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Info Service on WTO and Trade Issues (Jun26/03) Geneva, 4 Jun (D. Ravi Kanth) -- The United States Trade Representative (USTR) on 2 June announced the likely imposition of unilateral tariffs of 10% and 12.5% on scores of countries under Section 301 of the Trade Act of 1974, citing their failure to impose and effectively enforce a prohibition on the importation of goods produced with forced labour. However, the move to impose tariffs based on the failure of countries to comply with the International Labour Organization (ILO)'s Forced Labour Convention appears to violate the multilateral trade rules, as trade and labour obligations are not part of the WTO's rule-book, according to people familiar with the development. Interestingly, the United States has ratified only two of the ILO's core labour standards - on forced labour and child labour - while leaving unratified several other conventions, including that on freedom of association, right to organize and collective bargaining, minimum age of employment, equal remuneration, and discrimination in employment and occupation. Moreover, attempts to incorporate trade and labour provisions into the WTO's rule-book failed at the WTO's third ministerial conference in Seattle in December 1999. The latest US announcement comes just before the Section 122 tariffs of 15% imposed by the US on a large swathe of countries are due to expire on 24 July on account of the 150-day statutory limit under the US Trade Act of 1974. Although the issue of forced labour was repeatedly raised by the US during the fisheries subsidies negotiations in the run-up to the WTO's 12th ministerial conference (MC12) in Geneva in June 2022 - allegedly to target China - the proposal to include this issue was not agreed to, said people familiar with the development. More importantly, while a WTO dispute panel did not rule outright against Section 301 in a trade dispute brought by the European Communities back in 1999, it clearly stated: "Significantly, all these conclusions are based in full or in part on the US Administration's undertakings mentioned above. It thus follows that should they be repudiated or in any other way removed by the US Administration or another branch of the US Government, the findings of conformity contained in these conclusions would no longer be warranted." US EXPLANATION The USTR, Ambassador Jamieson Greer, declared on 2 June that "the failure of our most important trading partners to address the importation of goods made with forced labor is unacceptable." "This creates a dynamic where American workers are forced to compete globally on an unlevel playing field", he said. Ambassador Greer further warned that "we will no longer tolerate this disparity," while suggesting that "some trading partners have taken initial steps to prevent the importation of forced labor goods, including through USMCA [the US, Mexico, and Canada free trade agreement] and commitments in Agreements on Reciprocal Trade." However, he said that "each of our trading partners must do more to ensure that trade does not perversely encourage and entrench forced labor globally." According to the USTR's press statement, the USTR "has proposed responsive action for public comment." According to the USTR's proposal, action would be taken under Section 301 and includes "additional duties on all products of the investigated economies," subject to certain exceptions. The proposal states that "for economies that impose a forced labor import prohibition, that have committed to impose and enforce such a prohibition through an Agreement on Reciprocal Trade, or economies that have imposed a partial regime with the effect of preventing the importation of certain forced labor goods, the US Trade Representative proposes 10% as the rate of additional duties." "For all other economies, the US Trade Representative proposes 12.5% as the rate of additional duty." According to the USTR's press statement, six countries have failed to effectively enforce a prohibition on the importation of goods produced with forced labour: Canada, Ecuador, the European Union, Indonesia, Mexico, and Pakistan. These economies would face a 10% tariff on all goods entering the US market. Meanwhile, 54 other countries that have failed to impose and effectively enforce a prohibition on the importation of goods produced with forced labour would be subject to a 12.5% additional duty. They include: Algeria, Angola, Argentina, Australia, the Bahamas, Bahrain, Bangladesh, Brazil, Cambodia, Chile, China, Colombia, Costa Rica, the Dominican Republic, Egypt, El Salvador, Guatemala, Guyana, Honduras, Hong Kong-China, India, Iraq, Israel, Japan, Jordan, Kazakhstan, Kuwait, Libya, Malaysia, Morocco, New Zealand, Nicaragua, Nigeria, Norway, Oman, Peru, the Philippines, Qatar, Russia, Saudi Arabia, Singapore, South Africa, South Korea, Sri Lanka, Switzerland, Taiwan, Thailand, Trinidad and Tobago, Turkiye, the United Arab Emirates, the United Kingdom, Uruguay, Venezuela, and Vietnam. The USTR has also proposed a textile mechanism that would allow a certain volume of apparel and textile imports from selected economies to enter the United States at a reduced Section 301 tariff rate. SECTION 301 The USTR defended Section 301 of the Trade Act of 1974, as amended, arguing that it is "designed to address unfair foreign acts, policies, or practices affecting US commerce." The USTR further claimed that "Section 301 may be used to respond to unjustifiable, unreasonable, or discriminatory foreign government acts, policies, or practices that burden or restrict US commerce. Under Section 302(b) of the Trade Act, the Trade Representative may self-initiate an investigation under Section 301." However, the USTR did not refer to the WTO panel ruling on the use of Section 301, which had been criticized by several countries during the panel proceedings. In a third-party submission before the WTO panel in 1999, India had argued: "Firstly, it is clear that Sections 301-310 are a case of United States reneging on its commitments undertaken in the Uruguay Round. Secondly, regardless of whether or not it is applied in practice, GATT/WTO jurisprudence is that a law, which, by its terms mandates behaviour that is inconsistent with a WTO provision, does violate that provision. Thirdly, Sections 301-310 fall foul of Article 23 of the DSU; specifically, they also contravene the time limits and other procedures of the DSU. Fourthly, Sections 301-310 violate Articles I, II, III, VIII and XI of GATT 1994 as evidenced in the Bananas dispute. For the above reasons, India requests the Panel to find that Sections 301-310 are violative of the DSU, GATT 1994 and the WTO Agreement and to recommend that the DSB request the United States to bring its Trade Act of 1974 into conformity with its obligations under the WTO Agreements." CRITICISM BY EC According to media reports, the European Commission has criticized US plans to impose an additional 10% tariff against the European Union. "The Commission will carefully analyse the preliminary findings of the investigation and will continue engaging with the US Administration. That said, the EU considers tariffs imposed on these grounds to be unjustified," Deputy Chief Spokesperson Olof Gill said in a statement. Bernd Lange, chair of the European Parliament's trade committee, said Washington was "desperately searching for new legal grounds to sustain its tariff policy", following its Supreme Court defeat. "Accusing the EU of not doing enough against forced labour is absurd," Lange wrote in a post on X (formerly Twitter). "The EU has adopted the world's most stringent rules against products made with forced labour. This looks very much like trying to make the facts fit a legal justification for tariffs that has already been decided." China has so far not issued any statement on the proposed 12.5% tariff on its goods. Meanwhile, in a separate development, the US appears to have extended more favourable treatment to China by announcing a public comment process on a proposed mechanism for managing bilateral trade. "Under President Trump's leadership, the United States and China have established a Board of Trade to ensure that trade with China is more balanced and beneficial for Americans," Ambassador Greer said. "The Trump Administration will work with stakeholders to identify non-sensitive goods trade that can deliver results for American farmers, ranchers, fishermen, small businesses, manufacturers, and workers," the USTR stated. The agency also welcomed "comments from interested parties on effective ways to facilitate mutually beneficial trade with China while continuing to use tariffs to defend American economic and national security and promote balanced and reciprocal trade." The consultation would consider whether certain categories of "non-sensitive products" from both sides could be eligible for tariff reductions. Chinese analysts described the US move as a "positive" first step toward returning the tariff discussions to a more open and rational track. According to China's Global Times on 2 June, analysts argued that Washington should go further by removing unreasonable unilateral tariffs in order to create a stable and predictable environment for bilateral trade. The consultation covers "specific types of non-sensitive products" that could potentially benefit from tariff adjustments on both sides, with the stated goal of promoting balance and reciprocity in the bilateral trade relationship. Comments will be accepted until 10 July 2026, according to the USTR. A Federal Register notice released by the USTR stated that the US-China Board of Trade, announced as part of a package of outcomes from President Donald Trump's visit to China, will serve as a government-to-government channel for discussions on optimizing trade in non-sensitive products. "The public comment process could be seen as a positive step by the US toward easing tariff frictions after the leaders' meeting in May," Xin Qiang, deputy director of the Center for American Studies at Fudan University, told the Global Times on 3 June. +
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