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TWN
Info Service on WTO and Trade Issues (Jul24/27) Geneva, 29 Jul (D. Ravi Kanth) — The United States on 26 July blocked a first-time request from China for the establishment of a World Trade Organization dispute panel to examine Washington’s reportedly nearly one trillion dollars’ worth of “green” subsidies and tax credits under the US Inflation Reduction Act (IRA) that are allegedly inconsistent with the WTO rules, said people familiar with the development. Significantly, for the 78th time, the US also blocked a request from 130 WTO members to expeditiously begin the selection processes to fill the vacancies at the WTO’s Appellate Body (AB) so as to make it functional again after five years, said people familiar with the development. At a meeting of the WTO’s Dispute Settlement Body (DSB) on 26 July, the two separate US actions seemingly stood out like the proverbial “eyesore”, said people who asked not to be quoted. To start with, China pressed ahead with its first request for the establishment of a dispute panel “to assess the consistency of the challenged measures” under the IRA. According to China, the IRA “is probably the single largest subsidy measure ever enacted”, with estimates varying between $393 billion and $1 trillion. China said that many WTO members, as well as Beijing “have raised concerns on various occasions about this massive level of subsidization and its trade-distorting effects.” It argued that “many of the IRA subsidy provisions, such as the Advanced Manufacturing Tax Credit, are deeply problematic from the standpoint of international trade in clean energy products and the United States’ WTO obligations.” Despite several concerns over the IRA, China said that it has “limited itself to challenge only those subsidy provisions under the IRA that are clearly prohibited under WTO rules: those that are contingent upon the use of domestic over imported goods or that otherwise discriminate against goods of Chinese origin.” Pointing out that Beijing is committed to support “national and international efforts to reduce and mitigate the effects of climate change,” China said it believes that “non-prohibited, non-discriminatory subsidies have a role to play in this transition, including by creating incentives for consumers and industries to adopt clean energy technologies.” China, however, lamented that “subsidies that discriminate against imported clean energy goods, including those that require the use of domestic over imported goods as a condition of obtaining the subsidy, remain prohibited under WTO rules and will do nothing to advance the clean energy transition.” China noted that “the Clean Vehicle Credit under the IRA provides a subsidy of up to $7,500 for the purchase of a clean vehicle, but only if the vehicle is assembled in North America and certain other conditions are satisfied, including conditions that require the use of domestic over imported goods.” Further, according to China, “the four different types of Renewable Energy Tax Credit identified in the panel request each provide additional subsidy amounts if certain domestic content requirements are satisfied, including the use of US iron or steel and the use of a certain percentage of US-origin components.” “These subsidy measures clearly violate the United States’ obligations under multiple provisions of the covered agreements, including Article III:4 of the GATT 1994, Article 2 of the TRIMs Agreement, and Article 3 of the SCM Agreement,” China said. US REJECTION In a sharp rejection of the Chinese panel request, the US said that the Chinese request for the establishment of a dispute panel seeks to undermine US efforts to address the global climate crisis and build a more resilient clean energy supply chain. The US regretted that China’s complaint is aimed at preventing progress on these critical issues, to entrench “reliance on China’s non-market excess capacity, and to undermine the broader interests of all WTO members.” According to the US, the IRA is a groundbreaking tool in the effort to address the global climate crisis and is the most significant action the US has taken on clean energy and climate change. It warned that existing WTO rules cannot be understood to prevent WTO members from taking action to address the most urgent global issues of our time. Also, the US said it is hypocritical for China to target the US measures in this dispute while failing to address its industrial targeting of clean energy sectors and its use of non-market policies and practices that are detrimental to all members. China, however, expressed its disappointment over the US opposition to its panel request. Washington will not be able to block the establishment of a panel should China press ahead with a second request for panel establishment. Meanwhile, in a separate trade dispute, the DSB agreed to the requests from South Africa for the establishment of two dispute panels to rule on several measures imposed by the European Union on the import of citrus fruit from South Africa. Aside from the above trade disputes, the US blocked for the 78th time a request from more than two-thirds of the WTO membership to immediately begin the selection processes for the appointment of members to the WTO’s Appellate Body. On behalf of 130 members, Colombia introduced the group’s proposal to start the selection processes for filling the vacancies on the Appellate Body. Colombia maintained that the substantial number of countries submitting the proposal reflects a common interest in the functioning of the Appellate Body and, more generally, in the functioning of the WTO’s dispute settlement system. More than two dozen countries intervened, referring to their previous statements made on this matter at earlier DSB meetings. These countries underscored the urgent need to comply with the mandates set out at the WTO’s 12th and 13th Ministerial Conferences in 2022 and early 2024 respectively, to conduct discussions with the view to having a fully and well-functioning dispute settlement system accessible to all members by 2024. The US echoed its oft-repeated statement at the DSB that it does not support the proposed decision to commence the selection processes for the appointment of Appellate Body members, as its longstanding concerns with WTO dispute settlement remain unaddressed. +
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