The World Trade Organization headquarters in Geneva, Switzerland. /Xinhua
Editor's note: Daryl Guppy is an international financial technical analysis expert. He has provided a weekly Shanghai Index analysis for media for the Chinese mainland for more than a decade. Guppy appears regularly on CNBC Asia and is known as "The Chart Man." He is a national board member of the Australia China Business Council. The article reflects the author's opinions and not necessarily those of CGTN.
The U.S., and its allies, make the preservation of the global rules-based order a central plank in their disputes with China. This demand to respect the rulings of world bodies has been central to the U.S., UK, Japanese and Australian foreign policy narrative.
Given the opportunity to show their support for this rules-based order, the U.S. has again refused to comply with the independent judgment of the World Trade Organization (WTO).
First, the WTO panel ruled that the U.S. broke trade rules in forcing Hong Kong Special Administration Region goods to be relabelled "Made in China." In August 2020, the U.S. said that goods from Hong Kong would have to be relabelled to gain entry to U.S. ports. They falsely claimed the relabelling was necessary to protect its "essential security interests."
Continuing with their unsubstantiated "security" claim, Adam Hodge, a spokesman for the office of the U.S. trade representative said "the U.S. does not intend to remove the marking requirement as a result of this report. Issues of national security cannot be reviewed in WTO dispute settlement, and the WTO has no authority to second-guess the ability of a WTO member to respond to what it considers a threat to its security."
Second, a few days prior, Washington rejected WTO's ruling against Trump metal tariffs on China's steel and aluminium exports to U.S. The U.S. government also denounced this ruling. Hodge again rejected "the flawed interpretation and conclusions in the [WTO report] regarding challenges to the U.S."
It is clear that the U.S. only accepts rulings that are in its favor. This latest attack on the legitimacy and operation of the WTO is a determined continuation of the crude policy implemented during the Trump years.
Former U.S. President Donald Trump did his best to dismantle the WTO. His most egregious action in this respect was his refusal to allow the replacement of arbitration judges which effectively froze the settlement of trade disputes. The U.S. President Joe Biden continues this attack on this global foundation of the rules-based order.
Other trading nations were forced to develop an alternative settlement mechanism to ensure global trade could continue and disputes be resolved.
Other smaller nations which rely on free and open trade eventually found the courage to join China and Australia in opposing Trump, and now Biden, while supporting the need for WTO change rather than wholesale destruction.
If they are to remain true to their support for the institutions of the global rules-based order, then they have no choice but to support the latest Geneva rulings. It is a test of commitment to the rule-based global order.
Under its new government, Australia has faced this test head-on. Australia has teamed up with China and more than 100 countries to protest longstanding blockages at the WTO as the U.S. vetoes appeal judge appointments.
Australia is advocating for a "fully and well-functioning dispute settlement system" so alleged breaches of trade rules can be "effectively addressed by all members, regardless of their size or influence."
"Australia is concerned about the real costs, both commercial and systemic, that arise from the current appellate body impasse," a Department of Foreign Affairs and Trade spokesperson said.
The WTO ruled that U.S. tariffs on $200 billion of Chinese imports were illegal, Geneva, Switzerland, July 23, 2020. /CFP
China and Australia are among a large number of co-sponsors of a proposal put to a meeting of the Dispute Settlement Body in Geneva. The proposal highlighted "the urgency and importance"of filling the seven vacancies on the appeal body. It noted that the U.S. had provided "no legal justification for the current blocking of the selection processes, which is causing concrete nullification and impairment of rights for many members."
The most recent rejection of WTO rulings shows scant respect for the independent decisions made by one of the central bodies responsible for the global rules-based order. Rather it shows a willingness to rip-up the foundations of the U.S. policy reliance on this order.
It comes as no surprise as over the past decade the WTO has repeatedly ruled against the U.S. in this and other disputes. Previously Washington has repeatedly refused to withdraw its illegal countervailing duties so the current rejections are part of an established pattern of non-compliance.
The definition of a rogue state is one that consistently disregards international rules, norms and bodies. The U.S. is moving towards meeting this definition.
The counter-balance in support of the rules-based order is China. Continued U.S. intransigence undermines this order and the credibility of the U.S. in providing global leadership. To be effective, global rules need to be applied equally to all.
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