The US complaint about Chinese tariff-rate quotas (TRQs) on certain grain products helps illustrate several key issues in US–China trade relations and the effectiveness of WTO disputes. First, do international obligations based on transparency and fairness work in relation to an authoritarian country not known for the rule of law domestically? Second, can there be a disconnect between the legal aspects of a dispute and the underlying economic interests, with a DSB ruling sometimes not leading to improved trade flows? And third, given the bilateral trade war and ‘phase one’ trade deal between the United States and China, has the WTO been superseded in this trade relationship? This paper summarizes the facts and law of the China–TRQs dispute, and examines each of these questions in that context.
In the midst of the US–China trade war that has emerged over the last couple years, the prevailing view in Washington, DC policy circles is that WTO dispute settlement is only of limited value in addressing Chinese trade barriers. The US Trade Representative’s Office (USTR), the agency in charge of deciding whether to file WTO complaints, seems skeptical of the prospects: ‘The notion that our problems with China can be solved by bringing more cases at the WTO alone is naïve at best, and at its worst distracts policymakers from facing the gravity of the challenge presented by China’s non–market policies’ (US Trade Representative, 2018, p. 5). Part of the reason for this doubt is that in a non–transparent, authoritarian regime, eliminating a particular barrier may not lead to additional export sales, as it is easy for the Chinese government to put in place an alternative barrier (Groombridge and Barfield, 1999, p. 2; The Economist, 2020).
But conventional wisdom is not always correct. Surveys of WTO complaints against China show that the Chinese reaction to complaints and adverse rulings have been reasonably good (Bacchus et al., 2018; Zhou, 2019). At the same time, WTO disputes can be complex, and a superficial overview of the cases only tells you so much. In this paper, we dig deep into one particular case, in order to evaluate the impact of a US complaint about Chinese trade restrictions on certain agricultural products. As part of its accession to the WTO, China agreed to open its market to wheat, corn, and rice through a tariff-rate quota (TRQ). But 15 years later, US producers felt they were not getting what had been promised, as the TRQ was being administered in a way that left it unfilled. At the end of the Obama administration, US producers convinced USTR to file a consultations request with the WTO Dispute Settlement Body (Caporal, 2016). The complaint was pursued by the Trump administration, and a panel ruling was issued and adopted in 2019.
Beyond the issue of whether China complies with WTO rulings, there are several features of this dispute worth considering as part of the discussion of the legal and economic aspects of the case. First, do international obligations based on transparency and fairness work for an authoritarian country not known for the rule of law domestically? If China does not follow these principles internally, what can we realistically expect externally?
Second, is there a disconnect between the legal aspects and the underlying economic aims? The purpose of the complaint was to generate an increase in the quantity of US exports. But the legal provisions invoked do not refer to specific figures for exports, but rather to some abstract legal provisions about transparency and fairness. Could a finding of violation of such provisions lead to the export increases that the US producers were seeking?
Third, given the bilateral trade war and trade deal the United States and China are engaged in, has the WTO been superseded? Which set of rules – multilateral or bilateral – are most relevant here?
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