body’s adoption of the WTO Appellate Body’s report last month that largely upheld an earlier ruling, trade sources said.

The WTO appeals body had applied “the wrong legal interpretation in this dispute”, while China continues to be the “serial offender” of the WTO’s subsidies agreement, the U.S. delegation said in a text seen by Reuters.

“This is a very serious problem, with grave implications for the global trading system,” it told the closed-door talks.

China also voiced dismay with the appeals body ruling, particularly its “sweeping” interpretation of the term “public body” under WTO subsidy rules.

“But these (WTO) reports are nevertheless sufficient to establish that the United States has acted unlawfully in the investigations at issue by countervailing alleged ‘input subsidies’ that do not, in fact, exist,” China’s delegation said.

“The U.S. Department of Commerce can no longer presume that in-country prices are ‘distorted’ and force respondents to prove the contrary,” it said.

“China calls on the United States to reform its countervailing duty practices more generally to conform to these rulings, with respect to investigations of both Chinese products and those of other members,” it added.

Unlike the United States, China did not believe that the appeals body had exceeded its authority, Beijing’s delegation said.

The European Union (EU) and Canada expressed concern at the U.S. position that it was not joining consensus, citing WTO rules that the only way to block adoption of reports was unanimous rejection, trade sources said.

Reporting by Stephanie Nebehay; Editing by Toby Chopra