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TWN
Info Service on WTO and Trade Issues (Dec22/06) Geneva, 13 Dec (D. Ravi Kanth) — China has initiated dispute settlement proceedings against the United States at the World Trade Organization over Washington’s recent spate of export-related measures as contained in its CHIPS Act of 2022 that seem to be particularly targeted against China in the area of semiconductor chips and other items that allegedly violate the core WTO rules. On 12 December, China invoked proceedings against the US under Article 4 of the Dispute Settlement Understanding (DSU) by calling on Washington to enter into consultations with it on grounds that the US has been over-generalizing the concept of “national security” by over-stretching its export control measures. China alleged that the US actions have impeded the normal international trade of, among others, semiconductor chips, while threatening the stability of the global industrial supply chains. Such seemingly WTO-inconsistent practices, China said, “have not only undermined the international trade order but also constituted a violation of the international trade rules.” China argued that the allegedly wrongful practices adopted by the US “are trade protectionism in nature, against the basic economic laws and the interests of global peace and development.” China justified its recourse to dispute settlement proceedings against the US “within the WTO framework as a necessary way to address our concerns and to defend our legitimate interests.” Beijing expressed hope that the US “abandons its zero-sum game mentality, and stops disrupting the trade of high-tech products including semiconductor chips by remedying its wrongful practices in a timely manner.” It urged “the US to maintain the normal economic and trade exchanges with China, as well as the stability of the global industrial supply chains in such crucial industries as semiconductor chips.” Under Article 4 of the DSU, the US is required to reply within 10 days after the date of receipt of China’s request for consultations and enter into consultations in good faith within a period of no more than 30 days after the date of receipt of China’s request. If the two sides fail to arrive at an amicable solution/agreement, then China can request the establishment of a dispute settlement panel to rule on the US export-related measures. Significantly, the dispute initiated by China against the US comes close on the heels of a WTO panel’s comprehensive ruling against the US over the Section 232 measures adopted by the Trump administration in 2018. Although the US has summarily rejected the panel’s ruling on the US Section 232 tariffs on steel and aluminum products and asserted that it will continue imposing them, the panel’s ruling has marked a “watershed” moment in dispute settlement jurisprudence, said several analysts. As reported in SUNS #9709 dated 13 December 2022, the panel ruled against the US for violating the cardinal rules of the WTO such as MFN (most-favored-nation) treatment and scheduled tariff concessions under Article II of the GATT 1994. On the “security exceptions”provision under the GATT 1994, which was one of the main arguments advanced by the US, the panel said it “does not find that the measures at issue were taken “in time of war or other emergency in international relations” within the meaning of Article XXI(b)(iii) of the GATT 1994.” US “CHARADE” OVER APPELLATE BODY Writing for the CATO Institute on 12 December, former Appellate Body member Mr James Bacchus (from the United States) argued that “the prolonged charade of the United States is over in its disingenuous opposition to the reconstitution of the Appellate Body of the World Trade Organization.” He said, “It is clear now that the Biden administration – like the Trump administration before it -has no desire to restore the highest court of appeal in world trade as an independent and impartial tribunal,” adding that “one now glaring reason is the absence of an Appellate Body will enable the United States to escape the imposition of what would likely have been billions of dollars in annual trade sanctions because of its continued imposition of illegal tariffs on imports of steel and aluminum.” “This clarity is provided by the negative US reaction to the long-awaited decision of WTO jurists in disputes brought by China, Norway, Switzerland, and Turkey challenging the 25 percent tariffs on steel imports and the 10 percent tariffs on aluminum imports that former President Donald Trump imposed in 2018, on supposed national security grounds, under Section 232 of the Trade Expansion Act of 1962,” he maintained. According to Mr Bacchus, “the national security motivation cited by the Trump administration was the need to protect domestic manufacturers from market distortions caused by the global overproduction of the two metals.” Mr Bacchus said the panel has ruled that “these measures are not entitled to the benefit of the national-security exception in the WTO treaty because – contrary to what the United States argued in the case – the WTO does have jurisdiction to decide such disputes, and these measures were not – as the exception requires – “taken in time of war or other emergency in international relations,” per Article XXI(b)(iii) of the General Agreement on Tariffs and Trade (GATT).” He dismissed the criticisms levelled by the Office of the US Trade Representative (USTR) against the panel’s ruling, saying that the concerns expressed by the US administration are misplaced. THE CHIPS ACT China has already denounced the US CHIPS Act of 2022 and the US Inflation Reduction Act (IRA) of 2022 at meetings of various WTO bodies over the past two months. As reported in SUNS #9698 dated 28 November 2022, China inveighed against the US for adopting many “discriminatory” and “distortive” subsidy policies that “blatantly violate the WTO rules”. It suggested that “underlying the US approach is the kind of Cold War mentality, featuring zero-sum game, picking sides and building entrenched camps.” Voicing the strongest criticism yet of the “US unilateral policies” at the WTO’s Goods Council meeting on 24 November, China said that “fighting trade wars and technology wars, artificially “building walls” and forcing “decoupling” completely violates the principles of market economy and disrupt international trade, which is good to none but even worse to oneself.” China said that it “opposes the politicization and weaponization of economic, trade, [and] scientific exchanges” by the US. It called on the US “to correct the above-mentioned practices that violate the WTO rules and the basic norms of international law, and jointly maintain the stability of the semiconductor global supply chain.” In some rather strong remarks, China said that the US “not only imposed export controls on China unilaterally without any basis in multilateral export control regimes but also compelled other members to follow suit.” “It is like the US not just violates the WTO rules on its own, but also bullies other members to violate the WTO rules, at the cost of their legitimate interests, for the purpose of the so-called “US national security”.” Further, said China, “what the US does, with the so-called “Foreign Direct Product Rules”, is essentially to dictate its approach to dictate export control on China on other WTO members, trespassing the sovereign rights of the members concerned.” In short, while the latest dispute initiated by China against the US may go on for three to four years, Beijing seems to have shown that it is the US that is promoting a “non-market” economy by allegedly violating the multilateral trade rules that it had helped create at the end of the Uruguay Round negotiations in 1994. +
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