China and the World Trade Organization

Tim Brightbill

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Introduction

China joined the WTO in 2001, and it is increasingly involved in WTO disputes.

World Trade Organization dispute panels have addressed key trade law issues involving China in several recent cases

• United States – Various Products from China (AD/CVD)

• United States – Tires from China (Section 421)

• EU – Fasteners from China

The ongoing proceeding in China –Raw Materials could have a significant impact on key raw materials for making steel

The United States has also requested consultations with China through the WTO regarding China’s subsidies to the green technology industries

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United States: Various Products from China (AD/CVD)

China sought WTO dispute settlement regarding U.S. antidumping (AD) and countervailing duty (CVD) cases involving four different sets of products, including pipe and tube

The WTO panel upheld a number of key aspects of the U.S. determinations

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United States: China (AD/CVD)

Sales of inputs by state-owned enterprises (SOEs) at below-market rates could constitute a subsidy

• State-owned enterprises are “public bodies” capable of bestowing subsidies

• Majority government ownership indicates government control of a company

Where SOEs dominate a market, the U.S. Department of Commerce properly looked to benchmarks outside of China to value inputs

• Land• Bank loans

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United States: China (AD/CVD)

Double counting: The panel found that, because of the AD methodology the United States applies to non-market economy (NME) countries like China, applying both countervailing duties and antidumping duties to a given product could theoretically result in double-counting subsidies

But the WTO Agreement on Subsidies and Countervailing Measures does not prohibit this result, so the Panel held that the U.S. action was GATT-legal

The panel also found that imposition of both antidumping and countervailing duties to Chinese products does not violate the most favored nation requirement of the GATT

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Ramifications

China has appealed the panel decision to the WTO Appellate Body

• The Appellate Body recently held a hearing on the appeal

If the decision is upheld, the United States will be able to continue

• To treat sales of inputs by SOEs at below-market prices as bestowing countervailable subsidies

• To apply both antidumping and countervailing duties to imports from China without taking any steps to eliminate “double counting”

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United States – Tires from China (Section 421)

After an investigation in response to a petition under Section 421

• The U.S. International Trade Commission found that imports of certain types of tires from China were disrupting the U.S. market

• President Obama determined to impose additional duties on imports of tires from China

This was the first time the WTO had considered the legality of measures taken by the United States under Section 421

China argued that a number of aspects of the U.S. decision violated China’s rights The WTO rejected essentially all of China’s arguments

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Tires from China: Key Panel Holdings

Imports did not have to increase at an accelerating pace to qualify as “increasing rapidly”

Imports were only required to be a significant cause of market disruption, not the only cause or even the chief cause of disruption

There was no requirement that there be any statistical correlation between increases in imports and indicators of injury to the U.S. industry

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Tires from China: Ramifications

In this decision, the WTO panel upheld the use of Section 421

Indeed, this is the first time a WTO panel has upheld any U.S. safeguard measure

China has appealed this ruling to the Appellate Body

• The Appellate Body’s ruling could be crucial to the future application of Section 421

Section 421 is available to address other import surges from China (but expires in 2013).

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EU: Fasteners from China

China challenged the EU’s antidumping duties on imports of steel and iron fasteners from China

The WTO panel held that the EU’s use of a single country-wide antidumping duty rate to most Chinese producers violated the WTO Antidumping Agreement and the GATT

• The panel held that, if a producer provided the EU with the necessary information, the EU was required to calculate an individual rate for it

The United States applies a similar approach (but with differences) to China

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China – Raw Materials

The United States, the EU, and Mexico have challenged China’s application of a variety of restrictions to exports of key raw materials used in steel making, including

• Coke• Refractory bauxite• Fluorspar• Zinc

The restrictions China applies include• Export duties• Export quotas• Restrictive bidding procedures

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China – Raw Materials China has argued that these measures are justified to

prevent pollution and to preserve natural resources China has also claimed a “sovereign right to regulate” its

raw material exports The panel will release its decision this year:

• The interim report is due February 18, 2011• The final report is due April 1, 2011

This decision could have a major impact on international trade in raw materials for steel making

Many other countries also restrict exports of raw materials, especially steel scrap

USTR is very interested in a potential case regarding China’s restrictions on exports of rare earths and other raw materials

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China – Green Energy Technology

The USW has filed a petition asking USTR to investigate a number of China’s policies regarding “green technology”

The Chinese practices identified include• Subsidies to the solar and wind power industries

• Restrictions on exports of rare earths, antimony and tungsten

• Measures discriminating against foreign companies attempting to enter Chinese renewable energy industries

• Technology transfer requirements

USTR has requested consultations with China through the WTO regarding subsidies to the wind industry

USTR has stated that it will continue to investigate the other measures

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China’s Steel Industry

China’s trade law violations relating to its steel industry are well documented

• Subsidies• State ownership and control• Massive market distortion (overcapacity)

USTR WTO litigation has become more aggressive

It is time to take a serious look at a comprehensive challenge to China’s steel-related WTO violations

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Conclusion

Recent decisions involving China have largely upheld U.S. laws, regulations, and decisions

The United States is more aggressively using WTO challenges to address China’s failure to meet its international trade commitments

A favorable decision in the China – Raw Materials case could substantially increase trade of key raw materials for making steel

Important to consider future cases against China’s export restrictions (on rare earths and other raw materials) and its many trade-distorting actions on behalf of its steel industry