Latest U.S.-China WTO Trade Dispute Baffles

There is a certain ritual to complaints to the World Trade Organization. And like many rituals its meaning can be opaque to outsiders.

The WTO action the U.S. instigated on Friday against China falls into that class. Washington alleges that Beijing is using export subsidies to promote Chinese-branded exports through cash grant rewards for exporting, preferential loans for exporters and payments to lower the cost of export credit insurance, all in contravention of WTO rules. China said on Sunday that its so-called Famous Brands program operates within WTO rules.

There is a certain irony in the fact that the U.S. Trade Representative announced the action the same day her colleagues in another part of the Executive Branch were announcing that $17.4 billion of taxpayer funds to bailout financial institutions would be used to prop up U.S. carmakers. But we digress.

The timing of the trade action is confusing, though it has been in the making in Washington for at least the past nine months. The current U.S. administration is done in a month. So while it has kicked off the process with a formal request for dispute settlement discussions, it will be up to the new administration to decide whether to take the next step, should those discussions go nowhere, as is usually the case. WTO rules allow the two sides 60 days to resolve the dispute between themselves, before one or the other can call for the case to go to a dispute settlement panel.

At the same time the action comes a couple of weeks before U.S. quotas are removed on January 1 on Chinese textile and apparel products.  So President-elect Obama, who promised to be tougher on China on the campaign trail, has two potential tests of his free-trade resolve in his early weeks.

Whether that is the intention behind this latest action this Bystander frankly has no idea. But what he does know is that this is no time for protectionism to rear its ugly head — in either country.

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Filed under China-U.S., Economy

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