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TWN Info Service
on WTO and Trade Issues (May26/14) Geneva, 21 May (D. Ravi Kanth) -- China, along with Brazil, Colombia, Indonesia, Thailand and Turkiye, on 20 May is understood to have raised the stakes for technical discussions at the World Trade Organization's Council for Trade in Goods (CTG) on the potentially improper use of Article XXVIII of the GATT 1994, which allows for the modification or withdrawal of tariff concessions on systemic grounds, according to people familiar with the development. In contrast, the United States and the European Union reportedly maintained that the use of Article XXVIII is a treaty-based right of members, offering no substantive justification for why technical discussions should be avoided despite the likely misuse of the Article at a time when major industrialized countries are selectively upending the WTO's rule-book, the same sources said. During the CTG meeting on 20 May, several other issues were also raised, including on subsidies and restrictions on rare earth minerals. Apparently, a group of industrialized countries along with India, seems to have raised sharp concerns over the restrictions placed by China on the supply of rare earth minerals, said people familiar with the development. CHINA'S DEMAND In a proposal (G/C/W/896) calling for technical discussions issued hours before the CTG meeting on 20 May, China explained that "Article XXVIII of the GATT 1994 (hereinafter "Article XXVIII") entitles Members to modify or withdraw tariff concessions subject to prescribed procedures." Citing a factual report prepared by the WTO Secretariat on how the Article has been used over the years, China noted that "since the establishment of the WTO, Members have initiated 58 negotiations for the modification of their Schedules of concessions under Article XXVIII." "Of these," China stated, "29 have been concluded and 18 remain ongoing." According to China, "Historically, Members have invoked Article XXVIII for a range of purposes, including the introduction of new or streamlined customs duties, the formation of customs unions, and the implementation of minor or partial adjustments to their concession commitments." "In many instances," China said, "mutually agreed solutions are reached through consultations or negotiations." However, China noted: "Recently, there has been a growing tendency among Members to invoke Article XXVIII, with an increasing number of Members participating or set to participate in such negotiations." China argued that if Article XXVIII is properly used, it "could accommodate Members' needs for moderate tariff adjustments with the binding of tariff concessions, while preventing arbitrary and unilateral changes to tariff commitments which may cause chain retaliation among Members if negotiations break down." Furthermore, China said the "proper use of Article XXVIII can serve as a "safety valve" to ease Members' trade frictions within the WTO framework." It cautioned that the improper use of Article XXVIII "could become a "broken window" undermining the multilateral trading system." Even though "there are legal provisions and guidance documents dealing with the negotiations," China said that "Members, in particular developing Members, desire a better understanding and clarification of Article XXVIII and its relevant procedures and practices, with a view to enhancing their effective participation in the consultations and negotiations, and ensuring that Article XXVIII will be used properly to strike a sound balance between stability and moderate flexibility of tariff concessions." Against this backdrop, China proposed "holding technical discussions on the proper use of Article XXVIII." To lay the groundwork for robust technical discussions on the proper use of Article XXVIII, China suggested several issues revolving around this Article. TECHNICAL QUESTIONS China raised a series of technical questions on the "Invocation of Article XXVIII," "Negotiation procedures," and "Substantive aspects of negotiations." Under "Invocation of Article XXVIII," China sought to know "under what circumstances may a Member invoke Article XXVIII to modify its tariff schedule." It asked whether a Member can "modify an unlimited number of tariff lines and raise tariffs to any desired level." China also questioned whether "a Member [can] strike a balance between protecting domestic industrial development and maintaining the authority of multilateral tariff commitments when invoking Article XXVIII." As regards "Negotiation procedures," China asked for clarity on how reasonable compensatory adjustments can be determined. It asked, "should the compensation package be unilaterally determined by the Member initiating the Article XXVIII negotiations?" Lastly, China posed several questions on the "Substantive aspects of negotiations," including: * How can the balance of rights and obligations between negotiating parties be effectively maintained, fair and equitable negotiation outcomes be ensured, and the negotiations be prevented from becoming a mere formality? * Is it necessary to set criteria for adequate compensation? * To what extent do the process and outcome of Article XXVIII negotiations affect the determination of compensation? * How can it be assessed and verified that the negotiations' outcome maintains "a general level of reciprocal and mutually advantageous concessions not less favorable to trade than that before the negotiations?" * When tariff quotas are offered as compensation, how can the tariff quotas be reasonably allocated to avoid substantially impairing market access opportunities of other Members? * May a Member offer more favourable compensation to FTA partners than to non-FTA partners? * What retaliatory measures qualify as withdrawal of "substantially equivalent concessions" and should there be quantitative calculation criteria? * How can chain retaliation resulting in increasing the general level of concessions be effectively prevented? Several developing countries, including Brazil, Colombia, Indonesia, Thailand and Turkiye, supported China's demand for holding technical discussions on the proper use of Article XXVIII. Colombia is understood to have backed China for raising the issue at a critical moment given the circumstances. It apparently underscored the initiation of technical debates on this subject, with the elements and questions suggested by China as the first step. Turkiye, which had already raised several concerns about the EU's proposal to raise tariffs on a long list of steel products during the previous CTG meeting, appears to have raised further concerns at the present meeting. It is an open secret that the EU's move is primarily aimed at China, which is frequently criticized by the US, the EU, Japan, and other industrialized nations for its alleged excess steel capacity, according to people familiar with the development. Given that discussions among the US, the EU, and Japan have failed to reach a common understanding on "excess capacity" - an issue they continue to raise repeatedly at various WTO bodies - the EU is apparently suggesting a full discussion on excess capacity, said people familiar with the matter. Last year, Brussels proposed raising steel duty bindings (commitment ceilings) from 0 to 50 percent under GATT Article XXVIII. The UK made an identical proposal in March of this year. Several countries reportedly criticized the EU on grounds that its Article XXVIII negotiations raised systemic issues, as nearly 400 tariff lines covering various steel products in HS chapters 72 and 73 have been opened up for a sharp increase in tariff bindings (from 0 to 50 percent) under GATT Article XXVIII. To recall, the EU had called for an ambitious round of trade negotiations immediately after the Uruguay Round concluded, and starting from the WTO's first ministerial conference in Singapore in 1996, the EU wanted members to pay in areas of its interest so as to avoid any reforms in its subsidy-driven agriculture, said people familiar with the development. As China explained in its proposal for technical discussions on the proper use of Article XXVIII, this treaty provision is generally considered relevant for limited adjustments in tariff commitments, where the member concerned proposes to raise tariff bindings for certain products or tariff lines and offers compensatory reductions on other tariff lines to maintain an overall balance in tariff concessions, said a negotiator who asked not to be quoted. If two major steel-producing members like the EU and the UK are seeking to amend their schedules for 400 tariff lines, it is bound to raise a systemic question: whether Article XXVIII is intended for such large-scale amendments to tariff concessions via negotiations in a very confined setting - as opposed to multilateral negotiations where one might modify tariff bindings more broadly, such as under the unfinished Doha Development Agenda (DDA) negotiations, which remain frozen at this juncture, the negotiator added. The requests for Article XXVIII negotiations have been triggered by the expiration of safeguard actions on steel, as such temporary measures cannot be maintained indefinitely, said another negotiator who asked not to be quoted. According to the minutes (G/C/M/132) of the CTG meeting held on 27-28 November last year, the EU's move generated considerable opposition from members. As reported in SUNS #10446 dated 19 May 2026, Japan had severely questioned the EU's action, stating that it has "many doubts and serious concerns about the necessity and legitimacy of these measures, as each measure was taken without appropriate consideration of the trade-restrictive effects of other related measures." According to Japan, the EU "has been imposing a limitation on the maximum volume that one single Member can export under the residual TRQ for product category 1 (hot rolled plate products) since July 2024, and for product category 2 (cold rolled plate products) since July 2025." As a result of the EU's measures, Japan said, "imports of those products from Japan have drastically decreased since then." Japan urged "the European Union to rectify the aforementioned cumulative trade-restrictive measures on steel products. In this regard, Japan reserves the right to take action under the relevant Agreements." Similarly, Turkiye expressed sharp concern over the EU's move, noting that "the global steel industry remains a cornerstone of sustainable industrial growth while facing mounting pressures from global excess capacity." Ankara said that it is "cooperating with the EU and others to find solutions to meet this challenge; however, ensuring a fair and predictable trading environment that is consistent with the WTO and other international rules is essential for the benefit of all." Turkiye said that "the excess capacity pressures must be addressed in a manner that does not unfairly and unnecessarily restrict international trade," adding that "increasing protectionism in international trade has unfairly impacted countries which are not responsible for the excess capacity." "Protectionist measures are a source of concern for the future of the sector," it maintained. Ankara further argued that "proposing a 47% reduction in import quotas and doubling the level of out-of-quota duty to 50%" marks a critical shift. Several other members, including Chinese Taipei, India, and Korea, also raised multiple concerns about the EU's proposed Article XXVIII negotiations on steel. In response, the EU defended its move in requesting Article XXVIII negotiations, stating, "A WTO Member can take legitimate action, such as increasing its tariff commitments under the WTO, in compliance with the rules. In this case, the procedure is regulated by Article XXVIII of the GATT 1994." The EU said that several members "acknowledged the rationale for the EU to act against overcapacity." The EU argued that "the only way to avoid the proliferation of unilateral measures is collectively to address the root issue of overcapacity." Brussels said that it "remains fully committed to advancing on that objective together with like-minded partners, both bilaterally and in the context of the Global Forum on Steel Excess Capacity (GFSEC)." In short, a new divide appears to be emerging between industrialized countries led by the US and the EU on one side, and China and key developing countries on the other, over the seemingly questionable use of treaty-based rights, said a person who asked not to be quoted. Ironically, while the same industrialized countries seem determined to drastically change the treaty provisions - such as decision-making by consensus - and introduce "level-playing field" issues while normalizing interim plurilateral agreements allegedly concluded illegally, they are not prepared for technical discussions on Article XXVIII of the GATT 1994. +
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