TEAM #7 VICKY RAHAMTALL MAURICIO RAMIREZ JULIA STRAKER 1 Pending U.S.-China Cases U.S. v. China (Antidumping on Auto Parts) (Pending #440) U.S. v. China (Export Restrictions Rare Earths) (Pending #431) U.S. v. China (Subsidies and Wind Power) ( Pending # 419) China v. U.S. (CVD on Products from China) (Pending # 437) U.S. v. China 2 Main WTO Issue: Antidumping on Auto Parts Pending #440 History & Context Sept 2009: Obama imposes safeguard measures against Chinese tire imports Shortly after, China announces investigations of imports of American made cars & SUVs May 2011: China finds that American automobiles had been sold at less than value December 2011: China imposes anti-dumping/countervailing duties on U.S. produced automobiles Products affected: American automobiles with engine capacity of 2.5 liters +. Last year, the U.S. exported more than $3 billion of these automobiles to China Prior Proceedings 3 July 5, 2012: U.S. requests consultations with China for imposing countervailing and antidumping duties September 17, 2012: U.S. requests establishment of a panel September 28, 2012: DSB deferred establishment of a panel October 23, 2012: Panel is established Business & Political Context 4 For the U.S., there are political expectations to confront unfair Chinese trade practices. Moreover, the U.S. auto industry is greatly protected by unions and lobbies, further pressuring the U.S. take action against China given the industry at stake. Combating these duties is also viewed as protecting jobs and growing the economy. Chinese Law Contested 5 Regulations of the PRC on Countervailing Measures Articles 11, 13, 16, 17 WTO Agreements Cited 6 Anti-Dumping Agreement 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 Determination of injury caused is based on positive, objective evidence that examines volume and impact of dumped imports (evidence subject to investigation / parties able to defend their interests). Subsidies & 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 CV duties must be in accordance with GATT article VI; evidence subject to investigation; all parties are provided with requested information/essential facts (also reiterates anti-dumping articles cited). GATT 1994 Article VI Defines the purpose of CV & AD duties and the legal obligations of the contracting parties to impose such duties transparently, fairly, and with proper evidence. Positions of the Parties 7 Complainant: U.S. Insufficient evidence Failed to objectively examine evidence Unsupported findings of injury to China’s economy Failure to disclose ‘essential facts’ Failure to provide adequate explanation of findings Improper execution of investigative procedures Failure to require non-confidential summaries of Chinese company submissions Respondent: China American automobiles sold at less than fair value Automobiles benefitted from subsidies WTO rules permit imposition of duties if found to be dumped/subsidized and causes injury to domestic economy National & International Interests 8 United States Interests: The U.S. believes the duties imposed are a retaliatory effort to block U.S. exports in light of the safeguard measure the U.S. imposed against Chinese tire imports in 2009. By challenging the CV & AD duties, the U.S. is able to better protect the auto industry, especially given the huge presence of unions and lobbies. This protects jobs and helps grow the economy. Chinese Interests: The Chinese claim that the dumping of American automobiles has caused injury to their domestic manufacturers. Therefore, this will help protect their auto industry. Proposed Resolution 9 If the evidence collected by Chinese authorities is found to be insufficient in proving American-made automobiles were sold at a less than fair value and caused injury to the domestic economy, then the Chinese should remove the CV & AD duties in a timely manner in accordance with their international obligations. U.S. v. China 10 Main WTO Issue: Export restrictions on Rare Earths Pending #431 History & Context The Chinese imposed export restraints, including export duties, export quotas, minimum export price requirements and export licensing requirements, on 17 rare earth minerals as well as tungsten and molybdenum. These rare earths are indispensible components needed to produce modern technologies for the defense, electronics and renewable-energy industries. China produces about 97% of the of rare earth minerals. Prior Proceedings 11 March 13, 2012: U.S. requested consultations on China’s actions Subsequently, EU, Japan and Canada joined the consultations June 27, 2012: U.S. requested the establishment of a panel July 23, 2012: Single panel was created September 24, 2012: Director General composed the panel Business & Political Context 12 China produces 97% of the world output of rare earth minerals that are critical components to producing advanced technologies. This equates to significant economic and political control over the technology industry and more. For example, in 2010 China cut off exports of rare earths to Japan due to an unrelated diplomatic spat when the Japanese detained a Chinese fishing boat captain. For critical components that are costly both financially and environmentally, it is important for the U.S. to ensure the fair trade of these goods through mechanisms such as the WTO. Contested Chinese Law 13 Foreign Trade Law of the PRC and the Regulation of the PRC on the Administration of the Import and Export of Goods Articles 35 & 16 Rare earths are listed as catalogue item no. 21 as an acceptable commodity to enact export restrictions WTO Agreements Cited 14 GATT 1994 Art. VII, VIII, X, XI, XI:1, X:3(a) The price of goods are based on fictitious values; fees and charges should not represent indirect protection, need to simplify export documentation requirements; information should be published promptly; elimination of quantitative restrictions Protocol of Accession: Part I, para. 1.2, Part I, para. 5.1, Part I, para. 11.3, Part I, para. 5.2, Part I, para. 8.2, Part I, para. 7.2 China should: Apply all laws in uniform, impartial and reasonable manner; progressively liberalize availability/scope of trade; eliminate and not introduce, re-introduce or apply non-tariff measures not justified under WTO rules; eliminate all taxes and charges applied to exports unless under Annex 6. Positions of the Parties 15 Complainant: U.S. China imposed unfair export restraints: duties, quotas, pricing requirements, procedures and document requirements These harmful policies artificially increase prices for rare earths internationally while lowering prices in China Creates advantages for Chinese producers Creates pressure for international producers to move their operations, technologies and jobs to China Respondent: China Export restraints were implemented in order to prevent environmental damages that result from mining the minerals National & International Interests 16 Chinese Interests: Export restrictions on rare earths could potentially allow China to capture a large portion of the market by selling advanced technologies at substantially lower prices than the international community is able to; this could also enable China to control general price-points on the technology because international firms would not be competitive. Finally, this could draw substantial FDI U.S./International Interests: If the export restrictions were eliminated, firms could produce the advanced technologies at a lower cost; in return, consumers could purchase technology at lower prices. Proposed Resolution 17 If Chinese export practices are found to be inconsistent with WTO regulations, China should be responsible for meeting their international trade obligations in accordance with their WTO commitments. China and the complainant should agree to a specific amount of time in which the Chinese have to bring their rare earth trade practices in line with international obligations. U.S. v. China 18 Subsidies and Wind Power Main WTO Issue: Import Substitution Subsidies Pending # 419 History & Context China provides grants, funds and awards to Chinese wind power equipment manufacturers if they use domestic parts and components rather than imported goods. Program grants range from $6.7 million and $22.5 million and Chinese companies are eligible for multiple awards. USTR estimates that China has given several hundred million dollars to Chinese manufacturers of wind turbines and components for wind turbines since 2008. Prior Proceedings 19 December 22, 2010: U.S. requested consultations with China January 12, 2011: EU requested to join consultations January 17, 2011: Japan requested to join consultations February 16, 2011: U.S. held consultations with China June, 2011: Following consultations, China formally revoked the legal measure that created the Special Fund for Wind Power Manufacturing program Business & Political Context 20 The imposition of Chinese import substitution subsidies curbs the export potential for foreign manufacturers of wind power components, including the U.S. The USTR received multiple petitions from unions citing the burdens and restrictions on commerce as a result of the Chinese protectionist policies. Contested Chinese Law 21 Renewable Energy Law of the People’s Republic of China - Appendix No. 476 (Legal measure enabling Special Fund for Wind Power Manufacturing) WTO Agreements Cited 22 GATT 1994 Art. XVI:1 If a subsidy or price support is implemented that increases exports/reduces imports, they responsible for estimating the effects and notifying contracting parties. If any contracting parties’ interests are seriously threatened, the party granting the subsidy should discuss with other parties the possibility of limiting the subsidy. Subsidies and Countervailing Measures Agreement Art. 3, 25.1, 25.2, 25.3, 25.4 Subsidies provided for the use of domestic over imported goods is prohibited; all information regarding imposed subsidies should be made available to all parties to evaluate the effects of said subsidy. Protocol of Accession: Part I, para. 1.2 The WTO Agreement to which China accedes shall be the WTO Agreement as rectified, amended or otherwise modified by such legal instruments as may have entered into force before the date of accession. Positions of Parties 23 Complainant: U.S. Respondent: China Import substitution subsidies acts Need to subsidize green technology as a barrier to U.S. exports to China in the green technology industry Failed to make available necessary translations of measures & generally lacks the necessary transparency to monitor subsidies sector as it is an investment to improve the environment and accelerate technology advancement of wind equipment manufacturing sector and promote wind power development in China National & International Interests 24 Chinese Interests: Claims that the subsidies were intended to increase R&D in the wind energy sector and that this should be a non-issue. U.S./International Interests: Chinese subsidies effectively thwart U.S. green technology exports to China. The eradication of such subsidies could allow U.S. and international firms in the green technology sector to share the same competitive playing field as Chinese firms. Finally, with increased exports to China, the U.S. could create more jobs and grow the economy. Resolution of Trade Issue 25 Following consultations with the United States, China formally revoked the legal measure that created the Special Fund for Wind Power Manufacturing program in June 2011. USTR issued the following Statement: “The United States is pleased that China has shut down this subsidy program. Subsidies requiring the use of local content are particularly harmful and are expressly prohibited under WTO rules. This outcome helps ensure fairness for American clean technology innovators and workers. We challenged these subsidies so that American manufacturers can produce wind turbine components here in the United States and sell them in China. That supports well-paying jobs here at home.” China v. U.S. 26 Countervailing Duty Measures on Certain Products from China Main WTO Issue: Countervailing duties and Subsidies Pending #437 History & Context The WTO previously ruled against a similar set of anti-dumping and countervailing duties imposed by the U.S. on certain products from China (DS379). The Chinese have said that after the issuance of the Appellate Body report for this previous dispute, the U.S. did not fully comply with the DSB rulings and recommendations; nor did the U.S. modify its conduct in the subsequent trade remedy investigations. The Chinese requested subsequent consultations for CV duties on a wide range of products from China. Chinese Products Affected by CV Duties 27 Thermal paper Seamless pipe Pressure pipe Print graphics Line pipe Drill pipe Citric acid Aluminum extrusions Lawn groomers Wood flooring Kitchen shelving Steel wheels Oil country tubular goods Steel wire Wire strand Steel cylinders Steel grating Solar panels Wire decking Wind towers Magnesia bricks Steel sinks Prior Proceedings 28 May 25, 2012: China requested consultations with the United States concerning the imposition of countervailing duty measures by the United States on certain products from China. August 20: 2012: China requested the establishment of a panel. August 31, 2012: the DSB deferred the establishment of a panel. September 28, 2012: DSB established a panel (Australia, Brazil, Canada, the European Union, India, Japan, Korea, Norway, the Russian Federation, Turkey and Viet Nam and Saudi Arabia reserved their third party rights) November 14, 2012: China requested the Director-General to determine the composition of the panel. November 26, 2012: The Director-General composed the panel. Business & Political Context 29 The United States asserts that the CV duties are imposed against the Chinese products counteract Chinese government subsidies. Lobbies and unions may also play a role in this protectionist effort given the industries affected by these products (i.e. the steel industry). Contested U.S. Law 30 U.S. Public Law 112-99: “An act to apply the countervailing duty provisions of the Tariff Act of 1930 to nonmarket economy countries, and for other purposes” In a statement, the US said that it conducted the proceedings transparently and with all the procedural safeguards provided for under the WTO Agreement. WTO Agreements Cited 31 GATT 1994: Article VI SCM Agreement: Articles 1.1, 2, 11.1, 11.2, 11.3, 12.7 and 14(d) Protocol of Accession of China: Article 15 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. China also challenges 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”. Positions of Parties Complainant: China China believes that the countervailing duties imposed by the U.S. are inconsistent with their obligations to the WTO. The WTO has already ruled against the United States in 2011 for a similar set of measures (DS379) 32 Respondent: U.S. The WTO Agreements permit members to levy a countervailing duty in order to offset injury caused by subsidies bestowed by another Member on the manufacture, production, or export of goods. With respect to the CV duty proceedings at issue in this dispute, the US said that it conducted the proceedings transparently and with all the procedural safeguards provided for under the WTO Agreement. National & International Interests 33 U.S. interests: Countervailing duties on these products are necessary to offset the injury caused by China's government subsidies. Chinese/international interests: Chinese exports are hurt by the CV duties; therefore, it is in Chinese interests to have these duties removed. Proposed Resolution 34 If the countervailing duties are found to be inconsistent with WTO regulations, the U.S. should be responsible for meeting their international trade obligations in accordance with their WTO commitments. The U.S. and China should agree to a specific amount of time in which the U.S. will into bring the matter at issue into full compliance with the DSB recommendations and rulings and their international obligations.