China as the Starting Point Shaking the WTO... The EU Also Complicit [WTO Endgame] ④

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The main reason for the United States' dissatisfaction with the World Trade Organization (WTO) is China. While the U.S. is the primary actor shaking the multilateral trade system established through the WTO, it was China that set this process in motion. The European Union (EU) also cannot be absolved of responsibility.

Professor Jo Sujeong of Korea University School of Law explained, "Because the United States wields overwhelming influence over global trade, its influence within the WTO remains strong. However, after China joined the WTO in 2001 and its influence grew, the U.S. became increasingly dissatisfied with China's economic system, and these concerns were not resolved through the WTO framework. As a result, the U.S. stance toward the WTO appears to have turned negative."

Jung Haneul, head of the Institute for International Legal Order, also identified China as a key factor behind the shift in U.S. attitudes. He said, "The countries most responsible for the weakening of the WTO system are China and the United States. China was the starting point, and the U.S. delivered the decisive blow. China initiated the process through indirect state subsidies and intellectual property (IP) infringement over the past two decades, while the U.S. has responded by moving away from free trade principles in practice."

According to the International Monetary Fund (IMF), China's nominal gross domestic product (GDP) in 2000 was $1.22 trillion, just 11.9% of the U.S. GDP at the time. By 2010, China's GDP had surged to $6.138 trillion, a 403.1% increase in ten years. In 2020, it reached $15.103 trillion. Thus, China's economy, which was only 11.9% the size of the U.S. economy before joining the WTO in 2000, closed the gap to 40.8% in 2010 and 70.7% in 2020.

The U.S. believes that China has engaged in illegal subsidy support and IP infringement, leveraging the WTO's free trade framework, and that the WTO has failed to adequately restrain such actions, resulting in losses for the U.S. In fact, since 2020, China has imposed export quotas and tariffs on strategic resources such as rare earths, tungsten, and molybdenum. In response, the U.S., EU, and Japan filed complaints with the WTO, and China lost the case, leading it to abolish the export restrictions. However, when the U.S. imposed countervailing duties on Chinese solar panels and steel products, China filed a complaint against the U.S. at the WTO. The WTO ruled that some of the U.S. measures violated the WTO Subsidies Agreement, resulting in a partial victory for China. In 2020, the WTO also ruled in favor of China regarding $200 billion in retaliatory tariffs imposed by the Trump administration under Section 301 of the Trade Act during his first term in 2018.

China and the U.S. are not the only countries that have weakened the WTO. The EU has also violated WTO agreements on multiple occasions. To protect its domestic industries, the EU has frequently imposed 'anti-dumping duties'?tariffs on foreign products sold below domestic market prices in the importing country?and 'countervailing duties'?tariffs imposed when foreign governments subsidize their industries, artificially boosting price competitiveness.

The EU's Carbon Border Adjustment Mechanism (CBAM) may also violate WTO agreements. CBAM is a system under which the EU will impose a carbon cost on imported products with high carbon emissions, applying the same carbon cost to imports as is imposed on domestic products within the EU to reduce emissions and protect domestic industry competitiveness. The system is scheduled to take effect in January next year. However, if CBAM is applied in a discriminatory manner to certain countries or products, it could violate the WTO's Most-Favored-Nation (MFN) principle or the National Treatment principle.

Jung stated, "The EU maintains that CBAM is perfectly consistent with WTO agreements because it is designed fairly for environmental protection, implemented transparently, and enforced in a non-discriminatory manner. However, Russia filed a complaint with the WTO on May 12 of this year, arguing that the EU's CBAM constitutes a trade barrier. Ultimately, whether it violates WTO rules will depend on how it is actually implemented."

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