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TWN Info Service on WTO and Trade Issues (Feb19/01)
1 February 2019
Third World Network


Dispute panel to examine US Section 301 tariffs on Chinese goods
Published in SUNS #8835 dated 30 January 2019

Geneva, 29 Jan (Kanaga Raja) – The Dispute Settlement Body (DSB) of the World Trade Organisation (WTO) on Monday agreed to a Chinese request to establish a dispute panel to examine tariffs imposed by the United States on imports of Chinese goods under Section 301 of the US Trade Act of 1974.

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

The European Union, Japan, Norway, Canada, New Zealand, Singapore, the Russian Federation, Chinese Taipei, Ukraine, Indonesia, India, Kazakhstan, Korea and Brazil reserved their third-party rights to the dispute.

In other actions, the DSB also agreed to establish a dispute panel, at the second request of the United States, to examine additional duties imposed by Turkey on certain US products in response to the US additional tariffs on imports of steel and aluminum (DS561).

The EU, Japan, Canada, Ukraine, Thailand, Indonesia, Singapore, New Zealand , Mexico, the Russian Federation, Norway, Switzerland, Chinese Taipei, Venezuela, Guatemala, Kazakhstan, Brazil, China and India reserved their third-party rights to the dispute.

Six dispute panels have now been established to examine the additional duties imposed by WTO members on imports of US products in response to the US steel and aluminum tariffs.

[In a post on the International Economic Law and Policy (IELP) blog, Prof Simon Lester, a US trade academic, said: “For the nine panels established to hear the complaints against the Section 232 measures, the panels have all been composed with the same panelists, as follows: Elbio Rosselli (Uruguay), Esteban Conejos (Philippines), Rodrigo Valenzuela (Chile) ….

“For the five panels established to hear the complaints against the retaliation for the Section 232 measures, they have done something interesting that I’ve never seen before: All the cases have the same chairperson, but then each has different panel members.

“William Ehlers of Uruguay is the chair of all the panels, but then the following are panelists on individual cases: DS566 – Petina Gappah and Syed Tauqir Hussain Shah; DS560 – Cesar Montano Huerta and Fabian Villaroel Rios; DS559 – Olga Lucia Lozano Ferro and Anwar Zaheer Jamali; DS558 – Cristian Espinos a Canizares and Monica Rolong; DS557 – Darlington Mwape and Claudia Uribe.

“The facts of each of these cases are a little different (because the measures are different), but the legal issues will be very similar. Will there be any divergence among these various panel members in how they would like to approach the legal reasoning? Will the chair be able to keep them all on the same page? Will there be some juicy dissents?”

See the full post at: https://worldtradelaw.typepad.com/ielpblog/2019/01/panels-composed-in-the-section-232retaliation-cases.html]

At the DSB meeting on Monday, referring to the US-Turkey dispute, the EU noted that today the DSB will establish this panel, which could mark the end of a long series of meetings in each of which the DSB considers panel requests in relation either to the safeguard measures which the US has taken starting in March 2018, or to the suspension of GATT obligations in response.

This series alone is testimony to the strength of the opposition which the US measures on steel and aluminium have generated across the world, the EU underlined.

Likewise, the number of cases of suspension of GATT obligations is testimony to the strength of this opposition, said the EU.

Time and again, the United States delivers in this Body hardly changing statements that are intended to make us all believe that the US in good faith took the necessary measures to protect its essential security interests. And that the other WTO Members in bad faith resorted to action that is not allowed, said the EU.

The EU said it is confident that these disputes will above all demonstrate that the rules-based multilateral trading system is good enough and strong enough for not allowing the form of abuse of Article XXI of the GATT present in this case.

This case does not fit under the requirements of that Article, but serves merely to protect two US industries against competition from imports, it added.

The EU said that it is likewise confident that these disputes will confirm the right of WTO Members to resort to their right of suspension under the WTO Agreement on Safeguards, when a safeguard measure has actually been taken, irrespective of how the Member in question has called its measure.

Meanwhile, under a separate agenda item, the US again said it was not in a position to agree to a joint proposal sponsored by some 71 WTO Members that called for the simultaneous launch of the selection processes to fill four vacancies on the seven-member Appellate Body as soon as possible. (A separate article on the AB blockage will appear in a forthcoming issue of SUNS).

CHINA-US DISPUTE OVER SECTION 301

In its communication to the DSB, China said that on 4 April 2018, it had requested consultations with the United States pursuant to Article 4 of the Understanding on Rules and Procedures Governing the Settlement of Disputes (DSU) and Article XXIII of the General Agreement on Tariffs and Trade 1994 (GATT 1994).

China said it filed addenda to its 4 April 2018 requests for consultations on 6 July 2018, 16 July 2018, and 18 September 2018 as a result of the expansion of the extraordinary tariffs being imposed on imports of Chinese goods into the United States after those subject to China’s initial requests for consultations.

China said consultations were held with the United States on 28 August 2018 and 22 October 2018, but these consultations failed to resolve the dispute.

According to the Chinese communication, on 18 August 2017, the United States Trade Representative (USTR) initiated an investigation under Section 301 of the Trade Act of 1974 concerning alleged acts, policies, and practices by China related to technology transfer, intellectual property, and innovation.

On 22 March 2018, the USTR released its report on the investigation under Section 301 of the Trade Act of 1974.

On the same date of 22 March 2018, the United States issued a Presidential Memorandum, in which the USTR was directed to take all appropriate action under Section 301 of the Trade Act of 1974 to address the acts, policies, a nd practices of China, and that such action should include increasing tariffs on imported goods from China.

Thereafter, the USTR published a series of notices, according to which the United States started to impose 25% additional tariffs on approximately $34 billion of Chinese imports from 6 July 2018, and impose 10% additional tariffs on approximately $200 billion of Chinese imports from 24 September 2018.

The latter tariff increases were scheduled to increase to 25% on 1 January 2019.

According to China, the measures at issue in its request include the action s taken by the United States, based on the USTR’s investigation into China’s acts, policies, and practices related to technology transfer, intellectual property, and innovation under Section 301 of the Trade Act of 1974 and pursuant to sections 301(b), 301(c), and 304(a) of the Trade Act of 1974 and the direction made in the President’s statement to impose an additional ad valorem duty upon certain imported products of Chinese origin.

The abovementioned actions include:

1. An additional 25% duty ad valorem on approximately $34 billion worth of imports from China announced by the USTR on 15 June 2018 and implemented by the Federal Register notice of 20 June 2018 (Notice of Action and Request for Public Comment Concerning Proposed Determination of Action Pursuant to Section 301: China’s Acts, Policies and Practices Related to Technology Transfer, Intellectual Property and Innovation, (83 Fed. Reg. 28,710)); and

2. An additional 10% duty ad valorem on approximately $200 billion worth of imports from China implemented on 24 September 2018, and the rate of additional duty will increase to 25% ad valorem on 1 January 2019, according to the announcement by the USTR on 21 September 2018 (Notice of Modification o f Section 301 Action: China’s Acts, Policies and Practices Related to Technology Transfer, Intellectual Property and Innovation, (83 Fed. Reg. 47,974)).

According to the Chinese communication, the measures at issue appear to be inconsistent with the US obligations under the following provisions of the GATT 1994 and the DSU:

1. Article I:1 of the GATT 1994, because the United States imposes addition al tariffs on certain imported products as identified in measures 1 and 2 above that exclusively apply to Chinese products, and therefore fails to accord immediately and unconditionally to certain products originating in China and imported to the United States the “advantage, favour, privilege or immunity” granted by the United States “[w]ith respect to customs duties and charges of any kind imposed on or in connection with” the importation of the like products originating in the territories of other WTO Members;

2. Article II:1(a) and (b) of the GATT 1994, because the United States impo ses additional tariffs on certain imported products originated in China as identified in measures 1 and 2 above that are in excess of United States bound rates in its Schedule of Concessions and Commitments annexed to the GATT 1994, and therefore fails to accord to certain products originating in China and imported into the United States, as identified in the legal instruments, treatment no less favourable than that provided for in the United States’ Schedule of Concessions and Commitments annexed to the GATT 1994; and

3. Article 23.1, and Article 23.2 (a), (b), and (c) of the DSU, because the United States fails to follow the required procedures and conditions set out in Article 23.1 and Article 23.2(a), (b) and (c).

Specifically, when seeking the redress of the violation of obligations or other nullification or impairment of benefits under the covered agreements of WTO agreements or an impediment to the attainment of any objective of the covered agreements of WTO agreements, the United States fails to seek recourse to dispute settlement mechanism under the DSU to determine whether certain acts, policies, or practices of China identified in the Section 301 report violated a covered agreement.

Instead, the United States unilaterally imposes the additional tariffs on certain imported products originated in China, which are identified in measures 1 and 2 above, based on the findings and/or determinations made in the Section 301 report.

In its statement at the DSB, China said that despite its strong opposition, the US began to collect 25% additional duties on approximately $34 billion of Chin ese imports on 6 July 2018, and impose 10% additional duties on approximately $200 billion of Chinese imports from 24 September 2018, based on unilateral determination by the US under the so-called “Section 301” of its Trade Act of 1974.

This is a blatant breach of the US obligations under the WTO Agreements and is posing a systemic challenge to the multilateral trading system.

Due to the urgency of this dispute, which continues to damage China’s legitimate economic and trade interests as well as the rules-based multilateral trading system, China said that it decided to make its second request for the establishment of a panel in accordance with WTO rules.

The subject of its request is the US imposition of a 25% additional duty on $34 billion of imports from China, and subsequently, a 10% additional duty on $200 billion of imports from China.

China said it had made it clear that these unilateral actions taken by the US not only infringe China’s rights and interests under the covered agreements, but also flagrantly violate various WTO rules and the fundamental principles in this organisation, such as non-discrimination, bound tariffs and strengthening of the multilateral system, as set forth in Article I and II of the GATT 1994, as well as Article 23 of the DSU respectively.

If the US were free to continue infringing these principles without consequences, the future viability of this organisation is in dire peril, China underlined.

China said it believes that it is important to all Members that unilateral actions, such as Section 301 employed by the US should have no room in this organisation.

China noted that at the 18 December 2018 meeting of the DSB (where China’s first panel request came up), the US attempted to justify its unilateral imposition of additional tariffs by citing grievances regarding certain Chinese acts, policies and practices identified in its Section 301 report.

However, said China, despite the validity of such assertions, the unilateral nature of the US measures blatantly run against the very clear rules and principles agreed by the whole membership including itself.

Contrary to critiques of the US, China said its action today by resorting to the WTO dispute settlement system reaffirms its strong support to the rules-based multilateral trading system and is helping to strengthen the validity of the system.

In its statement, the US said that at the December meeting of the DSB, it noted that China intends to do, and is doing, great damage to the international trading system.

China damages this system, which has brought China tremendous economic gains, both through its grossly unfair and trade-distorting forced technology transfer policies and practices and through this unfounded dispute, the US claimed.

First, in bringing this dispute, China seeks to use the WTO dispute settlement system as a shield for a broad range of trade-distorting policies and practices not covered by WTO rules.

In doing so, it is China, and certainly not the United States, that is threatening the overall viability of the WTO system, the US claimed.

Second, China’s request is entirely hypocritical, the US further claimed.

China is currently damaging the United States not only through its forced technology transfer practices but additionally by imposing discriminatory duties on over $100 billion in US exports.

So while China with one hand points an accusing finger at US tariff measures for being “unilateral” and WTO-inconsistent, with the other hand China points a finger squarely at itself by adopting its own “unilateral” tariff measures in connection with the very same issue.

Third, in these circumstances, the outcome of any dispute settlement proceeding would be pointless, the US argued.

China has already taken the unilateral decision that the US measures cannot be justified, and China has already imposed tariff measures on US goods.

Accordingly, the US said it regrets that China has chosen for a second time to request the establishment of a panel with regard to this matter.

This action suggests that China is not serious about addressing the legitimate concerns of its trading partners over Chinese technology transfer practices that no one could describe or defend as fair, it maintained.

In response to the US statement, with respect to the US claims against China’s economic policy, China pointed out that these findings of the Section 301 investigations are a willful distortion of facts and full of selective assertions and allegations.

With respect to Section 301 measures of the US Trade Act of 1974, China said it is well settled among various stakeholders that these measures are unilateral in nature and are inconsistent with the WTO obligations of the US.

China said it sees no reason that attacking China or blaming China’s policy could provide any legitimacy for the notorious US Section 301 measures.

 


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