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An embarrassing US maneuver

"Mike Pence’s decision was primitive and misplaced."



The failure of the delegates to agree on the final communiqué at the conclusion of the 18h Asia-Pacific Economic Conference in Papua New Guinea now brings the trade war between the US and China to a higher level covering wider dimension.

To begin with, tariff in violation of the WTO rules is a prohibited trade practice known as “protectionism.” It defies the accepted comparative advantage principle in international trade. In the case of the US, to make it less discernible, the Trump administration included countries like Canada, Mexico, South Korea, Japan, and countries of the European Union by slapping them with additional tariff. The common denominator for the imposition of penalties is that they all enjoy a trade surplus with the US.

Strangely however, the US did not file the same charges for illegal and unethical trade practices against them, except for China, for “forced technology transfer and theft of intellectual property.” Maybe the US contemplated that uniformly charging them would be unwise, and that the move is calculated to intimidate them to increase their imports from the US.

As expected, countries with precarious economic standing easily caved in like what Mexico and Canada did to reach an early compromise, although there was no clear indication as to which country won in that compromise deal.

Nonetheless, the US fears that shaking them up altogether could drive them away instead of offering to compromise. This is contrary to the bullying tactic of the Trump administration.

In the case of China, their objective is different. The additional charges are intended to stultify the awaited possibility of China overtaking the US as the world’s biggest economy. The problem, however, is that the US has not clarified those charges which China has consistently demanded so that the problem could be addressed properly. Neither has it filed a case before the WTO. If China is proven guilty, it could be slapped with fines and other trade sanctions. Rather, it has chosen to operate outside of the WTO to justify its policy arbitrariness and unilateralism.

It is for this why many trade analysts are wondering whether the imposition of additional tariff is a legitimate form of economic defense. No matter how one looks at the decision of President Trump, that policy is inescapably one of economic protectionism. It is a serious reversal of free trade, the reason that gave birth to the creation of the WTO. Protective tariff is only allowed under certain conditions. In no case can a member-state impose protectionist policies as a form of retaliation without first submitting the case for arbitration before the WTO.

Some even dare question whether the charges of “intellectual property and forced technology transfer” are cases that can be properly adjudicated by the WTO. They argue that China has repeatedly demanded the US to be specific of those charges, knowing that they constitute criminal violations of one’s proprietary rights. They are raising this question because the violation committed is not resolvable by the mere imposition of protectionism. It requires payment of compensation and/or damages against the violator provided the country has given its consent to be sued.

Nonetheless, US Vice President Mike Pence’s decision to raise the issue of trade war with China before the APEC summit under the pretext of wanting to introduce reforms in the WTO was treated as primitive and misplaced. That caused confusion because the issue of trade war could have been raised separately. Pence wanted to ram the issue under cover of seeking to reform the WTO. He wanted to steal the show; this surprised many as they were unprepared to deal with the trade war.

It was the work of the US delegates led by Pence to hijack the summit to make it appear that the members came out in support of its position which is totally different from the original reforms demanded by Third World countries in the 70s which call for the complete removal of discriminatory tariff barriers which the US consistently opposed before the WTO was formed in 1995 to replace the General Agreements on Tariff and Trade or Uruguay Round Agreement.

Even if the delegates failed to come out with a final communiqué, Pence as his cabal managed to divide the organization. From there, US propagandists trumpeted that a number of the APEC members were supportive of its mischievous position though in truth, their refusal to sign stems from the US attempt to insert a line that would inferentially blame China for serious trade imbalance. It was a sole US initiative to recalibrate WTO to allow it to regain its economic dominance clothed as an APEC amendment to restore US economic competitiveness.

Other delegates’ refusal to sign the declaration has nothing to do with and is not in support of the US demand for reforms. It is a position that such issue should be brought before the proper forum. The attending delegates wanted to observe the protocol by not affixing their signature to the declaration that would inferentially condemn China. According to sources quoted by AFP, “the US wanted to press the leaders to issue what amounted to a denunciation of the World Trade Organization (WTO) and a call for its wholesale reforms.”

What was clear that the members of APEC are also members of the WTO, the imbroglio that has deeply affected global trade is more of a US concern against the world. China has become its main target because it enjoys the biggest trade surplus against the US. By seeking to reform the WTO, the US hopes to resolve its trade deficit which is seen by its arbitrariness to overvalue its currency, which practice has backfired to wipe out its own productivity. By reforming the trade rules, the US expects that its comparative advantage will be resurrected through the instrumentalities of the WTO.

The US refuses to look back that most of the provisions of the WTO, including the definition of a free market economy, which imposed certain restrictions and conditions before a state can attain full status of membership, were conceived by the US and supported by its Western allies. In fact, there are trade barriers that remain embedded in the rules like the subsidy to agricultural products by Western Europe, US, Canada, Australia, and New Zealand, while strictly prohibiting underdeveloped countries from subsidizing their own products intended for exports and the discriminatory entry of textiles and clothing to selective countries under the multi-fiber agreement (MFA) where the quota system still operates.

The US has not raised an issue about the discriminatory trade practices in the WTO because it is working to its advantage. Now that its trade with most countries has been faltering, the US wants to introduce reforms. The solution it offers is to incorporate its protectionist policies, which are apart from what other countries are seeking to remove all forms of tariff barriers. The US is trying to recruit allies it could count as with them in their crusade against China.

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Topics: Rod Kapunan , An embarrassing US maneuver , 18h Asia-Pacific Economic Conference , Papua New Guinea , WTO , trade war , US , China
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