While many trade policy observers focus on signs of life from the Doha round of negotiations, arguably more important to the long-run relevance of the WTO is how the United States and China politically manage a number of currently ongoing formal trade disputes. The cases are likely to become political flashpoints not only because they involve major U.S. exporting industries such as Hollywood, music and other media, as well as the struggling automobile firms, but because a full process WTO trade dispute—that would include targeted and WTO-sanctioned U.S. threats of retaliation—would be China’s first such experience in the limelight.
We provide a road map of what to expect from both countries in this WTO process, and we also identify a number of new issues likely to confront Washington and Beijing along the way. While we do draw lessons from how countries have used earlier WTO disputes to manage tensions in bilateral relationships, we also pinpoint limitations as to what can be learned from these earlier episodes given the complexities of trading with China. The politics of handling these particular disputes is especially critical for the international trading system in the context of a global resurgence of protectionist pressures amid the deepening economic crisis.
[On the ongoing trade negotiations] If we’re serious about resolving the core issues that the U.S. has with China, then this is going to be a way station that’s going to require a lot more continued focus by the administration for a number of months if not years.