It was just last week that the United States scored a minor victory with China regarding protectionist trade measures. Now this week, the World Trade Organization has sided with China, and also India, on a separate dispute. The WTO has ruled that the United States violated world trade laws when it imposed tariffs on Chinese solar panels and steel products. The WTO also ruled that the United States violated trade laws when it imposed tariffs on Indian steel products.

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American Government Argued Products Were Subsidized

The American government initially leveled hefty tariffs against both Chinese and Indian products because it believed that the governments of these respective countries were subsidizing their production. If so, the costs of manufacturing and producing the products would be greatly lowered, giving the Chinese and Indian firms an opportunity to sell them more cheaply on the world market. This, in turn, would have a detrimental impact on producers in the United States and elsewhere.

At first glance it might not make sense for a foreign government to subsidize production, but once the market is cornered, the government would be able to lift its subsidies. Meanwhile, with the market already cornered, the once supported companies would face far less competition, thus making it easier to compete in the market. While the American government argued that the Chinese and Indian governments were subsidizing production, the WTO ruled against this claim.

According to the 1964 Marrakesh Accords the accusing government must prove that any subsidizes being passed on to state-owned or partially state-owned firms were coming from a “public body”, something that the WTO claims the United States failed to do. The WTO also claims that the United States overestimated the amount of any subsidies and that the nation must bring its trade laws into line with WTO standards.

WTO: Complicated Cases With All Sides Declaring Victory

The WTO did not uphold all of the arguments made by either China or India, allowing some American trade officials to declare the case a victory. Meanwhile, both the Indian and Chinese governments welcomed the ruling and declared it a victory of their own.

The Indian case was especially complicated as Indian steel makers are supplied by a state-owned Indian iron ore firm, NMDC, making the case more difficult to examine. Regardless, while the WTO ruled against many of India’s arguments, it ultimately ruled against American tariffs.