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TWN
Info Service on WTO and Trade Issues (Apr23/05) Geneva, 5 Apr (D. Ravi Kanth) — China apparently launched a broadside against the United States at the World Trade Organization during the past several days (3-4 April) over Washington’s imposition of “disruptive and restrictive measures in the name of national security”, as well as the controversial US Section 301 measures deployed against Chinese goods, said people familiar with the development. China also lashed out at the US for its alleged attempts at bringing together Japan and the Netherlands in order to stop them from exporting advanced chips to China, said people familiar with the development. At the meeting of the WTO’s Council for Trade in Goods (CTG) that started on 3 April and concluded on 4 April, China and the US engaged in a showdown over the above issues that have been festering for the past several months at the WTO. As reported in SUNS #9710 dated 14 December 2022, China initiated dispute settlement proceedings against the US at the WTO last December over Washington’s plethora of export-related measures as contained in its CHIPS Act of 2022 that seem to be particularly targeted against China in the area of semiconductor chips and other items that allegedly violate the core WTO rules. In its dispute complaint, China alleged that the US actions have impeded the normal international trade of, among others, semiconductor chips, while threatening the stability of the global industrial supply chains. Such seemingly WTO-inconsistent practices, China said, “have not only undermined the international trade order but also constituted a violation of the international trade rules.” China argued that the allegedly wrongful practices adopted by the US “are trade protectionism in nature, against the basic economic laws and the interests of global peace and development.” Beijing directly accused the US for adopting many “discriminatory” and “distortive” subsidy policies that “blatantly violate the WTO rules”, suggesting that “underlying the US approach is the kind of Cold War mentality, featuring zero-sum game, picking sides and building entrenched camps.” At the last meeting of the CTG on 24 November 2022, China laid bare the unilateral “discriminatory” measures contained in the US Inflation Reduction Act (IRA) of 2022 and the CHIPS Act of 2022 (see SUNS #9698 dated 28 November 2022). Voicing the strongest criticism yet of “US unilateral policies”, China said that “fighting trade wars and technology wars, artificially “building walls” and forcing “decoupling” completely violates the principles of market economy and disrupt international trade, which is good to none but even worse to oneself.” China said that it “opposes the politicization and weaponization of economic, trade, [and] scientific exchanges” by the US. It called on the US “to correct the above-mentioned practices that violate the WTO rules and the basic norms of international law, and jointly maintain the stability of the semiconductor global supply chain.” CTG MEETING ON 3-4 APRIL In the showdown at the CTG meeting that lasted till 4 April, China seems to have strongly condemned the continued imposition by the US of “disruptive and restrictive measures in the name of national security”. China denounced the unimpeded restrictive measures put in place by the US since 2018, which it said have severely damaged the global trading system. By justifying export restrictions on the grounds of national security concerns, China suggested that the US is abusing the use of this provision, which is normally used in exceptional circumstances. As reported in SUNS earlier, China highlighted the US export control measures under the Foreign Direct Product Rule, which implies that exports of items produced with US software or technology are subject to US controls even if they do not contain any US content. According to China, the extreme unfairness of this US measure is like a European writing a fiction story with a US-made computer, and for that reason, the US denies permission to publish a Chinese edition of the story in China. China said that battery components made in China have also been considered a potential threat to US national security and therefore require discriminatory treatment in its subsidiary partners, said trade envoys, who preferred not to be quoted. Worse still, the Chinese delegate pointed out that the US considers the security exemption provisions solely as “self-designating and not subject to review by WTO dispute settlement panels.” On account of the growing abuse of the national security exemption, the US has shattered one window after another in the house of the multilateral trading system and will give rise to the “broken window” theory where exemptions become the rule, and thereby, permanently jeopardizing the rule-based multilateral trading regime, said trade officials, who asked not to be quoted. Beijing pressed for strengthening the deliberative function of the WTO to protect the organization from such abuses. In the face of a volley of criticism, the US apparently merely said that the Goods Council was not the appropriate forum to discuss issues related to national security. USE OF SECTION 301 ON CHINESE GOODS China also took the US to task over its imposition of duties on certain goods from China under Section 301 of the Trade Act of 1974. China apparently explained that the Section 301 duties imposed four years ago on USD 360 billion worth of Chinese exports to the US had been extended, despite a panel that had ruled that these measures were inconsistent with the WTO rules, said participants at the meeting. More importantly, China showed that the US measures have adversely affected its own exporters. The Chinese delegate pointed out that ultimately, the US measures undermined the stability and security of the global supply chains and contributed to high inflation in the US. In response, the US seems to have said that China’s decision to continue to raise this matter in this and other WTO bodies has been a pointless waste of WTO resources given that China has already unilaterally imposed the only remedy that the WTO Dispute Settlement Body (DSB) could potentially authorize – the suspension of WTO concessions. The US drew attention to the applied tariffs imposed by China on imports from the US apparently in excess of its WTO commitments for the explicit purpose of retaliation, said trade envoys present at the meeting. The US explained that from July 2018 to September 2019, China imposed four rounds of tariffs ranging from 2.5% to 30% in retaliation against US Section 301 tariffs, which covered approximately 71% – or USD 109 billion – of 2007 imports into China from the United States. In what seemed like tit-for-tat exchanges between the two sides, China argued that the US imposed measures without obtaining authorization from the DSB pursuant to the Dispute Settlement Understanding. China admitted that it has imposed retaliatory tariff measures in response to the US measures at issue, nor does it dispute that these retaliatory measures remain in effect, the US delegate said, according to trade envoys present at the meeting. With respect to the dispute “United States – Tariff Measures on Certain Goods from China” (DS543), the US indicated that this is a matter before the DSB, where it has already provided the relevant information. BRINGING TOGETHER ALLIES TO DENY CHIP EXPORTS TO CHINA At the meeting, China pointed a finger at the US for allegedly devising the “agreement between the United States, Japan, and the Netherlands on export restrictions on the export of chips”. China said that no official information has been shared yet about the agreement that has been widely reported in the media. China sought to know from these three members whether this agreement exists, and if so, it should be notified and reviewed by WTO members. The Chinese official was of the view that the agreement may violate WTO rules, arguing that they may have decided to keep the contents of the agreement in the dark. China said that there is reason to believe that the agreement was made under the pressure of the US, adding that the agreement is contrary to the principles of openness and transparency at the WTO. It undermines the authority and the effectiveness of the WTO, China said, urging the US, Japan, and the Netherlands to notify the agreement and the follow-up measures to the WTO. It called on the WTO to strengthen the monitoring of these measures. In reply, the US merely said that the Goods Council is not the appropriate forum to discuss issues related to national security, including export controls. Japan informed the CTG that it has been conducting strict export controls for a long time based on the Foreign Exchange and Foreign Trade Act, in a manner consistent with WTO agreements from the perspective of maintaining international peace and security. The EU raised some objections against China’s characterization of the measures undertaken by the three countries, suggesting that China is projecting the issue as though it is a planned national export control measure relating to advanced semiconductor manufacturing equipment, as announced on 8 March by the Dutch government. The EU clarified that the announced measure falls under the dual use and export control framework of the European Union, which allows EU member states to impose additional national export controls based on security interests. INDIA’S CONFORMITY ASSESSMENT POLICY At the CTG meeting, Canada, Japan, the United Kingdom, and the European Union raised concerns with regard to New Delhi’s “Implementation of conformity assessment policy through quality control orders in various sectors”. Apparently, these four members raised deep concern at the increasing number of quality control orders that India has been issuing across many sectors such as toys, automotive parts, including tires, chemical and petrochemical substances, and steel. These delegations noted that the majority of quality control orders introduced by India appear to have a protectionist orientation and raise questions regarding their compliance with the WTO Agreement on Technical Barriers to Trade (TBT). The four members said they are concerned by the visible trend of quality control orders prescribing specific standards in situations where international standards already exist. India replied that the concerns expressed are being reviewed in New Delhi by the relevant authorities following a paper submitted by Canada in the context of the TBT Committee, which is being currently reviewed and will have a response in due course. India added that it has held productive bilateral discussions with the EU on the sidelines of the TBT Committee meeting on this and other trade issues. OTHER TRADE CONCERNS At the CTG meeting, members raised around 41 trade concerns, including non-tariff barriers on agricultural products, quality control schemes for agricultural products and foodstuffs, tariffs and tariff rate quotas (TRQs), technical barriers to trade, sanitary and phytosanitary measures, import/export bans and restrictions, subsidies, domestic certification, and administrative procedures. These concerns encompass a wide range of sectors (agricultural, information technology, environment, fisheries, forestry, and food products), as well as specific products, such as tyres, air conditioners, energy drinks, pulses, chips, apples and pears, cheese, onions and potatoes, steel and aluminum, cosmetics and office equipment. [The full agenda of the meeting is available at https://docs.wto.org/dol2festaff/Pages/SS/directdoc.aspx?filename=q:/G/C/W827.pdf&Open=True] SUBSIDIARY BODIES Members failed to agree on a proposed list of names of chairpersons for the 14 subsidiary bodies that report to the CTG: Market Access Committee, Agriculture Committee, Sanitary and Phytosanitary Measures Committee, Technical Barriers to Trade Committee, Trade-Related Investment Measures Committee, Anti-dumping Committee, Customs Valuation Committee, Rules of Origin Committee, Import Licensing Committee, Subsidies and Countervailing Measures Committee, Safeguards Committee, Working Party on State Trading Enterprises, Trade Facilitation Committee, and Information Technology Agreement Committee. The CTG chair, Ambassador Etienne Oudot de Dainville of France, reported that he and the Chair of the Council for Trade in Services (CTS), Tsvetelina Georgieva Dimitrova of Bulgaria, held meetings with the coordinators of the four regional groups on 9, 15 and 24 March, which resulted in a provisional list of names for the subsidiary bodies of both Councils. WTO REFORMS On WTO reforms, members apparently agreed on a series of actions to increase the transparency and efficiency of the Council for Trade in Goods and its subsidiary bodies and to improve its practical functioning. +
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