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TWN Info Service on WTO and Trade Issues (Oct19/26)
31 October 2019
Third World Network

Panel set to examine Indian duties on US products
Published in SUNS #9008 dated 30 October 2019

Geneva, 29 Oct (Kanaga Raja) -- The WTO Dispute Settlement Body (DSB) on Monday agreed to establish a dispute panel, at the request of the United States, to examine additional duties imposed by India on certain products from the US.

The additional duties imposed by India were in response to duties imposed by the US in 2018 on imports of steel and aluminium.

This was a second time request and panel establishment was automatic.

The European Union, Japan, China, Mexico, Canada, Brazil, Guatemala, Ukraine, Turkey, Switzerland, Chinese Taipei, Norway, Venezuela, Russia, Malaysia, and Singapore reserved their third party rights to the dispute.

In other actions, China sought authorisation from the DSB to suspend concessions and related obligations to the United States at an annual amount of $2.4 billion over the US failure to fully comply with an earlier WTO ruling concerning US countervailing duties on a range of Chinese goods.

The US noted that in a letter dated 25 October 2019, it had objected to the level of suspension of concessions or other obligations proposed by China.

Under the terms of Article 22.6 of the Dispute Settlement Understanding (DSU), the filing of such an objection automatically results in the matter being referred to arbitration, it said.

China urged the United States to take concrete actions, respect the WTO rules, and faithfully implement the recommendations and rulings in this dispute to fully comply with its obligations under the covered Agreements.

According to trade officials, the DSB took note that the matter has been referred to arbitration as required by Article 22.6 of the DSU.

Meanwhile, under a separate agenda item, the US once again blocked the start of a selection process to fill four current vacancies on the Appellate Body (AB), as well as two vacancies that will come about when the second terms of AB members Ujal Singh Bhatia and Thomas Graham expire on 10 December 2019.

The US said that it is not in a position to support the proposed decision (co-sponsored by 116 WTO members) and that the systemic concerns that it has identified remain unaddressed.

According to trade officials, nearly 20 members took the floor to underline the importance of resolving the impasse over the appointment of new AB members as soon as possible.

They noted the large number of members (more than 70% of the membership) that supported the joint proposal.

Many said it was important that all members engage in efforts to break the deadlock, and several welcomed the draft General Council decision put forward by DSB Chair Ambassador David Walker of New Zealand on 15 October addressing the concerns raised by the United States regarding the Appellate Body.

China criticized what it said was the lack of constructive engagement by the US on the matter, while Norway said what was most incomprehensible about the current situation was the absence of any clear demands from the United States that would stop the destruction of the Appellate Body.

The DSB Chair highlighted his most recent report to WTO members on 15 October on his efforts to facilitate a compromise on overcoming the impasse as well as his draft General Council decision on the functioning of the Appellate Body for members' consideration.

He said the draft decision is based on proposals put forward by members, extensive discussions in the informal consultation process and feedback received since July.

It is now up to members to see how to take this matter forward, said Ambassador Walker.

US-INDIA DISPUTE

In its communication to the DSB (WT/DS585/2) concerning its dispute against India, the US said consultations were held with India on 1 August 2019, but that these consultations did not resolve the dispute.

The US claimed that the additional duties measure applies only to products originating in the United States.

The additional duties measure does not apply to like products originating in the territory of any other WTO Member, and thus appears inconsistent with the most-favored nation obligation in Article I of the GATT 1994.

Moreover, the additional duties measure results in rates of duty greater than the rates of duty set out in India's schedule of concessions, and thus appears inconsistent with Article II of the GATT 1994, said the US.

According to the US communication, the additional duties measure appears to be inconsistent with India's obligations under:

* Article I: 1 of the GATT 1994 because it fails to extend to products of the United States an advantage, favor, privilege or immunity granted by India with respect to customs duties and charges of any kind imposed on or in connection with the importation of products originating in the territory of other Members;

* Article II: 1(a) of the GATT 1994 because it accords less favorable treatment to products originating in the United States than that provided for in India's schedule; and

* Article II: 1(b) of the GATT 1994 because it imposes duties or charges in excess of those set forth in India's schedule.

The additional duties measure appears to nullify or impair the benefits accruing to the United States directly or indirectly under the GATT 1994, said the US.

In its statement at the DSB, the US said it has explained that its actions taken on imports of steel and aluminum pursuant to Section 232 (of the Trade Expansion Act of 1962) are to address a threat to its national security.

It said every sovereign has the right to take action it considers necessary for the protection of its essential security. This inherent right was not forfeited in 1947 with the GATT or in 1994 with the creation of the WTO.

Instead, this right was enshrined in Article XXI of the GATT 1994. The actions of the United States are completely justified under this article, the US claimed.

What remains inconsistent with the WTO Agreement, however, is the unilateral retaliation against the United States by various WTO Members including India.

These Members pretend that the US actions under Section 232 are so-called "safeguards," and claim that their unilateral, retaliatory duties constitute suspension of substantially equivalent concessions under the WTO Agreement on Safeguards.

Just as these Members appear to be ready to undermine the dispute settlement system by ignoring the plain meaning of Article XXI and 70 years of practice, so too are they ready to undermine the WTO by pretending to follow its rules while imposing measures that blatantly disregard them, said the US.

The additional, retaliatory duties are nothing other than duties in excess of India's WTO commitments and are applied only to the United States, contrary to India's most-favored-nation obligation.

The United States will not permit its businesses, farmers, and workers to be targeted in this WTO-inconsistent way, it said.

In its statement, India said that it is disappointed that the US has chosen to move forward with its second request for panel establishment.

As it had explained at the last regular meeting of the DSB on 30 September, the measures at issue in this dispute are consistent with Article XIX: 3(a) of the GATT 1994 and Article 8 of the Agreement on Safeguards and are permitted and proportionate response to the measures adopted by the US (Section 232 measures) on steel and aluminium products.

India considers that Section 232 measures on steel and aluminium products imposed by the United States are nothing but disguised safeguard measures to protect the US domestic industry in the garb of national security.

Further, India said that it had provided ample time to the United States to resolve issues concerning Section 232 measures but that the US did not agree to any positive solution.

As a result, India was constrained to impose additional duties to suspend concessions and other obligations referred in Article 8.2 of the Agreement on Safeguards.

India said that its rebalancing measures are in direct response to the unwarranted restrictions imposed by the US against Indian steel and aluminium exports.

India said it is committed to remove its rebalancing measures as soon as the US removes its illegal tariffs against Indian steel and aluminium products.

India would vigorously defend the measures at issue and is confident that it would prevail in this dispute, it said.

According to trade officials, the European Union and China noted that other members have also challenged the US duties and the US argument that the duties are justified for national security reasons.

China pointed out that this dispute relates to a WTO Member's rebalancing measures in response to Section 232 measures which are indeed disguised safeguard measures adopted by the US.

It recalled that nine Members have brought these Section 232 measures to the dispute settlement proceedings and seven panels are currently scrutinizing the matter.

The unprecedented number of complaints could suggest the general opposition against the unilateralism of the United States, it said.

As the co-complainant on the same matter, China said it supports other Members to safeguard their legitimate interests by taking rebalancing measures in accordance with WTO rules.

The US said it is not invoking Article XIX as a basis for its Section 232 actions and has not utilized its domestic law on safeguards. Thus, Article XIX and the Safeguards Agreement are not relevant to the US actions under Section 232, it added.

OTHER ACTIONS

The DSB agreed to establish a dispute panel at the second request of Tunisia to examine definitive anti-dumping measures imposed by Morocco on school exercise books from Tunisia.

The EU, the US, Brazil, Canada, China, Russia and Japan reserved their third party rights to the dispute.

Meanwhile, under a separate agenda item, the US made a statement concerning Article 6.2 of the DSU.

(Article 6.2 of the DSU states: "The request for the establishment of a panel shall be made in writing. It shall indicate whether consultations were held, identify the specific measures at issue and provide a brief summary of the legal basis of the complaint sufficient to present the problem clearly. In case the applicant requests the establishment of a panel with other than standard terms of reference, the written request shall include the proposed text of special terms of reference.")

The US said that the Appellate Body has added a requirement for the legal basis of a panel request that does not appear in the text.

Specifically, the Appellate Body has imposed a requirement to explain "how or why the measure at issue is considered by the complaining Member to be violating the WTO obligation in question."

This incorrect interpretation has made disputes more complicated by encouraging procedural challenges. That procedural complexity, in turn, results in delays in proceedings and creates significant uncertainty for the parties to the dispute, the US claimed.

While the Appellate Body recently appears to have attempted to back away from this approach, it has done so in a manner that creates confusion and more uncertainty, without any assurance that the difficulties that have been identified will be alleviated.

This is yet another instance demonstrating that the panels and the Appellate Body need to follow the text that Members have agreed to, rather than departing from that text and undermining the WTO dispute settlement system, said the US.

According to trade officials, Japan agreed with the US that the "how or why" requirement set by the Appellate Body in earlier rulings has no basis in Article 6.2 and that the clarification provided in the DS504 ruling (Korea - Anti-Dumping Duties on Pneumatic Valves from Japan) fully reflected the arguments made by Japan.

Canada said a request for a panel must provide at a minimum the specific WTO provisions alleged to have been violated, although there may be cases where just citing the provisions does not cover the requirements of the DSU.

Ultimately, a judgment must be made on a case-by-case basis, said Canada.

China said that rather than exchanging rhetoric, the priority of the discussions should be on what concrete actions should be taken to unblock the current impasse in the appointment of new Appellate Body members. +

 


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