Info Service on WTO and Trade Issues (Oct17/11)
16 October 2017
Third World Network
US reiterates it will not engage in negotiations on trade remedies
Published in SUNS #8552 dated 13 October 2017
Geneva, 12 Oct (Kanaga Raja) - The United States once again categorically
stated that it was not prepared to engage in negotiations on the issue
of trade remedies, including on the issues highlighted by China in
its latest proposal.
This US reiteration came at an informal open-ended meeting of the
WTO Negotiating Group on Rules on 11 October that was dedicated to
discussing the issues of trade remedies and horizontal subsidies.
The informal meeting also discussed the European Union's proposal
on improving disciplines on subsidies notifications (see below).
PROPOSAL BY CHINA ON TREATMENT OF SMEs
China's follow-up paper (TN/RL/GEN/194) on special consideration and
treatment of small and medium-sized enterprises (SMEs) in anti-dumping
(AD) and countervailing (CVD) proceedings further clarifies the suggestions
that China had made in its proposal (TN/RL/GEN/185) submitted earlier
this April. (See SUNS #8450 dated 26 April 2017).
In its follow-up paper, China said it is well-accepted that SMEs with
their vigour and competitiveness are among the powerhouses for creating
job opportunities and promoting technology innovation as well as economic
Acknowledging SMEs' increasingly important role in international trade
in recent years, facilitating SMEs' integration into international
trade has become a common interest among Members.
In light of the global and local economic difficulties, it is the
Members' shared responsibility to help create a free trading environment
for the SMEs and facilitate their participation in international trade
and cooperation, it argued.
China said that its paper is aimed at encouraging the investigating
authorities to make positive efforts to identify small and medium-sized
enterprises when appropriate, take due account of the unique or disproportionate
difficulties confronted by them in responding to proceedings, and
provide them with any practicable assistance or help to reduce their
China said although it focuses on the SME's participation as respondents,
any proposal from the Membership with respect to SME's participation
as petitioners is welcome as a basis for subsequent discussions on
With respect to SMEs' participation in responding to AD and CVD proceedings,
China noted that Article 6.13 of the Anti-Dumping Agreement (ADA)
and Article 12.11 of the Agreement on Subsidies and Countervailing
Measures (ASCM) both provide that "[t]he authorities shall take
due account of any difficulties experienced by interested parties,
in particular small companies, in supplying information requested,
and shall provide any assistance practicable".
China further noted that SMEs face multifarious difficulties and bear
a heavy burden in responding to trade remedy proceedings in practice,
which may involve several procedural aspects such as access to information,
questionnaire, extension, sampling, and price undertaking.
For instance, they may have difficulty in obtaining qualified professional
assistance from lawyers or experts due to high financial expenses.
Because of lack of experience and expertise, even when SMEs have already
done their best in cooperating, their [responses to] questionnaires
may still be less than ideal or even incomplete, which could often
lead to unfavourable or even excessively highest rates for them, said
Their applications for price undertaking are also easily disregarded
due to their small percentage of industrial representativeness.
The above has, in turn, contributed to SMEs' reluctance in responding
to other AD and CVD proceedings, resulting in a worse-off situation
for SMEs in international trade.
According to China, as the existing Article 6.13 of ADA and Article
12.11 of ASCM, or the previously proposed amendments to Article 6.13
of ADA are insufficient to cover all the typical difficulties confronted
by SMEs, it is necessary to add a self-standing article "Small
and Medium-sized Enterprises" to ADA and ASCM to address the
China has proposed the following for discussion:
In principle, the authorities shall, when appropriate or requested,
make positive efforts to identify SMEs as respondents, take due account
of the unique or disproportionate difficulties experienced by them
in the process of investigations and provide them with any practicable
In detail, assistance to SMEs may include but is not limited to:
a. The authorities shall take due account of difficulties of SMEs
in gaining access to information and take appropriate measures to
ensure their easier access to relevant information including initiation,
questionnaire, disclosure and public notice etc.
b. The authorities shall give full consideration to SMEs' comments
and opinions when sampling for limited examination. If SMEs have genuine
difficulties in providing full cooperation and present justifiable
explanation therefor, the authorities may decide not to select them
for limited examination.
c. If SMEs are unable to submit [responses to] questionnaires on time
with good cause, the authorities shall grant them reasonable extension
upon request unless such extension will significantly impede the investigation.
d. The authorities shall provide any assistance practicable to SMEs
when they supply information requested by the authorities, including
responding in a timely manner to requests for clarification of questionnaires
and permitting SMEs to submit [responses to] questionnaires in less
e. The authorities shall take due account of price undertakings offered
by SMEs where appropriate.
f. Even when information provided by SMEs may not be ideal in all
respects, this situation shall not lead to a result which is less
favourable to SMEs if they have provided cooperation to the best of
China recalled from previous discussions in the context of this issue
that some Members raised the question of how to define SMEs.
"It is our understanding that there is no established or generally
accepted definition or test of SMEs among the Membership, particularly
for the purpose of AD and CVD proceedings," it noted.
Therefore, China believed it would be better to leave this issue to
be decided upon by investigating authorities based on their domestic
regulations, industry-specific standard, common practice or the case-by-case
China said it is also conscious of the additional administrative burden
that may come to bear on the authorities of some of the developing
Members as a result of the above proposed amendments.
It thus recommended "an incremental approach" for the adoption
by such Members and extension of technical assistance to them under
the principle of special and differential treatment.
According to trade officials, in introducing its paper at the informal
meeting, China said SMEs were important for creating job opportunities
and promoting economic development and that WTO members needed to
help create an environment for SMEs to facilitate their participation
in international trade.
However, it pointed out, SMEs face many difficulties and bear a heavy
burden in responding to trade remedy proceedings.
Article 6.13 of the WTO's Anti-Dumping Agreement (ADA) and Article
12.11 of the Agreement on Subsidies and Countervailing Measures (ASCM)
recognize the special needs of SMEs but these provisions are insufficient
to cover all the problems SMEs face, China said.
As a result, a "self-standing article" needs to be written
into the ADA and SCM Agreement to address the issues highlighted.
Among others, this article shall require authorities to ensure easier
access for SMEs to relevant information related to a trade remedy
investigation, grant SMEs reasonable extensions to deadlines for submitting
information, provide assistance to SMEs in responding to requests
for information, and ensure that results of an investigation are not
less favourable to an SME if the information for an investigation
is provided to the SME's "best abilities".
According to trade officials, nearly all delegations recognised the
problems faced by SMEs in participating in, or responding to, trade
remedy investigations and the constraints they face.
However, a number of members including the Russian Federation, Japan
and Norway said the rights of larger firms risked being diminished
by the proposal and that it could lead to discrimination.
Russia, Korea, Canada, Argentina, Thailand, and Chinese Taipei were
of the view that the large discretion being given to domestic authorities
to determine what firms qualified as SMEs could lead to disputes and
place a big burden on authorities in making the determinations.
According to trade officials, some members including Russia and India
said that instead of focusing on SMEs only, it would be more fruitful
to consider how to assist all companies, regardless of size, when
targeted in AD and CVD proceedings.
The European Union said that it was important to look at the issues
faced by SMEs not only as targets in trade remedy investigations but
also as victims of unfair trading practices.
According to the EU, it is exposure to such unfair practices, first
and foremost, which threatens SMEs the most.
Australia pointed to the wide differences among members regarding
the definition of SMEs and the problems it could cause.
It noted that an SME in Australia is any firm with up to 200 employees
while an SME in China is any firm with up to 3,000 employees.
The EU informed that under its 2003 recommendation, "small"
firms are defined as those with less than 50 employees.
According to trade officials, a number of members (Switzerland, Peru
and India) said that they believed that the Chinese proposal merited
Several members also reiterated their view that the discussions within
the Negotiating Group on Rules on trade remedies and horizontal subsidies
should not be linked to any other issue, especially new disciplines
on fisheries subsidies.
Hong Kong-China and Brazil said they had an interest in the issues
raised by China but that the talks on fisheries subsidies were the
According to Singapore, any outcome on these issues would be a long-term
According to trade officials, the United States once again stated
- as it had in earlier meetings of the Negotiating Group on Rules
on China's previous proposals - that there was no common basis from
which members could constructively engage on trade remedies, including
the issues outlined in China's latest paper (see SUNS #8505 dated
18 July 2017).
Accordingly, the US said that it would not engage on these issues
or any others identified by China.
Effective trade remedies are needed more than ever to address issues
such as the historic overcapacity situation in several industrial
sectors, a situation attributable to the non-market, non-transparent
policies and distortive trade practices of one WTO member, the US
According to trade officials, China said that it appreciated the comments
from members. It explained that it was proposing "encouraging"
rather than "mandatory" language which would not change
existing obligations or impose an excessive burden on authorities.
With respect to the core issue of defining what firms qualify as SMEs,
China said given the different practices among members, it was better
to leave it to investigating authorities to decide in line with their
However, it said that it was open to any suggestions on the issue.
China further said it did not believe the existing provisions under
Articles 6.13 of the ADA and 12.11 of the SCM Agreement were sufficient
to address the problems currently faced by SMEs targeted in trade
The Chair of the Negotiating Group on Rules, Ambassador Wayne McCook
of Jamaica, said that he was aware that China was engaging members
bilaterally on these issues and that he looked forward to hearing
from them in the future on prospects for future discussions.
The Chair also underlined that each issue discussed within the Negotiating
Group would be addressed on its own merits and that all proposals
would be afforded an opportunity for discussion.
EU PROPOSAL ON SUBSIDIES NOTIFICATION
The EU's proposal on improving disciplines on subsidies notification
(TN/RL/GEN/188) was first presented in July, and the EU answered the
various questions posed on its proposal at the informal meeting this
In its proposal, the EU noted that Article 25 of the SCM Agreement
requires Members to notify subsidies, and that this requirement is
a fundamental element to ensure the correct functioning of the SCM
The objective of Article 25 of the SCM Agreement is to ensure transparency
in the subsidies provided by Members so as to allow Members to review
each other's actions in this regard.
Unfortunately, said the EU, the level of compliance by WTO Members
with this requirement has deteriorated significantly since 1995 as
the share of Members that notified subsidies decreased from 50% to
As regards the latest notification cycle, namely for 2015, out of
the membership of 162, a mere 62 Members notified subsidies despite
the obligation to do so by 30 June 2015.
Equally worrying is the fact that, while notifications are required
for subsidy programs implemented at both the central and sub-central
levels of government, some Members do not notify sub-central subsidy
programs at all or these notifications are inadequate.
In addition, said the EU, the quality of actual notifications, including
the attempts by some Members to notify subsidy programs that clearly
fall outside the scope of the SCM Agreement to create the appearance
of transparency without subjecting actual industrial subsidies to
global scrutiny, also deserves attention.
It is therefore imperative to continue working towards ensuring that
all Members abide by their obligations in this regard to allow full
transparency in respect of subsidies being granted worldwide at all
levels of government and to understand the impact that such subsidies
might have on international trade in goods, the EU added.
One option that the EU proposed is the creation of a general rebuttable
presumption according to which all non- notified subsidies would be
presumed to be actionable.
This would require an amendment of Article 25.7 of the SCM Agreement
in that where a subsidy has not been notified under Article 25, such
subsidy would be presumed to be causing serious prejudice to the interest
of other Members within the meaning of Article 6.
It would then be for the subsidizing Member to demonstrate that the
subsidy in question did not cause these effects.
This system would not alter the extent of subsidies notifications
for the subsidizing Member. It would only create a strong incentive
to comply with the existing obligations under the SCM Agreement, the
Another, admittedly more moderate option to address the transparency
problem would be a presumption of actionability that would be based
on the mechanism of the current Article 25.10 of the SCM Agreement,
Thus, the presumption of actionability would exist only for subsidies
that a Member brought to the notice of the SCM Committee because the
subsidizing Member had not notified such subsidies despite having
been called on to do so beforehand by the other Member.
Of course, this would also be a rebuttable presumption of actionability.
Therefore, the subsidizing Member would still be allowed to demonstrate
that the subsidy in question did not cause the serious prejudice.
This option would thus require an amendment to Article 25.10 of the
SCM Agreement, said the EU.
According to trade officials, while nearly all the members that spoke
expressed support for the idea of improving subsidy notifications,
they however offered mixed views over the EU's proposal.
The US welcomed what is said are the "bold ideas" set out
in the EU proposal. Australia said that it was prepared to "explore
all options" in order to improve reporting.
However, other members continued to express reservations with the
"general rebuttal" presumption proposed by the EU, as well
as the more moderate second option (a presumption of actionability).
According to trade officials, Brazil said the EU proposal could pose
particular problems for developing country members and that the SCM
Agreement already had mechanisms to deal with problems of transparency.
China pointed out that the problem of non-notification was mainly
due to capacity constraints, particularly in developing countries.
It said that the EU's "general rebuttal" presumption would
upset the balance of rights and responsibilities under the SCM Agreement
by increasing the burden of proof for members providing subsidies.
Korea said the responsibility of providing notifications belongs to
the subsidizing member, not the member taking CVD actions. The EU
proposal could lead to a sharp increase in CVD measures, it cautioned.
Canada said while transparency was critical in ensuring the functioning
of WTO subsidy disciplines, it was not currently in a position to
support the EU proposal.
Russia also expressed concerns about shifting the burden of proof
to subsidizing members under the EU's "general rebuttal"
presumption. It said that it could not endorse the proposal as currently
Norway said it was not convinced that the EU proposal was the best
way to address the problem of notification.
New Zealand suggested using existing rules and institutions, such
as the Trade Policy Reviews of members, to address the problem.
Singapore, Japan and Chinese Taipei said that they were open to further
discussions on the EU proposal.
The Chair said that the EU may wish to bring back its proposal for
further discussions and that he would leave open how and when to reconvene