COURT RULING DENTS CHINA TARIFFS: A Court of International Trade ruling on Friday requires USTR to reconsider and further explain some of the Section 301 tariffs that former President Donald Trump imposed on more than $350 billion worth of Chinese goods. But the mixed ruling does not direct the federal government to remove the tariffs or reimburse importers for more than $130 billion in duties they have already paid. The CIT rejected the plaintiff's argument that USTR did not have the right to increase tariffs beyond the ones it imposed on an initial $50 billion worth of Chinese goods contained in USTR's List 1 and List 2. However, the CIT also found USTR did not respond to the public comments filed in response to List 3 (covering another $200 billion worth of goods) and List 4 (covering $300 billion more) in a manner that enabled the court to understand USTR's justification for imposing the additional duties. The CIT remanded List 3 and List 4 back to USTR to provide that explanation by June 30. (Note: The Trump administration divided List 4 into two parts, 4A and 4B, and tariffs on List 4B were never imposed.) "The court cautions that, on remand, USTR may 'only further explain the justifications it has given' for the List 3 and 4A tariffs," the law firm Morris, Manning and Martin said in a note to clients. "It may not identify new reasons that were not previously given unless it takes new agency action." In a win for the government, the CIT did not find that tariffs on List 3 and List 4A were unlawfully imposed. Instead, it ruled that USTR was within its rights to apply those tariffs in retaliation for Chinese duties that Beijing imposed in the tit-for-tat trade war. Those Chinese tariffs came in response to Trump's original duties on $50 billion worth of Chinese goods that were meant to punish Beijing for intellectual property theft and trade secret appropriation. Next steps: However, the remand decision does require the Biden administration to look again at the List 3 and 4A tariffs and provide a fulsome explanation of why they are justified if it decides to keep them. June 30 "is a short deadline for a remand determination," said Lewis Leibowitz, an attorney who has been fighting Trump's Section 232 steel and aluminum tariffs. "I would imagine the government will probably ask for an extension." Both USTR and the Justice Department declined to comment on Friday's court ruling. The plaintiff law firm, Akin Gump, also was quiet. "We believe it will still likely take many more months before this litigation is resolved as the losing party is likely to appeal to the U.S. Court of Appeals for the Federal Circuit," Morris, Manning and Martin said in their client note. WTO 'STUMBLES IN THE DARK' AHEAD OF MC12: Russia's war in Ukraine has ushered in a new dark chapter for the world order, not least at the already-ailing World Trade Organization. The war is weighing on the day-to-day work of the organization, threatening the 12th Ministerial Conference scheduled for June in Geneva, and could precipitate the decline of the WTO. Fly on the wall: One Geneva-based trade official spoke of the "symbolic impact" the war in Ukraine is having on daily work at the WTO. The same group of members takes the floor "at every single meeting." They said that "Ukraine will often start it off," and about a dozen or so members give the same speeches. And then Russia replies. "They seem to be getting more and more irritated by it," the official said. "But they still go along with it, in the sense that they're not walking out of the room. They're sitting, taking their lumps." Boycotting Moscow: A group of Western countries — including the EU, U.S. and Ukraine — refuses to sit in the same room as Russia in small-group negotiations. This is blocking the WTO-wide discussions on fisheries subsidies and agriculture, as well as four plurilateral negotiations, according to several Geneva-based trade officials and diplomats. "'I'm not participating in a meeting where Russia is present' — that's indeed suspension de facto," economist André Sapir of the Bruegel think tank told Morning Trade. This, he said, is "really highly problematic for the WTO." One potential solution that several diplomats mentioned is for negotiating chairs to consult with Russia individually to keep talks going. MC12 still "in the dark": One Geneva-based trade diplomat said that WTO members are "stumbling around in the dark" ahead of the 12th Ministerial Conference, aka MC12. "It looks like there won't even be a multilateral declaration, which normally tends to be adopted at the WTO's ministerial conferences, because for several members, not mentioning the Ukrainian crisis would be unthinkable," the diplomat said. "But obviously, Russia will oppose" mentioning Ukraine, they added. Low expectations: "There's no real deliverable," the Geneva-based trade official said bluntly about MC12. "Fisheries: No. Agriculture: No. In fact, agriculture has become more complicated because food security has suddenly become a very big issue because of the Ukraine crisis. … I think expectations are pretty low." Divisive values: "[One] hurdle for MC12 is whether to turn this into a meeting where it's about championing the importance of international law and international order — this is a proposal which has been put forward I'm told by the American ambassador," said economist Simon Evenett, a University of St. Gallen professor. "But it's clearly a proposal which I think will find traction in some quarters, but not universally. … You'd end up with an MC12 that is actually more divisive, potentially, than constructive." Moscow terms veto fears 'conspiracy theory': Morning Trade asked Russia whether it could promise not to unilaterally veto deals struck at MC12. The Russian Mission to the WTO said in response, "Russia never expressed radical views on the issues under discussion and never threatened to block negotiations (unlike some other Members). ... So why should anyone expect that we will start changing our stance now and start vetoing draft decisions?" "It seems that these fears and rumors are part of the conspiracy game played by those who dream that Russia disappears from the WTO negotiations table, thus letting them fulfill their political instructions." Ignoring Russia: "In theory, there are ways to work around consensus," one Geneva diplomat told Morning Trade when asked whether Russia could single-handedly block deals at MC12. They pointed to the WTO's 2013 conference in Bali when Cuba, Venezuela, Bolivia and Nicaragua threatened to veto the Bali package agreement. Slo-mo train wreck? "Is it the case that stable liberal trade relations can only happen between democracies? If your answer to that question is yes, then what we're seeing is a sort of slow-motion train wreck, as a system that had a single set of rules begins to fragment along more and more dimensions," Evenett said.
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