American import duties: a trade war and accumulating WTO complaints
A few months have passed since the USA introduced duties on the imports of steel, aluminium, solar panels and washing machines. Currently, no end is in sight for one of the modern history’s greatest trade conflicts. The number of import duties is growing, as is the number of complaints filed by World Trade Organisation members, as procedures used to introduce customs are not in compliance with the WTO’s principles.
According to the WTO’s rules, WTO member states may not discriminate against their business partners but instead have to follow the most favoured nation clause, guaranteeing that if one member state grants a special benefit (such as lower customs) to another member state, this benefit must also be granted to all other WTO members. This essential principle was violated by the USA when it imposed customs duties, as the new duties do not apply to all. States such as South Korea, Brazil, Australia and Argentina have negotiated a permanent exception, excluding them from the U.S. customs duties.
Claiming discrimination, the world’s leading powers began filing complaints with the WTO against the USA. Chances that the WTO will decide in favour of the complainants are quite high; however, the national security rule must also be taken into account, according to which WTO members may violate their customs obligations for national security reasons, which is what the USA is planning to plead. Since the WTO’s resolution of a complaint generally takes at least a year (and some complaints have not been settled since 1995 when the WTO was established), some WTO member states have started to adopt their own retaliatory measures.
Strongest response from China
The trade war is strongest between the USA and China. In early July, the USA began applying a 25% duty on imports of Chinese goods amounting to USD 34 billion, adding other goods at the end of August and involving the aggregate value of USD 50 billion. Within its retaliatory measures, China imposed the same customs duties on the same volume of American goods and filed a second complaint with the WTO. Pending negotiations do not suggest that the situation is likely to be resolved in the near future. Moreover, the USA have made themselves heard that they are preparing a 25% duty on Chinese goods amounting to up to USD 200 billion.
End of exception for the EU
The EU was at first granted an exception from duties on steel and aluminium but this ended in mid-June. Consequently, the EU submitted a complaint to the WTO and adopted its own retaliatory measures, introducing a 25% duty on selected American goods in June. Affected goods include, in particular, steel and aluminium, trucks, motorcycles, jeans, bourbon, whisky, tobacco and orange juice. The USA responded by issuing a threat of imposing duties on European cars, which could also to a larger extent affect the Czech Republic, as a considerable part of its exports involve component parts for the automotive industry.