TWN Info Service on WTO and Trade Issues (Dec16/08)
22 December 2016
Third World Network

China blocks US panel request over domestic support measures
Published in SUNS #8380 dated 20 December 2016

Geneva, 19 Dec (Kanaga Raja) -- A panel request by the United States to examine domestic support provided by China for agricultural producers, in particular of wheat, rice and corn, was blocked by China at a meeting of the WTO Dispute Settlement Body on 16 December.

This was a first-time request and panel establishment will be automatic when the request comes up again before the DSB.

In its communication to the DSB, the United States charged that China provides domestic support in excess of its product-specific de minimis level of 8.5 percent for each of wheat, Indica rice, Japonica rice, and corn.

The United States considered that China has acted inconsistently with its obligations pursuant to Articles 3.2 and 6.3 of the Agriculture Agreement because the level of domestic support provided by China exceeds China's commitment level of "nil" specified in Section I of Part IV of China's Schedule CLII.

In particular, said the United States, China's domestic support in favour of agricultural producers, expressed in terms of its current Total Aggregate Measurement of Support ("Total AMS"), exceeds China's final bound commitment level in 2012, 2013, 2014, and 2015 on the basis of domestic support provided to producers of, inter alia, wheat, Indica rice, Japonica rice, and corn.

The United States further considered that, to the extent applicable, these measures are inconsistent with China's obligation under Article 7.2(b) of the Agriculture Agreement because, in 2012, 2013, 2014, and 2015, China provides domestic support for wheat, Indica rice, Japonica rice, and corn in excess of its product-specific de minimis level of 8.5 percent for each product.

In its statement at the DSB, the United States recalled that all WTO Members, including China, have undertaken to limit the trade- or production-distorting government support they provide to agricultural producers.

For each WTO Member, non-exempt domestic support, as defined by the Agreement on Agriculture, may not exceed the level agreed to by that Member as reflected in its WTO schedule.

Unfortunately, said the United States, it appears that China maintains domestic support at levels well in excess of its scheduled commitments, including with respect to wheat, Indica rice, Japonica rice, and corn.

The United States maintained that when China joined the WTO, it had committed not to provide support in favour of domestic producers, expressed in terms of China's Current Total Aggregate Measurement of Support (Current Total AMS), in excess of its final bound commitment level of "nil".

China further agreed that its de minimis exemption for product-specific support would be equivalent to 8.5 percent of the total value of production of a basic agricultural product during the relevant year, the United States added.

The United States said that for the years 2012, 2013, 2014 and 2015, however, it appears that China has exceeded its final bound commitment level on the basis of China's market price support (MPS) programs for wheat, Indica rice, Japonica rice and corn alone.

That is, China's support for these products exceeded 8.5 percent of the total value of production for each product.

Prior to initiating this dispute, the United States said it had attempted to resolve these issues with China, both bilaterally and in the Committee on Agriculture.

However, China has continued to provide domestic support at levels well in excess of its WTO commitments, the United States complained.

According to trade officials, China said the support that it provides to its agricultural producers are consistent with the WTO rules and practices.

It pointed out that the WTO rules permit such support and encourages the protection of interests of agricultural producers.

On the US panel request, China said it was disappointed with what it said was an unjustified step to challenge its legitimate and WTO-consistent support for agricultural producers.

China emphasised that it will strongly defend its interests and demonstrate the WTO-consistency of its measures.

TWO PANELS SET ON AD METHODOLOGIES, RAILWAY PARTS

In other actions, the DSB agreed to establish a panel, at the second request of the Russian Federation, to examine the European Union's cost adjustment methodologies and certain anti-dumping measures on imports from Russia.

The dispute is with respect to Council Regulation (EC) No 1225/2009 of 30 November 2009 on protection against dumped imports from countries not members of the European Community, in particular Articles 2.3 and 2.5 thereof, the cost adjustment methodology used by the European Union authorities in anti-dumping procedures, as well as anti-dumping measures imposed on imports of ammonium nitrate and certain welded tubes and pipes of iron or non-alloy steel originating in the Russian Federation.

Japan, the United States, Ukraine, Korea, Argentina, Indonesia, Australia, India, China, Canada, Norway, Brazil, Vietnam and Mexico reserved their third party rights to the dispute.

The DSB also agreed to establish a panel, at the second request of Ukraine, to examine Russian measures affecting the importation of railway equipment and parts thereof.

The dispute concerns certain measures imposed by the Russian Federation on importation of railway rolling stock, railroad switches, other railroad equipment, and parts thereof ("railway products") from Ukraine.

Canada, Japan, the European Union, the United States, China, Indonesia and Singapore reserved their third party rights to the dispute.

APPOINTMENT OF APPELLATE BODY MEMBERS

According to trade officials, the Chair of the DSB, Ambassador Xavier Carim of South Africa, said that the terms of two Appellate Body members - Ricardo Ramirez Hernandez and Peter Van den Bossche - will expire on 30 June 2017 and 11 December 2017, respectively.

Accordingly, the DSB will have to decide next year on the appointments of two new Appellate Body members to replace them.

The Chair said that he intends to circulate a draft decision early next year regarding the selection process to be adopted by the DSB.

For efficiency, and taking into account that delegations will be busy in the second half of the year preparing for the WTO's Ministerial Conference in Buenos Aires in December 2017, he proposed that members carry out one selection process for the two positions at the same time, with a view to completing the process by the end of June.

However, a selection committee would make recommendations for filling one position as of 1 July 2017 and the other as of 12 December 2017, he said.

The chair said that the two newest Appellate Body members, Ms Zhao Hong and Mr. Hyun Chong Kim, would be sworn in on 25 January 2017 following the DSB meeting scheduled for that day.

The DSB agreed on 23 November to the appointment of Ms Zhao and Mr Kim to replace Ms Yuejiao Zhang and Mr Seung Wha Chang, whose terms ended on 31 May 2016.

OTHER BUSINESS

Under this agenda item, Colombia reported that it had issued a new decree modifying certain tariffs and thus "fully complied" with the DSB's rulings and recommendations in its dispute with Panama over measures on imported textiles, apparel and footwear.

According to trade officials, Panama said that another Colombian decree provides for strict checks, restricted entry ports and certain customs procedures which restricts access to the Colombian market for the same goods.

Panama said that it is reviewing the new measures and reserves its right to recourse to dispute settlement.

Meanwhile, the item of United States - Conditional Tax Incentives for Large Civil Aircraft was taken off the agenda of the DSB meeting as the United States has notified that it is appealing the panel report. +