Info Service on WTO and Trade Issues (May18/17)
Geneva, 24 May (D. Ravi Kanth) - As the United States intensifies its "unilateral" trade war on several nations, India has launched dispute settlement proceedings against the US at the World Trade Organization over Washington's controversial additional duties imposed on imports of steel and aluminium under Section 232 of its Trade Expansion Act of 1962, the national security provisions.
On late Wednesday evening (23 May), US President Donald Trump opened another front for his continued unilateral trade actions, this time by ordering investigations under the same Section 232 provisions on whether imports of autos, trucks and auto parts are undermining the US national security.
Despite mounting concern over the earlier additional duties of 25% and 10% on steel and aluminium respectively under the controversial Section 232 provisions, the Trump administration decided to investigate under the same provisions whether "core industries such as automobiles and automotive parts [which] are critical to our strength as a Nation" are being undermined by imports.
According to a report in Washington Trade Daily on 24 May, "the investigation will determine whether imports of automobiles, including SUVs, vans and light trucks, and automotive parts into the United States threaten to impair national security as defined in Section 232."
If the investigation into autos and auto parts, to be conducted by the US Department of Commerce, results in a positive finding, then, President Trump could slap additional duties of 25% on autos and automotive parts.
"There is evidence suggesting that, for decades, imports from abroad have eroded our domestic auto industry," the US Commerce Secretary Wilbur Ross said in a statement issued on 23 May.
"The Department of Commerce will conduct a thorough, fair and transparent investigation into whether such imports are weakening our internal economy and may impair national security," Ross said.
The Commerce department maintained that imports of vehicles increased by 32 per cent over the past 20 years while employment during 1990 and 2017 declined by 22 per cent.
"The investigations will consider whether the decline of domestic automobile and automotive parts production threatens to weaken the international economy of the United States, including by potentially reducing research, development and jobs for skilled workers in connected vehicle systems, autonomous vehicles, fuel cells, electric motors and storage, advanced manufacturing processes and other cutting-edge technologies," the WTD said.
[The Washington Post, citing trade analysts, reported that the Trump administration's move was designed to put pressure on Mexico during the fin al stages of negotiations for a new North American trade deal. Initial reaction to the idea of an import tax on cars based on national security needs, the report added, was unfriendly, with one veteran trade lawyer saying it would prompt "pant-wetting laughter - followed by retaliation" among US trading partners . A unilateral move by the US to raise tariffs would also almost certainly be challenged at the WTO and lead to further retaliation by US trading partners. "It's flabbergasting. What makes the imports of cars a threat to the national security of the United States? It's flagrant protectionism," said one European official. SUNS]
Before announcing the investigations on late Wednesday evening, President Trump tweeted that "there will be big news coming soon for our great American Autoworkers."
"After many decades of losing your jobs to other countries, you have waited long enough," Trump said.
Clearly, the Section 232 seems to have been weaponized for ensuring support from the American workers in key states ahead of the mid-term elections to the US Congress.
"If they [the US] were to go ahead with such wide-ranging trade restrictions, it would throw the global market into confusion," said Hiroshige Seko, Japan's minister of economy, trade and industry.
"There could be a negative effect on the WTO multilateral trading system. It's extremely regrettable," Seko said.
"To treat auto imports like a national security threat would be a self-inflicted economic disaster for American consumers, dealers and dealership employees," said Cody Lusk, President and chief executive of the American International Automobile Dealers Association.
The US imported more than 8 million cars and light trucks estimated at around US$191.7 billion. Significantly, more than half of the imports of 4.27 million came from Mexico and Canada, the two North American Free Trade Agreement (NAFTA) partners who are waging a grim negotiating battle with the US for rewriting the NAFTA agreement all over again.
On the face of it, Trump's latest Section 232 action into autos and automotive parts seems to be a subtle warning to Mexico and Canada that if they don't fall in line in the ongoing NAFTA negotiations they will pay another price on their exports on the autos front.
"Using Section 232 against steel and aluminium was already a stretch, a violation of the WTO and against the spirit and letter of the law. Using it against autos would be preposterous," said Luis de la Calle, a former Mexican negotiator.
"The national security exemption is a privilege to use in case of war. This [latest action] has little to do with national security and a lot to do with nation al politics," the Mexican negotiator maintained.
It remains to be seen whether the US would target China on the autos and automotive parts after Beijing signalled on 22 May that it would reduce its tariffs on passenger cars from 25 to 15 per cent.
Ahead of the investigations into autos and automotive parts, India launched Dispute Settlement Body (DSB) proceedings against Washington's controversial additional duties for adjusting the imports of steel and aluminium, saying that it violated global trade rules, especially the Safeguards Agreement. (See separate story).
In an Article 4 request filed with the chairperson of the Dispute Settlement Body on May 18, India said the US decision to impose 25% and 10% of additional duty on certain steel and aluminium products from all countries except Canada, Mexico, Australia, Argentina, South Korea, Brazil and the European Union, which took effect from 23 March 2018, violated core WTO rules.
According to India, the US measures on steel and aluminium based on Section 232 national security provisions violated the following provisions of the WTO agreements:
i. Articles XIX:1(a), XIX:2 of the GATT 1994 and Articles 2.1, 2.2, 3.1, 4. 1, 4.2, 5.1, 7, 9.1, 11.1(a), 12.1, 12.2 and 12.3 of the Agreement on Safeguards because the measures at issue are, in effect and in substance, safeguard measures and the United States has adopted and implemented the measures at issue inconsistently with its obligations, both substantive and procedural, as set out under the said provisions of the GATT 1994 and the Agreement on Safeguards.
ii. Article 11.1(b) of the Agreement on Safeguards and Article XI:1 of the GATT 1994 to the extent that the United States seeks, through the adoption of the measures at issue, any voluntary export restraints, orderly marketing arrangements or any other similar measures on the export or the import side.
iii. Article II:1(a) and (b) of the GATT 1994, because the United States has imposed import duties on certain steel and aluminium products in excess of the duties set forth and provided in Part-I of the United States' Schedule of Concessions and Commitments annexed to the GATT 1994.
iv. Article I:1 of the GATT 1994, because the measures at issue do not apply uniformly to all imports of certain steel and aluminium products into the United States irrespective of their origin and thereby the measures at issue discriminate against imports of the said steel and aluminium products originating from India, with respect to the advantage, favour, privilege or immunity extended by the United States to certain selected WTO Members.
v. Article XI:1 of the GATT 1994, because the measures implicitly introduce restrictions in the form of quotas, as the said measures reduce the imports of steel and aluminium products from the trade levels as existed prior to these measures.
vi. Article X:3(a) of the GATT 1994, because the United States has failed to administer its laws, regulations, decisions and rulings in relation to the measures at issue in a uniform, impartial and reasonable manner.
The US has to address India's concerns in the next 60 days to arrive at an amicable agreement. India could call for the establishment of a dispute settlement panel to adjudicate the issues raised in its complaint.
Significantly, India's request for the dispute settlement consultations with the US came a week after New Delhi signalled at the WTO's Goods Council its intention to impose trade retaliatory measures to the tune of $165.56 million on American goods if the US makes the duties permanent.
The US also intensified its actions against India by calling for the establishment of a dispute settlement panel to adjudicate over India's alleged export subsidy schemes for various sectors in violation of global subsidy rules.
In a complaint filed with the Dispute Settlement Body on May 17, the US said the consultations with India on April 11 failed to resolve the concerns raised by Washington. Consequently, the US said it is compelled to seek the establishment of a panel to adjudicate India's various export subsidy schemes that are allegedly inconsistent with global trade rules.
The US said, "India provides export subsidies through: (1) the Export Oriented Units Scheme and sector specific schemes, including Electronics Hardware Technology Parks Scheme and Bio-Technology Parks Scheme, (2) the Merchandise Exports from India Scheme, (3) the Export Promotion Capital Goods Scheme, (4) Special Economic Zones, and (5) a duty-free imports for exporters program."
India, according to the US, is subject to the obligations of Article 3.1(a) of the SCM Agreement because India's gross national product per capita has reached $1,000 per annum.
"The measures [arising from India's export subsidy schemes] appear to be inconsistent with Article 3.1(a) of the SCM Agreement, and India appears to have acted inconsistently with Article 3.2 of the SCM Agreement," the US said.
The US dispute against India on the subsidies front comes at a time when the US is systematically undermining the DSB by blocking the expeditious selection process for filling vacancies on the Appellate Body (AB).
It is clear that the multi-pronged assault launched by the US through its unilateral crowbar trade measures, in tandem with its destructive actions at the WTO, can only be addressed if the developing countries as well as developed countries pursue a common strategy.
But global trade based on divisive mercantile philosophy that gives primacy to one's own dollar-and-cents gains will pose a big obstacle for cooperative action.
Little wonder that President Trump is able to steam-roll countries by launching unilateral crowbar trade actions that almost resemble what an infamous Chancellor of an European country did in the run-up to and during the Second World War.