Will the US 'Washing Machine Safeguard' End Early? WTO Rules in Favor of Korea

WTO "US Washing Machine Safeguard Illegal"
Dispute Could Become 'Permanent Unresolved' if US Appeals
Government to Pursue Behind-the-Scenes Negotiations by Next Month

LG Electronics washing machine factory production line located in Tennessee, USA.
[Photo by Asia Economy DB]

[Asia Economy Sejong=Reporter Lee Junhyung] The government has won a trade dispute with the United States over washing machine exports. Although Korean companies such as Samsung and LG Electronics already produce a significant volume domestically in the U.S., minimizing the impact of the ruling, it is expected that the abuse of safeguards (emergency import restrictions) will be curbed going forward.

On the 8th (local time), the Ministry of Trade, Industry and Energy announced that the World Trade Organization (WTO) circulated the panel report ruling in favor of the Korean government in the dispute over the U.S. washing machine safeguard measures to WTO member countries. It has been about 3 years and 9 months since the government filed a complaint with the WTO against the U.S. safeguard in May 2018. Yoon Chang-yeon, Director of Trade Law and Policy at the Ministry, said, “We will make efforts to ensure the early termination of the U.S. washing machine safeguard measures based on this panel ruling,” adding, “We plan to actively utilize WTO dispute resolution procedures to protect our rights as WTO members and the interests of domestic industries in the future.”

Previously, the Trump administration in the U.S. invoked the trade law in early 2018 to impose safeguards on imported household washing machines from countries including Korea. This measure set an import quota of 1.2 million units for foreign household washing machines and applied a tariff-rate quota (TRQ) system. This was the result of then-President Trump’s protectionist stance accepting persistent claims from the domestic washing machine maker Whirlpool that it was suffering serious damage from foreign washing machines. The Trump administration also extended the safeguard’s validity, originally set to expire last year, by two years.

The WTO ruled that the safeguard measures were illegal on all key issues. According to the Ministry, the core issues in this dispute were ▲whether there was a surge in washing machine imports causing industry injury ▲appropriateness of the domestic industry scope ▲proof of injury to the domestic industry ▲causal relationship between import increase and domestic industry injury, among five key points. However, the WTO judged that the safeguard tariff could not be considered excessive simply because it was higher than the price difference between imported and U.S.-made washing machines. It also found that the U.S. notification regarding the adoption of the safeguard measures was made within a reasonable period.

If the U.S. accepts this ruling, the dispute will end and the safeguard may be lifted. However, considering that the dispute resolution process takes about a year to complete, the safeguard is likely to remain in effect until February next year.

Content related to the U.S. washing machine safeguard.
Photo by Ministry of Trade, Industry and Energy

The problem arises if the U.S. appeals the WTO panel ruling. The WTO Appellate Body has been non-functional since the end of 2019 due to the U.S. blocking the appointment of its members. If the U.S. appeals, the dispute could be indefinitely stalled at the WTO, effectively becoming a “permanent unresolved” case. The U.S. must decide whether to appeal within 60 days, starting 20 days after the panel report circulation date.

Accordingly, the government is pursuing behind-the-scenes negotiations with the U.S. This is based on the judgment that the practical benefits of this victory may be limited if the U.S. appeals. The government plans to coordinate with the U.S. on the adoption of the panel report by the next WTO Dispute Settlement Body (DSB) regular meeting scheduled for the 28th of next month. A government official said, “It is highly likely that the positions of both countries regarding the panel report will be settled around the 28th of next month,” adding, “If detailed opinion coordination is delayed, a special DSB meeting may be held in April when the deadline for adopting the panel report approaches.”

However, even if the safeguard issue is resolved, there are concerns that the export improvement effect for domestic companies may not be significant. Samsung and LG, the original targets of the U.S. safeguard, moved their washing machine production bases to South Carolina and Tennessee respectively after the safeguard was imposed. It is known that these two companies produce a substantial portion of their U.S. domestic demand at local factories.

This content was produced with the assistance of AI translation services.