Wednesday, December 14, 2011

Taking on China in the WTO

Three disputes in the Dispute Settlement mechanism of the WTO pertaining to China brings the spotlight back to the emerging power in multilateral trade. The three disputes pertain to X-ray security inspection equipment, Broiler products and grain-oriented flat rolled electrical steel. All three cases involved challenge of countervailing and anti-dumping duties by China on these products which were imported into the Chinese economy.

Pascal Lamy, Director General of the WTO while addressing a forum in Beijing on December 11th, 2011 opined, 

"Looking into the future, as a key member of the WTO family, China’s role and influence will be vital in our collective endeavour to advance trade opening and global trade regulation.

And this in turn is linked to the continuation of China’s reform and opening process. Understandably the pace of such reforms is a topic of debate within China. But the best argument in favour of such policy is that market opening, coupled with the right domestic policies, have worked for this country as well as for its trade partners. Anchoring in the WTO further reforms of China’s services sector or further opening of its procurement markets can bring welfare gains and can help sustain China’s growth for the next decades.  China can also provide tremendous opportunities for growth in other countries. Growing together is more stable and sustainable than growing alone."

This can be seen as an indirect reference to resist from protectionist measures that are WTO inconsistent.

There is an interesting piece of legislation in the US (U.S.-China Relations Act of 2000 (P.L. 106-286), 22 U.S.C. § 6951 (the Act)) which requires the USTR to report annually to the Congress on compliance by China with commitments made in connection to its accession to the WTO. (Wonder if any other legislation exists in relation to other countries?)

The USTR submitted this report in December 2011. The report is a comprehensive summary of the compliance status of China in the WTO. The intention of the USTR is also made abundantly clear,

"In 2012, the Administration will continue to energetically pursue increased benefits for U.S. businesses, workers, farmers, ranchers and service suppliers from our trade and economic ties with China. Tools for achieving these objectives include productive, outcome-oriented dialogue at all levels of engagement and in both bilateral and multilateral settings; negotiation of new disciplines, where feasible; and vigorous use of the WTO dispute settlement mechanism, where appropriate. The Administration will also continue to consult closely with U.S. stakeholders to ensure that U.S. policies and actions advance their interests.

On the bilateral front, the United States will continue to pursue a robust set of formal and informal meetings and dialogues with China, including high-level meetings under the auspices of the S&ED and the JCCT, as well as ongoing work in JCCT working groups. The United States will also take full advantage of multilateral venues such as the WTO to engage China. Key goals will include ensuring that the benefits of China’s WTO commitments are fully realized by the United States and other WTO members and that problems in the U.S.-China trade relationship are appropriately resolved. The United States will continue to place particular emphasis onreducing Chinese government intervention in the market.

At the same time, as the United States has repeatedly demonstrated, when dialogue is not successful in resolving WTO-related concerns, the United States will not hesitate to invoke the dispute settlement mechanism at the WTO where appropriate. Similarly, the United States will continue to rigorously enforce U.S. trade remedy laws, in accordance with WTO rules, when U.S. interests are being harmed by unfairly traded or surging imports from China.

Breaking down Chinese market barriers and maximizing our stakeholders’ opportunities to compete in the global marketplace could not be more important in today’s world. Going forward, the Administration will continue its dedicated efforts to achieve these goals."

Referring to China's use of Anti-dumping measures the Report has stated,

"China has become a leading user of AD measures since its accession to the WTO. Currently, China has in place 109 AD measures, some of which pre-date China’s membership in the WTO, affecting imports from 17 countries or regions. China also has nine AD investigations in progress. The greatest systemic shortcomings in China’s AD practice continue to be in the areas of transparency and procedural fairness. China has also begun to invoke AD and CVD remedies under troubling circumstances. As discussed below, the United States is currently pursuing two WTO cases alleging multiple violations of WTO rules, one involving China’s AD and CVD investigations of imports of GOES from the United States and the other involving China’s AD and CVD investigations of imports of certain U.S. chicken products known as “broiler products.”

Whether the measures undertaken by China are inconsistent with the provisions of the WTO and hence "unjustifiably protectionist" will be decided by the WTO Dispute settlement process. 

As the Reuters reports, 12 cases have been brought by the USA against China in the WTO,
"Many members of the U.S. Congress remain skeptical over the benefits of China's accession. They blame the huge U.S. trade deficit with China, which hit a record $272 billion last year, for millions of lost U.S. manufacturing jobs."

 It is clear that such disputes will continue to remain in focus in the coming years.

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