US Should Resort to WTO Rules, Not Unilateral Tools

The United States should resort to rules of the World Trade Organization (WTO), not unilateral trade tools such as Section 301, to resolve trade disputes with China, a former White House economist has said.

Pitfalls of using Section 301

US President Donald Trump will direct the US Trade Representative (USTR) on Monday to determine whether to investigate China's trade practices under Section 301 of the Trade Act of 1974, senior administration officials said Saturday.

Section 301, once heavily used in the 1980s and the early 1990s, allows the US president to unilaterally impose tariffs or other trade restrictions against foreign countries. But the United States has rarely used the trade tool since the WTO came into being in 1995.

"It became no longer necessary really for the United States that they have to use that law, because now we have an effective dispute settlement system under the WTO," Chad Bown, a senior fellow at the Washington-D.C. based Peterson Institute for International Economics, told Xinhua in a recent interview.

Meanwhile, "the legal timeline of the process under Section 301" doesn't work well with the rules of the WTO, said Bown, who previously worked as a senior economist for international trade and investment in the White House Council of Economic Advisers and the World Bank.

The WTO dispute settlement process usually takes a number of years to work out, while the Section 301 investigation just takes a year or 18 months to reach a conclusion, he explained.

It will become much difficult for the Trump administration to defend the use of Section 301 today as the US government "acted as a police force, prosecutor, jury and judge" in the process, according to the trade expert.

"A decision to trigger Section 301 today is problematic because it would provide additional fuel to the already simmering argument that the Trump administration is undoing the American commitment to rules-based trade and decades of work to establish international cooperation," he said.

Resolve trade disputes through WTO

While there's no evidence that the Trump administration is willing to engage constructively with the WTO, Bown recommends the United States and China resolving their trade disputes through the Geneva-based international trade body.

Michael Froman, former USTR under the Obama administration, echoed his view, saying the Obama administration tended to skip the process of Section 301 and "go straight to bringing cases against China at the WTO."

"It wasn't just the Obama administration, the Bush administration, the Clinton administration tended to do that as well," said Bown, adding that previous US administrations have successfully used the WTO to get other countries to change their policies that were breaking the rules.

"It's much easier politically" for a government to tell the public that they have to change their policies or push forward reforms, if the WTO says the government is breaking the rules, he said.

However, if the Trump administration moves away from resolving trade disputes through the WTO and instead starts taking unilateral actions, the United States could face retaliation by other trading partners, warned Froman.

The Chinese Ministry of Commerce has also urged US authorities to abide by WTO rules in its trade measures and resolve differences with China through dialogue and consultation.

New trade deal

As the world's largest developed country and the largest developing country, the United States and China also need to negotiate a new trade deal, covering issues including the steel and aluminum industries, investment, State-owned enterprises and intellectual property rights, according to Bown.

"I do think the United States and China need to sit down and negotiate a new trade deal, probably not a bilateral deal, but through some kind of multilateral forum to really address the heart of the problems that the two countries have with each other," he said.

However, Bown was worried that the Trump administration "hasn't really yet identified a strategy to engage China on the long-term systemic sort of talks" as they seemed much focused on "getting quick wins."

"It's not easy and it can't be done quickly, but it requires serious effort and continual engagement," said Bown, referring to major issues including trade disputes plaguing US-China trade relations.