Pacific Money | Economy

Australia’s WTO Complaint: What’s the Point?

With the complaint against China, Australia has a chance at a moral victory a few years from now — and that’s the best case scenario.

By Jikon Lai for
Australia’s WTO Complaint: What’s the Point?
Credit: Pixabay

After months of being on the receiving end of a series of trade measures adopted by China, the Australian government finally decided on December 16 to lodge a formal complaint at the World Trade Organization (WTO) against China for the latter’s initial action in this series, the imposition in mid-May 2020 of anti-dumping and anti-subsidy duties on Australian barley. While Australia’s trade minister claims that this is the “logical” next step for the country, it is not clear to me what, if anything, Australia would gain from this move.

The WTO Dispute Settlement Understanding (DSU) contains suggested timeframes and a “proposed timetable” for a series of sequential steps to arrive at an outcome. Although a case should not normally take more than about a year to run its full course to a first ruling, in practice the time needed can be much longer than that. Time frames between panel establishment and circulation of the panel report for the most recent 10 cases have ranged from 365 to 1,117 days, and that does not include the 60 to 90 days between first notification to the WTO requesting a consultation and the formation of a DSU panel. The losing party has a right to appeal following the publication of the panel’s report and the last 10 cases heard by the WTO’s Appellate Body took between 117 to 170 days. In short, a more realistic expectation for the time needed for Australia’s complaint against China to go through the WTO dispute process is anywhere from 542 to 1,377 days or approximately one-and-a-half to four years. This is before we factor in complications that may arise from the need to use a “contingency appeal arrangement” after the United States, arguably Australia’s closest ally, effectively put the WTO’s Appellate Body out of work.

Should the process come out in Australia’s favor, and we do not know if it will, China might drop the anti-dumping and anti-subsidy duties on Australian barley. However, two or more years would have passed and many of Australia’s barley growers would likely have switched to other crops. By that time, China’s anti-dumping and anti-subsidy duties would also be within a year or two of their natural date of expiration.

However, if China’s actions are not motivated by legitimate trade issues (that is, not actually motivated by arguments of dumping) but are in fact driven by political ends, then we might expect China to continue with the anti-dumping and anti-subsidy duties so long as their political goals have not been attained. At that point, Australia would have the option of retaliating against China with tariffs under the legitimate cover of the WTO. It is, however, not clear if any retaliation that Australia might take would have any impact on China. In recent years, about a third of Australia’s exports went to China whereas just under 2 percent of China’s exports were destined for Australia. In other words, if Australia choses to punish China by imposing tariffs, the most that it will do is affect 2 percent of China’s total exports going forward. There is no possibility of retrospective compensation – that is not how the WTO system works.

It therefore seems to me that at the end of a multi-year process, the most that Australia would score would be a moral victory and probably a very slim one at that. Australia arguably already has the support of a number of key countries. A win at the WTO is not going to improve that number significantly even if China choses to disregard the outcome should it lose. Defying WTO rulings does not appear to carry much political cost globally. The most recent high-profile case of economies ignoring findings of the WTO’s dispute settlement body involve the United States and the European Union, which were both found to have provided illegal state aid to their respective aircraft manufacturers. Both economies are, incidentally, repeat offenders. A win is also not going to contribute to clarifying provisions in the WTO since this case does not appear to involve any legal ambiguities.

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A win might help to call China’s bluff and serve to embarrass Beijing, but that gives rise to the possibility that this potential moral victory could turn into a potentially Pyrrhic one. This process would presumably be added to China’s long list of grievances against Canberra and incite further action, assuming that Australia’s assumptions about China’s motivations are correct. If indeed the Australian government truly believes that the source of this problem is politics rather than trade, then surely the solution has to be political, something that the WTO cannot, and was not designed to, deliver.

Lodging a complaint at the WTO might be the “logical” next step and it might even be politically sensible from a domestic perspective but is it strategic or tactically wise, and will it be productive?

Jikon Lai is assistant professor in the Centre for Multilateralism Studies (CMS), S. Rajaratnam School of International Studies (RSIS), Nanyang Technological University (NTU), Singapore.