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TWN
Info Service on WTO and Trade Issues (Apr24/11) Geneva, 12 Apr (D. Ravi Kanth) — The United States has informed China that it is ready to join consultations in the dispute launched by Beijing at the World Trade Organization against several aspects of the US Inflation Reduction Act (IRA), indicating that issues concerning national security are beyond the review/resolution of the dispute settlement system. In a communication sent to China on 5 April and posted on the WTO’s website on 8 April, the US said, “the Inflation Reduction Act is a groundbreaking tool for the United States to seriously address the global climate crisis, cutting the pollution that drives climate change and environmental injustice while pursuing major new investments in clean energy technology.” It maintained that “without prejudice to whether each of the items in China’s letter constitutes a “measure” within the meaning of Article 4 of the DSU, or whether the consultations request raises issues of national security not susceptible to review or capable of resolution by WTO dispute settlement, the United States accepts the request of China to enter into consultations.” “We stand ready to confer with officials from your mission on a mutually convenient date for the consultations,” the US told China. Even before the start of the consultations, the US is subtly conveying two messages, said a legal analyst, who asked not to be quoted. According to the analyst, the US is saying that measures adopted for fighting climate change ought to be pursued regardless of their consistency, or lack of it, with the provisions of the WTO’s covered agreements. China, in its complaint (WT/DS623/1), said that “the Clean Vehicle Credit is inconsistent with the following provisions of the covered agreements: * Article I:1 of the GATT 1994, because by conditioning eligibility for the Clean Vehicle Credit on the North American assembly requirement, the critical minerals requirement, and the battery requirement (whether these three requirements are viewed separately or in any combination), and also by restricting eligibility for the Clean Vehicle Credit in the case of vehicles incorporating critical minerals and battery components produced by so-called “foreign entities of concern”, the United States does not accord to products of Chinese origin immediately and unconditionally the same advantages, favours, privileges, or immunities in respect of matters referred to in paragraph III:4 of the GATT 1994 that the United States accords to like products originating in the territory of other countries. * Article III:4 of the GATT 1994, because by conditioning eligibility for the Clean Vehicle Credit on the North American assembly requirement, the critical minerals requirement, and the battery requirement (whether these three requirements are viewed separately or in any combination), and also by restricting eligibility for the Clean Vehicle Credit in the case of vehicles incorporating critical minerals and battery components produced by so-called “foreign entities of concern”, the United States does not accord to products of Chinese origin treatment no less favourable than the treatment accorded to like products of national origin in respect of laws, regulations, and requirements affecting the internal sale, offering for sale, purchase, transportation, distribution or use of the affected products. * Article 2.1 of the TRIMs Agreement, because the measures at issue appear to be investment measures related to trade in goods that are inconsistent with Article III:4 of the GATT 1994. * Article 2.2 of the TRIMs Agreement, because the measures at issue appear to be investment measures related to trade in goods, compliance with which is necessary to obtain an advantage, and which require the purchase or use by an enterprise of products of US origin or from any US source, as provided for in paragraph 1(a) of the Annex to the TRIMs Agreement. * Articles 3.1(b) and 3.2 of the SCM Agreement, because the Clean Vehicle Credit is a subsidy contingent, whether solely or as one of several other conditions, upon the use of domestic over imported goods.” In a similar vein, China maintained that “the Renewable Energy Tax Credits are inconsistent with the following provisions of the covered agreements: * Article III:4 of the GATT 1994, because by conditioning eligibility for bonus subsidy amounts on the use of US-origin goods, the United States does not accord to products of Chinese origin treatment no less favourable than the treatment accorded to like products of national origin in respect of laws, regulations, and requirements affecting the internal sale, offering for sale, purchase, transportation, distribution or use of the affected products. * Article 2.1 of the TRIMs Agreement, because the measures at issue appear to be investment measures related to trade in goods that are inconsistent with Article III:4 of the GATT 1994. * Article 2.2 of the TRIMs Agreement, because the measures at issue appear to be investment measures related to trade in goods, compliance with which is necessary to obtain an advantage, and which require the purchase or use by an enterprise of products of US origin or from any US source, as provided for in paragraph 1(a) of the Annex to the TRIMs Agreement. * Articles 3.1(b) and 3.2 of the SCM Agreement, because the bonus subsidy amounts available for the Renewable Energy Tax Credits are subsidies contingent, whether solely or as one of several other conditions, upon the use of domestic over imported goods.” China said that the above “measures at issue appear to nullify or impair benefits accruing to China, directly or indirectly, under the cited agreements.” However, the above measures, even if they are inconsistent with the WTO rules, could form part of the “fight against climate change” toolbox, as the US has indicated, the analyst said. More importantly, the US seems to be telling China that regardless of the dispute at the panel stage, ultimately it could come under national security exceptions. Already, the US has appealed to a non-functioning Appellate Body, a dispute panel ruling in favour of China against the Trump administration’s Section 232 tariffs on steel and aluminium, on national security grounds. +
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