US tariffs contradict WTO rules on fair trade and non-discrimination

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OPINION

By Ernest Talwana

The current US administration has continued the rhetoric of the previous Trump administration (2016-2020), which includes placing trade barriers against China amongst a litany of actions, including barriers on Chinese EVs entering the US market (carefully avoiding placing tariffs on Chinese rare earth metals critical to US defense and aviation industries). This time round, the current administration has opted to place tariffs on all nations and territories across the planet (with the exception of Russia).

These actions contradict World Trade Organisation agreements on Trade Without Discrimination, which asserts equal treatment for all parties under said rules that the US is party to.

Freer Trade through negotiation is equally envisaged by said rules. These rules equally desire gradual and progressive liberation. Something the current US administration is rallying against by putting America First.

Predictability through transparency is equally significant amongst trade partners. Uneven tariffs can be viewed as acting against stated principles and create strain on well-established trade relations.

The Uruguay round of talks, therefore, placed a ceiling on customs tariffs which would avoid any form of unpredictability that causes strain on global supply chains and unnecessarily raises the cost of doing business.

The current American administration thus disregards the rules-based order and seeks to act in its own interests while affecting global trade as a whole, subsequently causing price hikes for American citizens as well as creating shocks on global stock markets.

It should be noted that global supply chains are dependent on free trade. Not the restriction of it with tariffs. Tariffs only act to protect one party while causing an economic slowdown.

In an economic war, there are no clear winners. Any form of concession another party seeks to achieve will be offset by losses incurred through higher production costs and strains on the end consumer, who foots a higher bill to buy the same commodity.

China’s complaints at the World Trade Organisation are made in an effort to promote fair trade amongst a community of nations. China doesn’t actively seek to antagonise other nations. Rather, to promote its own interests while building its trade and industrial capacity in a dynamic world.

China equally has bilateral trade agreements with a variety of nations across the globe. This means that countries are aware of China’s competence and willingness to trade. These include Austria, the Belgium-Luxembourg Economic Union, Canada, France, Germany, Italy, Japan, South Korea, Spain, Thailand, and the United Kingdom.

China has built these relationships through its culture of mutuality and trust. A culture deeply embedded in China’s millennia-old cultural fabric permeates throughout her society and international relations.  It is no surprise that many nations are seeking trade relationships with her. China is equally the leading trade partner with the MERCOSUR regional bloc, with the Uruguayan President seeking to fast-track negotiations on a free trade area with China.  This includes 30 free trade agreements with a variety of nations across the planet. Aside from the more dominant states, China is equally a dominant Economic and regional player in the Pacific region.  

American tariffs underestimate China’s resilience, adaptability and the versatility of Chinese supply chains and its global trade apparatus. Any pain the US hopes to inflict on China is grossly overestimated, as China has shown throughout its history a capacity to withstand greater pains.

US Tariff hikes can also be seen as a deprivation of the Global South’s right to development as asserted by the Chinese MFA Spokesperson. Developing states utilise WTO Rules to negotiate global trade through negotiation and deliberation. The actions by the United States signal economic coercion and exceptionalism, which contradict the desire for a fair system that promotes the growth and development of all nations in line with the UN 2030 Agenda for Sustainable Development.

Furthermore, it should be stated that WTO Rules promote fair competition, which protectionism stands antithetical to. Protectionism limits innovation and dulls an economy’s ability to challenge itself in the face of competition from other global players.

Protectionism isolates a nation from the rest of the world and causes possible stagnation in the face of changing trends in consumer preferences.

A nation only thrives when it acknowledges competition in all its forms. Not close itself to it.

The writer is a research fellow at Sino-Uganda Research Centre.