BACK TO MAIN  |  ONLINE BOOKSTORE  |  HOW TO ORDER

TWN Info Service on UN Sustainable Development (Mar18/12)
29 March 2018
Third World Network

   
US slammed at Goods Council over its unilateral actions
Published in SUNS #8651 dated 28 March 2018


Geneva, 27 Mar (Kanaga Raja) - More than 40 Members, both developed and developing, took the floor along with China, at a meeting of the Council for Trade in Goods of the WTO on Friday (23 March), to slam the US over its imposition of steep tariffs on imports of steel and aluminium based on grounds of national security.

The sharp criticism of the US move at the Goods Council came following the coming into effect of US President Donald Trump's proclamations adjusting imports of steel and aluminium into the United States as of 23 March, the same day the Goods Council meeting took place.

The proclamations impose a 25% ad valorem tariff on imports of steel and a 10% tariff on imports of aluminium articles into the United States.

[Meanwhile, the US imposition of tariffs on steel imports, acting under Section 232 of its Trade Expansion Act of 1962 and purporting to be on national security grounds, has been challenged in domestic proceedings at the United States Court of International Trade, New York, on the ground that the tariffs are unconstitutional because they are not tied to the interest of protective national security but to President Trump's actual intent, as often stated both during his election campaign and after entering office, to his political agenda.

[The challenge by Severstal Export GmbH ("SSE") and Severstal Export Miami Corporation ("SSE M") argues that though purported to be on national security grounds, both prior to entering the Office of the President, and after assuming the Presidency, Trump has pronounced on his political agenda, namely, to obtain a "positive trade balance" with other countries, to "bring jobs home", and win trade wars.

[The decision is thus not based on national security grounds as required under Section 232, and thus unlawful. See post by Simon Lester at IELP blog on 25 March: http://worldtradelaw.typepad.com/ielpblog/2018/03/the-section-232-tariffs-in-us-court.html - SUNS]

A rather full agenda of the Goods Council resulted in the meeting spilling over into Monday (26 March) where under "Other Business", China voiced concerns over the US plan to impose tariffs to the tune of billions of dollars on imports from China following a Section 301 investigation of its intellectual property regime (see below).

The Goods Council meeting also heard concerns over the US imposition of safeguard measures on imported solar cells and washing machines.

In a statement posted on the WTO's website on 23 March, WTO Director-General Roberto Azevedo spoke on the meeting of the Goods Council, and said:

"At today's [23 March] meeting of the Council on Trade in Goods, WTO members reviewed and discussed many of the most pressing trade issues of the moment, including a number of the specific tensions that have arisen between different members in recent weeks. It is positive to see members continuing to use the WTO as a place to discuss these issues.

"I encourage members to continue working through the WTO's many forums and mechanisms to deal with their concerns and explore potential solutions. Actions taken outside these collective processes greatly increase the risk of escalation in a confrontation that will have no winners, and which could quickly lead to a less stable trading system. Disrupting trade flows will jeopardise the global economy at a time when economic recovery, though fragile, has been increasingly evident around the world. I again call for restraint and urgent dialogue as the best path forward to resolve these problems."

At the Goods Council meeting on Friday, both China and the Russian Federation had requested the agenda item on US Section 232 investigations and measures on imports of steel and aluminium.

[A news item summarising the meeting of the Goods Council on Friday has been posted on the WTO website at https://www.wto.org/english/news_e/news18_e/good_23mar18_e.htm]

According to trade officials, China told the Goods Council meeting on Friday that the US measure is inconsistent with the General Agreement on Tariffs and Trade (GATT) as well as the WTO Agreement on Safeguards.

In China's view, the US measure did not take into account information demonstrating how steel and aluminium imports would not affect national security.

China urged the United States to refrain from taking unilateral measures, follow the WTO rules and uphold the multilateral trading system.

The Russian Federation said that the new tariffs on imports of steel and aluminium exceed the bound rates that the US had committed to under WTO rules.

It pointed out that several WTO members would be exempted from the new US measures.

The Russian Federation sought further clarification on this exemption and how the measures can be justified under WTO rules.

It said that it was looking forward to a constructive dialogue with the US.

According to trade officials, the other Members that voiced concerns over the US measures and stressed on upholding the multilateral trading system included the European Union (28 member states), Japan, Venezuela, Brazil, New Zealand, Turkey, Korea, Hong Kong-China, Singapore, Thailand, Pakistan, Norway, Australia, India, El Salvador, Switzerland, Paraguay, Guatemala, and Kazakhstan.

The United States responded that in January of this year, pursuant to Section 232 of the Trade Expansion Act of 1962, the US Secretary of Commerce had delivered to the President his findings and recommendations in investigations into the impact of steel and aluminium imports on US national security.

In the investigations, the Secretary had found that the quantities of imports and circumstances of global excess capacity for producing steel and aluminium "threaten to impair the national security", as defined in Section 232 and recommended actions to the President to adjust the imports of steel and aluminium articles so that such imports will not threaten to impair the national security.

On 8 March, said the United States, the President issued proclamations concurring with the Secretary of Commerce's findings, and imposing 25 and 10 percent ad valorem tariffs on imports of steel and aluminium articles, respectively.

The proclamations noted the President's determination that these tariffs are necessary to address the threat that imports of steel and aluminium articles pose to national security.

The additional tariffs will apply to goods entering into the United States, or withdrawn from warehouse for consumption, on or after 23 March, it said.

According to the United States, the President's proclamations authorised the Secretary of Commerce to provide relief from the additional duties for steel or aluminium articles determined not to be produced in the United States in sufficient and reasonably available amounts or of satisfactory quality, as well as on the basis of specific national security considerations.

On 19 March, the US Department of Commerce published requirements and procedures for requesting such exclusions, as well as the requirements and procedures for submitting objections to the granting of exclusion requests.

The United States noted that on 22 March, the President issued proclamations removing, for a period of time, the application of additional tariffs with respect to certain countries with which the United States has a security relationship, and with which the United Sates is currently engaged in discussions on alternative means to address the threat posed to US national security by steel and aluminium article imports.

OTHER AGENDA ITEMS

According to trade officials, the Goods Council meeting on Friday also discussed a revised proposal by the United States on enhancing transparency and strengthening notification requirements.

An earlier version of the US proposal was discussed at a meeting of the Goods Council on 10 November 2017 in the run-up to the WTO's eleventh ministerial conference (MC11) in Buenos Aires last December.

In introducing it revised proposal, the US said that it had made changes to the proposal to reflect that MC11 has come and gone, and thus it is no longer seeking a Ministerial outcome but rather a General Council decision.

It has also made various changes to the timelines in the paper to account for the passage of time.

It said that it removed explicit provisions pertaining to notifications concerning technical barriers to trade and specific enhancements proposed regarding the fisheries subsidy notifications.

The US said that is has however maintained the administrative measures it had previously proposed for WTO members that fail to provide a required notification after a certain time.

According to trade officials, while members said enhancing transparency and improving members' compliance with notification requirements were important objectives, many of them voiced the view that the proposed administrative measures would not necessarily encourage compliance with the notification obligations, particularly when technical capacity to draft these notifications was lacking.

Updates were provided by Armenia, the Kyrgyz Republic and the Russian Federation about ongoing negotiations for concessions to compensate interested WTO members following changes to Armenia's and the Kyrgyz Republic's tariff schedules as a result of their application of the Eurasian Economic Union (EAEU) Common External Tariff. Members are continuing to negotiate compensation packages.

According to trade officials, the Goods Council also agreed to extend the time period to preserve members' rights to withdraw concessions to the European Union for changes in schedules of commitments stemming from Croatia's accession to the EU.

The time-period has been extended to 1 October 2018 pending the entry into force of a compensation agreement that the EU struck with New Zealand.

US SECTION 301 ACTION AGAINST CHINA

The Goods Council meeting on Monday (26 March) heard China voicing concerns over the US plan to impose tariffs on imports from China following a Section 301 investigation of its intellectual property regime.

According to media reports, President Trump announced plans on 22 March to impose tariffs on some $60 billion worth of Chinese goods in retaliation over its trade practices involving alleged theft of intellectual property. A list of products on which 25% tariffs would be imposed is expected to be released within 15 days.

The United States has also initiated a dispute at the WTO with respect to certain Chinese measures concerning the protection of intellectual property rights.

In its request for consultations with China, circulated to WTO Members on 26 March, the US claimed that China denies foreign patent holders the ability to enforce their patent rights against a Chinese joint-venture party after a technology transfer contract ends.

The US said that China also imposes mandatory adverse contract terms that discriminate against and are less favourable for imported foreign technology.

Therefore, the US maintained, China deprives foreign intellectual property rights holders of the ability to protect their intellectual property rights in China as well as freely negotiate market-based terms in licensing and other technology-related contracts.

The request for consultations is the first step in the dispute settlement process at the WTO.

At the Goods Council meeting on Monday (26 March), China said that the "unilateral action" stemming from the US Trade Representative Section 301 investigation of China's intellectual property regime will not only impair the rights and interests of WTO members but will also seriously undermine the multilateral trading system.

According to trade officials, China pointed out that Article 23 of the Dispute Settlement Understanding (DSU) prohibits WTO members from unilaterally determining a trade violation such as what the US has done with its recent Section 301 action.

The US is setting a "very bad precedent" by breaching its commitment to the WTO rules, it said.

China called on WTO Members to jointly prevent the resurrection of this US practice.

It said that it will use WTO rules and other "necessary" ways to safeguard China's rights and interests.

"We should not stay put watching someone rocking the boat. The WTO is under siege and all of us should lock arms to defend it," China said.

According to trade officials, Japan and the EU said while they share the US concerns on the need for stronger protection of intellectual property rights as well as concerns over technology licensing and transfers in China, any trade measures taken should be consistent with WTO agreements.

The US said that China appears to be denying patent holders their exclusive rights to prevent unauthorised use.

China also appears to be discriminating against foreign technology holders through licensing requirements that do not apply to Chinese technology holders.

The US maintained that both of these appear to breach China's obligations under the TRIPS Agreement.

According to the US, the USTR report estimates that Chinese forced technology transfer policies and practices are causing billions of dollars in losses annually to US businesses and individuals.

These Chinese policies or practices would also apply to other WTO Members, said the US, pointing out that it has filed a request for consultations with China at the WTO on this issue.

OTHER ACTIONS

Also at the Goods Council meeting on Monday, six WTO members voiced concerns over the imposition of safeguard measures by the US against imported solar cells and residential washers.

The agenda item on US safeguard measures against imported crystalline silicon photovoltaic cells and residential washers was requested by China.

According to trade officials, China said that the measures were inconsistent with the General Agreement on Tariffs and Trade and also the WTO Agreement on Safeguards.

It asked the US to explain how it conducted its investigation before coming to decide on these safeguard measures.

The EU noted that the US had not used this instrument in almost 15 years.

It recalled that the WTO criteria for imposing safeguard measures are very strict and it doubted they were met, either on the solar panel's case or in the case regarding residential washing machines.

According to the EU, safeguard measures target imports from all sources including those that are not causing any injury, which is the case of EU imports.

The EU represents less than 2% of total US imports and imports from the EU have much higher prices than imports from Asia, it said.

In addition, it is likely that the US measures will create trade diversion and disrupt markets, including in the EU.

The EU urged the US to refrain from taking any other broad trade restrictive actions and resort to more proportionate trade defence measures that cause less collateral damage.

According to trade officials, Switzerland, Korea, Malaysia and Singapore also expressed their concerns over the US measures.

The US said that the US International Trade Commission (ITC) reached separate affirmative determinations that certain crystalline silicon photovoltaic cells, whether or not assembled into other products, and large residential washers, are being imported into the US in such increased quantities as to be a substantial cause of serious injury, or threat of serious injury, to the domestic industry producing a like or directly competitive article.

For solar products, the measure went into effect on 7 February 2018 and will last for four years in the form of a tariff rate quota.

For each year, measures will not be applied for the first 2.5 gigawatts of cells, with a tariff to be applied outside the quota. The tariff to be applied will be progressively liberalised on an annual basis.

For large residential washers, said the US, the measure also went into effect on 7 February 2018 and will last for three years and one day, with separate duty rates for large residential washers and parts.

For each year, the US added, parts will be subject to a tariff rate quota and measure that will be progressively liberalised on an annual basis. The tariffs for washers will also be liberalised on an annual basis.

The US said it offered and has conducted consultations under Article 12.3 of the Safeguards Agreement with all of the Members that have requested consultations, and has begun to jointly notify to the Goods Council the results of those consultations.

The US maintained that the measures are as a result of absolute increases in imports, and all of the steps taken by the US are consistent with its obligations under Article XIX of the GATT 1994 and the Agreement on Safeguards.

Meanwhile, on 23 March before the Goods Council resumed on 26 March, a number of Members expressed concern over China's restrictions on imported scrap material, its draft export controls law, and its tariffs on integrated circuits.

According to trade officials, the US, Canada, Australia, the EU, and New Zealand reiterated concerns over the impact China's restrictions on imported scrap materials were having on the global recycling chain for industrial plastics, paper, ferrous and non-ferrous scrap, and electrical appliances.

The US, Canada, Australia and the EU said that they recognized China's interest in addressing environmental concerns.

They were however of the view that the restrictions were preventing scrap from being recycled, causing their diversion to landfills, and that these restrictions should have been implemented over a more reasonable period of time.

The EU said that scheduled exportations of scrap will be likely rerouted to other countries that may not have safe recycling facilities.

China said countries generating the waste have the ultimate responsibility over their disposal and management.

China said that, as it had a large population, it must make the inevitable choice of restricting imports to better improve management of its domestic waste. It added that the government will take into consideration members' statements.

Japan, the US and the EU sought more information on the implications that China's draft law on export controls could have in relation to WTO rules.

Japan, which requested this issue be included on the agenda, said that the draft made mention of export controls on rare earth minerals, which are essential in many technological/industrial products.

According to trade officials, China gave assurances that it intends to honour its WTO commitments as well as results of previous WTO dispute settlement decisions.

Meanwhile, Malaysia, Colombia, Thailand, Indonesia, Guatemala, Costa Rica and Nigeria expressed concern over draft measures (in relation to the EU's renewable energy directive) which is seen to affect palm oil imported into the EU for biofuel.

According to trade officials, Malaysia, which requested this issue to be included on the agenda, noted that there were draft amendments before the EU Parliament that would exclude palm oil in the bloc's directive concerning the promotion of renewable energy sources.

Malaysia, echoed by the others, said singling out palm oil while not doing the same for other vegetable oils was discriminatory.

The Members concerned said they would be monitoring the situation for further developments.

The EU said that the revision's objective is to further reduce the carbon footprint of the transport sector.

It stressed, however, that biofuels from palm oil could still be imported into the EU although they would not count towards meeting the EU Renewable Energy targets.

The EU said that there still was no final outcome to the legislative procedure and that it stands ready to work with other countries to strengthen the sustainability of palm oil production.

Japan, the US, Thailand, Canada, and the EU voiced concerns over Viet Nam's "Decree 116/2017" which imposes new regulations on vehicles.

They noted that it has caused a slowdown in sales of cars in the country.

The US and EU called for the decree's suspension. The US said its companies have not been able to comply with the stricter regulations and, as a result, imports of US automotives have stopped as of January 2018.

Thailand said that the decree has had a "serious impact" on automobile trade. Japan urged Vietnam to ensure its measures are in accordance with WTO principles.

According to trade officials, Vietnam said that the measure was promulgated to ensure consumer's safety and to protect the environment.

It said that the measure did not discriminate against imported vehicles. It said it would take note of the comments and duly relay them to relevant authorities.

Meanwhile, Chinese Taipei introduced two papers on e-commerce that it circulated last month on the reported benefits from the free flow of online data and the need for WTO rules to keep up with changes in trade patterns posed by online innovations.

Chinese Taipei said it hoped these papers would help facilitate further discussions on e-commerce at the WTO.

According to trade officials, China, Cuba and South Africa said that government regulation of online data flows was necessary.

China said it continues to value a multilateral discussion focused on e-commerce. It suggested holding a joint seminar with the World Customs Organization.

According to trade officials, several members expressed support for holding such a seminar.

The Goods Council elected Ambassador Stephen De Boer of Canada as its new chair, and also elected new chairs for its subsidiary bodies.

 


BACK TO MAIN  |  ONLINE BOOKSTORE  |  HOW TO ORDER