TWN Info Service on WTO and Trade Issues (Nov18/02)
5 November 2018
Third World Network
       
US blocks seven panel requests over steel and aluminium duties
Published in SUNS #8785 dated 31 October 2018

Geneva, 30 Oct (Kanaga Raja) - Requests for panel establishment by seven WTO members over the additional duties imposed by the United States under Section 232 of its trade law (on grounds of national security) on imports of certain steel and aluminium products were blocked by the US at a meeting of the WTO Dispute Settlement Body (DSB) on Monday.

China, the European Union, Canada, Mexico, Norway, Russia and Turkey submitted their first requests for panel establishment over the US decision to impose an additional duty of 10% on imports of certain aluminium products and an additional duty of 25% on imports of certain steel products.

All seven were first-time requests and panels establishment will be automatic when the requests come up again before the DSB.

In turn, Canada, China, the European Union and Mexico blocked first-time panel requests by the US over the additional duties imposed by these members on certain products from the US.

According to trade officials, the US maintained that these duties, imposed as "rebalancing measures" in response to the additional duties imposed by the US on imports of steel and aluminium, violate the WTO's most-favoured-nation principle.

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 68 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).

In a related development, the US made a long statement concerning the issuance of "advisory opinions" by WTO panels and the Appellate Body on issues not necessary to resolve a dispute (more details of the US statement to follow in a forthcoming issue of SUNS).

MATTERS RELATING TO STEEL AND ALUMINIUM

In the disputes over the additional duties imposed by the US on steel and aluminium, China, the European Union, Canada, Mexico, Norway, Russia and Turkey were of the view that while the US claims that the measures at issue were taken due to national security reasons, it appeared that the duties, in their content and substance, were safeguard measures imposed because the imports of steel products and aluminium products were deemed to be in such increased quantities and under such conditions as to cause or threaten injury to domestic producers of these products.

According to trade officials, the seven complainants said that as a result, the imposition of the additional duties was intended to protect the US steel an d aluminium industries from the economic effects of imports.

The complainants questioned the US claim that the duties were justified as an exception from WTO rules on national security grounds. They said that such a claim can and should be reviewed by a WTO panel.

They also pointed out that the additional duties are not administered in a uniform manner, since Argentina, Australia, Brazil and Korea are exempt from the additional duty on steel, while Argentina and Australia are exempt from the additional duty on aluminium.

In addition, quotas have been established for Argentina, Brazil and South Korea in the case of imports of steel products, and for Argentina in the case of imports of aluminium products.

The seven complainants said the measures are inconsistent with US obligations under the WTO's Safeguards Agreement and the General Agreement on Tariffs and Trade (GATT) 1994.

They noted that consultations between them and the US were held over the course of July through early October but the talks failed to resolve the dispute, prompting the requests for establishment of panels.

According to trade officials, China said that its consultations with the US on 19 July were very limited and failed to resolve the dispute.

It said that the tariffs, taken under the guise of national security, are e egregiously inconsistent with the provisions cited.

China and the six other complainants believe that the US actions are inconsistent with the core principles of the WTO and that invoking the national security exception should only be done on a bona-fide basis.

The US said it was not surprised by China's panel request. It claimed that China was following a pattern of using the WTO dispute settlement system as an instrument to promote its non-market economic policies, policies which have led to massive excess capacity in steel and aluminium and distortions of world markets that are damaging the interests of market-oriented economies, its businesses and its workers.

The US said that it would not allow China's "Party-State" to fatally undermine the US steel and aluminium industries, on which the US military, and by extension, global security, rely on.

The US said that it has explained that the tariffs are necessary to address the threatened impairment these imports of steel and aluminium pose to US national security.

It maintained that what threatens the international trading system is not invocation of the national security exception, but China attempting to use the WTO dispute settlement system to prevent any action by any member to address its unfair, trade-distorting policies.

As a result, the US said it does not agree to the establishment of a panel.

In response, China said that the long arguments made by the US regarding China's economic system were not part of the US Department of Commerce report on which the Section 232 tariffs on steel and aluminium are based.

It seems that the US is again using Section 232 as a pretext for protectionist measures, China said.

Brazil said that it was concerned about the restrictive US Section 232 measures and in particular the "elastic interpretation" of the concept of national security.

The EU said in its request for a panel that the US actions have prompted significant reactions over the past several months, both in the US and worldwide.

It noted that the request by the seven complainants was unprecedented in that one member was being targeted with so many panel requests in one day, which was a sign of the degree of objection the US actions were eliciting from members.

The US arguments justifying its actions are simply wrong, the EU said.

The US tariffs are in effect safeguard measures designed to protect domestic industries from imports, the national security justification under Article XXI of the GATT can be reviewed in WTO adjudication, and the Article XXI exception does not apply in this case, it said.

It's a very dangerous proposition to suggest that members can invoke national security in order to protect the prosperity of domestic industries, the EU said.

In response, the US said that it was deeply disappointed with the EU's request for a panel and that the EU's action was misdirected.

Rather than supporting the international trading system by taking action to resolve underlying concerns regarding non-market economic conditions, the EU is undermining the system by asking the WTO to do what it was never intended to do - it is simply not the role of the WTO to review a sovereign nation's judgment of its essential security interests, the US claimed.

The EU has supported the US interpretation of Article XXI in the past, notably in 1982 when certain EU actions were examined before the GATT Council. The US supported the EU at that time, it said.

The US said it wishes to be clear - if the WTO were to undertake to review an invocation of Article XXI, this would undermine the legitimacy of the WTO's dispute settlement system and even the viability of the WTO itself.

Infringing on a sovereign's right to determine what is in its own essential security interest would run exactly contrary to the WTO reforms that are necessary in order for this organization to maintain any relevancy, the US said.

It said that it was not in a position to accept the EU's panel request.

According to trade officials, Canada, Mexico, Norway, Russia, and Turkey also described the US actions as, for all intents and purposes, safeguard measures and questioned the national security exception cited by the US as a justification for its action.

Canada said that it was inconceivable that exports of steel and aluminium to the US could threaten US national security and that it was very concerned that these measures could undermine the integrity of the global trading system.

Mexico said using the national security exception as the US has done would frustrate the object and purpose of the WTO dispute settlement system.

Norway said that in making its panel request, it is joining six other co-complainants in seeking to bring the US steel and aluminium tariffs before a WTO panel.

This collective resort to dispute settlement reflects the serious concern of the WTO membership over the US' actions. It also reflects trust and confidence in the WTO as a forum for resolving international trade disputes.

The seven panel requests reflect a shared conviction among the co-complainants: the US steel and aluminium tariffs are inconsistent with the US' WTO obligations, it said.

It appreciated that the US does not characterise the steel and aluminium tariffs as "safeguard measures" as a matter of US municipal law. However, the question is not one of municipal law, said Norway.

Rather, the question is whether, as a matter of WTO law, the steel and aluminium tariffs constitute "safeguard measures" under the Agreement on Safeguards.

Norway said it is deeply concerned about the US action in this case, and the negative impact it will have on the WTO system, if left unchallenged.

Norway is worried that the US would adopt measures so evidently inconsistent with obligations fundamental to the rules-based trading system and offer a purported justification that is so evidently divorced from real-world security concerns, it said.

Russia said it fully shares the views expressed by the EU that the unprecedented number of complainants is a sign towards shared understanding of the inconsistency of the US measures with the cited agreements.

Taking into account that there are seven analogous requests for the establishment of a panel against the US measures on steel and aluminium, Russia requested the establishment of one single panel under Article 9.1 of the DSU.

In rejecting the panel requests, the US said that the Section 232 tariffs were necessary for the protection of its essential security interests and were thus justified under Article XXI.

The position of the United States for over 70 years has been that actions taken pursuant to Article XXI are not subject to review by the WTO. Because the US has invoked Article XXI, there is no basis for a WTO panel to review the cl aims of the complainants and no reason for this matter to proceed further.

The US maintained that Russia was not even acting consistently with views it expressed last year when the US agreed with Russia's understanding of Article XXI that WTO members have sole discretion to determine what is necessary to protect its essential national security interests.

Meanwhile, the US requested establishment of four panels over the increased duties imposed by Canada, China, the European Union, and Mexico on certain US imports.

The measure applies only to products originating in the US and do not apply to like products originating from any other WTO Member.

As a result, the duties appear to be inconsistent with the most-favored nation obligation under Article I of the GATT 1994, said the US.

Moreover, the additional duties applied by Canada, the EU and China result in rates of duty greater than the rates of duty set out in their schedule of concessions, and thus appears inconsistent with Article II of the GATT 1994.

The US said that members claim the US is breaching WTO rules by imposing tariffs on steel and aluminum imports, but at the same time they are unilaterally retaliating against the US based on the pretense that the US actions are safeguards.

This is the height of hypocrisy, the US claimed. It said that it has not invoked WTO safeguard provisions for its actions, and because the US has not done so, other members cannot simply act as if these provisions have been invoked and use that pretense to apply safeguard rules that are simply inapplicable.

According to trade officials, Canada, China, the European Union and Mexico generally argued that the US tariffs are, for all intents and purposes, safeguard measures, and the increased duties imposed by the four members are completely justified counter-measures in accordance with the WTO's Safeguards Agreement.

If it looks, acts and quacks like a safeguard, then it probably is a safeguard, the EU said.

China said the US refused to hold consultations with China on possible compensation for the steel and aluminum tariffs, leaving it no choice but to impose rebalancing measures.

Mexico said its action was not in the purview of the WTO and that it was rightly taken in line with its NAFTA commitments.

The four members said they were not in a position to accept the US request for panels establishment.

Japan said that the US measures appeared to be safeguards, while Brazil said that any unilateral measures taken by members undermine multilateral trade rules.

OTHER ACTIONS

The DSB agreed to establish a panel, at the second request of the United Arab Emirates (UAE), to examine anti-dumping measures imposed by Pakistan on imports of biaxially oriented polypropylene film from the UAE.

The US, the EU, China, Saudi Arabia, Japan, Russia and Afghanistan reserved their third party rights to the dispute.

The DSB also agreed to a second panel request from Japan over Korea's decision to maintain anti-dumping duties on imports of stainless steel bars from Japan.

The US, the EU, China, India, Kazakhstan, Russia and Chinese Taipei reserved their third party rights to the dispute.

Russia blocked a request for the establishment of a compliance panel by the EU to determine whether Russia had implemented an earlier WTO ruling over Russian measures on the importation of live pigs, pork and other pig products from the EU.

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

Meanwhile, China blocked a panel request from the US over certain measures imposed by China concerning the protection of intellectual property rights.

According to trade officials, the US said China agreed when it joined the WTO to provide certain protections for intellectual property rights (IPRs), among them to protect exclusive rights of patent holders and to accord to nationals of other WTO members treatment no less favourable than that it accords to its own nationals with regards to protection of IPRs.

However, China's policies consistently seek to disadvantage foreign patent holders for the benefit of Chinese companies, the US claimed.

According to the US, these policies deny foreign patent holders, including US companies, basic patent rights to stop a Chinese entity from using the technology after a licensing contract ends and impose mandatory adverse contract terms that discriminate against, and are less favourable for, imported foreign technology.

These policies are in violation of the WTO's TRIPS Agreement, the US maintained.

The US said that it held consultations with China on the matter in July, but the consultations did not resolve the dispute, prompting the US request for a panel.

China said it was disappointed with the US request for panel establishment and that it positively responded to the questions posed by the US in the consultations held on 18 July.

The accusations made by the US in its request for consultations are meritless, said China, adding that it is not in a position to accept the establishment of a panel.

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