Info Service on WTO and Trade Issues (Nov16/03)
1 November 2016
Third World Network
China blocks panel request in raw materials dispute
Published in SUNS #8343 dated 28 October 2016
Geneva, 27 Oct (Kanaga Raja) -- A US request for a dispute panel to
examine China's export restrictions on certain raw materials was blocked
by China at a WTO Dispute Settlement Body (DSB) meeting on Wednesday
This was a first-time request and panel establishment will be automatic
when the request comes up again before the DSB.
Meanwhile, a second dedicated session of the DSB was held later in
the afternoon on the question of reappointment of Appellate Body members.
The sessions have come following the US veto of the reappointment
of Appellate Body member Mr Seung Wha Chang of South Korea to a second
term of office. (See separate story).
US-CHINA DISPUTE OVER RAW MATERIALS
The dispute raised by the US against China is over its restrictions
on the export of various forms of antimony, chromium, cobalt, copper,
graphite, indium, lead, magnesia, talc, tantalum, and tin.
In its communication, the US said that China imposes export duties
on various forms of antimony, chromium, cobalt, copper, graphite,
lead, magnesia, talc, tantalum, and tin.
According to the US, these materials subject to China's export duties
are not listed in Annex 6 of the Accession Protocol of the People's
Republic of China (WT/L/432).
The US considered these measures are inconsistent with Paragraph 11.3
of Part I of the Accession Protocol because these measures constitute
taxes and charges applied to exports.
The US also complained that China imposes restrictions, such as quotas,
on the export of various forms of antimony, indium, magnesia, talc,
The US considered these are inconsistent with Article XI: 1 of the
GATT 1994 and China's obligations under the provisions of Paragraph
1.2 of Part I of the Accession Protocol, which incorporates commitments
in Paragraphs 162 and 165 of the Working Party Report on the Accession
of China (WT/MIN(01)/3) (Working Party Report), because these measures
constitute export restrictions other than duties, taxes, or other
With respect to the administration and the allocation of the export
quotas on various forms of indium, magnesia, talc, and tin, the US
said that China imposes restrictions on the trading rights of enterprises
seeking to export various forms of indium, magnesia, talc, and tin,
such as prior export performance requirements.
The US considered that these measures are inconsistent with Paragraph
5.1 of Part I of the Accession Protocol, as well as China's obligations
under the provisions of Paragraph 1.2 of Part I of the Accession Protocol,
which incorporates commitments in Paragraphs 83 and 84 of the Working
Party Report, because these measures limit the right to trade.
In its statement at the DSB, the US recalled that in two prior disputes,
the DSB found that China's export restrictions on various raw materials
were inconsistent with WTO rules.
Unfortunately, those raw materials are not the only ones on which
China has imposed export restraints. China continues to maintain export
restrictions on other raw materials, the US said.
The US said its panel request reflects its concerns with China's restraints
on the exportation of antimony, chromium, cobalt, copper, graphite,
indium, lead, magnesia, talc, tantalum and tin.
These materials are critical inputs to a wide range of industrial
sectors in the United States and in other Members. China's export
restraints provide an advantage to its domestic industries purchasing
these raw materials, at the expense of industries elsewhere.
The US said that China's persistence in maintaining such export restrictions,
notwithstanding US efforts to engage with China on this issue and
the WTO findings in the two previous disputes "is troubling".
The US said it attempted to resolve these issues through dialogue
with China on a bilateral or multilateral basis. China did not take
any action to resolve the US concerns, it added.
In its statement, China expressed its strong disappointment with the
United States' decision to request the establishment of a panel to
examine the subject matter of the present dispute.
China said that it had sincere consultations with the US in early
September and positively responded to the relevant questions.
China had reiterated its steadfast stance on respecting the WTO rules
and abiding by commitments made for accession to the WTO.
Given the increasing pressure from protection of exhaustible natural
resources and the environment, China's policies concerning the products
at issue are an integral part of the comprehensive measures taken
to promote the scientific management of natural resources products
and strengthen ecological environment protection with the purpose
of achieving sustainable development, it said.
In sum, China regrets to see the US decision to move this dispute
to panel proceeding. It said that it is not in a position to accept
the establishment of a panel.
China said that it stands ready to safeguard its rights under the
DSU and the covered agreements.
In an intervention, the EU said that it shares the US concerns regarding
China's continued export restrictions on certain raw materials.
The EU expressed disappointment that China maintains such restrictions
despite two very clear rulings by the WTO (albeit on a different set
of raw materials).
It noted that on 19 July and 19 August 2016, the EU had requested
consultations with China with regard to its export restrictions on
certain raw materials (DS509).
As the consultations failed to resolve the dispute and the EU has
not received any information from China that the export restrictions
in question will be removed, the EU said that it will later today
request that the establishment of a panel in its own dispute be put
on the agenda of the next DSB meeting.
EU-ARGENTINA BIODIESEL DISPUTE
In other actions, the DSB adopted the Appellate Body and panel reports
in the dispute over anti-dumping measures imposed by the European
Union on biodiesel from Argentina.
In a ruling issued on 6 October, the Appellate Body had upheld an
earlier panel ruling that anti-dumping measures imposed by the EU
on imports of biodiesel from Argentina were inconsistent with its
WTO obligations (see SUNS #8330 dated 11 October 2016 for details
of the AB ruling).
In its statement at the DSB, the EU welcomed the Appellate Body's
confirmation of the panel's finding that the second subparagraph of
Article 2(5) of the EU's basic anti-dumping regulation is WTO-consistent.
As regards the EU regulation imposing anti-dumping duties on imports
of biodiesel from Argentina, the EU said that it is pleased that the
panel and Appellate Body have rejected a number of claims of WTO-inconsistency.
Nevertheless, the EU added, the panel and Appellate Body have made
certain findings of WTO-inconsistency with regard to the specific
anti-dumping measures imposed on biodiesel from Argentina.
The EU took note of the Appellate Body clarification that Article
2.2 of the Anti-Dumping Agreement and Article VI: 1(b)(ii) of the
GATT 1994 do not preclude an investigating authority from using information
on the cost of production "in the country of origin" from
sources outside the country as long as this information is apt or
capable of yielding a cost of production in the country of origin.
Argentina said that the rulings were of great value to the country
as well as to the trading system.
According to Argentina, all members have an interest in clear guidelines
on the construction of "normal value" or the cost of production
which is used to determine whether dumping is taking place. These
normal values cannot be based on hypothetical costs, said Argentina.
The US commented on the Appellate Body's findings and conclusions.
According to the US, the reports of the Panel and the Appellate Body
in the dispute make findings on a number of matters regarding the
interpretation and application of the Agreement on the Implementation
of Article VI of the GATT 1994.
The US understands from those reports that those findings turn on
the facts and circumstances of the specific anti-dumping investigation
at issue in this dispute.
The US also drew attention to what it said was an important systemic
issue with implications for the operation of the dispute settlement
This issue is how the Appellate Body should approach appeals from
panel findings on the meaning of municipal law, as well as how the
Appellate Body approached Argentina's particular appeal in this dispute
on the meaning of the EU law being challenged.
According to the US, in the WTO system, or in any international law
dispute settlement system, the meaning of municipal law is an issue
In contrast, the interpretation of the WTO Agreement, or other relevant
international law, is the issue of law for that system.
This proposition is not controversial, the US claimed. For example,
one of the standard treatises on international law (Brownlie) states
that "municipal laws are merely facts which express the will
and constitute the activities of States."
The US maintained that the Appellate Body, however, has treated panel
findings on the meaning of municipal law as a matter of WTO law, to
be decided by the Appellate Body de novo in an appeal under Article
17.6 of the DSU.
The Appellate Body has given no rationale - based in the text of the
DSU or in any other source - for this fundamental departure from the
principle that the meaning of municipal law is an issue of fact in
international dispute settlement.
In its report in this dispute, the Appellate Body's explanation for
the proposition that the meaning of municipal law is an issue of law
under Article 17.6 is a single sentence: "Just as it is necessary
for the panel to seek a detailed understanding of the municipal law
at issue, so too is it necessary for the Appellate Body to review
the panel's examination of that municipal law."
According to the US, the only basis given for this assertion is a
citation to the Appellate Body's own report in India - Patents (US).
That report, however, provides no meaningful explanation for this
proposition. Ironically, said the US, India - Patents (US) cites the
very same international law treatise quoted above, that municipal
law is an issue of fact for the purpose of international dispute settlement.
That is, the India - Patents report cites a treatise that stands for
the opposite of what the Appellate Body cites it for, the US added.
Further, the Appellate Body's stated rationale - that a "detailed
understanding" is important - says nothing about the proper role
of the Appellate Body in reviewing a Panel's finding.
Indeed, said the US, many factual issues in WTO dispute settlement
require "detailed understanding".
But that provides no basis for treating those factual issues as issues
of law to be decided de novo by the Appellate Body on appeal, it maintained.
According to the US, the problems with the Appellate Body's approach
is highlighted by this very appeal.
One of Argentina's claims was that a provision of EU law, the Basic
Regulation, was inconsistent "as such" with the AD Agreement.
On appeal, Argentina claimed that the panel erroneously construed
that EU law.
Argentina's argument was based on the text of the EU provision, legislative
history, a supposed EU practice in several other investigations, and
certain EU court decisions.
On appeal, Argentina claimed both that the Panel's interpretation
of EU law was wrong as a matter of law (although under what provision
of the AD Agreement or the DSU remains unclear) and that the Panel
failed to make an "objective assessment of the matter" under
Article 11 of the DSU.
The US said that especially given the panel's alleged error in examining
all of the different types of evidence introduced by Argentina, the
Appellate Body could have, and should have, handled this matter as
an appeal under Article 11 of the DSU.
In an Article 11 appeal, of course, the Appellate Body would not have
conducted a de novo review of EU law, but rather would have examined
whether the panel had exceeded its "margin of appreciation"
as the trier of fact.
The Appellate Body, however, examined the meaning of the EU law both
as a de novo legal issue, and then proceeded to conduct a separate
examination of whether the Panel made an objective assessment, the
"Frankly, this approach does not make sense. It departs from
the Appellate Body's frequent admonition that a party should present
an issue as an error of law or an error under Article 11, but not
both types of claims with respect to the same issue," said the
Furthermore, it raises the prospect that the Appellate Body might
find that the Panel made an objective assessment of a complex factual
record, and at the same time might find that precisely the same panel
was incorrect simply because the Appellate Body made a different factual
determination based on its own de novo review.
This type of outcome - which follows from the Appellate Body's finding
that it can conduct its own de novo review of the meaning of domestic
law - is inconsistent with the appropriate functioning of the dispute
settlement system, argued the US.
It departs from the basic division of responsibilities where panels
determine issue of fact and law, and the Appellate Body may be asked
to review specific legal interpretations and legal conclusions, it
Under the agenda item of US anti-dumping and countervailing measures
on large residential washers from Korea, the US said that it intends
to implement the recommendations of the DSB in this dispute "in
a manner that respects US WTO obligations".
It said that it will need a reasonable period of time for implementation,
adding that in accordance with Article 21.3(b) of the DSU, it will
discuss this matter with Korea with a view to reaching agreement on
the period of time.
Korea welcomed the US statement that it intends to comply with the
recommendations and rulings of the DSB in this dispute.
It urged the US to take the necessary steps to immediately bring its
measures into conformity with its obligations under the WTO Agreements.
Korea believed that the appropriate and reasonable period of time
for the US to take necessary steps should be as prompt as possible
pursuant to Article 21.1 (of the DSU).
In this regard, it said that it is prepared to enter into consultations
with the US under Article 21.3(b) of the DSU on the reasonable period
of time necessary for prompt compliance.
Under the agenda item of Russian tariff treatment of certain agricultural
and manufacturing products, Russia informed the DSB that the overwhelming
majority of the measures challenged by the EU had already been brought
by Russia into compliance with its WTO obligations prior to, and in
the course of, the dispute settlement proceedings.
With respect to the remaining measures, Russia said that it intends
to implement the recommendations and rulings of the DSB in accordance
with Article 21.3 of the DSU.
To this end, it said that it needs a reasonable period of time for
implementing the DSB recommendations and rulings in this dispute,
and looked forward to discussing this matter with the EU in due course
with the view to resolving it in full accordance with the provisions
of the DSU.
The EU welcomed Russia's statement on its intention to comply and
is ready to discuss a reasonable period of time to do so.
While it took note of the modifications that have already occurred
for certain tariff lines, the EU urged Russia to promptly take the
necessary steps to ensure WTO compatibility of the measures for which
The EU said that it expects that the Russian Federation will fully
respect the bindings that it committed in its Schedule.
Meanwhile, the item of US measures affecting the cross-border supply
of gambling and betting services - statement by Antigua and Barbuda,
was removed from the agenda.
According to trade officials, the chair of the DSB, Ambassador Xavier
Carim of South Africa, informed members that Antigua and Barbuda,
in a letter dated 24 October, requested that their delivery of the
statement be deferred to the next regular DSB meeting. +