U.S. v. China 4 Pending Cases in the WTO 1. 2. 3. 4. Antidumping on auto parts Export restrictions on rare earths Subsidies and wind power CVD on products from China 1 Case #1: Anti-Dumping and Countervailing Duties on Certain Automobiles from the United States Complaint: United States Respondent: China Photo: https://motoren.wordpress.com/page/156/ 2 China’s New Tariffs • In December 14, 2011, the Chinese government officially introduced two new tariffs on U.S. car imports. • The Announcement on Imposing Anti-dumping and Countervailing Measures on Imports of Certain U.S.-made Cars (MoC Announcement [2011] No.84) states: between December 15, 2011 and December 14, 2013, both anti-dumping and countervailing tariffs will apply to U.S-made passenger cars and sports utility vehicles with engine capacities of 2.5 liters and above. • China’s trade protectionism? • “Normal trade remedies” • In line with WTO rules Source and Photo: http://www.china-briefing.com/news/2011/12/16/u-s-car-exporters-get-hit-by-chinas-new-tariffs.html 3 Anti-Dumping “If a company exports a product at a price lower than the price it normally charges on its own home market, it is said to be “dumping” the product. Is this unfair competition? The WTO agreement does not pass judgement. Its focus is on how governments can or cannot react to dumping -it disciplines anti-dumping actions.” –WTO Subsidies and Countervailing Measures “The WTO Agreement on Subsidies and Countervailing Measures disciplines the use of subsidies, and it regulates the actions countries can take to counter the effects of subsidies. Under the agreement, a country can use the WTO’s disputesettlement procedure to seek the withdrawal of the subsidy or the removal of its adverse effects. Or the country can launch its own investigation and ultimately charge extra duty (“countervailing duty”) on subsidized imports that are found to be hurting domestic producers.” –WTO Source: http://www.wto.org/english/tratop_e/adp_e/adp_e.htm 4 Dispute DS440 Complaint by the United States • On 5 July 2012, the United States requested consultations with China with regard to Notice No. 20 [2011] and Notice No. 84 [2011] of the Ministry of Commerce of the People's Republic of China (“MOFCOM”) imposing anti-dumping and countervailing duties on certain automobiles from the United States, including any and all annexes. Source: http://www.wto.org/english/tratop_e/dispu_e/cases_e/ds440_e.htm Photo: http://www.caribbeanbusinesspr.com/news/escalation-in-china-us-trade-clashes-76426.html 5 China’s Unfair Imposition of Duties “The United States believes that China initiated the investigations without sufficient evidence; failed to objectively examine the evidence; and made unsupported findings of injury to China’s domestic industry. In addition, China failed to disclose “essential facts” underlying its conclusions; failed to provide an adequate explanation of its conclusions; improperly used investigative procedures; and failed to require non-confidential summaries of Chinese company submissions.” – U.S. Trade Representative Press Release, July 05, 2012 Source: http://www.ustr.gov/about-us/press-office/press-releases/2012/july/obama-administration-challenges-chinas-unfair-duties-american-made-cars 6 Inconsistent Anti-Dumping Agreement (Article VI of GATT 1994): Articles 1, 3.1, 3.2, 3.4, 3.5, 4.1, 5.3, 5.4, 6.2, 6.5.1, 6.8 (including Annex II, paragraph 1), 6.9, 12.2, and 12.2.2 Subsidies and Countervailing Measures Agreement: Articles 10, 11.3, 11.4, 12.4.1, 12.7, 12.8, 15.1, 15.2, 15.4, 15.5, 16.1 22.3, and 22.5 Source: http://www.wto.org/english/tratop_e/dispu_e/cases_e/ds440_e.htm Photo: http://www.renewableenergyworld.com/rea/news/article/2012/05/31-percent-anti-dumping-tariffs-announced-for-chinese-solar-panels 7 Likely Outcome • On September 17, 2012, the United States requested the establishment of a panel. • At its meeting on September 28, 2012, the Dispute Settlement Body deferred the establishment of a panel. • Pending Source: http://www.ustr.gov/about-us/press-office/press-releases/2012/july/obama-administration-challenges-chinas-unfair-duties-american-made-cars Photo: http://www.latimes.com/news/politics/la-pn-china-wto-obama-20120916,0,550815.story 8 Complainant: United States Respondent: China Photo Credit: http://cdni.wired.co.uk/620x413/k_n/mining.jpg 9 http://blog.thomsonreuters.com/index.php/rare-earth-metals-graphic-of-the-day/ 10 11 http://spectrum.ieee.org/tech-talk/semiconductors/materials/complaints-over-chinas-rare-earth-export-policies-get-serious http://blog.thomsonreuters.com/index.php/rare-earth-metals-graphic-of-the-day/ 12 http://blog.thomsonreuters.com/index.php/rare-earth-metals-graphic-of-the-day/ 13 Complaint by the United States • The United States alleges that China has imposed and administered export restrictions on rare earths, tungsten and molybdenum, including export duties, export quotas, minimum export price requirements, export licensing requirements and additional requirements and procedures in connection with the administration of the quantitative restrictions. 14 What’s All The Fuss About? “America’s workers and manufacturers are being hurt in both established and budding industrial sectors by [China’s] policies. China continues to make its export restraints more restrictive, resulting in massive distortions and harmful disruptions in supply chains for these materials throughout the global marketplace.” – U.S. Ambassador Kirk. Because China is a top global producer for these key inputs, its harmful policies artificially increase prices for the inputs outside of China while lowering prices in China. This price dynamic creates significant advantages for China’s producers when competing against U.S. producers – both in China’s market and in other markets around the world. The improper export restraints also contribute to creating substantial pressure on U.S. and other non-Chinese downstream producers to move their operations, jobs, and technologies to China. 15 http://www.ustr.gov/about-us/press-office/press-releases/2012/march/united-states-challenges-china%E2%80%99s-export-restraints-r Violated Agreements • Articles VII, VIII, X and XI of the GATT 1994 • Paragraphs 2(A)2, 2(C)1, 5.1, 5.2, 7.2, 8.2 and 11.3 of Part I of China's Protocol of Accession, as well as China's obligations under paragraph 1.2 of Part I of the Protocol of Accession. 16 Likely Outcome 17 Photo Credit: http://www.mining.com/wp-content/uploads/2012/07/China_USA_tensions-300x250.jpg China: Measures concerning wind power equipment Case #3 Complainant: United States Respondent: China 18 Background 1. The United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service Workers International Union, AFL-CIO CLC file petition China's acts, policies, and practices affecting trade and investment in green technologies. (September 9, 2010). 2. The petition sparks an investigation by U.S. Trade Representative to determine if these acts, policies, and practices deny U.S. rights or benefits under the GATT 1994, under the Agreement on Subsidies and Countervailing Measures the (Oct. 20, 2010). 3. The U.S. Trade Representative requests consultation regarding subsidies provided by China on wind power equipment through its Wind Power Equipment Fund (December 22, 2010). 4. Within a week of each other, the EU (Jan 12, 2011) and Japan (Jan 17, 2011) requested to join the consultation. 19 Dispute Resolution DS419: U.S. Complaints 1. The grants, funds, or awards are contingent on the use of domestic over imported goods. Violation: Article 3 of the Subsidies and Countervailing Measures (SCM) Agreement. 20 2. China did not notify the WTO of these measures. Violation: Article XVI:1 of the GATT 1994 as well as Article 25.1, 25.2, 25.3 and 25.4 of the SCM Agreement. 21 3. China did not provide translation of the subsidy measures into any of the WTO official languages Violation Part I, Paragraph 1.2, of its Protocol of Accession. 22 Contradicting Positions U.S. (EU and Japan) • Subsidies are harmful to the global economy, providing unfair advantage to green-energy manufacturers, and expressly prohibited under WTO rules. • China has inadequate transparency to monitor subsidies. China • It is a misunderstanding, measure at hand was to enhance investments on R&D in wind power. This case should be a non-issue. 23 24 25 Likely Outcome On June 7, 2011, the Office of the U.S. Trade Representative issued press release stating: “China has ended certain wind power equipment subsidies…this is the third successful WTO challenge that the U.S. has brought against Chinese government subsidies. In each of these cases, following formal consultations at the WTO, China agreed to eliminate the subsidies that the U.S. had challenged.” Pending Case is still open (last update March 2011). Why? Other countries also filed and the multifaceted aspects of the case. Prediction: China will be comply, but will find other subsidies/grants and get away with it due to “lack of transparency.” http://www.ustr.gov/about-us/press-office/press-releases/2011/june/china-ends-wind-power-equipment-subsidies-challenged 26 DISPUTE DS437 Countervailing Duty Measures on Certain Products from China Complainant: China Respondent: United States Third Parties: The European Union, Japan, India, Turkey, Norway, Vietnam, Australia, the Russian Federation, Canada, Brazil and Korea 27 Photo credit: clv-triangle.vn Complaint by China On 25 May 2012, China requested consultations with the United States concerning the imposition of countervailing duty measures by the United States on over 22 categories of Chinese products (including, steel products, solar cells and paper products) worth $7.29 billion. CONTESTED PRACTICES: 1) China challenges various aspects of certain identified countervailing duty investigations, including their opening, conduct and the preliminary and final determinations that led to the imposition of countervailing duties. 1) The “rebuttable presumption” allegedly established and applied by the US Department of Commerce that majority government ownership is sufficient to treat an enterprise as a “public body”. 28 Violated Agreements • Article VI of the GATT 1994; • Articles 1.1, 2, 11.1, 11.2, 11.3, 12.7 and 14(d) of the SCM Agreement; and • Article 15 of the Protocol of Accession of China. Photo credit: http://www.chinaustradelawblog.com/ 29 China’s Position • The WTO has already ruled against the United States in 2011 that a similar set of measures (DS379) and although some of these measures at issue were adopted after the issuance of the Appellate Body report, the U.S. did not modify its conduct. • China recognizes WTO members' legitimate rights to adopt trade remedy measures, however, such rights must be exercised in accordance with WTO rules and not be subject to any form of abuse. 30 United States’ Position The U.S. will defend its use of countervailing duties which are necessary to offset the injury caused by China's illegal government subsidies. Photo credit: http://www.chinaustradelawblog.com/tags/subsidies/ 31 Consultations and Dispute panel • Consultations were held on June 25 and July 18, 2012 but the dispute failed to be resolved • August 20, 2012, China requested the establishment of a dispute panel. • The U.S. exercised its right to block the creation of a panel for one meeting of the WTO's dispute settlement body, meaning China can renew its request at the next session and at the August 31, 2012 meeting, the DSB deferred the establishment of a panel. • At China’s second request for a panel establishment, the DSB agreed on September 28, 2012 to establish a panel, to examine countervailing (CV) duty measures imposed by the United States on a wide range of products from China. • The panel has not yet been composed. 32 Other pending cases Photo credit: http://theocculttruth.com/ Photo credit: http://www.katv.com/ • DS449- Complaint by China: On 17 September 2012, China requested consultations with the United States on countervailing and anti-dumping measures applied to a wide range of products exported by China to the US. Among the products cited by China, affected by the measures, are paper, steel, tyres, magnets, chemicals, kitchen appliances, wood flooring, and wind towers. • DS450- Complaint by the United States: On 17 September 2012, the United States requested consultations with China concerning certain measures providing subsidies in the form of grants, loans, forgone government revenue, the provision of goods and services, and other incentives contingent upon export performance to automobile and automobile-parts enterprises in China. 33 Discussion Case #1: Is it better to strengthen or weaken ties with China in regards to tariffs? Case #2: On the one hand, the West demands China export more rare earths, on the other, the West demands China protect the environment. Is the West being hypocritical? Should this play a role in the WTOs decision(s)? Case #3: What should take precedence, focusing on and bolstering domestic renewable energy or equal opportunity for foreign companies? Case #4: Is it possible for a long-term winner to prevail from a U.S./China trade war? 34