Resolving the Trade War via the World Trade Organization and Europe

The trade war is ramping to higher levels. President Trump’s new tariffs on $200 billion worth of Chinese goods start on Monday, and he has threatened more. China had already retaliated with tariffs of its own. China has canceled high-level talks planned for this week.

Yukon Huang laid out a solution to the trade war. He is a senior fellow in the Carnegie Asia Program.

Turning to the World Trade Organization (W.T.O.) is currently a nonstarter, but its appeal will increase as the conflict drags on.

The W.T.O. as currently structured cannot adequately deal with a state-driven economy like China’s, as Mark Wu, a law professor at Harvard, has argued. China has cut back on directly subsidizing exports which are a clear violation of W.T.O. guidelines. Many Chinese companies still benefit indirectly from access to underpriced state-owned land and privileged relations with local authorities and banks, and those issues are not explicitly covered in the regulations.

Just last week, the European Commission proposed reforming the W.T.O., with new rules to deal with forced technology transfers and the rise of e-commerce.

Europe and China could work out the terms that address key complaints from the USA.

The White House could also point to any thorough overhaul of the W.T.O. as a victory, and an admission on China’s part that the United States’ concerns were legitimate. It could then address any specific issues that remained in a bilateral investment treaty, which the U.S.-China Business Council has been advocating.