US rejects Chinese proposal on trade remedy measures

A Chinese proposal to negotiate WTO disciplines governing the use of countermeasures against dumping and subsidization in trade has been rebuffed by the US.

by Kanaga Raja

GENEVA: A proposal by China for advancing the WTO negotiations aimed at further clarifying and strengthening the rules on anti-dumping (AD) and countervailing (CV) measures was rejected outright by the United States at an informal meeting of the WTO Negotiating Group on Rules on 31 May.

According to trade officials, the US argued at the meeting that there was no basis for re-engaging on the rules negotiations, and said that it would not take part in any further discussions on the items highlighted in China’s proposal.

(The improvements, sought by China in the WTO Anti-Dumping Agreement and the Agreement on Subsidies and Countervailing Measures, are elements that the US had opposed in the rules negotiations. Significantly, however, China has not sought the elimination of the “zeroing” methodology which is employed by the US in anti-dumping investigations and which has been repeatedly struck down by the WTO Appellate Body in disputes involving the US use of this approach.)

Chinese proposal

According to the Chinese proposal, rules are the foundation for upholding and safeguarding the open and non-discriminatory multilateral trading system. “Recognizing the lingering and serious challenges the multilateral trading system is faced with, such as the global economic slowdown, rising protectionism and the rapidly changing international marketplace, China sees the merit of continuing to seek balanced results of the Rules Negotiations to the furtherance of the rules-based multilateral trading system.”

According to China, anti-dumping and subsidies and countervailing measures are key subjects in the rules negotiations and one of the essential components of the Doha Development Agenda.

As mandated by the Ministerial Declaration of the Doha Ministerial Conference, the rules negotiations on anti-dumping and subsidies and countervailing measures are aimed at clarifying and improving disciplines under the Anti-Dumping Agreement and the Agreement on Subsidies and Countervailing Measures while preserving the basic concepts, principles and effectiveness of these Agreements and their instruments and objectives, and taking into account the needs of developing and least-developed participants.

China said in reviewing the increased application of AD and CV instruments by WTO members, it is concerned that “it is even more important now than ever” to further clarify and strengthen the AD and CV rules.

According to the Chinese proposal, over the last two decades, the application of AD and CV measures has no longer been limited to the traditional users. While a number of rules remain unclear or ambiguous, AD and CV are often misused in many cases.

“Disparate application of the same rules has given rise to increased trade disputes under the WTO Dispute Settlement Mechanism in recent years. Moreover, overused AD and [CV] measures for policy considerations and their distortionary effects on international trade as well as the internal markets of the investigating Members to the harm of all Members involved and their downstream industries/consumers has no longer been an exceptional phenomenon.”

It recalled that in the negotiations on anti-dumping, the Negotiating Group on Rules has been discussing in detail proposals on such issues as determinations of injury/causation, the lesser-duty rule, public interest, transparency and due process, interim reviews, sunset, duty assessment, circumvention, the use of facts available, limited examination and all other rates, dispute settlement, the definition of dumped imports, affiliated parties, product under consideration, and the initiation and completion of investigations.

In respect of subsidies and countervailing measures, proposals for amendments to the Agreement on Subsidies and Countervailing Measures have been submitted on a number of issues, including the definition of a subsidy, specificity, prohibited subsidies, serious prejudice, export credits and guarantees, and the allocation of benefit.

The Chinese proposal also noted that based on the consolidated text of 2011, “there is a growing convergence among Members regarding the un-bracketed issues.” Meanwhile, there are also a number of bracketed issues on which members have divergent views, it said.

It further noticed that the Appellate Body and dispute settlement panels have clarified important issues in quite a few cases, which would give clear guidance and reference to the rules negotiations.

Given the present state of play in the negotiations, it would be feasible to promote the rules negotiations by seeking to identify and prioritize important and “doable” issues as the starting points for further discussions, and putting them forward in a balanced and efficient way, said China.

China proposed the following aspects for further discussion and negotiation: (1) enhancing transparency and strengthening due process; (2) preventing AD measures from becoming “permanent”; (3) preventing AD measures from “overreaching”; (4) special consideration and treatment of small and medium-sized enterprises (SMEs); and (5) transplanting similar provisions from the Anti-Dumping Agreement to the Agreement on Subsidies and Countervailing Measures.

Speaking at the informal meeting, China said it recognized the difficulties encountered in the rules negotiations in the past but that great efforts were made to advance the talks as reflected in the consolidated text issued by the then chair of the negotiations in April 2011. This past effort can serve as the basis for future negotiations. China said that many of the ideas for discussion in its own proposal “stand on the shoulders” of the consolidated text.

In reference to its proposed aspects for further discussion and negotiation, China suggested that members could start with these easier issues and then progressively expand the scope of the discussions to the more difficult issues. It was open to any comments and suggestions.

No common basis

According to trade officials, the US spoke first, maintaining that there is no common basis from which the Negotiating Group on Rules can constructively engage on trade remedies.

The US said that it will not engage in talks on any of the items China has proposed as starting points for further discussion.

The US also said that the consolidated text of April 2011 did not represent any convergence or consensus among the membership at the time and even less so now. It maintained that in the intervening years the divergences have grown even greater, with WTO dispute rulings on trade remedy actions moving members even farther apart. The increasing use of trade remedy measures was the result of increasing “injurious” trade taking place worldwide, it said.

The US argued that the Chinese proposal ignores the root cause of the problem, which in the US view is increased dumping and subsidization of trade. The proposal also seeks to restrain legitimate remedial tools. At a time when dumped and subsidized trade has reached new levels of intensity, now is precisely the wrong moment for members to consider new limits on the use of legitimate remedies, the US said.

As for the Doha mandate, the US argued that members could not agree to reaffirm the Doha mandates at their last Ministerial Conference (in Nairobi) in 2015. Doha was totally obsolete and disconnected from the current reality, the US claimed.

Realistic approach

According to trade officials, Japan, Russia, Hong Kong-China, Turkey, Norway, Singapore, Switzerland, Chinese Taipei, Peru, Thailand and Indonesia expressed support for some or most aspects of China’s proposal.

Japan, speaking on behalf of most members of the Friends of Anti-Dumping Negotiations (FANs) group, said that new and clear disciplines for trade remedy measures are needed now more than before.

(The members of the FANs group include Brazil, Chile, Colombia, Costa Rica, Hong Kong-China, Israel, Japan, Korea, Mexico, Norway, Singapore, Switzerland, Chinese Taipei, Thailand and Turkey.)

According to Japan, members need to take a realistic approach built on past experiences. Japan and the FANs underlined that no linkages should be made between trade remedies and other issues being negotiated in the Rules Group (notably fisheries subsidies).

Other members of the FANs group including Norway, Turkey, Switzerland, Singapore and Thailand said that there were elements of the Chinese proposal where consensus was more likely to be reached, such as transparency and due process. These issues should be the focus of discussions in the run-up to the WTO Ministerial Conference in Buenos Aires this December, they said.

Korea, another member of the group, expressed concern about the increasingly arbitrary application of trade remedy measures and said that disciplines needed to be strengthened. It however recognized the post-Nairobi reality, namely that negotiations can only take place if the counter-party is prepared to negotiate.

While welcoming the initiative by China, Korea pointed out that members failed to reach an agreement on transparency and due process in Nairobi even though these issues were also recognized at the time as being the closest to reaching consensus. The situation today is the same, if not worse, Korea said, adding that differences on the other issues, such as disciplines on sunset reviews for existing AD measures, are even greater than in the past.

Subsidy disciplines

According to trade officials, the European Union voiced agreement with China that the issues of transparency and due process are important areas. At least as important, it said, is considering improving existing disciplines on the granting of subsidies. Despite existing obligations under the Agreement on Subsidies and Countervailing Measures to notify subsidies to the WTO, the level of compliance is low and has deteriorated in recent years, the EU maintained. In this context, the EU informed the informal meeting that it has submitted a new proposal to the Rules Group on improving subsidy notification disciplines.

With respect to the specific aspects in China’s proposal, the EU voiced concerns over the proposal to limit the duration of all AD measures to a maximum of 10 years and for members to refrain from initiating anti-circumvention investigations in cases where exporters are suspected of skirting AD orders. According to the EU, circumvention is a growing phenomenon undermining legitimate trade remedy measures.

According to trade officials, Australia said that what is causing trade distortions is subsidies and not the countervailing measures. It also said that the issues of transparency and due process are already being addressed in the various WTO trade remedy committees (AD, CV and safeguards). Addressing the problems of compliance with existing transparency obligations would enhance what China is seeking in its proposal, Australia argued.

Canada pointed out that there was little time and little willingness among members to agree on disciplines by Buenos Aires. While it expressed support for the general objective of advancing the rules negotiations, Canada said that it had concerns with specific aspects of the Chinese proposal, such as the idea of members refraining from initiating anti-circumvention investigations. Trade remedies are a fair and justified answer to injury caused by unfair trade, Canada maintained.

According to trade officials, Russia said it was high time that members contributed to more predictable rules of trade. It welcomed the Chinese proposal, saying that many of the ideas put forward by China could be discussed at the least. Transparency and due process were two areas where members could leverage past achievements.

Russia expressed hope that all the rules negotiation “tracks” would be given equal treatment and addressed in the same constructive manner for outcomes in Buenos Aires.

According to trade officials, South Africa called for the preservation of policy space for members with regard to their practices. It underlined that measures to address injurious trade should not be questioned as long as they were in line with WTO obligations.

According to South Africa, the consolidated text of 2011 did not represent a consensus outcome and substantial differences existed between members on the issues contained therein.

According to trade officials, India said that its officials in capital were still considering the Chinese proposal. It however expressed concerns that some of the ideas outlined in the proposal could impose additional burdens on investigative authorities.

Brazil said that a realistic approach was needed in terms of what could be achieved in Buenos Aires.

Both Brazil and Argentina cited the work in the Rules Group on fisheries subsidies, where intensive efforts were underway to develop new disciplines for the sector, and the importance attached to the issue by many WTO members.

Argentina said that the UN’s Sustainable Development Goal 14.6, which calls for a global deal to eliminate subsidies that contribute to illegal, unreported and unregulated fishing by 2020, did not link the issue of fisheries subsidies with any other issue under discussion at the WTO.

According to trade officials, a number of delegations highlighted concerns about linking progress on trade remedies to progress in other areas, in particular fisheries subsidies. (SUNS8474)          

Third World Economics, Issue No. 640, 1-15 May 2017, pp6-8