Institutional Origins of the US–China Trade War: The Concurrence of America's Limited Legal Leverage and China's Overproduction

Abstract

This paper examines why the United States and China could not accommodate their trade disputes within the framework of the World Trade Organization (WTO), which now escalated into a rhetorical and retaliatory tariff war. The existing literature, which assumes the dominance of US institutional power in the WTO litigation process, has not anticipated the administration's current gambit that has ignited a trade war with China. Specifically, many liberal‐minded pundits and public alike were puzzled by the United States imposing self‐destructive tariff measures against the WTO rules, despite the WTO still remains as an effective tool and resource for America's trade policies. Against such a backdrop, this paper claims that the concurrence of America's limited legal leverage in the WTO and China's domestic industrial structure that induces overproduction substantially explains the puzzle. To support this central claim, the paper conducts a comparative case analysis of US–China disputes in two industrial domains: steelmaking and renewable energy, including solar photovoltaic (PV) power and wind power. Despite contrasting domestic industrial structures and sectoral characteristics, the case study shows a similar pattern present in China's successful legal maneuvers and US strategic failures. Furthermore, the study also reveals the structural causes of overproduction beyond the Chinese central authority's managerial capacity.

Digital Capitalism and Distributive Forces

“…At any rate, we can establish that even industrial capitalism often produces scarcity in multiple ways: from steel, coal and rare earths to ships, cars and food (let alone myriad-more or less useful-consumer articles). Far too much is produced or consumed during production: more than can be sold under the given income distribution and more than is reasonable in ecological terms (see, e.g., Johnson/Quance 2013;Kim/Kim 2019;Sharma et al 2019). Ultimately, despite his critical style and numerous evident phenomena of overproduction, Betancourt remains within the confines of classic (i.e.…”