Jinping and the Beanstalk: the Tale of Feuding International Giants and How the Planting of Agricultural Tariffs Cultivated a Trade War

• Citation: Vol. 34 No. 4
• Publication year: 2020
• topic: Intellectual Property

Jinping and the Beanstalk: The Tale of Feuding International Giants and How the Planting of Agricultural Tariffs Cultivated a Trade War

Amy Jicha

JINPING AND THE BEANSTALK: THE TALE OF FEUDING INTERNATIONAL GIANTS AND HOW THE PLANTING OF AGRICULTURAL TARIFFS CULTIVATED A TRADE WAR

Introduction

Agriculture has consistently received protections dating all the way back to Ancient Greece, a time when the Greek government would punish an individual who made a serious mistake pertaining to agriculture by death.¹ Food is one of life's necessities that is critical for maintaining a sustainable life, both for organisms and overall development.² Take China's soybean imports from the United States for example: the oil seed is used for animal feed, human consumption, cooking oil, and other products.³

Unfortunately, the need for food makes for a strategy that hurts innocent people in an effort to win a relentless trade war. Specifically, the media coverage of the 2018 Trade War between the United States and China has incited fear in citizens by warning of increased prices for several everyday products.⁴ But what some of the media fails to emphasize is that as the trade war progresses, the U.S. agricultural industry is fighting a daunting trade deficit and bringing down the U.S. economy.⁵ The United States has seen a twenty percent reduction in the farming industry's profit from China's tariff, or tax, imposed on U.S. soybeans alone.⁶ Food not only drives animal life, but also the life of the international and U.S. economies as well.⁷

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Consequently, the world is left to reconcile the raging trade war between two of its top economies. The United States and China consistently struggle to find a common ground through their attempts at negotiating a solution, but the World Trade Organization (WTO) has offered to step in if the parties are willing.⁸ While the WTO may be able to mediate some of the trade issues, the Organization may not be equipped to tackle China's unique economic structure. Therefore, the 2018 Trade War between the world's economic powers may spark a reevaluation of WTO rules among treaty members, so the WTO can be better suited for complaints which concern an evolving world economy of technology.⁹

In 1994, the United States and European Union spearheaded the creation of the WTO at the Uruguay Round of negotiations concerning international trade.¹⁰ Specifically, the negotiations covered the regulation of international trade, improvement of market access, and the establishment of a system to better resolve disputes.¹¹ The Uruguay Round was unique in that it was the first time that the world witnessed the implementation of technological protections.¹² The Uruguay Round presented a forum for international intellectual property rights and protections of said rights to be negotiated as part of the WTO.¹³

China joined the WTO in 2001, and has since made its presence known in the international community by its participation in approximately 190 cases and numerous propositions to the WTO.¹⁴ Despite China's international advocacy through the WTO, the sovereign has domestically violated several aspects of international trade in its short tenure, and it has undermined the rule of law. Yet, the United States and other countries fail to hold China accountable.¹⁵ Most importantly, the United States claims that China has consistently stolen U.S.

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intellectual property (IP) rights and is therefore attempting to handle the IP issues with China on its own, without international dispute resolution mechanisms.¹⁶ This includes imposing tariffs in response to the IP theft and justifying the tariffs by alleging that the theft is a threat to U.S. national security.¹⁷ Both countries are implementing protectionist trade policies in an attempt to settle the score for trade abuses and further protect their respective economies.¹⁸

This Comment suggests that the WTO is the proper channel for resolving this international dispute to prevent a growing trade deficit and international agricultural waste. But to be effective, the disputing member countries should file a claim with the WTO.¹⁹ Thus, the United States should file its own complaint with the WTO regarding China's targeted tariffs on U.S. agriculture. The country must also deliver on its promise to enforce WTO regulations, rather than take matters into its own hands and allow the trade war to fester. In turn, the WTO has a daunting challenge to face because the IP abuses that the United States claims against China get to the root of China's unique economic structure.²⁰ China filed a complaint against the United States for its actions and the United States will likely justify its tariffs by alleging the national security defense.²¹

Additionally, the WTO will likely have to discern whether the Chinese tariffs against U.S. agriculture were justified. The spark of the trade war can be attributed to IP theft and soybeans, along with other U.S. agricultural products, that fell victim to tariffs.²² The agricultural tariffs require recourse because they

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violate both the Agreement on Agriculture and the U.S.-China Bilateral Concession Agreement which were created prior to China's WTO participation.²³ Lastly, it is difficult to determine how the WTO would handle the United States' national security defense,²⁴ but the WTO may ultimately hold in favor of the United States because the United States did not act illegally according to domestic laws.²⁵ In essence, this Comment intends to provide a solution for the ongoing trade deficit in the U.S. agricultural industry to further prevent international inefficiency and waste.

Even if the WTO rejects the United States' justification that it began imposing tariffs for national security purposes, the WTO would have to reconcile China's state-run data-sharing and determine how to limit Chinese state access in international trade to prevent further IP theft. This Comment suggests that the WTO lacks a first impression regarding the United States' claims of China's IP theft. However, the WTO could use this opportunity to set new precedent by establishing new policies or inspire another negotiation round.

This Comment provides a solution to the ongoing trade war between China and the United States which is negatively affecting the United States' agricultural industry. Part I explores the current issue in the international community. Part II discusses the history of protectionism, its place in international trade, and how the philosophy has made a comeback since the time of The Great Depression. Further, Part II uses the backdrop of protectionist policies to explain the initiation of trade wars, the start of the WTO, and China's accession to the WTO. Part III examines the current trade war between the United States and China to better understand how the trade war has progressed and provides some insight regarding why agriculture is targeted. Part IV explains why ameliorating the trade war is critical, theories on how to fix it, and how the WTO can use this hard-hitting case as a turning point toward fairness in international trade.

I. Factual Background

This Part discusses protectionist trade policies and historical repercussions of their implementation. Although there are few notable trade wars, those sparked by the United States have had devastating consequences and are most

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relatable to the 2018 Trade War. After exploring the history of trade wars, this Section explains the history of the WTO and China's arduous accession to the Organization. Finally, the Part ends by explaining longstanding abuses that underlie the tensions of the trade war.

A. Protectionism and the Historical Effects of a Trade War

Protectionism is the idea that a country must reduce imports, often by imposing tariffs on goods, to boost that country's industry, increase trade revenue, and protect that country from foreign competition.²⁶ In short, it is the concept of placing one's own country before any other country.²⁷ Experts differ in their views on protectionist measures and their efficacy, but history has shown that protectionist trade policies worsen well-being in the countries that adopt them and harm consumers and the industries that rely on imported products.²⁸ Although protectionist measures are employed to protect a state's own economy and jobs, history shows that such measures result in more job loss and reduced economic growth.²⁹ Protectionist measures have the potential to destroy relationships with international trading partners and restrict international trade.³⁰

The current U.S. administration began imposing protectionist measures on steel and aluminum so that U.S. companies would buy locally.³¹ But history demonstrates that in the rare situations where protectionist policies may succeed, success only results in certain industries.³² Moreover, where industries have to pay more to compensate for their raw materials, the consumer pays the difference.³³ In turn, the countries who maintain trade relationships with the tariff-imposing country retaliate with their own tariffs on that country's products, and thus create a "tit-for-tat" escalation known as a trade war.³⁴

Trade wars are rare, but their presence in history have revealed devastating ramifications. In 1930, Congress enacted the Smoot-Hawley Act, also known as the Tariff Act of 1930, to counteract the drought that damaged a majority of U.S.

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crops.³⁵ President Hoover was quick to sign the Act into law because it simultaneously provided him a way to support his campaign-promised agenda to make trade fairer.³⁶ Congress created the Act so the Executive could impose large import tariffs on foreign goods and encourage U.S. citizens to support local farmers.³⁷ Hoover believed that U.S. agriculture relied too much on foreign markets and therefore isolated the agricultural economy by strictly regulating domestic production and imposing tariffs.³⁸ In turn, the...