Info Service on WTO and Trade Issues (May18/08)
14 May 2018
Third World Network
China assails US over its "unilateralism and protectionism"
Published in SUNS #8679 dated 14 May 2018
Geneva, 9 May (D. Ravi Kanth) - China tore into the "unilateralism
and protectionism" unleashed by the United States in the multilateral
trading system, cautioning members at the World Trade Organization's
General Council meeting on Tuesday (8 May) that they face a grave
moment since the establishment of the WTO in 1995, trade envoys told
In an extraordinary development rarely witnessed at a GC meeting,
the highest forum between WTO ministerial summits, China pointedly
attacked the US for causing enormous damage to the multilateral trading
system in general, and the WTO in particular, in three areas.
China said it had listed three items (see SUNS #8677 dated 8 May 2018)
- selection of New Appellate Body Members, US Section 232 Investigations
and Measures on Steel and Aluminium Products, and US Section 301 of
the Trade Act of 1974 - on the GC agenda to sensitize members to "the
most urgent and burning question that the WTO has to answer now: how
to respond to (the US) unilateralism and protectionism."
China's trade envoy Ambassador Zhang Xiangchen said that "before
the end of the Uruguay Round, GATT contracting parties have severely
suffered from the unilateral and protectionist measures."
To overcome the unilateral and protectionist measures, he said, GATT
contracting parties negotiated and agreed "on the Understanding
on Rules and Procedures Governing the Settlement of Disputes and other
Consequently, "the prohibition on unilateral and protectionist
measures became the bedrock and central elements of the multilateral
trading system," the Chinese envoy maintained.
But a most dangerous and devastating situation has now arisen after
the US has systematically challenged the "fundamental guiding
principles by blocking the selection process of the Appellate Body
members, applying restrictive trade measures under Section 232 (national
security under US trade law) and threatening to impose tariff measures
of 50 Billion USD on goods imports from China under Section 301 of
US domestic law," Ambassador Xiangchen maintained.
"Any one of these three measures, if left untreated, will fatally
undermine the functioning of the WTO," he cautioned.
"The reality," he said, "is that the WTO is currently
confronted with "three hard blows".
The Chinese envoy urged members "to join efforts and defend our
system, rules and order, defend the equal rights of all Members, and
defend the dignity o f the international law."
Thereby, "we can collectively strengthen and improve the multilateral
trading system, and prevent the unilateral or protectionist actions
from damaging this system and undermining international trade,"
Ambassador Xiangchen said.
If members fail to safeguard the system, especially the Dispute Settlement
Body and the Appellate Body, then, "the Crown Jewel of the WTO"
will rapidly lose its "brilliance."
Given hundreds of trade disputes that have been resolved since 1995
in which the Appellate Body had played a vital role in "ensuring
the stability and predictability of the WTO system and its rules,"
it is a grim situation now that "only four of the seven Appellate
Body members are in office."
"If the selection process is not launched, the functioning of
the Appellate Body will be paralysed, which will put the entire dispute
settlement system in crisis," the Chinese trade envoy warned.
In the absence of the AB, rules will not be enforced and trust and
credibility will be deeply undermined.
"Ultimately, we will not be able to effectively control the unilateralism
and protectionism," Ambassador Xiangchen emphasized.
All issues can be easily addressed under the WTO framework, he said,
arguing that "we cannot agree to link these [the US] concerns
with the selection process."
"The Member-driven mechanism does not mean that it is driven
by only one single Member [the US]," the Chinese envoy maintained.
In short, "by taking the selection process as a hostage, the
US is abusing the decision-making mechanism of consensus," Ambassador
Zhang Xiangchen emphasized.
He urged members, particularly the US, to start the commencing of
the selection process so that the Appellate Body can resume its proper
functioning at the earliest.
A large number of member-countries - the European Union, Mexico, Cambodia,
Zimbabwe, Russia, Honduras on behalf of informal group of developing
countries without Israel, Uganda, Japan, Bolivia, Tanzania, Qatar,
Benin, Guinea, Tur key, Norway, Hong Kong-China, Brazil, Venezuela,
Canada, Pakistan, Maldives, Switzerland, Australia, Myanmar, Thailand,
Liberia, Kazakhstan, India, Guatemala, Korea, and Egypt - spoke at
the meeting, sharing China's concern s in their respective nuanced
In response, the US trade envoy Ambassador Dennis Shea said that the
WTO rule-book has a substantial value, including for the US. "Adherence
to those rules has generally contributed to global economic stability,"
"But something has gone terribly wrong in this system when those
charged [i n the Appellate Body] with adjudicating rules are so consistently
disregarding those very rules," the American envoy said, without
offering some examples.
"What we are dealing with, fundamentally, is a steadily worsening
rupture o f trust on the part of the Appellate Body... That ruptured
trust has, in turn, placed in jeopardy the political sustainability
of our entire dispute settlement system," the American envoy
In a series of unsubstantiated charges against the AB, Ambassador
Shea said the US had warned about this for years, arguing that "the
AB has not only re-written our agreements to impose new substantive
rules, we Members never negotiated or agreed, but has also been ignoring
or rewriting the rules governing the dispute settlement system, expanding
its own capacity to write and impose new rules."
The US envoy said the AB failed to issue rulings within the stipulated
90 days. "Similarly, the AB has decided that it can deem a person
who "ceases to be a member of the Appellate Body" to continue
to be a member, despite there being no basis whatsoever in the DSU
for such actions," the American envoy said.
"We do not see how perpetuating the existing dysfunctions through
a complacent approach to the filling of Appellate Body vacancies can
advance that objective," the American envoy said.
Significantly, not one member took the floor to support the US complaints
about the AB; if anything, China's assessment was shared by members
who took the floor, said a trade envoy, who asked not to be quoted.
[Trade observers also noted that in the early years of the WTO, as
the AB handed down rulings that were favourable to the US view, and
against positions of developing countries, like India, Indonesia,
Brazil and the like, the US was an enthusiastic supporter of the AB
and the DSU. SUNS]
Commenting on the second item on Section 232 measures, China cited
several reports, including a report prepared by the US Department
of Commerce, which showed that Washington's measures are not aimed
at protecting "national security" of the US but rather to
protect the commercial interests of its domestic industries.
China said that the US measures on steel and aluminum would be tantamount
to safeguard measures under the WTO's Agreement on Safeguards.
The Chinese envoy asked if "imports subject to the restriction
of the Section 232 measures on steel accounts for only 5% of the steel
consumption of the US, will they threaten the "national security"
of the US?"
China said members must urge "the US to honour its obligations
under the WTO Agreement and immediately withdraw its Section 232 measures,
so that the normal order of international trade can be restored."
In an immediate response to China's comments on Section 232, the US
trade envoy said it is ironic that China is raising the issue on steel
and aluminium after having created the overcapacity.
The US said that it is puzzled by China's claim that it is the victim
of the American measures, saying it is not a safeguard measure.
However, several countries - South Africa, Russia, Brazil, Uganda,
and Venezuela - expressed concern over unilateral measures on steel.
Japan said that the US actions on steel are regrettable, adding that
unilateralism and tit-for-tat threats are not conducive to maintaining
healthy trade relations.
The EU said the US measures on steel and aluminum are not driven by
national security. Brussels argued that there will systemic risks
because of the use of security provisions under Article 21.
The EU said issues concerning overcapacity stemming from subsidies
is a cause for concern.
Turkey said that the US duties are safeguard measures under the guise
of national security while Switzerland expressed concern over the
knock-on effect on its small steel producers.
China reminded the proponents of the overcapacity argument, that when
it kept its steel mills running in 2008 and sustained the world market,
Beijing was praised by members.
It maintained that it lost thousands of jobs in the steel industry
following closures in the recent past.
China also challenged the US on Section 301 actions, saying it "is
prima facie incompatible with the multilateral trading system."
China said it can withstand the Section 301 actions but "we are
wondering, who is the next target?"
"History teaches us that if the unilateralism is unrestrained,
it would bring destruction to the world economy and rip all members,"
In a sharp response to the Chinese envoy's comments, US Ambassador
Dennis Shea said China, particularly its state-owned enterprises,
are provided hug e subsidies to acquire technologies.
The US envoy said that the Chinese subsidies are also contributing
to stealing of technologies from foreign companies.
"The truth is," said Ambassador Dennis Shea, "it is
China that is the unilateralist, consistently acting in ways that
undermine the global system of open and fair trade."
The US envoy gave four types of transfer of technology that include
foreign ownership restrictions, China's regime of technology regulations
which force US companies seeking to license technologies to Chinese
entities on non-market based terms, and systematic investments for
acquisition of foreign technologies and unauthorized intrusions.
The EU said that while it doesn't support unilateral measures, it
remains concerned about forced transfer of technology.
Japan said it shares the US concerns about the lack of IP protection,
including licensing procedures. Tokyo urged the US and China to cooperate
instead of resorting to tit-for-tat trade measures.
In concluding remarks, the Chinese envoy told his US counterpart that
"as trade negotiators, let's bargain with each other, instead
of biting each other."
By bringing the unilateral trade measures and violations perpetuated
by the US to the General Council, and by pointedly telling the US
that Beijing will not be cowed down by the incessant American threats,
China has given a massive shot in the arm to other members, including
the erstwhile heavyweights such as the EU, Japan, and Canada (who
whisper their own concerns about the US), and an opportunity for all
other members to join hands to face the grave threat posed to the
WTO, trade envoys said.