Process Over Substance

The WTO today announced the formal decision in the IPR case the US government brought against China. The outline of the three part decision had been known for some time but today was the formal announcement.

USTR issued a statement declaring victory. A top American expert on US-China IPR matters had previously told me he thought the case represented a defeat for the US (on the issue that mattered most). As a layman, it looked to me like a split decision.

But when a reporter today asked me for a reaction to the USTR announcement declaring victory, I responded from a slightly different perspective:

“…I am not enough of a trade law expert to have any views on the substance of the decision, but I would point to a more important aspect. The US has been increasing the number of cases it is bringing against China in the WTO and China is beginning to bring cases against the US. This is a good development because it allows an impartial and transparent forum for the decision of such disputes.

Before China joined the WTO the US could unilaterally take virtually any trade actions it wanted against China, and vice versa. Today both need to abide by WTO rules when they have disputes. Over time, the US will win some cases and so will China. This is the same with cases that the US and the EU bring against each other, and for all trading partners. It reflects yet another step in China’s integration into the global economy and international organizations, and it is good for the world to have such disputes settled in an impartial and transparent manner.”

I remember the days before China was a WTO member and the US had broad unilateral discretion to take trade actions against China. In fact, the Special 301 and Super 301 provisions of the Trade Act encouraged such actions. In my experience, the threat of such unilateral actions against China created enormous resentment there and, at the end of the day, did not really advance our issues all that much (if the unilateral power of our Special 301 provisions had had the power to solve the IPR issue we would not have an IPR problem in China today, right?)

I believe that the decisions that come out of the increasing number of cases the US and China are bringing against each other in the WTO are important (certainly to the affected industries). But from a broader perspective, the substance of the decisions is less important than the fact that we are forced to bring our disputes to the forum. It is a fabulous tool to: 1) try to address problems we see; 2) lower the heat on the Hill by showing the Administration (whichever one) is “doing something” about China’s trade practices; and 3) pursue our differences in an impartial way that does not sow seeds of resentment and backlash in China. What more could one ask for?

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