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TWN
Info Service on WTO and Trade Issues (Dec22/04) Geneva, 12 Dec (D. Ravi Kanth) — China has urged the United States to respect the findings of a World Trade Organization dispute settlement panel that US tariffs on steel and aluminum products imposed by the Trump administration in 2018 are WTO-inconsistent, arguing that the “security exception is not a “safe harbour” for unilateralism and protectionism.” In one of its first rounds of allegedly unilateral trade policy measures, the Trump administration, in 2018, had imposed on many WTO members tariffs of 25% on steel products and 10% on aluminum products. Later, it selectively gave relief from these measures to several countries, which were seen to be closely aligned with its interests. Several countries including China, Norway, Switzerland, and Turkiye invoked dispute settlement proceedings against the US on grounds that the US measures were inconsistent with the core WTO rules. It is against this backdrop that a three-member dispute settlement panel chaired by Mr Elbio Rosselli, together with two other members – Mr Esteban B. Conejos Jr, and Mr Rodrigo Valenzuela – issued an 84-page report on 9 December. The panel ruled that it did not find, based on the evidence and arguments submitted in this dispute, that the measures at issue were “taken in time of war or other emergency in international relations” within the meaning of Article XXI(b)(iii) of the GATT 1994. Therefore, the panel members concluded that “the inconsistencies of the measures at issue with Articles I:1 (most-favored-nation treatment) and II:1 (schedule of concessions or binding scheduled commitments) of the GATT 1994 are not justified under Article XXI(b)(iii) of the GATT 1994.” THE PANEL’S CONCLUSIONS In its ruling, the panel pronounced, in response to China’s claims under Article II of the GATT 1994, that “the additional duties of 25% on steel products and 10% on aluminum products do not accord the treatment provided for in the United States’ Schedule, contrary to Article II:1(b) and Article II:1(a) of the GATT 1994.” It said that “the additional duty of 50% on steel products from Turkiye does not accord the treatment provided for in the United States’ Schedule, contrary to Article II:1(b) and Article II:1(a) of the GATT 1994.” Further, it pronounced that “the additional duties of 25% on derivative steel products and 10% on derivative aluminum products do not accord the treatment provided for in the United States’ Schedule, contrary to Article II:1(b) and Article II:1(a) of the GATT 1994.” Ruling on China’s claims under Article I of the GATT 1994 (MFN treatment), the panel said that “the country exemptions for steel and aluminum products confer an advantage to products from Australia, Argentina, Brazil, and the Republic of Korea that has not been accorded immediately and unconditionally to like products from all other Members, in a manner inconsistent with Article I:1 of the GATT 1994.” The three-member panel also found that “the country exemptions for derivative steel and aluminum products confer an advantage to products from Australia, Argentina, Brazil, the Republic of Korea, Canada, and Mexico that has not been accorded immediately and unconditionally to like products from all other Members, in a manner inconsistent with Article I:1 of the GATT 1994.” According to the panel’s conclusions on China’s claims under Article X of the GATT 1994 (publication and administration of trade regulations), “the Panel does not consider it necessary to make findings on China’s claims relating to the administration of the process for excluding products from duties that have already been found inconsistent with other obligations under the GATT 1994. The Panel, therefore, declines to make findings regarding the claims under Article X:3(a) of the GATT 1994.” On the most important issue of the “security exceptions” provision under the GATT 1994, which was one of the main arguments advanced by the US, the panel said that “it does not find that the measures at issue were “taken in time of war or other emergency in international relations” within the meaning of Article XXI(b)(iii) of the GATT 1994.” More importantly, the panel found that “the inconsistencies of the measures at issue with Articles I:1 and II:1 of the GATT 1994 are not justified under Article XXI(b)(iii) of the GATT 1994.” The panel concluded that where there is “an infringement of the obligations assumed under a covered agreement, the action is considered prima facie to constitute a case of nullification or impairment.” It said that “to the extent that the measures at issue are inconsistent with certain provisions of the GATT 1994, they have nullified or impaired benefits accruing to China under that Agreement.” It recommended that the US bring its “WTO-inconsistent measures into conformity with its obligations under the GATT 1994.” The response of the US to the panel’s findings and conclusions seemed somewhat “outlandish”, as it rejected in one go the entire panel report. The Assistant United States Trade Representative (USTR) Adam Hodge on 9 December rejected the panel’s findings on grounds that issues of national security cannot be reviewed in WTO dispute settlement. “The WTO has no authority to second-guess the ability of a WTO Member to respond to a wide range of threats to its (national) security,” he said. CHINA ISSUES A “MEASURED” RESPONSE China, however, welcomed the panel’s ruling, calling it an “objective and just ruling.” China said “since 2018, the US selectively imposed additional tariffs (under “Section 232 tariffs”) of 25% on steel and 10% on aluminum products from certain WTO members.” It argued that “these tariffs are unilateral and protectionist measures in the name of “national security”, and have severely been undermining the rules-based multilateral trading system.” Moreover, said China, “these measures were not only opposed by many WTO members but also widely criticized within the US.” According to Beijing, the panel’s findings vindicated that “the security exception is not a “safe harbour” for unilateralism and protectionism.” China expressed hope that “the US respects the panel’s ruling and the WTO rules, correct its wrongful conduct as soon as possible, and work with China and other WTO members to jointly uphold the multilateral trading system.” SWITZERLAND’S REMARKS Switzerland, one of the four complainants along with China, Norway, and Turkiye, said “the panel came to the conclusion that the US measures violated the GATT and thus agreed with Switzerland.” “The panel followed Switzerland’s legal arguments,” it said, adding that the panel report “concluded that the US measures violated several provisions of the GATT and could not be justified by the security exemption provided for in that agreement.” Switzerland said, “the panel report does not call into question the right of the WTO members to take measures to protect their security interests.” THE US REJECTION Even before China issued its statement on the panel’s rulings, the Assistant USTR not only rejected the panel’s findings but also claimed that it is the unequivocal position of Washington “for over 70 years, that issues of national security cannot be reviewed in WTO dispute settlement and the WTO has no authority to second-guess the ability of a WTO Member to respond to a wide range of threats to its security.” The US inveighed against the WTO panel reports, saying that they “only reinforce the need to fundamentally reform the WTO dispute settlement system.” According to the US, “the WTO has proven ineffective at stopping severe and persistent non-market excess capacity from the PRC (People’s Republic of China) and others that is an existential threat to market-oriented steel and aluminum sectors and a threat to US national security.” It further criticized the WTO ostensibly for suggesting that “the United States too must stand idly by. The United States will not cede decision-making over its essential security to WTO panels.” “The Biden Administration is committed to preserving US national security by ensuring the long-term viability of our steel and aluminum industries, and we do not intend to remove the Section 232 duties as a result of these disputes,” the Assistant USTR said. Several members, who asked not to be quoted, seemed somewhat puzzled by the US criticism of the WTO and the dispute settlement system, saying that Washington’s positions are allegedly exposed as they seem to permanently undermine the WTO. It is not clear yet whether the US will challenge the panel’s findings before the defunct Appellate Body (AB). It is public knowledge that the US made the Appellate Body dysfunctional in December 2019 on grounds that it had allegedly gone beyond its mandate in various rulings against the US. +
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