TWN Info Service on WTO and Trade Issues (Apr18/18)
26 April 2018
Third World Network
       
US faulted at WTO Safeguards Committee over S.232 actions
Published in SUNS #8669 dated 25 April 2018

Geneva, 24 Apr (Kanaga Raja) - Several members of the World Trade Organisation (WTO) on Monday voiced sharp concern and disappointment over the decision by the United States to impose additional tariffs on imports of certain steel and aluminium products under Section 232 of the Trade Expansion Act of 1962.

The Russian Federation, Venezuela, Turkey, Norway, Switzerland, India and Singapore all joined China in criticising US imposition of additional tariffs on imports of certain steel and aluminium products, claiming "national security" and purporting to act under S.232 of the US Trade Expansion Act of 1962.

This criticism of the US actions came at a formal meeting of the Committee on Safeguards, under an agenda item requested by China on measures taken by the US following its Section 232 investigations.

In recent weeks, a growing number of WTO members have been seeking consultations with the US under Article 12.3 of the WTO's Agreement on Safeguards over its S. 232 actions.

So far, China, the European Union, India, the Russian Federation and Turkey have requested consultations with the US over its measures following the Presidential Proclamations on Steel and Aluminium issued by President Donald Trump under Section 232 of the Trade Expansion Act of 1962 imposing additional tariffs on these products. (See SUNS #8668 dated 24 April 2018).

Also at the meeting of the Safeguards Committee on Monday, Korea, the Philippines, the European Union, China, Singapore, Switzerland, Norway and Malaysia criticized the recent US decision to impose safeguard tariffs on imported solar cells.

Korea, China, and Mexico also criticized a similar action taken by the US targeting imported large residential washers.

Meanwhile, Korea, Turkey, Argentina, China, Egypt, Vietnam, Chile and India voiced criticism over the decision by the EU on 26 March to initiate a safe guard investigation on imports of 26 steel products. (See below.)

According to trade officials, at the meeting of the Safeguards Committee on Monday, the Russian Federation, Venezuela, Turkey, Norway, Switzerland, India and Singapore joined China in voicing their concerns over the US actions under Section 232.

In a strong statement, China said that on 8 March US President Trump issued a proclamation finding that steel and aluminium were being imported into the US market in such quantities as to pose a national security threat to the United States, and imposed tariffs of 25% and 10% on imports of steel and aluminium, respectively.

China said that although the measures were imposed under the guise of national security, these are safeguard measures and that the US should have responded to its request for consultations under the Safeguards Agreement.

According to trade officials, China underlined that the Section 232 actions severely damage the stability of the multilateral trading system and distort international supply chains, with considerable negative follow-up effects.

For example, it pointed out, some members have been forced to take measures because of concerns regarding trade diversion arising from the steel and aluminium tariffs.

China warned that if such measures deliberately undermining the multilateral trading system cannot be curtailed, the multilateral system will face the risk of collapse.

China also emphasised that the US decision to exempt certain exporters from the tariffs, including some of the largest suppliers to the US market, clearly violated the WTO's most favoured nation principle.

In an apparent reference to the US-Korea free trade agreement, China said another example is the US use of the exemptions to push another member to agree to voluntary export restraints on steel in their bilateral trade agreement, which is clearly forbidden under multilateral trading rules.

China said that it opposes the US approach and that members cannot allow this unilateralist momentum to continue.

A member is not allowed to use tariff measures as a threat to pressure other members unilaterally, said China, adding that the answer is to respect the multilateral trading system.

According to trade officials, the US reiterated what it had said in an earlier submission to the Safeguards Committee (G/SG/168), in that the tariffs are not safeguard measures, and therefore, there was no basis to conduct consultations under the Safeguards Agreement with respect to these measures, and that there was nothing to justify China's imposition of "rebalancing" tariffs under Article 8.2 of the Safeguards Agreement.

The US maintained that China's response on 2 April in imposing "rebalancing" tariffs on 128 US products (G/SG/N/12/CHN/1) has no basis under the WTO's Safeguards Agreement, since these are not safeguard measures.

It also claimed that China has not asserted any other legal basis for its action, therefore, there appears to be no basis for China's actions under the WTO rules.

The US maintained that China has adopted non-market-oriented policies in these sectors, leaving WTO members with no other choice to address the situation.

According to the US, it is important to put first things first and discuss such distortions.

The US maintained that China doesn't appear to be addressing this but in fact appears to be increasing state intervention under its "Made in China 2050" industrialization and innovation programme.

The US said until China alleviates the global problem it has created, members will have no choice but to address the problem in the form they consider most appropriate.

According to trade officials, noting that this issue was already raised in the Goods Council, Russia believed, like China, that the US action was in essence a safeguard measure.

According to Russia, the whole process leading up to the imposition of tariffs lacked transparency and deprived foreign producers the right to provide evidence in the hearings.

What is most outrageous, said Russia, are the exclusions exempting certain suppliers, including the biggest suppliers, from the tariffs.

Russia said it cannot understand how the US intends to achieve its goal of protecting the US industry when the biggest exporters are excluded.

The US actions only cause instability in trade, lead to increased trade barriers, and create a lose-lose situation for all members, it warned.

Turkey said that it was not convinced by the national security argument and that such claims should only be used in exceptional circumstances.

According to Turkey, the G20's Global Forum on Steel Excess Capacity provides a venue to discuss the problem of excess capacity, and that such problems should be resolved through coordinated efforts, rather than resort to unilateralism.

Norway said that it was deeply concerned by the US actions. While these act ions are harming Norwegian steel producers, Norway said what it is most concerned about is that the actions are undermining the multilateral trading system.

Switzerland shared the concerns of the other Members regarding the unilateral US actions. It said that it did not understand the rationale of exempting certain members while similar members are subject to the tariffs.

According to trade officials, India said that such unilateral actions have no place in the international trading system and that it was watching the situation closely.

Singapore said that the US actions adversely affect global supply chains and downstream US industries.

China pointed out that it was working with other members to resolve their relevant concerns and that the G20's Global Forum on Steel Excess Capacity and other fora exist to discuss the issue.

Good discussions have already taken place, and China has already made significant progress in reducing domestic steel production and is continuing to further reduce capacity, it said.

US ACTIONS ON SOLAR CELLS, LARGE RESIDENTIAL WASHERS

Meanwhile, the US made a long statement under the agenda item on US safeguards on solar cells and large residential washers (G/SG/N/8/USA/9, G/SG/N/8/USA/10).

According to trade officials, with respect to the imposition of safeguard duties in January on imported solar cells and large residential washers, the US maintained that the investigation into both products was carried out in a very open an d transparent manner, with WTO members notified of the progress in the US investigation during every step of the process.

WTO members were given ample opportunity to present written arguments, it said.

Recommendations were forwarded to the president, who took the measures he considered necessary to remedy the situation.

Members were also given the opportunity to consult with the US on its actions under the Safeguards Agreement, with those requesting consultations holding talks with the US from February to April.

The US said that it then submitted to the WTO joint notifications with nearly all members it held consultations with, and most of the notifications contained a specific date regarding the date by which members can take actions of maintaining substantially equivalent levels of concessions.

With regards to the safeguard on solar cells, the US said that it was still considering requests for exclusions and that it expected an announcement on this in the coming months.

According to trade officials, Korea said that it considered the US measures to be excessive and inconsistent with the WTO agreements with respect to the alleged significant increase in imports, serious injury to competing US producers, and direct causation between the increased imports and the injury suffered.

Korea informed that it had failed to agree with the US on compensation for both the safeguard measures and has notified the WTO of its plans to suspend concessions against the US.

Korea expressed hope that the measures would be withdrawn as soon as possible.

The Philippines said that it had held consultations with the US on the safe guard on solar cells and that both sides agreed to continue their discussion while maintaining their rights under the Safeguards Agreement.

According to the Philippines, they also agreed that the Philippines had the right to suspend concessions after 6 February 2021 or following any decision by the Dispute Settlement Body declaring the safeguard to be in violation of WTO rules.

The EU said it was very concerned about the use of safeguards by the US, which was not a traditional user of such remedies, having last imposed a safeguard in 2002.

The EU maintained that the safeguard on solar cells is not appropriate because the problem was primarily the increased imports from a number of Asian producer s but was causing collateral damage to others.

EU imports were not the problem, it claimed.

According to trade officials, China voiced concerns over both the investigations on solar cells and large residential washers.

With respect to the investigation on solar cells, almost all important data was kept confidential, and particular key indicators were redacted, said China.

China said the US failed to consider how its domestic industry was affected by the global market downturn in the solar cells market, instead, attributing injury to imports.

Furthermore, the US did not impose the tariffs in response to unforeseen circumstances as required under the Safeguards Agreement.

Singapore said it was concerned about the US action and that the tariffs will only dampen growth and increase costs to US producers.

Switzerland expressed deep disappointment with the US decision. It said that blocking all imports, even those not contributing to the problem, was not a proper solution.

Norway said that it regretted the US decision and had doubts that it met the criteria for imposition of a safeguard under WTO rules.

Malaysia said the US solar safeguard was causing serious injury to its domestic producers and that it had agreed to continue discussions with the US on the matter.

Mexico said it was very concerned about the US change of position on the use of safeguards and that safeguards should only be used in exceptional circumstances.

Mexico also pointed to a US International Trade Commission finding that exports of washing machines from Mexico do not harm the US industry.

EU SAFEGUARD INVESTIGATION ON STEEL PRODUCTS

On the agenda item on the European Union safeguard investigation on certain steel products (G/SG/N/6/EU/1), the EU said that its safeguard investigation on imports of 26 steel products was still in the initial phase, with interested parties being registered and questionnaires being completed.

It maintained that the investigation would be carried out in line with WTO requirements.

According to trade officials, Korea expressed concern over the increasing threat to global trade due to the protectionist measures imposed by major traders.

Korea argued that the EU investigation is not in response to any sudden, sharp increase in imports, nor is it in response to unforeseen circumstances.

It is also difficult to argue that the EU industry has suffered injury since its financial situation has improved since 2017.

Korea said that it hoped the investigation would be terminated without any safeguard being imposed.

Turkey expressed disappointment over the EU action. It said the EU should contribute to stopping protectionism, not making the problem more difficult to resolve.

Argentina said it should be exempted from the investigation on de minimis grounds, since its steel producers account for less than a tenth of one per cent of EU steel imports.

China viewed the EU's actions as an incorrect move that will only damage the global steel order. It urged the EU to follow WTO rules.

Egypt also questioned whether the EU investigation was in response to a sharp, significant increase in imports.

Egypt, along with Vietnam, asked to be exempted from the investigation as a developing country exporter accounting for de minimis shares of the EU market.

Chile said that the EU notification of the investigation was unclear about the exact products targeted.

According to trade officials, India said that the evidence provided by the EU for justifying the investigation does not meet the standards of the Safeguards Agreement.

OTHER MATTERS

Under the agenda item on India - solar cells (G/SG/N/8/IDN/17), the EU said that safeguard measures should only be imposed under exceptional circumstances, particularly if the imports causing problems come from predominantly one source.

The EU claimed that India's injury analysis on imported solar cells is inconclusive and its causal analysis doubtful. Injury to other domestic producers needs to be assessed, it said.

The EU said it trusts that India will refrain from imposing any definitive measure.

Japan said an investigation should include reasonable public notice and other appropriate means to ensure interested parties can present evidence.

According to trade officials, India said that it had informed members in January that a preliminary safeguard of 70% was notified to WTO members in January and that this was followed by a challenge to the measure in the domestic courts, so the matter is sub judice.

India said it has nothing further to add at this stage other than to say that its investigation will be carried out in line with WTO rules.

On the agenda item on Thailand's request to review suspension of concession s under the Safeguards Agreement (G/SG/158/Rev.1), Thailand asked the Safeguards Committee to review Turkey's imposition of "rebalancing" tariffs on imports of air conditioners from Thailand in response to Thailand's earlier imposition of a safeguard on non-alloy hot rolled steel flat products in co ils and not in coils.

Thailand first imposed a three-year safeguard in 2014 and then decided last June to extend the safeguard for a further three years, until June 2020.

Thailand said that consultations were held with Turkey in April 2017 on the extension of the measure and that there was no discussion on the issue relating to maintaining a substantially equivalent level of concessions due to the fact that Turkey's import share of the subjected goods counted only for 5.14% of Thai land's total imports.

Nevertheless, Turkey announced plans in August 2017 to suspend concessions in the form of a 9.27% tariff on imported Thai air conditioners for a three-year period, taking as its reference a period when imports of Thai air conditioners to Turkey were particularly high.

Thailand said it considers the tariff imposed by Turkey is not "substantially equivalent" to the lost trade arising from the Thai safeguard on steel, and that the substantially equivalent concessions for Turkey should be at most a 5.7% additional duty.

Thailand therefore asked that, in line with Article 13.1(e) of the Safeguards Agreement, the Committee review the Turkish action and determine whether it can be considered "substantially equivalent".

According to trade officials, the Chair of the Safeguards Committee, Mr. Kensuke Tsunoda of Japan, said that in line with Article 13.1(e), the role of the Committee is to review the matter and report to the WTO's Goods Council as appropriate.

Since it was unlikely that members would reach consensus on Thailand's request, the Chair said that discussions would have to continue beyond today's meeting and that his successor would have to convene meetings on the matter.

Turkey said its notification on the suspension of concessions was appropriate and in full conformity with the Safeguards Agreement.

Contrary to Thailand's claim, said Turkey, nothing in the Agreement requires the suspension of concessions to be determined in a three-year period preceding the original safeguard measure.

It also refuted Thailand's claim that the two sides never discussed maintaining a "substantially equivalent" level of concessions.

The US said that Thailand's request was similar to the one presented to the Committee in 2011, albeit under Article 13.1(b) of the Safeguards Agreement concerning differences over whether procedural requirements under the Agreement were followed.

At that time, the Chair provided a factual report to the Goods Council on the Committee's discussions.

The US suggested that the Committee consider engaging on the issue, listen to views, and come up with a result consistent with Article 13.1(e).

Australia also pointed to the earlier discussions in 2011 that resulted in a Chair's report to the Goods Council, and that provisions needed to be in place to ensure the Committee carries out its required functions on the matter.

The Chair said that he would ask the Committee's incoming chair to hold consultations with members on the issue as soon as possible.

Meanwhile, the US, EU, Argentina, Australia, and New Zealand voiced concern s over Chile's initiation of a safeguard investigation on imports of powdered milk and Gouda cheese, particularly with respect to the speed of the investigation and lack of apparent support from the local industry.

Chile said there were exceptional circumstances justifying the speed of the investigation (G/SG/N/6/CHL/20).

The US and New Zealand reiterated concerns over the continued absence of notifications from some WTO members regarding their safeguards legislation.

The US said that it submitted a revised proposal on how to improve compliance with notification requirements across the board to the March meeting WTO's Goods Council (JOB/CTG/10/Rev.1) and that it would begin meeting with interested WTO members to discuss the initiative.

According to trade officials, Japan again voiced concerns with global overcapacity in the steel sector, saying that much of the increased safeguard activity was a result of oversupply in steel.

This was mainly caused by emerging economies expanding capacity beyond what was economically rational, it claimed.

Members should avoid resorting to restrictive measures that are inconsistent with the WTO agreements, Japan said.

The Committee confirmed the appointment of Mr Hyouk Woo Kwon of Korea as its new chair for 2018.