A sign of the WTO on its headquarters in Geneva Photo: VCG

China on Thursday urged the US to respect a WTO panel ruling that rejected a US' origin labelling requirement on products from the Hong Kong Special Administrative Region (HKSAR). Admonishing the US against politicizing trade issues, China crystallized its stance on upholding a rules-based multilateral trade system. 

The ruling, the second in half a month in favor of the Chinese side, debunks a rule-breaking US that has indulged itself in the exploitation of national security claims to put its selfishness above universally adopted principles, experts said. 

The latest ruling can be relied on by Hong Kong firms as a bulwark against US coercion, they said. And if Washington continues with its reckless approach to cause global trade disruptions and turn the WTO framework into a mere figurehead, a failing multilateral regime will eventually boomerang on the US, observers stressed. 

Upright ruling 

China greeted the Wednesday ruling by the panel established under the WTO's Dispute Settlement Body (DSB) that deems the US origin marking requirement as unjustified, describing the conclusion as an upright ruling.

A spokesperson with the Ministry of Commerce (MOFCOM) said on Thursday that China took note of the ruling and welcomes the just verdict.

China hopes the US will respect the ruling, take practical actions to correct its wrongdoings and uphold a rules-based multinational system and normal trade order, according to a statement on MOFCOM's website, citing the spokesperson.

Also on Thursday, Foreign Ministry Spokesperson Mao Ning told a regular press conference that China welcomes the just ruling by the WTO panel.

Hong Kong's status as a separate customs territory is approved by the Chinese government, affirmed by the Basic Law of the HKSAR and established by the WTO's multilateral rules. It is not something that was granted to Hong Kong by any single WTO member, Mao stated.

"The US overstretched the concept of national security and politicized trade issues. This not only violates WTO rules but also hurts the US' own interests," she continued.

"We urge the US to respect the ruling of the WTO panel, take concrete actions to correct its wrong move, uphold the WTO-centered multilateral trading system, and maintain the normal international trade order," according to Mao.

China will firmly implement One Country, Two Systems, oppose interference in Hong Kong affairs by external forces, support Hong Kong in safeguarding its status as a separate customs territory, and support the region in cementing and improving its status as an international financial, shipping and trade center, Mao remarked. 

The WTO conclusion to a two-year dispute was undoubtedly expected, Gao Lingyun, an expert at the Chinese Academy of Social Sciences in Beijing, told the Global Times on Thursday.

The ruling is based on WTO principles and in line with adequate evidence provided by the Chinese side, Gao said, noting that the US' unilateral and protectionist practices are unequivocally in violation of WTO rules.

"Since Hong Kong's status as a separate customs territory is widely recognized, it is certainly wrong to confuse the products from the two members, and it is also a disguised way of raising tariffs on Hong Kong's exports to the US," Tu Xinquan, dean of the China Institute for WTO Studies at the University of International Business and Economics in Beijing, told the Global Times on Thursday.

The ruling could provide support for Hong Kong companies to file lawsuits in US courts against the US government for violation of international commitments, Tu said.

In a statement on Wednesday, the HKSAR government said the WTO panel has submitted its report to the DSB, clearly ruling that the US' origin marking request is "inconsistent with the most-favored-nation treatment requirement in respect of origin marking under the General Agreement on Tariffs and Trade 1994."

"The ruling has once again confirmed that the US has disregarded international trade rules, attempted to impose discriminatory and unfair requirements unilaterally, unreasonably suppressed Hong Kong products and enterprises, and politicized economic and trade issues," read the statement, quoting HKSAR Secretary for Commerce and Economic Development Algernon Yau.

The "Made in Hong Kong" marking on products from Hong Kong goods has been globally accepted over the years, factoring that the rights and obligations of the HKSAR - as a separate customs territory - are on par with that of other WTO members.

Nonetheless, since mid-November 2020, the US has required that all Hong Kong-origin items to be imported to the US may no longer be labelled as originating in "Hong Kong", but must instead be relabelled to indicate "China". The revised origin marking requirement prompted the HKSAR government to swiftly advance an objection via bilateral and multilateral means, and the DSB agreed at a meeting in late February 2021 to create a panel to consider the dispute.

Rule breaker 

The Wednesday ruling is seen as the latest warning to the US, which has provoked the ire of its trading partners including China. Its habitual positioning of itself as a rule breaker will only end up subjecting the US to the repercussions of a malfunctioning multilateral mechanism, experts said.

The latest ruling showed that the WTO panel apparently doesn't support the US argument that the relabelling was necessary to protect its essential security interests, and offered a good precedent to fend off US' abuse of national security in other cases, Tu said.

Its setback at the WTO this time could be a blow for the US in continuing to cite so-called national security concerns to hurt other sides'  interests, and be a positive factor in China's lawsuit against the US in its chip export control measures, the expert emphasized.

In another setback to the US, a WTO dispute settlement panel ruled earlier in December that the 25 percent tariffs on global steel imports and 10 percent import tariffs on aluminum imposed under former US president Donald Trump on so-called national security grounds were in violation of WTO rules.

The US has maintained tariffs on steel and aluminum imports from certain WTO members, including China, since 2018.

However, the US has continued to portray itself as a rules breaker. In a statement on Wednesday, Adam Hodge, spokesperson of the US Trade Representative's office, said that the US "strongly rejects the flawed interpretation and conclusions" in the WTO panel report regarding marks of origin. 

In a similarly toned statement following the WTO ruling on steel and aluminum imports, Hodge also showed defiance of the WTO assessment.

The US' selfishness and unilateralism has reached a new level, it "has no shame" and "doesn't care about its international image at all," Tu stressed.

"It is fair to say that the US is a bit of a public outrage now. Its inflation reduction legislation with massive subsidies for US companies also hurt and undermined the interests of its allies," Tu noted.

It seems that Americans have been weighing the costs and benefits of breaching rules and may have become conceited about some transitory gains from being a rules breaker, while other members of the WTO pledge allegiance to multilateralism-centric rules, Gao said.

In so doing, the US puts the WTO system at risk of collapsing, as the WTO framework could descend into a failing regime with the US, a major stakeholder, disregarding rulings, he explained, calling the US the eventual "victim" of its own misconduct.