American farmers have suffered in President Donald Trump's ongoing trade war with China, and things could get even worse, argues Kimberly Ann Elliott, a visiting scholar at the George Washington University Institute for International Economic Policy.

A landmark ruling last month by the World Trade Organization should have been good news for American farmers, since it could provide a bit of relief for them from the trade war.

The problem lies with the fact that, while the US won the first round of these disputes at the WTO, such decisions by dispute settlement panels can be appealed, says Elliot.

Because of the Trump administration's policy of blocking new appointments to the WTO's appellate body, the WTO is unlikely to be able to hear new appeals from China for some time.

If China does not get its appeal heard, says Elliot, it might choose to come into compliance, which would escalate the conflict by forcing the US to impose more unilateral sanctions.

American farmers have arguably suffered the greatest collateral damage in President Donald Trump's ongoing trade war with China, and things could get even worse.

A landmark ruling last month by the World Trade Organization — one of Trump's favorite targets — should have been good news for American farmers, since it could provide a bit of relief for them from the trade war. But even that small compensation is now likely to be delayed or lost — again because of Trump.



Even if Trump's trade war with China ends soon, American farmers are going to struggle to regain the markets they once had there. Making matters worse is Trump's antipathy to the WTO.

US President Donald Trump participates in a round-table discussion with business leaders at Northeast Iowa Community College on July 26, 2018 in Peosta, Iowa. Scott Olson/Getty Images In late February, the WTO announced that a dispute settlement panel had agreed with the United States that Chinese agricultural subsidies were higher than allowed under international rules. The case was originally brought to the WTO under the Obama administration, in 2016. US trade officials argued that the Chinese government was exceeding the cap on subsidies for wheat, corn, and rice that it had agreed to when China joined the WTO.

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An announcement in another case before the WTO involving Chinese agricultural trade barriers is expected soon, and many experts believe US arguments will prevail in that one as well. That case, which was also begun under President Barack Obama, covers technical issues with how China implements minimum import requirements for commodities subject to quantitative restrictions. A number of other agricultural exporting countries joined both complaints as third parties, indicating the depth of the concern about Chinese agricultural practices.

Trump's hostility to multilateralism could get in the way of any benefits of improved trade access for American agriculture

Despite the Trump administration's open scorn for the WTO, the US Trade Representative opted to continue to pursue the cases, and Washington appears to have won on key issues in both. These kinds of rulings by the WTO should be big wins for American farmers, helping to offset some of the damage done by Trump's tit-for-tat tariffs with China. Instead, the Trump administration's hostility to multilateralism in general, and the WTO in particular, could get in the way of any benefits of improved trade access for American agriculture.



The problem lies with the fact that, while the US won the first round of these disputes at the WTO, such decisions by dispute settlement panels can be appealed. Despite being intended as a safety valve that would rarely be necessary, such appeals have become quite common at the WTO.

Sorted soybeans are ready for shipment and planting near White Cloud, Kansas. Associated Press Countries know that even if they are likely to lose eventually, they can delay compliance for months or sometimes years while the appeal is ongoing. But once the appellate body affirms a panel decision, the respondent must come into compliance or face the possibility of the complaining party imposing WTO-authorized trade sanctions.



But this process is about to break down because the Trump administration is blocking the appointment of new members to the WTO's appellate body until there are changes in how this part of the system operates. The Trump administration — like the Obama administration — accuses the appellate body of exceeding its authority in a number of past cases, often to the detriment of US interests.

But unlike the previous administration, the Trump administration appears to want to grind the system to a halt. The normally seven-member body is down to three members, the minimum required to hear appeals — and two of their terms are up in December. If the impasse continues, there will be only one member remaining on the roster by the end of the year.

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What happens now? In the Chinese agricultural subsidies case, the WTO panelists agreed with the core US charge that China had exceeded the allowable level of subsidies. But they also agreed with China on other issues that lowered the degree to which the subsidies were over the limit.

Trump administration appears to want to grind the system to a halt

If things were to go as they typically have in the past at the WTO, China or the US — and quite possibly both countries — would appeal the parts of the decision with which they disagreed. But because of the Trump administration's policy of blocking new appointments to the appellate body, the WTO is unlikely to be able to hear new appeals in this case, or any other, for some time.

The headquarters of the World Trade Organization (WTO) in Geneva, Switzerland. Denis Balibouse/Reuters So instead, there are three possible alternatives. In the first scenario, China complies with the WTO ruling and everyone is happy. A second possibility, which probably wouldn't end as well for US interests, is that US negotiators wrap the settlement of this case into its broader trade talks with China. The third scenario is that there is another escalation in the trade war.



In the first scenario, China would simply decline to appeal the panel rulings and bring its agricultural policies into compliance with the rules. Chinese officials have said they have not decided whether to appeal last month's WTO decision because they are considering broader agricultural policy reforms to lower the costs of their existing subsidy programs. This scenario, if it unfolded, would be a good example of how the WTO can help countries undertake politically difficult reforms.

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In the second scenario, since there is unlikely to be an appellate body decision affirming the need for China to comply with the WTO's ruling, Beijing could refuse to give up something Washington wants — the higher agricultural subsidies — without getting something in return for it.

Robert Lighthizer, the US trade representative, has said that he expects China to comply with the panel's ruling. But he also said that resolution of the agricultural policy issues could be wrapped into the broader, ongoing trade negotiations. In this scenario, which may be the most likely, Washington may end up having to pay a price — by giving in on some other issue that is relatively more important to China — when it could have gotten rid of the Chinese agricultural subsidies without that if the WTO process were working normally.



US Trade Representative Robert Lighthizer speaks in the Eisenhower Executive Office Building on the White House complex in Washington. AP Photo/Evan Vucci The third and most costly scenario is opening a new front in the trade war. With no one to consider an appeal, China could argue that there is no definitive decision in the case and refuse to come into compliance until it gets one.

A new front in the trade war