TWN Info Service on WTO and Trade Issues (Apr18/03)
11 April 2018
Third World Network

US claims no basis for safeguard consultations on its S.232 actions
Published in SUNS #8656 dated 6 April 2018

Geneva, 5 Apr (D. Ravi Kanth) - The United States has informed China that there is no basis for safeguard consultations at the World Trade Organization on the additional duties it has imposed on steel and aluminum, emphasizing that the Presidential Proclamations under S.232 of US trade law are aimed at adjusting imports, threatening national security.

Short of saying that its actions on steel and aluminum under Section 232 of the Trade Expansion Act of 1962 would be tantamount to unilateral trade actions that cannot be justified under the WTO rulebook, the US has also advised China that Beijing cannot impose safeguard duties to the tune of around $3 billion on American products, as the American measures are not safeguard-based actions in accordance with the Safeguards Agreement.

In a two-page communication sent to China on Wednesday (4 April), the US stated that the additional duties imposed on steel and aluminum imports did not come under the purview of the WTO's Safeguards Agreement.

Last month, China requested the US to enter into consultations under Article 12.3 of the WTO's Safeguards Agreement following the Steel and Aluminium Proclamations issued by President Donald Trump last month, increasing tariffs of 25% on steel imports and 10% on aluminium imports.

In response to China's request, in its communication sent to the Chinese mission to WTO and to the WTO, the US said: "the President issued the Steel and Aluminium Proclamations pursuant to Section 232 of the Trade Expansion Act of 1962, under which the President determined that tariffs are necessary to adjust imports of steel and aluminum articles that threaten to impair the national security of the United States."

Therefore, maintained the US, its actions do not constitute safeguard measures, nor is there any basis to conduct consultations under the Agreement on Safe guards with respect to the American measures.

The US administration is clearly distraught by the tumbling down of stock markets following China's decision to impose $3 billion of tit-for-tat duties on a range of politically-sensitive products such as pork, fruits, nuts etc, and China making public its likely targets for similar actions on imports from the US of soybeans (in response to any tariffs US may impose under its S.301 family of trade laws) and which could tilt the scales against Republican candidates in the mid-term elections later this year.

In the communication to the Chinese request for consultations, the US said it did not impose additional duties on steel and aluminum "pursuant to Section 201 of the Trade Act of 1974, which is the law under which the United States imposes safeguard measures."

Consequently, said the US, it did not notify the measures on steel and aluminum at the WTO "because they are not safeguard measures."

"As evidenced by our recent notifications with respect to solar products and washers," the US said it is well aware of its notification obligations for safeguards measures under the Agreement on Safeguards.

The US argued that, under Article 12.3 of the Agreement on Safeguards, a "Member proposing to apply or extend a safeguard measure shall provide adequate opportunity for prior consultations" with Members having a substantial interest in exports of the product concerned.

However, the US said it is not proposing "to apply or extend a safeguard measure" with respect to steel or aluminium, and therefore Article 12.3 does not apply.

Accordingly, said the US, China's requests for consultations pursuant to Article 12.3 have no basis in the Agreement on Safeguards.

Against this backdrop, China's notification on 29 March to suspend concessions and impose additional duties on American products on 2 April under Article 8.2 of the Safeguards Agreement "does not justify China's suspension of concessions or other obligations."

Further, "China has asserted no other justification for its measures, and the United States is aware of none," the US maintained. "Therefore, it appears that China's actions have no basis under WTO rules," Washington claimed.

The US said it is ready to answer further queries from China related to US actions under Section 232 of the Trade Expansion Act of 1962 but not under the Safeguards Agreement.

[In a comment on the US communication, Prof Simon Lester, US trade law academic who moderates and runs the IELP blog, says at the blog: "As noted in the comments here, I agree with the US view of this. But here's my question: Is the US going to file a complaint against China under the DSU? What role will WTO dispute settlement play in this escalating tariff battle?"
( ).

[Lester's comment and question to USTR comes in the context of the US derailing the WTO's dispute settlement understanding and procedures by blocking the process for filling vacancies in the Appellate Body, and soon make the AB unable to function. SUNS]

In short, the US seems rattled and somewhat apprehensive to press ahead with the proposed S.301 actions against China for its alleged mandatory requirements for transfer of technologies in violation of intellectual property provisions.

President Trump on Wednesday disclaimed that the US is in a trade war with China, arguing "that was lost many years ago by the foolish, or incompetent, people who represented the US."

In his daily ritual of multiple tweets on thorny issues, Trump said, "Now we have a Trade Deficit of $500 Billion a year, with Intellectual Property Theft of another $300 Billion. We cannot let this continue!"

"When you're already $500 Billion DOWN, you can't lose!" the President tweeted later.

Clearly, the Presidential tweets seem to suggest that Washington had not anticipated that China would announce a range of products on which it will levy tariffs to the value of $50 billion in response to Washington's proposed plans to impose tariffs on as much as $50 billion worth of Chinese imports because of Beijing's failure to protect intellectual property.

[The Chinese have said their actual tariffs and timing would depend on the US levies (at the end of its current period of domestic consultations to hear objections and decision to be taken in the light of them). SUNS]

Earlier, China had announced imposition of tariffs on $3 billion worth of U S products (pork, fruits, nuts and some other products) after the US imposed global tariffs of 25 percent on steel imports and 10 percent on aluminum imports.

Even the new National Economic Council director Larry Kudlow, according to a report in Washington Trade Daily on 5 April, has dismissed talk of a trade war.

Talking to reporters at the White House, Kudlow said: "This is not about a trade war. This is about holding a trade partner accountable." "The tariffs might not actually ever take effect if the two sides can work things out."

The US seems worried about the possibility of punitive duties on soybeans, with the US Agriculture Secretary Sonny Perdue suggesting that President Trump informed him that "farmers and ranchers will not be allowed to be the casualty in this strategy. He will support them every step of the way."

According to WTD, "Sen. Chuck Grassley (R-Iowa) - just back from a Congressional trip to China - said yesterday he will draft legislation to mitigate the economic hit farmers will take if the tariffs are imposed."

"Farmers and ranchers shouldn't be expected to bear the brunt of retaliation for the entire country," he said. "It's not fair and it doesn't make economic sense. The Administration knew that if it imposed tariffs on Chinese goods, China would retaliate against US agriculture," the senator said.

China's envoy to Washington Ambassador Cui Tiankai held talks with John Sullivan, who is acting as the Secretary of State, in a bid to avoid trade war, according to a report in the Financial Times on Thursday.

[Sullivan is acting as Secretary of State, after President Trump fired Rex Tillerson and nominated Mike Pompeo, presently CIA Director. Pompeo has to be confirmed by the US Senate before he can take office as Secretary of State. SUNS]

Ambassador Tiankai urged Sullivan that the US must "abandon unilateralism and trade protectionism as soon as possible" and "stop the 301 investigation into China."

The acting US Secretary of State, in response to Ambassador Cui's comments, "reiterated the need to restore fairness and balance our economic ties."

Sullivan said he and Ambassador Cui "agreed to remain in close communication on these and other bilateral, regional, and global issues of mutual concern ," according to the FT.

The continued silence of other dominant Northern countries - the European Union, Japan, Canada, and Australia - on the US actions against China goes to suggest that they are in concurrence with what Washington intends to do, said a trade official, who asked not to be quoted.

A long time ago, China's Chairman Mao Tse-tung called the US imperialism "a paper tiger" implying that the US seems threatening but is ineffectual and unable to withstand challenge.

Clearly, the US responses to China's proposed retaliatory measures (over intended US S.301 tariffs) suggest that the Chinese market for soybeans and aircraft are too big for Washington's powerful elite to ignore at their peril.