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Info Service on WTO and Trade Issues (Sep25/15) Geneva, 23 Sep (D. Ravi Kanth) — Ahead of a meeting of the World Trade Organization’s Committee on Agriculture on 25-26 September, China has questioned the United States, Indonesia, Japan, Vietnam, and the European Union on their recent “reciprocal” framework agreements. China is questioning whether these agreements are consistent with the rules outlined in Article XXIV of the GATT 1994 concerning free trade agreements, according to people familiar with the questions. The central question regarding the recent US “reciprocal” framework agreements has been whether they are consistent with Article XXIV of the GATT 1994, especially whether they cover “substantially all the trade”, and whether the benefits will be extended to other countries on a most-favoured-nation (MFN) basis, said farm trade negotiators from several countries. At a time when the Trump administration is reportedly drawing up plans to use “reciprocal” tariff revenue to fund a program to support American farmers facing a sudden dip in export sales and rising input costs, China’s detailed questions seem to highlight several issues that have not been adequately addressed, said negotiators, who preferred not to be quoted. In its questions to Indonesia, China referred to an “Agreement on Reciprocal Trade on 22 July 2025,” under which the US would impose a 19% tariff on Indonesian imports. China said that under the agreement, “Indonesia committed to eliminate approximately 99% of tariff barriers on US industrial, food and agricultural products, exempt all US food and agricultural products from import licensing requirements, and to purchase US agricultural products, including soybeans, soybean meal, wheat, and cotton with an estimated total value of USD 4.5 billion.” Against this backdrop, China asked Jakarta to clarify the following points: a. When will the Agreement enter into force and be notified to the WTO? b. How will Indonesia ensure it fulfills its WTO obligations, since the Agreement appears inconsistent with Article XXIV of GATT, which permits the formation of a free-trade area only if the parties eliminate tariffs on substantially all trade between them? c. Will Indonesia apply its tariff elimination and import licensing exemptions for US agricultural and industrial products on an MFN basis? Regarding Japan, China noted that “the United States announced that the US-Japan Trade Agreement officially entered into force on 4 September 2025.” Under the US-Japan agreement, Washington would implement a baseline 15% tariff rate on almost all goods originating from Japan, and adopt industry-specific arrangements for automobiles, aerospace products, generic medicines and certain natural resources. According to the agreement, Japan would expand market access for a wide range of US products, including agricultural products, industrial goods, energy, aerospace, and vehicles. The agreement provides for increased minimum access for US rice with a major expansion of import quotas, and annual purchases of USD 8 billion of US agricultural products, including corn, soybeans, fertilizer and bioethanol. In this context, China sought responses to the following questions: 1. When will the Agreement be notified to the WTO? 2. How will Japan ensure it fulfills its WTO obligations, since the Agreement appears inconsistent with Article XXIV of GATT, which permits the formation of a free-trade area only if the parties eliminate tariffs on substantially all trade between them? 3. Will Japan implement its expanded tariff concessions and market access measures (e.g., for rice, corn, soybeans, fertilizer and bioethanol) for the US on an MFN basis? With respect to Vietnam, China said “the White House announced that the United States and Vietnam have agreed on a Framework for the Reciprocal, Fair and Balanced Trade Agreement (the Framework Agreement) on 2 July 2025.” Under the Framework Agreement, the US would impose a 20% tariff on Vietnamese imports, and a 40% tariff on products transhipped through Vietnam. Vietnam committed to eliminate all import duties and non-tariff barriers on US products, and to not impose quotas on imports of US products. China sought clarification from the US on the following questions: 1. When will the Framework Agreement enter into force and be notified to the WTO? 2. How will the US ensure it fulfills its WTO obligations, since the Framework Agreement appears inconsistent with Article XXIV of GATT, which permits the formation of a free-trade area only if the parties eliminate tariffs on substantially all trade between them, rather than raise them? 3. How will the US fulfil its commitment to Articles II and XXVIII of GATT relating to schedules of concessions, since it plans to raise tariff rates on certain goods originating from Vietnam beyond the US bound commitments? 4. What is the legal basis for the 40% tariff on products transhipped through Vietnam? How does the US ensure this measure is consistent with WTO rules? Simultaneously, China also asked Vietnam the same questions, especially regarding its commitment to eliminate “all import duties and non-tariff barriers on US products, and not to impose quotas on imports of US origin products.” China asked Vietnam to clarify the following points: 1. When will the Framework Agreement enter into force and be notified to the WTO? 2. How will Vietnam ensure it fulfills its WTO obligations, since the Framework Agreement appears inconsistent with Article XXIV of GATT, which permits the formation of a free-trade area only if the parties eliminate tariffs on substantially all trade between them? 3. Will Vietnam implement its zero-tariff and quota-exemption commitments for US products on an MFN basis? Referring to the EU’s framework agreement with the US, which was announced on 21 August 2025, China noted that “the EU intends to eliminate tariffs on all US industrial goods and to provide preferential market access for a wide range of US seafood and agricultural goods.” China said, “the EU will also immediately take the necessary steps to extend the Joint Statement of the US and the EU on a Tariff Agreement announced on 21 August 2020, with respect to lobster, coupled with an expanded product scope to include processed lobster.” Further, the US has committed to “apply the higher of either the US MFN tariff rate or a tariff rate of 15%, comprised of the MFN tariff and a reciprocal tariff, on originating goods of the EU.” China asked the EU to clarify the following points: 1. When will the Framework Agreement enter into force and be notified to the WTO? 2. How will the EU ensure it fulfills its WTO obligations, since the Framework Agreement appears inconsistent with Article XXIV of GATT, which permits the formation of a free-trade area only if the parties eliminate tariffs on substantially all trade between them? 3. Will the EU implement its preferential tariff rates for the US on an MFN basis? In its questions to the US on its framework agreement with the EU, China cited the same points as it did for the EU. Against this backdrop, China asked the US to answer the following questions: a. When will the Framework Agreement enter into force and be notified to the WTO? b. How will the US ensure it fulfills its WTO obligations, since the Framework Agreement appears inconsistent with Article XXIV of GATT, which permits the formation of a free-trade area only if the parties eliminate tariffs on substantially all trade between them, rather than raise them? c. How will the US fulfil its commitment to Articles II and XXVIII of the GATT relating to schedules of concessions, since it plans to raise tariff rates on certain goods originating from the EU beyond the US bound commitments? US BAILOUT PACKAGE The US has reportedly signaled that it is drawing up plans to use the tariff revenue that it has collected to assist its farmers facing falling export sales and rising input costs, as they head into the harvest period. “There may be circumstances under which we will be very seriously looking at and announcing a package soon,” the US Agriculture Secretary Brooke Rolling told the Financial Times on 17 September. She suggested that financing a bailout through “tariff income that is now coming into America” was “absolutely a potential option.” The FT report suggested that the move to fund farmers follows mounting pressure from farm groups after China curbed purchases of the new US soybean crop. In a practice similar to that adopted by the US to support its industry through the revenues collected from anti- dumping and countervailing duties, infamously known as the Byrd Amendment, or the US Continued Dumping and Subsidy Offset Act of 2000 (CDSOA), the WTO’s Appellate Body had ruled that the CDSOA was inconsistent with the WTO’s Anti-dumping Agreement and the Agreement on Subsidies and Countervailing Measures. With the US having paralyzed the Appellate Body, there is no immediate danger of repercussions even if the allegedly illegal “reciprocal” tariff revenue is used for farm subsidies and other programs, said analysts familiar with the development. +
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