News: China’s WTO challenge moves forward today

Monday, September 23, 2024

China’s WTO challenge moves forward today

Sep 23, 2024

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Quick Fix

— China’s challenge of U.S. subsidies for electric vehicles and other incentives provided by the Inflation Reduction Act is primed to move forward today at the World Trade Organization.

— WTO members are trying to find a path to move forward on agricultural trade reform in hope of success by the next ministerial conference.

— Indian trade chief Piyush Goyal’s showmanship and negotiating savvy are in the spotlight this week as he turns his attention to trade talks with the European Union.

It’s Monday, Sept. 23. Welcome to Morning Trade. It’s a good day to plant peonies, according to my 1974 Popular Science Homeowners Almanac. In fact, it’s almost the last day you can do it. Otherwise, they won’t be well-established by the time cold weather arrives.

Gee whiz, book, talk about waiting until the last minute! Everybody take off work if necessary and plant peonies today! Then send any tips, suggestions and trade news to ahawkins@politico.com, gbade@politico.com and dpalmer@politico.com. You can also follow us on X: @_AriHawkins, @GavinBade and @tradereporter.

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A message from American Chemistry Council:

A question for the next administration and Congress.
Why is manufacturing chemicals in the U.S. vital to the economy and future? Over the next decade, global demand for chemistry is expected to increase by 30 percent, and by almost 15 percent in the U.S. Bottom line: we need more chemistry not less. Boosting American chemical production would onshore more manufacturing, create jobs and strengthen supply chains. Learn more about why it’s important to #KeepChemistryHere.

Driving the Day

AND SO IT BEGINS: Beijing complains — not without some justification — that the landmark U.S. climate law discriminates against Chinese suppliers in violation of WTO rules.

Barring some unforeseen circumstance, the WTO’s Dispute Settlement Body will approve China’s second request for a panel to be formed to hear the dispute. The United States rejected China’s initial request for a panel in July, exercising a right available to all members. However, WTO rules do not allow any member to block a second panel request.

Next steps: The United States and China now have 20 days to agree on panelists to hear the dispute, based on recommendations from the WTO Secretariat. If the two sides can not agree, WTO Director-General Ngozi Okonjo-Iweala then would have 10 days to select the panelists herself, after consulting with both sides and other WTO officials.

Once the panel is formed, the dispute settlement process begins, including hearings where both sides present their case. In theory, the panel is supposed to give its interim confidential ruling to the parties within six months and its final report three months after that. But in reality, WTO proceedings often take much longer than expected.

No Appellate Body: Adding another layer of complexity, China is bringing the case at a time when there’s no Appellate Body at the WTO because the United States has blocked the appointment of new judges since 2019 in response to what it considered a series of unfavorable rulings that went far beyond the trade commitments it made.

That means the case may never be officially resolved, since both countries still have the right to appeal any decision, even though there is no Appellate Body to hear their arguments.

Still, that may not be an issue if WTO members meet their deadline for striking a deal to reform the WTO’s dispute settlement system by the end of the year. But the question of how to revive or replace Appellate Body is the biggest one that negotiators still face.

National security card: The United States has increasingly used national security to justify some of its trade actions, such as the tariffs that former President Donald Trump imposed on steel and aluminum in 2018. A WTO panel ruled against the U.S on that issue, but the Biden administration has refused to comply with the decision, arguing that every WTO member has the right to decide for itself when to use the WTO’s national security exception.

It’s not clear yet whether the United States will use a national security defense in the IRA case, although many in the Biden administration see climate change as an existential threat that requires extraordinary measures to address.

U.S.-CHINA ECON TALKS: A U.S. team led by Treasury Undersecretary for International Affairs Jay Shambaugh was in Beijing on Thursday and Friday to exchange views on a range of issues, including policies that “support balanced growth in the domestic and global economies,” according to a Treasury Department readout.

It was the second meeting of the bilateral Economic Working Group launched last year by Treasury Secretary Janet Yellen and Chinese Vice Premier He Lifeng to help stabilize relations between the two countries.

They also discussed U.S. concerns about signs of increasing overcapacity in certain sectors of the Chinese economy, China’s non-market policies and practices and their impact on U.S. workers and firms, as well as Chinese firms’ support for Russia’s war in Ukraine, Treasury said.

During the final sessions, they shared views on domestic macroeconomic outlooks and discussions on areas of cooperation, including debt issues and financing challenges in emerging and developing economies.

The Treasury delegation also met with Vice Premier He while in Beijing. Shambaugh’s co-led for the EWG is Liao Min, China’s vice minister of finance.

Around the World

DELHI’S HARD BARGAINER: Goyal’s tough tactics on behalf of India most recently frustrated other members of the WTO at the group’s 13th Ministerial Conference in Abu Dhabi.

Like former President Donald Trump, Goyal “is a showbiz personality and deliberately provocative,” said a former EU official who negotiated with the Indian trade chief for years. “He loves cliffhanging negotiations where he can sabotage and then come to the rescue on a white horse at the last minute,” they said. “He’s done that several times.”

This week, India and the EU are holding their ninth round of trade talks, resuming negotiations that were put on hold for spring elections in India and in Europe. He also will restart negotiations with the U.K. — now under a Labour government — in the autumn.

For more, click on our profile here.

WTO AG TALKS SHOW SIGNS OF LIFE: Two negotiating groups, one representing African nations and the other major agricultural exporters, are working together to develop joint proposals to help forge an agricultural agreement by the WTO’s next ministerial conference in late 2025 or early 2026.

Following the August break, the African Group and the Cairns Group of agricultural exporting countries have resumed weekly technical level discussions aimed at finding common ground and “draft modalities” — WTO jargon for how farm subsidy or tariffs cuts would be made.

Turkish Ambassador Alparslan Acarsoy, the chair of the WTO’s Agriculture Committee, told members last week he detected a widespread desire to resume negotiations as soon as possible. Efforts to launch comprehensive farm trade talks at the WTO’s 13th Ministerial Conference earlier this year in Abu Dhabi failed, largely because of India’s insistence that its top issue — public stockholding — be resolved first.

Acarsoy, at an informal meeting of the Ag Committee, said members stressed the importance of working on modalities, rather than wasting time on a more conceptual “work program” that failed to produce results at MC13. However, some members, such as Russia, object to the modalities approach as premature, according to a Geneva-based trade official.

The chair outlined two suggestions for moving forward. One would be to establish informal small groups of members to work on various topics, with each group led by key proponents of reform. The second would be for Acarsoy to appoint facilitators to lead negotiations on specific issues, including domestic support, public stockholding and the special safeguard mechanism, export restrictions and competition, and market access.

Acarsoy said cotton could either be incorporated into domestic support discussions or remain under the cotton “quad-plus” negotiation framework. The latter is a forum to address concerns raised by four African countries about the trade-distorting effect of foreign cotton subsidy programs. It also includes Australia, Brazil, China, the EU, India, Pakistan and the U.S.

Other recommendations for the ag trade talks include setting milestones in the lead-up to MC14, adopting a comprehensive approach, and considering the relevance of past mandates when defining priorities, the Geneva-based trade official said.

PERU DISPUTE, ECUADOR TALKS, BRAZIL DIALOGUE: USTR and the Commerce Department were busy last week on a number of fronts in Latin America.

USTR asked the Peruvian government to verify that five timber shipments exported to the United States from Peru complied with applicable Peruvian laws and regulations. That enforcement action under provisions of the U.S.-Peru Trade Promotion Agreement intended to fight illegal logging brought a cheer from Rep. Richard Neal (D-Mass.), the top Democrat on the House Ways and Means Committee.

Assistant USTR for environment and natural resources Kelly Milton was in Ecuador to discuss illegal logging and a slate of other environmental issues.

And here in Washington, Undersecretary of Commerce for International Trade Marisa Lago and Brazilian Secretary of Foreign Trade Tatiana Prazeres co-hosted the 22nd Plenary of the U.S.-Brazil Commercial Dialogue. The two sides signed a memorandum of understanding to cooperate on good regulatory practices.

Trade Remedy Corner

CHINA WINE BOTTLES DODGE BULLET: The U.S. International Trade Commission on Friday voted 4-0 against imposing countervailing duties on glass wine bottles from China. That was a blow for the two petitioners — Ardagh Glass Inc., based in Indianapolis, and the United Steelworkers union, which also represents glass workers.

The Commerce Department said in August that Chinese producers benefited from subsidies ranging from 21 percent to more than 200 percent. However, the ITC said U.S. producers were “not materially injured or threatened with material injury” by the imports.

A message from American Chemistry Council:

TRADE OVERNIGHT

—- China investment screening legislation is set to be attached to a must-pass Senate defense bill, POLITICO reports.

— Myanmar’s civil war threatens a key China trade route, BBC reports.

— India needs better ports to compete with China, The New York Times reports.

— Malaysia is treading a fine line on electric vehicles amid US-China trade tensions, The South China Morning Post reports.

— Russia’s attempt to rewire global trade is faltering, The Wall Street Journal reports.

— The Commerce Department’s International Trade Administration announced new initiatives to advance U.S. competitiveness and trade in the digital economy, earning cheers from business groups like the National Foreign Trade Council.

—- Sens. Tammy Duckworth (D-Ill.) and Cory Booker (D-N.J.) have introduced legislation to ban the sale and manufacturing of products made from kangaroo skins.

— Assistant USTR Sarah Ellerman was in Laos last week to meet with ASEAN trade officials, USTR said in a readout.

— Chief U.S. Agricultural Negotiator Doug McKalip will travel to Wisconsin this week to talk about how the state’s cheese and livestock producers could benefit from a new agreement with Chile, USTR said in a press advisory.

THAT’S ALL FOR MORNING TRADE! See you again soon! In the meantime, drop the team a line: dpalmer@politico.com, gbade@politico.com and ahawkins@politico.com. Follow us @POLITICOPro and @Morning_Trade.

A message from American Chemistry Council:

American Success Relies on American Chemistry

Our country’s future depends on making more things here at home. That includes American chemistry. China is the largest chemical producer – and it’s increasing its capacity by more than a third over the next 10 years expanding its lead over the U.S.

That’s a big deal considering nearly every aspect of our economy runs on chemistry from semiconductors to agriculture to energy. Allowing the U.S. to fall further behind China could contribute to the trade deficit and weaken America’s supply chain. 

Whoever wins the next election must make increasing American chemical manufacturing a priority and not rely on other countries like China to fill the void.

Policymakers need to adopt smarter, pro-growth policies that support producing more chemicals in the U.S. to meet the growing demand, strengthen its competitive edge, and protect the nation’s trade balance.

Learn more about why it’s important to #KeepChemistryHere.