WTO opens way for Chinese sanctions against U.S. tariffs in Obama-era dispute

GENEVA (Reuters) - The United States did not fully comply with a World Trade Organization ruling and could face Chinese sanctions if it does not remove certain tariffs that break WTO rules, the WTO’s appeals judges said in a ruling on Tuesday.

FILE PHOTO: A logo is pictured outside the World Trade Organization (WTO) headquarters next to a red traffic light in Geneva, Switzerland, October 2, 2018. REUTERS/Denis Balibouse/File Photo

China went to the WTO in 2012 to challenge U.S. anti-subsidy tariffs on Chinese exports including solar panels, wind towers, steel cylinders and aluminum extrusions, exports that it valued at $7.3 billion at the time.

The office of U.S. Trade Representative (USTR) Robert Lighthizer said the WTO ruling recognized that the United States had proved that China used state-owned enterprises (SOEs) to subsidize and distort its economy.

But the ruling also said the United States must accept Chinese prices to measure subsidies, even though USTR viewed those prices as “distorted”.

“This conclusion ignores the findings of the World Bank, OECD working papers, economic surveys, and other objective evidence, all cited by the United States,” the U.S. statement said.

“The WTO appellate report undermines WTO rules, making them less effective to counteract Chinese SOE subsidies that are harming U.S. workers and businesses and distorting markets worldwide,” it added.

China’s commerce ministry said the WTO appellate report proves the U.S. “repeatedly abused trade remedy measures, which seriously damaged the fairness and impartiality of the international trade environment.”

The comments were posted late on Tuesday on the official website of the Ministry of Commerce.

Under President Donald Trump, the United States has been blocking the process to appoint or reappoint members of the WTO’s Appellate Body, which is effectively the top court for world trade.

The Appellate Body normally has seven members and needs three to consider each case, but from Dec. 11 it will have only one judge left, causing at least a temporary collapse, the European Union’s trade chief Cecilia Malmstrom said earlier on Tuesday.

The USTR statement said the outcome of its appeal illustrated the concerns it had about the Appellate Body, which it has accused of breaking procedural rules and overstepping its authority.

If China seeks to bring sanctions in the dispute, it would need to enter a new round of legal argument over the value of any damage to its trade.

The dispute centered on 17 investigations carried out by the U.S. Department of Commerce between 2007 and 2012.

The products concerned were solar panels, wind towers, thermal and coated paper, tow-behind lawn groomers, kitchen shelving, steel sinks, citric acid, magnesia carbon bricks, pressure pipe, line pipe, seamless pipe, steel cylinders, drill pipe, oil country tubular goods, wire strand and aluminum extrusions.

Shortly after the WTO ruling was released, U.S. President Donald Trump questioned China’s failure to make good what he saw as its promise to buy more U.S. agricultural goods, and said Washington could impose tariffs on an additional $325 billion worth of Chinese goods if it needed to do so.

The world’s two largest economies have been fighting over trade issues intensely over the past year, and resumed talks to reach an agreement are moving more slowly than expected.

Reporting by Tom Miles; Additional reporting by Andrea Shalal in Washington and Ben Blanchard in Beijing; Writing by Engen Tham; Editing by Catherine Evans