China calls for “balanced” agreement in all rules areas

China has put forward a proposal for reforming the WTO disciplines on anti-dumping and subsidies, placing the issue back on the radar of the WTO’s rules negotiations, which have of late mainly focused on the question of fisheries subsidies instead.

by D. Ravi Kanth

GENEVA: China has called for a “balanced” agreement to improve several core provisions in the anti-dumping, and subsidies and countervailing measures agreements in the Doha rules negotiations that are currently preoccupied largely with the disciplines for fisheries subsidies, trade envoys told the South-North Development Monitor (SUNS).

Over the past many months, a group of major industrialized countries such as the United States, the European Union, Australia, New Zealand on behalf of the Friends of Fish coalition, as well as developing countries like Peru, Argentina and several key members of the African, Caribbean and Pacific (ACP) group have upped the ante for negotiating new provisions on prohibiting fisheries subsidies while remaining silent on the much-needed improvements in trade remedies, said an Asian trade envoy who asked not to be quoted.

The US had also remained reluctant to address other outstanding issues in the Doha rules dossier in the run-up to the WTO’s tenth Ministerial Conference in Nairobi in December 2015. It sought agreement only on fisheries subsidies in the rules dossier.

Later, the EU and Japan, which is the coordinator of the Friends of Anti-Dumping group, nearly gave up their demands for considerable improvements in both anti-dumping and horizontal subsidies because of opposition from the US, the envoy suggested.

Against this backdrop, China’s comprehensive proposal on trade remedies based on the Doha Work Programme of 2001 assumes considerable importance.

The Work Programme calls for clarifying and improving several provisions in the WTO Agreement on Anti-Dumping (ADA) and Agreement on Subsidies and Countervailing Measures (ASCM).

Chinese proposal

In its submission on “Trade Remedies” on 24 April, China has emphasized that the best option open to WTO members for countering the endemic “economic slowdown” and “protectionism” in “the rapidly changing international market place” is to “seek balanced results of the Rules Negotiations to the furtherance of the rules-based multilateral trading system.”

Given the “desperate” application of anti-dumping (AD) and countervailing duty (CVD) measures by many WTO members which has resulted in trade disputes, China has sought “doable” outcomes on issues that were already discussed in the Doha Rules Negotiating Group.

The list of issues pertaining to anti-dumping includes “determinations of injury/causation, the lesser duty rule, public interest, transparency and due process, interim reviews, sunset, duty assessment, circumvention, the use of facts available, limited examination and all others rates, dispute settlement, the definition of dumped imports, affiliated parties, product under consideration, and the initiation and completion of investigations.”

As regards improvements in the area of subsidies and countervailing measures, China has listed issues such as the definition of a subsidy, specificity, prohibited subsidies, serious prejudice, export credits and guarantees, and the allocation of benefit.

The list of “doable” issues in both AD and CVD areas at this juncture for immediate discussions in the rules negotiations, according to China, must cover tentatively the following five issues:

(i)    enhancing transparency and strengthening due process;

(ii)   preventing AD measures from becoming “permanent”;

(iii) preventing AD measures from “overreaching”;

(iv)  special consideration and treatment of small and medium-sized enterprises (SMEs); and

(v)   transplanting similar provisions from the ADA to the ASCM.

China has maintained that “transparency and due process in AD and CVD investigation proceedings are vital for interested parties on both sides to effectively defend their rights and interests, and for investigation authorities to make fair and impartial determinations.”

Based on the convergence on “transparency and due process” in the negotiations up until now, China has demanded specific improvements in the following provisions:

(i)    the petitioner’s standing (in Article 5.4 of the ADA), notice before initiation (ADA Article 5.5);

(ii)   access to information (ADA Article 6.4, Article 6.5.1);

(iii) disclosure (ADA Article 6.9), evidentiary standards for subsidy allegations [ASCM Article 11.2(iii), Article 11.3];

(iv)  preventing AD measures from becoming “permanent” (ADA Article 11.2, Article 11.3, including provisions concerning the sunset reviews); and

(v)   preventing AD measures from “overreaching” (members shall refrain from initiating anti-circumvention investigations where the initiation of a new AD investigation would be a more appropriate approach).

Significantly, the improvements sought by China in both the ADA and ASCM are issues that the US had opposed during the rules negotiations on grounds that they would impinge on their existing rules.

China, however, did not seek the elimination of the “zeroing” AD methodology which has given rise to the maximum number of trade disputes at the WTO till now.

Although a large majority of developing and industrialized countries have demanded the elimination of the zeroing methodology during the rules negotiations, the US remained the only member to press for its continuation. Consequently, the issue remains unaddressed.

(The zeroing methodology, which the WTO Appellate Body has repeatedly ruled against, involves an investigating authority taking account of all imports below normal value but ignoring those equal to or above the export value – calculating the dumping margin as zero in such cases. This is akin to a judicial proceeding where the court takes account only of the evidence against a suspect and ignores all contrary evidence. – SUNS)

Nonetheless, China also proposed that “certain provisions be transplanted from ADA to ASCM, such as those relating to due process, transparency, and the annex II on best information available.”

China’s proposal on trade remedies also covers, somewhat controversially, “special consideration and treatment of SMEs” in the rules negotiations.

It maintained that despite provisions concerning assistance for small companies in ADA Article 6.13 and ASCM Article 12.11, members must add an independent article “Small and Medium-sized Enterprises” with several elements.

China argued that assistance to SMEs may include the following elements:

(i) The authorities shall take due account of difficulties of SMEs in getting access to information and take appropriate measures to ensure easier access to relevant information including initiation, questionnaire, submission, disclosure and notices etc.

(ii) The authorities shall give full consideration to comments and opinions of SMEs when making selection under Article 6.10. If SMEs have genuine difficulties in providing full cooperation and present justifiable explanation, the authorities may decide not to select them for limited examination.

(iii) If SMEs are unable to submit replies to questionnaires on time with good cause, the authorities shall grant them reasonable extension upon request unless such extension will significantly impede the investigation.

(iv)  The authorities shall provide any assistance practicable to SMEs by supplying information requested by the latter, including responding in a timely manner to requests for clarification of questionnaires and permitting SMEs to submit replies to questionnaires in less burdensome ways.

(v)   The authorities shall take due account of price undertakings offered by SMEs where appropriate.

(vi)  Article 2 and Article 5 of Appendix II shall be strictly observed even when information provided by SMEs may not be ideal in all respects, and this situation shall not lead to a result which is less favourable to SMEs if they provided cooperation to the best of their abilities.

In short, China’s proposal on trade remedies could prove to be a major challenge for the US to consider at a time when the Trump administration is actually considering tightening provisions concerning trade remedies.

Further, it would make things difficult for countries seeking a standalone agreement on fisheries subsidies without reforming the ambiguous provisions in the current ADA and ASCM, trade envoys said. (SUNS8450)                         

Third World Economics, Issue No. 637, 16-31 March 2017, pp10-12