Comments by Professor Steve Charnovitz regarding the Proposed Determination of Action Pursuant to Section 301
By Professor Steve Charnovitz
George Washington University
USTR-2018-0018
July 23, 2018
This is a comment regarding the proposed action of imposing an additional 25 percent ad valorem duty on the products classified in the list of tariff subheadings in Annex C of the subject notice. The question posed by USTR is whether the increased duties on products in Annex C “would be practicable or effective to obtain the elimination of China's acts, policies, and practices, and whether maintaining or imposing additional duties on a particular product listed in Annex C would cause disproportionate economic harm to U.S. interests, including small- or medium-sized businesses and consumers.”
The Trump Administration’s proposal to impose the Annex C tariffs would be a violation of international trade law, particularly Article II of the General Agreement on Tariffs and Trade (GATT). Because it violates international law and longtime US commitments to the World Trade Organization (WTO), this tariff scheme would impose (and already has imposed) disproportionate economic harm to US interests, including businesses, consumers, and the commonweal. The harm is clearly disproportionate because there will be no benefits to the US economy from raising tariffs. Tariffs are always a negative sum game. Some US stakeholders will gain from greater protectionism, but there will be a significant and sustained net aggregate dynamic loss to the US economy.
Using Section 301 to raise tariffs (above the bound level) on a particular country will always violate GATT Article II (and possibly Article I). The Section 301 tariffs also have the potential of violating one of the constitutional rules in the WTO, namely Article 23 of the Dispute Settlement Understanding (DSU). If a foreign country is engaging in unwelcome practices related to technology transfer, intellectual property, or innovation, then the three-part decision tree embedded in WTO law should be strictly followed: First, if the practices violate WTO law and the Trump Administration has lodged a WTO case against them, then in line with DSU Article 23.2, USTR should refrain from imposing any retaliatory tariffs unless the WTO finds that the practices violate trade law and unless the WTO authorizes the SCOO. Second, if the practices violate WTO law, but the Trump Administration has failed to lodge a case against them, then the Trump Administration should lodge such a case pursuant to DSU 23.1 so as to promote trade justice. Third, if the practices being complained about do not violate WTO law, then the Trump Administration should seek to negotiate needed improvements in WTO law to discipline such practices. Becoming a scofflaw nation through Section 301 in the manner proposed by the Trump Administration will only make matters worse for the American public as this scheme will focus attention on US misbehavior and distract attention from the misbehavior of other countries.
In summary, the proposed Annex C 25% tariffs should not be imposed and the Trump Administration should rethink its continuing flirtation with policies that move the United States away from being a market-driven economy and that withhold the level of transparency and honesty expected of any country aspiring to be great.
