Settling Trade Disputes: When Partners Attack

(The Economist)

China will test the WTO’s dispute-settlement system

In 2009 China overtook Germany to become the world’s largest exporter. Exactly half the trade disputes that were filed at the World Trade Organisation (WTO) last year involved China. These facts are not unrelated. As Pascal Lamy, the WTO’s chief, pointed out in January, the scope for trade friction increases as countries trade more. Disputes between China and other countries are only to be expected.

Mr Lamy did not have to wait long for evidence to back up his claim. On February 8th China complained to the WTO about the European Union’s anti-dumping duties on Chinese-made shoes. This latest fracas over footwear follows recent complaints by the Chinese about restrictions on its exports of steel fasteners, car tyres and poultry. Having initiated just two disputes between joining the WTO in 2001 and September 2008, China has complained to the WTO another five times since then. Marc Busch of Georgetown University in Washington, DC, says that China has moved from “learning by watching”, where it mainly observed others’ trade tussles, to being an active participant in formal dispute settlement.

China’s increasing propensity to bring disputes to the WTO is part of a broader shift. Although the average number of formal disputes per year has fallen since 2001, this is principally because rich countries spend less time fighting each other. Between the WTO’s founding in 1995 and the end of 2000, America and the EU initiated exactly half of the cases brought to the WTO. But between 2001 and 2008 they brought only 27.2% of cases. Over half were initiated by developing countries. Read more here.