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Dispute Resolution Understandings

DSU 449, 450, 451, 452 & 454 Presented by: Mahru Enkhchimeg, Carrie Stratmoen, Micaela Thurman & Rosanna Torres . Dispute Resolution Understandings. DSU Timeline. United States — Countervailing and Anti-dumping Measures on Certain Products from China DS449. Background.

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Dispute Resolution Understandings

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  1. DSU 449, 450, 451, 452 & 454 Presented by: Mahru Enkhchimeg, Carrie Stratmoen, Micaela Thurman & Rosanna Torres Dispute Resolution Understandings

  2. DSU Timeline

  3. United States — Countervailing and Anti-dumping Measures on Certain Products from ChinaDS449

  4. Background • GPX Int’l Tire Corp. v. United States (2008) • Final Decision from the US Court of International Trade (December 2011) • Countervailing duty law does not apply to non-market economy (NME) countries • Commerce Department's current method of applying countervailing and anti-dumping duties on imports from China and other "non-market economies" (NMEs) was invalid.

  5. New Public Law 112-99 (passed in March 2012)

  6. Key Facts

  7. Complaints - Measure at Issue 1 PUBLIC LAW 112-99 VIOLATE ARTICLES X:1, X:2, AND X:3 OF GATT Article X: Publication and Administration of Trade Regulations Articles X:1- Laws…shall be published promptly in such a manner as to enable governments and traders to become acquainted with them. Articles X:2 - No measure of general application… taken by any contracting party shall be enforced before such measure has been officially published. Articles X:3 Each contracting party shall administer in a uniform, impartial and reasonable manner all its laws… • Section 1- Countervailing Measures • A new piece of legislation (Public Law 112-99) that explicitly allows for the application of countervailing measures to non-market economy countries • Countervailing duty determinations or actions made or performed by US authorities between 20 November 2006 and 13 March 2012 in respect of Chinese products;

  8. Complaints - Measure at Issue 2 PUBLIC LAW 112-99 VIOLATE ARTICLES X:3 OF GATT Articles X:3 Each contracting party shall administer in a uniform, impartial and reasonable manner all its laws… • Section 2- Anti-dumping measures • Anti-dumpingmeasures associated with the concerned countervailing duty measures as well as the combined effect of these anti-dumping measures and the parallel countervailing duty measures;   • The United States' failure to provide the US Department of Commerce (USDOC) with legal authority to identify and avoid the double remediesin respect of investigations or reviews initiated on orbetween 20 November 2006 and 13 March 2012.

  9. Complaints - Measures at Issue 3 and 4 Difference in Effective Dates VIOLATE SCM, AD AND GATT This omission prevents the US authorities, in all such investigations and reviews, from ensuring that the imposition of countervailing dutiesis inconsistent with (Articles 10, 15, 19, 21, and 32 of) the SCM Agreementand (Article VI) of the GATT 1994 that the imposition of anti-dumping duties in the associated anti-dumping investigations and reviews is inconsistent with (Articles 9 and 11 of) the AD Agreement and (Article VI) of the GATT 1994. • US authorities have no basis under domestic law to identify and avoid double remedies initiated between 20 November 2006 and 13 March 2012 • US authorities did not investigate and avoid double remedies in the identified investigations and reviews,

  10. Take Away Messages • Legal Issue • Domestic law become the object of dispute settlement • Measurement Issues – avoid double remedy • ITC and DOC need to reach conclusive determinations on any CV and AB

  11. China-Certain Measures Affecting the Automobile and Automobile-Parts IndustriesDS450

  12. Part I: Key facts of DS450 China-Certain Measures Affecting the Automobile and Automobile-Parts Industries • USA Requested consultation in 09/17/ 2012 • Respondent: Republic of China • Joined consultation: European Union in 09/28/2012 (DSU: Article 4.11) • Current status: In consultation, panel not formed

  13. The U.S. Claims: • China provides subsidies in the form of grants, loans, foregone government revenue, the provision of goods and services, and other incentives contingent upon export performance to automobile and automobile-parts enterprises in China. • China created 12 export base provinces. • USA listed 157 legal instruments including 83 as statement of evidence through which China provides subsidies.

  14. Breach of Certain Rules • Article 3 of Subsidies and Countervailing Measures (SCM) • Breach of transparency obligations • Article XVI:1 of the GATT 1994 and 25.1, 25.2, 25.3, and 25.4 of SCM • Accession Protocol-Part I, Paragraph 2C1 and 2C2 • Accession Protocol-Part I, Paragraph 1.2.

  15. Part II: Context & History U.S. & Chinese Subsidies • U.S. provided GM and Chrysler $60 billion in loans, working capital, and other support funds in 2008 • Chinese automobile industry continued to grow as a result of $586 billion stimulus package; and sales tax cut on smaller cars during the financial crisis 2008

  16. ADAC: Chinese Brilliance Worst Crash Test Results in History • http://www.youtube.com/watch?v=K4cbjLVrKLM

  17. Chinese Auto-Parts Industry • US mainly imports auto-parts from China totaling $5.5 billion, while US exported one fifth of the amount • Hundred vehicle manufacturers in China of which 25 are domestic producers (two thirds SOE) • Magna International Inc., Canada’s largest auto parts maker, currently has 17 manufacturing and 6 sales, engineering, and product development facilities in China • Visteon has 25 manufacturing facilities and 3 customer service centers in China.

  18. Complexity of DS450 • PRC is Socialist country • Interventionist state, SOEs, state subsidies • State maneuvers the steering wheel • Chinese automobile and automobile parts industry is premature (established 1950s, 1980s) • DS 450 raises state sovereignty issues • Multiple interest groups involved: • General Motors • Volkswagen • Honda, etc. • Dispute resolution likely to impact U.S. and its largest trading partner Canada’s interests in China

  19. DISPUTE DS451 Production and Export of Apparel and Textile MEXICO vs CHINA

  20. DISPUTE DS451 MEXICO CLAIMS CHINA HAS MEASURES THAT SUPPORT EXPORTERS AND PRODUCERS OF APPAREL AND TEXTILE PRODUCTS measures CASH PAYMENTS Sale and Transport is provided to COTTON FARMERS TAX EXEMPTIONS Discounted ELECTRICITY RATES reduction of IMPORT DUTIES and VALUE ADDED TAX for equipment low cost loans by STATE-OWNED banks preferential land use RIGHTS support for production

  21. DISPUTE DS451 TIMELINE Oct 15 Mexicorequests consultations 2013 2012 Apr May Feb Jun Mar Nov Dec Jan Oct Jul Aug Oct Sept Oct 26 Australia & Guatemala request to join consultations Oct 29 Brazil, Peru & U.S. request to join consultations Nov 15 Colombia requests to join consultations Oct 25 European Union requests to join consultations Oct 30 Honduras requests to join consultations

  22. DISPUTE DS451 CURRENT STATUS IN CONSULTATION Complainant requests consultations with respondent, no dispute panel established and no withdrawal or mutuallyagreed solution notified.

  23. DISPUTE DS451 WHATS THE TRADE IMPACT? BUSINESS CONTEXT SUBSIDIES are causing or threatening to cause serious prejudicethrough displacement and impedance of Mexican exports to the United States as well as through significant price undercutting,price suppression,price depression, and lost sales in the United States.

  24. DISPUTE DS451 WTO ISSUES measures appear to INVOLVE PROHIBITED ACTIONS underSUBSIDIES & COUNTERVEILING MEASURES AGREEMENT, GATT 1994, AGREEMENT on AGRICULTURE & CHINA’S ACCESSION PROTOCOL agreements & provisions violated Agreement on AGRICULTURE Article 3 Article 9 Article 10 SCM AGREEMENT Article 3.1 (a), (b) Article 5 (c) Article 6.3 (b), (c) Article 6.4 Article 6.5 GATT 1994 Article III CHINA’S ACCESSION PROTOCOL PART 1 - Paragraph 1.2

  25. DISPUTE DS451 RECOMMENDATIONS FORM PANEL: Consultations will probably not resolvethe situation given the MARKET COMPETITION of both countries. PANEL REPORT must ask CHINA to REMOVE SUBSIDIES and INTERNAL PREFERENTIAL TREATMENTFOR: • producers/exporters of apparel & textile products • suppliers in cotton & chemical fibers industries

  26. WHAT: Domestic Content Requirements Certain Measures Affecting the Renewable Energy Generation Sector DSU452WHO: CHINA VS EU; Italy and Greece

  27. DISPUTE DS452 WHEN 2013 2012 Apr May Feb Jun Mar Nov Dec Jan Oct Jul Aug Oct Sept Nov 5 China requested consultations with the European Union, Greece and Italy NO ACTION EU & China negotiate over solar panels Nov 19 Australia and Argentina request to join consultations Nov 16 Japan request to join consultations

  28. DISPUTE DS452 IN CONSULTATION Complainant requests consultations with respondent, no dispute panel established and no withdrawal or mutually agreed solution notified.

  29. EU – China Trade • China = EU's 2nd biggest trading partner behind the United States • EU = China's biggest trading partner • EU policy initiative 20% of Energy from Renewables by 2020 • August 6th EU due to impose antidumping duties on Chinese Solar Panels of 47.6% (Now 11%) – China agreed to price floors

  30. DISPUTE DS452 Specific Issues in GATT • Articles I - General Most-Favored-Nation Treatment • Article III: National Treatment and Internal Taxation • III:1 – No internal taxes, charges, laws, regulation or requirements to imported or domestic products in order to protect the domestic markets • III:4 – No regulation affecting their internal sale • III:5 – No internal quantitative regulation

  31. DISPUTE DS452 Specific issues in Subsidies and Countervailing Measures (SCM) Agreement • Article 1.1 Subsidies = a financial contribution by a government • 3.1(b) Can not provide subsidies for using domestic over imported goods

  32. DISPUTE DS452 Specific Issues in Trade Related Investment Measures (TRIMS) Agreement • Article 2.1: No TRIMS inconsistent with article III (National Treatment) or XI (General Elimination of Quantitative Restrictions) of GATT • Article 2.2: Illustrative List of TRIMS Inconsistent w National Treatment:

  33. Likely Outcome? • China presents a typically vague case; • EU has many initiatives to spur renewable energy, likely to have domestic incentives; • Similar DSU between the EU & Canada panel found: • Canada in violation of GATT and certain TRIM measures • Rejected claims under SCM due to lack of evidence

  34. DISPUTE DS454 Antidumping Duties on High Performance Stainless Steel Seamless Tubes JAPAN vs CHINA

  35. DISPUTE DS454 JAPAN CLAIMS CHINA HAS MEASURES IMPOSING ANTI-DUMPING DUTIES ON HIGH PERFORMANCE STAINLESS STEEL TUBES measures INCREASING ANTI-DUMPING DUTIES 9.7% 11.1% IMPOSED ON IMPORTS OF STEEL TUBES FROM THE EU

  36. DISPUTE DS454 TIMELINE Jan 31 and Feb 1 Japanheld consultations with China May 24 Dispute Settlement Body establishes PANEL DISPUTE DS460 EU files similar case June 13, 2013 Panel was formed Sept 11, 2013 Dec 20 Japanrequests consultations 2012 2013 Jul Aug Jun Feb Mar Apr Jan Dec May Sept Oct Jul 17 Japan requested Director-General to determine composition of PANEL Apr 11 Japanrequests the ESTABLISHMENT OF A PANEL Jul 29 Director-General composes PANEL

  37. DISPUTE DS454 CURRENT STATUS PANEL COMPOSED Panelists have been selected according to procedures laid down in Dispute Settlement Understanding, Article 8. Panel report has not been adopted or appealed. No withdrawal or mutually agreed solution has been notified.

  38. DISPUTE DS454 WHATS THE TRADE IMPACT? BUSINESS CONTEXT ANTIDUMPING DUTIES are significantly hampering market access to China through price depression.

  39. DISPUTE DS454 WTO ISSUES measures are INCONSISTENT WITH ANTI-DUMPING AGREEMENT & GATT 1994 Article 1 Article 3.1 Article 3.2 Article 3.4 Article 3.5 Article 5.3 Article 5.8 Article 6.5 Article 6.5.1 Article 6.8 Article 6.9 Article 7.4 Article 12.2 Article 12.2.2 ANNEX II agreements & provisions involved GATT 1994 Article VI National Treatment on Internal Taxation and Regulation ANTI-DUMPING AGREEMENT Art.1 – Application of anti-dumping measures Art.3 – Determination of injury Art. 5 – Accuracy of evidence Art. 6 – Confidentiality clause Art. 7 – Provisional measures Art. 12 – Notification Annex II- Best Information

  40. DISPUTE DS454 RECOMMENDATIONS PANEL REPORT must ask CHINA to REMOVE INTERNAL PREFERENTIAL TREATMENT CHINA must commit to play by the rules

  41. CONCLUSIONS • WTO cases often have political & foreign policy undertones • Domestic lawmakers have added responsibility of domestic v. WTO laws • Nation states are developing “smart policy” to work around WTO/GATT regulation to appease domestic producers while also advocating for more free trade • Trade disputes & DSU force countries to engage on another level of diplomacy

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