TWN Info Service on WTO and Trade Issues (Jan10/01)
20 January 2010
Third World Network

Panel set over US measures on Chinese tyre imports
Published in SUNS #6845 dated 20 January 2010

Geneva, 19 Jan (Kanaga Raja) -- The WTO Dispute Settlement Body (DSB) on Tuesday agreed to establish a panel, at the request of China, to rule on measures imposed by the United States affecting imports of certain passenger-vehicle and light- truck tyres from China. 

This was a second-time request and panel establishment was automatic. 

The European Union, Japan, Chinese Taipei, Turkey and Vietnam reserved their third-party rights to the dispute. 

The panel request by China concerned the restrictions announced by the US on imports of tyres from China for certain passenger vehicles and light trucks, and the legal basis for those restrictions. 

According to the Chinese communication to the DSB, these restrictions - announced on 11 September 2009 as a presidential decision - take the form of substantially higher tariffs over the next three years well in excess of the tariff rates permitted under US international obligations to China. 

China considers that these higher tariffs, not having been justified as emergency action under relevant WTO rules, are inconsistent with Article I: 1 of the GATT 1994, because the US does not accord the same treatment it grants to passenger and light truck tyres originating in other countries to the like products originating in China, and Article II of GATT 1994, since these higher tariffs consist of unjustified modifications of US concessions thereunder. 

According to the Chinese communication, the US has not even attempted to justify these restrictions as a general safeguard action pursuant to Article XIX of GATT 1994 and the Agreement on Safeguards. The only justification offered was that these measures have been imposed under the Protocol on the Accession of the People's Republic of China. 

China believed that these restrictions, and the basis under US law for imposing these restrictions, are inconsistent with US obligations under the Protocol of Accession. 

In its statement at the DSB, China said that its government deeply regretted the US's decision to impose restrictions on Chinese tyres and believed it was a departure from international consensus of G20 leaders to fight against protectionism. 

China urged the US to promptly withdraw its measures. 

In its statement, the US said that it remains confident that its measure is consistent with its WTO obligations and, specifically, with the product-specific safeguard mechanism provided for in Section 16 of China's Protocol of Accession. 

The US added that it is not the first WTO Member to impose a product-specific safeguard on Chinese products, but it is the first that China has challenged in the WTO for that reason. 

In just four years, US tyre imports from China more than tripled by volume and the value of those imports rose to $1.8 billion, said the US, noting that in those same four years, US production shrunk by more than 25% while 14% of US workers in the industry lost their jobs.

This special safeguard mechanism was a key part of the deal that permitted China to become a WTO Member, said the US, adding that it rejects the notion that having recourse to this bargain through the proper application of the safeguard mechanism is unfair, unreasonable or protectionist. 

On another dispute, the DSB agreed to establish a panel, at the request of the European Union, to rule on taxes imposed by the Philippines on distilled spirits. 

The European Union request concerned the excise tax regime in force in the Philippines with respect to distilled spirits. 

This was a second-time request and panel establishment was automatic. 

China, Australia, Mexico, Chinese-Taipei, Thailand and the United States reserved their third-party rights to the dispute. 

In its statement, the EU said that there have been no indications that the longstanding tax discrimination will be remedied any time soon. 

It noted that this is a case of a longstanding tax discrimination that has only worsened over the years. Currently, imported spirits are subject to an excise tax 10 to 50 times higher than the tax imposed on domestic spirits. 

This has prevented EU spirits producers from benefiting from the growing demand for spirits in the Philippine market. Furthermore, it is estimated that EU exports to the Philippines have more than halved between 2004 and 2007, as a result of the increasing discrimination. 

The Philippines said that it firmly believed that its excise tax regime is fully consistent with its WTO obligations. 

The US also expressed concern over the Philippine excise tax system and its effect on market access for US exports of distilled spirits. 

The US said that it filed a request on 14 January for dispute settlement consultations. 

In other actions, the DSB adopted the report of the Appellate Body and the report of the panel (as modified by the Appellate Body report) concerning a dispute brought by the United States over Chinese measures affecting trading rights and distribution services for certain publications and audio-visual entertainment products. 

Both China and the United States appealed certain issues of law and legal interpretations in the panel report, which had ruled against China. 

The panel had been established to consider the US complaint concerning a series of Chinese measures regulating activities relating to the importation and distribution of reading materials, audio-visual home entertainment products and films for theatrical release. 

In its ruling on 21 December 2009, the Appellate Body upheld the panel's findings and recommended that the DSB request China to bring its measures, found in Appellate Body report and in the panel report as modified by the Appellate Body report, to be inconsistent with China's Accession Protocol, China's Accession Working Party Report, the GATS, and the GATT 1994 into conformity with its obligations. 

In its statement at the DSB, the US said that it was pleased that the panel found in favour of the US on the vast majority of its claims and that the Appellate Body upheld each of the panel's findings challenged by China. 

China said that it appreciates the Appellate Body's confirmation that China has the right, in this dispute, to invoke the general exception clauses, Article XX of GATT 1994. 

It firmly believed that Article XX of the GATT 1994 is certainly applicable to all commitments related to trade in goods in the Accession Protocol and reports of any new WTO Member. 

This is a serious systematic issue and must be handled very cautiously so as to guarantee that both old and new WTO Members have the equal rights to invoke general exception provisions, added China. 

It was also pleased to see that, in many critical respects, the panel agreed with China and rejected a large number of the claims of the US. 

China emphasized that because the cultural product is naturally embedded with not only commercial values but also cultural values, the administration of trade in cultural products should be different with the regulation of general goods. 

For these reasons, China expressed disappointment that the Appellate Body did not uphold China's claims on trade right issues and network music issues. +