TWN Info Service on WTO and Trade Issues (Oct19/22)
25 October 2019
Third World Network

China seeks $2.4 billion in sanctions against US in goods dispute
Published in SUNS #9003 dated 23 October 2019

Geneva, 22 Oct (Kanaga Raja) – China will be seeking authorisation from the WTO Dispute Settlement Body (DSB) next week to suspend concessions and related obligations to the United States at an annual amount of $2.4 billion over the US failure to fully comply with an earlier WTO ruling concerning US countervailing duties on a range of Chinese goods.

China has placed its request on the agenda of the DSB meeting scheduled to take place on 28 October.

Under the provisions of the Dispute Settlement Understanding (DSU), the matter will be automatically referred to arbitration, if the US objects to the amount of sanctions proposed by China at the upcoming DSB meeting.

In a ruling issued on 16 July, the WTO Appellate Body (AB) had upheld the findings of a compliance panel that had concluded that the United States had not fully complied with an earlier WTO ruling in the dispute over the duties imposed by the US on certain Chinese goods during the era of President Barack Obama.

The AB had recommended that the DSB request the United States to bring its measures found in the AB report, and in the panel report as modified by the AB’s report, to be inconsistent with its obligations under the SCM (Subsidies and Countervailing Measures) Agreement, into conformity with that Agreement.

Notably, one member of the three-member AB division bench had provided a separate opinion that addressed the findings concerning public body, benefit and specificity. (See SUNS #8949 dated 18 July 2019 for details of the AB ruling.)

The dispute (DS437) against the US was raised by China in 2012, and the panel reported on 14 July 2014. The Appellate Body reported on 18 December 2014. The AB report, and the panel report as modified by the AB, were adopted in January 2015.

Following the original dispute, the US Department of Commerce (USDOC) revised 12 of the countervailing duty determinations at issue, but maintained the related duties in place.

In the revised determinations, the USDOC had concluded that Chinese state-owned and state-invested enterprises (SOEs/SIEs) provided inputs to Chinese firms – such as steel billets, stainless steel coils, hot-rolled steel and polysilicon – for less than adequate remuneration.

As a result, the countervailing duty measures in these 12 cases were maintained.

A compliance panel was established in July 2016 to examine China’s claims, and in its ruling issued on 21 March 2018, the compliance panel had found amongst others that:

* China had failed to demonstrate that the USDOC’s public body analysis was inconsistent with the DSB’s rulings and recommendations and with Article 1.1(a)1 of the SCM Agreement, and China had not otherwise demonstrated that the USDOC erred in treating Chinese providers of steel and other inputs as public bodies;

* China had demonstrated that the USDOC’s recourse to third country prices for assessing the benefit granted to Chinese exporters was inconsistent with Article 14(d) of the SCM Agreement;

* China had demonstrated that the USDOC’s revised specificity determinations were inconsistent with Article 2.1(c) of the SCM Agreement.

In its present communication seeking authorisation from the DSB to retaliate against the US (WT/DS437/30), China noted that the original dispute underlying its request concerns the imposition by the United States of countervailing duties on a range of products from China, as well as the investigations leading to the imposition of such duties.

Before the original panel, China said it had challenged several aspects of the investigations conducted by the US Department of Commerce and the determinations resulting from such investigations.

The panel found that the United States acted inconsistently with several of its obligations under the Agreement on Subsidies and Countervailing Measures (SCM Agreement).

China and the United States both appealed aspects of the panel’s findings.

On appeal, the Appellate Body reversed certain of the panel’s findings and confirmed that the United States had acted inconsistently with several of its obligations under the SCM Agreement.

The Appellate Body recommended that the United States bring its measures into conformity with its obligations under the SCM Agreement, said China.

The original panel report, as modified by the Appellate Body report, was adopted on 16 January 2015.

According to China, by communication dated 15 April 2016, China and the United States informed the DSB of the Understanding between China and the United States regarding procedures under Articles 21 and 22 of the Understanding on Rules and Procedures Governing the Settlement of Disputes (DSU) with respect to this dispute (the Sequencing Agreement).

The Sequencing Agreement provides that the reasonable period of time (RPT) in this dispute would expire on 1 April 2016.

Paragraph 6 of the Sequencing Agreement provides that China may request authorization to suspend concessions or other obligations pursuant to Article 22.2 of the DSU in the event that the DSB concludes, following a proceeding under Article 21.5 of the DSU, that a measure taken to comply does not exist or is inconsistent with a covered agreement, and that the United States will not assert that China is precluded from obtaining such authorization on the grounds that the request was made outside the 30-day time period specified in Article 22.6 of the DSU.

China said that it considers that the United States had failed to bring its measures into compliance with the recommendations and rulings of the DSB within the RPT.

On 13 May 2016, China requested consultations with the United States pursuant to Article 21.5 of the DSU.

Consultations were held on 27 May 2016, but failed to resolve the dispute. On 8 July 2016, China requested the establishment of a panel pursuant to Article 21.5 of the DSU.

The report of the compliance panel was circulated to Members on 21 March 2018. China and the United States both appealed aspects of the compliance panel’s report.

On 15 August 2019, the DSB adopted the compliance panel report, as modified by the Appellate Body report.

According to China, in its recommendations and rulings, the DSB ruled that the US measures at issue are inconsistent with the relevant provisions of the SCM Agreement, and recommended that the United States bring its measures into conformity with its obligations under that agreement.

At the DSB meeting held on 15 August 2019, the United States did not indicate its intention to implement the recommendations and rulings of the DSB in this dispute, China charged.

The United States has failed to comply with the recommendations and rulings of the DSB within the RPT provided in the Sequencing Agreement, and no agreement on compensation has been reached, China maintained.

In response to the United States’ continued non-compliance with the DSB’s recommendations and rulings, China said that it is requesting authorization from the DSB to suspend concessions and related obligations at an annual amount of $2.4 billion.

In considering what countermeasures to take, China follows the principles and procedures set forth in Article 22.3 of the DSU, and in particular, Article 22.3(a), it said.

Accordingly, China said that it is requesting authorization to suspend the application to the United States of concessions or other obligations with respect to goods under the agreements described in Article 22.3(g)(i) of the DSU.