TWN Info Service on WTO and Trade Issues (Jan13/03)
23 January 2013
Third World Network

Panel set to examine US measures on Chinese products
Published in SUNS #7504 dated 19 December 2012

Geneva, 18 Dec (Kanaga Raja) -- The Dispute Settlement Body (DSB) of the World Trade Organisation (WTO) on Monday agreed to establish a panel, at the request of China, to examine countervailing and anti-dumping measures imposed by the United States on certain products from China.

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

According to trade officials, Japan, the European Union, Canada, Vietnam, Australia and Turkey reserved their third-party rights to the dispute.

According to the Chinese complaint, the measures at issue in its request include Public Law 112-99, "An act to apply the countervailing duty provisions of the Tariff Act of 1930 to nonmarket economy countries, and for other purposes" (P. L. 112-99). P. L. 112-99 was signed by President (Barack) Obama on 13 March 2012 following affirmative votes by the US House of Representatives and the US Senate, and amends the Tariff Act of 1930 to create two new subsections, 701(f) and 777A(f).

The measures at issue also include any and all determinations or actions by the US Department of Commerce, the US International Trade Commission, or US Customs and Border Protection (collectively, "the US authorities") relating to the imposition or collection of countervailing duties on products imported into the territory of the United States from the People's Republic of China, where such determinations or actions were made or performed in connection with countervailing duty investigations or reviews initiated between 20 November 2006 and 13 March 2012.

These measures include the ongoing conduct of maintaining and enforcing countervailing duty measures that resulted from investigations initiated during this period, as well as the ongoing conduct of maintaining countervailing duty investigations that were initiated during this period but not completed as of 13 March 2012.

China further said that the measures at issue also include the anti-dumping measures (as listed in Appendix B to its request), including the definitive anti-dumping duties imposed pursuant to their authority, as well as the combined effect of these anti-dumping measures and the parallel countervailing duty measures identified in Appendix A (to its request).

(Appendix A and B separately list products ranging from coated free sheet paper, carbon quality steel pipe, woven socks, off-road tires, citrate salts, sodium nitrate, kitchen appliance shelving and racks, steel grating, wire decking, magnesia carbon bricks, drill pipe, aluminium extrusions, wood flooring, steel wheels, photovoltaic cells to utility-scale wind towers.)

In its communication, China said that the measures at issue include, as an omission, the failure of the United States to provide the US Department of Commerce (USDOC) with legal authority to identify and avoid the double remedies that are likely to result when the USDOC applies countervailing duties in conjunction with anti-dumping duties determined in accordance with the US non-market economy methodology ("double remedies"), in respect of investigations or periodic reviews initiated on or between 20 November 2006 and 13 March 2012. (See SUNS #7494 dated 5 December 2012.)

In its statement at the DSB, China said that it regrettably finds itself without choice but to make a second request for the establishment of a panel in this dispute. As it had explained at the 30 November DSB meeting, the US has launched over 30 countervailing duty investigations against Chinese products since 2006, affecting more than $7.3 billion in total.

The Government of China and Chinese exporters have consistently maintained that these investigations were unlawful because the US countervailing duty laws do not apply to countries that the US designates as non-market economies. These views have been confirmed by the decision of the US Court of Appeals for the Federal Circuit in the Georgetown Steel case and the Federal Circuit's decision of December 2011 in the GPX case.

However, China said, in March 2012, the US enacted a new law, namely, "An Act to apply the countervailing duty provisions of the Tariff Act of 1930 to nonmarket economy countries, and for other purposes" (P. L. 112-99), which provides the US Department of Commerce (USDOC) with statutory authority to apply countervailing duties to imports from non-market economy countries.

Furthermore, the law states that this authority applies retroactively to 2006, when USDOC first began applying countervailing duties to Chinese products in contravention of existing US law. In contrast, the legal authority to identify and avoid double remedies does not apply retroactively to 2006, and it applies only to "investigations and reviews initiated ... on or after the date of the enactment of this Act", i. e. on or after 13 March 2012.

China highlighted that first of all, the US is not administering its trade remedy laws "in a uniform, impartial and reasonable manner", and some provisions of the US law were enforced prior to their official publication. The P. L. 112-99 is inconsistent with Article X of GATT 1994.

Moreover, China added, the absence of legal authority to identify and avoid double remedies in respect of investigations or reviews initiated between 20 November 2006 and 13 March 2012, prevents the US authorities from ensuring that the imposition of countervailing duties and anti-dumping duties is consistent with the SCM (Subsidies and Countervailing Measures) Agreement, the AD (Anti-Dumping) Agreement, and Article VI of the GATT 1994.

In its statement at the DSB, voicing disappointment with China's panel request, the US reiterated that the legislative measure at issue in this dispute is fully consistent with WTO obligations. In addition, each one of the specific proceedings at issue in this dispute were conducted in a manner consistent with the WTO Agreement.

It stressed that the US, and all other WTO Members, are within their rights under the WTO Agreement to levy countervailing duties to offset injurious subsidies bestowed by another Member on the manufacture, production, or export of goods.

In other matters, Australia blocked a first-time request for the establishment of a panel by the Dominican Republic over certain measures imposed by Australia concerning trademarks, geographical indications and other plain packaging requirements applicable to tobacco products and packaging.

Panel establishment will be automatic when the request comes up again at the DSB.

According to trade officials, the Dominican Republic said that the measures are a "dramatic regulatory meddling" in the appearance of products that can be legally sold in Australia. They appear to infringe Australia's obligations under the TRIPS and TBT (Technical Barriers to Trade) Agreements, and they are not effective in achieving a legitimate objective, the protection of human health, it added.

In its statement, Australia reported that since the DSB last met, its world first tobacco plain packaging legislation has come into force across the country, This means that in Australia, all tobacco products are now required to be sold in standardised, plain packaging.

It said that the most recent Australian Health Survey reports that while the number of smokers in Australia continues to decline, 2.8 million, or 16.3%, of Australians aged 18 years and over continue to smoke daily.

Smoking is one of the leading preventable causes of death in Australia. It results in the death of approximately 15,000 Australians every year and costs the Australian society and economy billions of dollars.

"This is why the Australian Government decided to introduce tobacco plain packaging as part of a balanced package of tobacco control measures that will contribute to the reduction of smoking rates in Australia."

"Tobacco plain packaging is a sound, well-considered measure designed to achieve a legitimate objective - the protection of public health. As a matter of key systemic importance, the WTO Agreements recognise the fundamental right of Members to implement measures necessary for the achievement of this objective," it added.

Australia recognised that the Dominican Republic also confronts a significant public health challenge resulting from tobacco use with recent studies showing there are more than 2,200 deaths from tobacco use in the Dominican Republic each year.

The WHO estimates that global deaths from tobacco use will rise from 3 million in 1990 to 8.4 million in 2020 and 10 million in 2030, with 70% of these deaths occurring in developing countries. In Latin America and the central Caribbean region, tobacco-related deaths are expected to triple from 3.3% of total deaths in 1990 to 9.4% in 2020 - a clear indicator of the increasing proportion of tobacco-related diseases which will be borne by countries such as the Dominican Republic.

Australia also acknowledged the tobacco control steps taken by the Dominican Republic such as the introduction of smoke-free environments in educational facilities, including universities, and mandatory health warnings on tobacco packaging. "Australia is therefore surprised at Dominican Republic's decision to challenge Australia's measure."

"The tobacco plain packaging legislation does not undermine the protection afforded to trademarks and geographical indications as required under the TRIPS Agreement. Nor is the measure more trade restrictive than necessary to fulfil its legitimate public health objective," Australia stressed.

"The tobacco plain packaging measure is origin neutral on its face and even-handed in its application. It is clearly non-discriminatory. It applies to all tobacco products, regardless of type or origin, and as such represents best practice in tobacco control."

"As a result, Australia is at a loss to understand the basis of Dominican Republic's claim that the measure treats imported tobacco products less favourably than like domestic products," said Australia.

According to trade officials, Honduras, Ukraine, Cuba, Zimbabwe and Nicaragua supported the Dominican Republic, while New Zealand, Uruguay and Norway supported Australia.

Meanwhile, under "Other Business", Australia expressed concern "with the apparent increase in disputes that seem to be initiated in response to another Member exercising its right to seek redress through the dispute settlement system."

It acknowledged that it is within the right of any WTO Member to initiate a dispute in the WTO in order to preserve its rights and obligations under the covered agreements. Under the DSU, the purpose of dispute settlement is to secure a positive solution to a dispute between WTO Members.

At the same time, said Australia, it is important that a Member gives due regard to whether it genuinely needs to initiate or advance a dispute in the WTO, particularly in situations where real opportunities exist for the amicable resolution of an issue without the need to proceed further down the path of formal dispute settlement.

Australia recalled that Article 3.10 of the DSU expressly enjoins that complaints should not be linked, while Article 3.7 expressly requires that a Member exercise its judgement as to whether dispute settlement action would be fruitful.

Australia urged Members "to be judicious and reasonable in their use of the dispute settlement system, to ensure that the integrity of the system in maintained." +