In US-China Trade Disputes, the WTO Usually Sides with the United States

Jeffrey J. Schott (PIIE) and Euijin Jung (PIIE)

March 12, 2019 3:15 PM
Photo Credit: 
REUTERS/Denis Balibouse

Trade wars are not as easy to win as President Donald Trump thought. But the United States generally wins trade disputes, particularly against China, when the case is brought to the World Trade Organization (WTO). This conclusion from the data is at odds with what Trump has asserted in his threats to pull the United States out of the WTO. In 2018, he declared that the WTO was set up "to benefit everybody but us" and added: "We lose the lawsuits, almost all of the lawsuits in the WTO."

Table 1 shows that Trump’s perception was wrong, at least with respect to China: Over the last 16 years, US officials have challenged Chinese practices 23 times in the WTO; the win-loss record is 19-0, with four cases pending. In the most recent decision, the WTO panel found that China’s agricultural subsidies are inconsistent with WTO rules, upholding US claims.

Table 1. WTO disputes between China and the United States, 2002-18
Case status Complainant
  United States China
Total number of WTO cases 23 15
Settled via/during consultation 9 1
Ruling favoring complainant 10 4
Ruling favoring respondent 0 1
Split decision 0 3
Pending 4 6
Length of time
Average number of months from initial consultation to settlement 8 2
Average number of months from initial consultation to panel decision 28 26
Sources: World Trade Organization (WTO); US Trade Representative (USTR) Trade Policy Agenda and Annual Report (various issues).

When the United States defends its own policies against Chinese complaints, it also gets good results: China has won only about one-third of the cases it has brought against the United States, with six cases currently pending.[1] US officials won one case and parts of three others. One Chinese complaint was dropped when the US International Trade Commission terminated an unfair trade investigation.

Almost 40 percent of the time, US complaints against China are resolved after consultations and without a protracted process of adjudication by a WTO dispute panel. On average, results are achieved eight months after the WTO talks begin. But in cases where panels are required to provide written decisions, the process takes more than three times longer and almost always is subject to appeal and compliance procedures that extend the duration of the proceedings even further.

US cases against China target a broad range of practices such as export duties and quotas, subsidies, and restrictions on market access to service sectors. Almost half of the cases brought by China against the United States involve complaints about US antidumping and countervailing duty investigations, particularly the methodologies for calculating dumping margins and subsidies to be countered by US penalty duties. Three of these cases involved split decisions by the WTO Appellate Body.

Among the ten pending cases, several involve complaints about tit-for-tat retaliation in the current trade war and could be dropped if bilateral trade negotiations are successful. Others, however, may get caught in the backlog of WTO cases caused by the blocking of the appointment of Appellate Body members by US officials seeking an overhaul of the WTO dispute settlement process.

In sum, WTO dispute procedures work to enforce existing US rights under the world trade rules. But some US-China problems fall outside the WTO rulebook, so there is a strong need to update international trade obligations to address current disputes over investment, intellectual property rights, and other issues.

Note

1. For compiled data on the cases brought by the United States and China against each other, see appendices A and B at https://piie.com/system/files/documents/schott-jung-appendices-3-12-2019.xlsx.