By: Daniel C.K. Chow & Ian M. Sheldon
When Joe Biden defeated Donald Trump to become president of the United States in 2020, many observers hoped that Biden would reset the troubled US–China trade relationship. The Trump administration had abandoned the rules-based approach to international trade of the World Trade Organization (WTO) and adopted a power-based
approach instead. Using a power-based approach, the United States imposed or threatened sanctions if China did not dismantle its state-led economy and terminate the use of industrial subsidies to support its domestic industries. The United States also crippled the dispute settlement system of the WTO so that nations could not challenge US
belligerence in the WTO. A power-based approach uses threats and sanctions in blatant disregard of WTO rules to bully US trading parties into trade concessions. Such an approach is a return to the law of the jungle and vigilante justice.
Two years into Biden’s term, rather than a reset, the Biden administration has retained most of the Trump-era China policies, maintaining a precarious status quo. At present, the Biden administration has no clear China strategy of its own and no clear path forward to challenge China’s state-led economy.
This Article proposes a new strategy for the United States: bring a non-violation case against China in the WTO. Unlike a violation case, a non-violation case does not assert a breach of any of the textual provisions of the WTO. The non-violation case asserts that China has used its state-led policies to deny the United States the benefits of China’s WTO membership. Under a non-violation case, the United States and China may be able to reach a private bargain under which China can maintain its state-led economy but will compensate the United States for any harm caused—an efficient-breach solution. The approach in this Article has the advantage of being a return to the rules-based approach of the WTO and will also allow China and the United States to reach a private bargain to resolve the longstanding problem of China’s industrial subsidies.