title of the thesis improving hina’s position in the
TRANSCRIPT
International and European Law
Faculty of Law, Tilburg University
Title of the Thesis：Improving China’s Position in the
WTO: A Critical Assessment of Dispute Settlement
between China and the EU
Research Question：How can China improve its position in the WTO by
learning lessons from WTO disputes between China and the EU?
Thesis Supervisor: Dr. Anna Marhold
Name of the Student: Shiyuewei Qiu
(Anr: 102578)
July, 2016
1
Table of contents
List of Abbreviation ........................................................................................................................... 2
Introduction ...................................................................................................................................... 4
Chapter 1 Background Description ................................................................................................... 5
Chapter 2 Friction between the EU and China .................................................................................. 9
2.1 EU’s Statement on China’s Trade Policy Review ................................................................ 10
2.2 Disputes between China and the EU within the WTO Regime .......................................... 12
2.2.1 Anti-dumping Disputes ........................................................................................... 13
2.2.2 Non-antidumping disputes ..................................................................................... 15
2.3 The Economic and Political Reasons ................................................................................. 18
Chapter 3 Difficulties for China to be Fully WTO Compliant ........................................................... 23
Chapter 4 Improvement of China’s Position ................................................................................... 37
4.1 China’s capability of WTO Compliance .............................................................................. 37
4.2 Compliant Domestic Policy ................................................................................................ 40
4.2.1 Market Economy Status ......................................................................................... 41
4.2.2 Enhance Transparency of Domestic Regulations and Trade Policy ........................ 43
4.3 Defense Strategy ............................................................................................................... 45
4.4 Amendment of the WTO Agreement and Accession Protocol .......................................... 46
Conclusion ....................................................................................................................................... 48
Bibliography .................................................................................................................................... 50
Annex 1： ....................................................................................................................................... 54
2
List of Abbreviation
Auto Parts: China—Measures Affecting Imports of Automobile Parts: Auto Parts
DSB: Dispute Settlement Body: DSB
DSM: Dispute Settlement Mechanism: DSM
Fasteners: European Communities—Definitive Anti-Dumping Measures on Certain
Iron or Steel Fasteners
FDI: Foreign Direct Investment: FDI
GATS: General Agreement on Trade in Services
GATT: General Agreement on Tariffs and Trade 1994
Marrakesh Agreement: Marrakesh Agreement establishing the World Trade
Organization
MESL: Market Economy Status
MSN: Most-favored Nation
NME status: Non-market Economy Status
PRC: People Republic of China
Rare Earths: China—Measures Related to the Exportation of Rare Earths, Tungsten
and Molybdenum: Rare Earths
Raw Materials: China—Measures Related to the Exportation of Various Raw
Materials: Raw Materials
SOEs: State-owned Enterprises
3
The EU: The European Union
The US: The United States
TPR: Trade Policy Review
TRIM: Agreement on Trade-Related Investment Measures
TRIPS: Agreement on Trade-Related Aspects of Intellectual Property Rights
TTIP: Transatlantic Trade and Investment Partnership
WTO: World Trade Organization
4
Introduction
The trade relation between the European Union (hereafter: the EU) and China is
consistently harmed by its conflict based on economic and political reasons since
China made accession to World Trade Organization (hereafter: WTO) in 2001. Settling
dispute not only requires tremendous cost of economy and time, but also harms the
EU-China relation.1 Based on the aforementioned reasons, it is viewed from the
perspective of how can China improve its position in the WTO by learning lessons
from WTO disputes between China and the EU?
In order to explore the potential ways China can reform in the future, descriptive and
analytical methods are undertaken. The legal research and case study methods are
applied in the following chapters. This analysis will facilitate a better understanding
of the friction between the EU and China, the causes of disputes and possible
solutions. The primary resources are derived from the Dispute Settlement Body and
Commission of European Union, particularly the relevant Report on WTO dispute
settlement. Secondary resources such as legal scholar books, journals, research
papers and websites which are relevant to the topic are cited in the analysis.
Descriptions and analysis will be performed on abovementioned sources.
The thesis proceeds with five chapters. In order to find a solution for the purpose of
the thesis, the discussion will be made on the background and the main factors in the
EU-China relation in this chapter. The next Chapter mainly focuses on the disputes
and friction between EU and China. The EU’s statement on China’s TPR and some
landmark cases (Automobile Parts, Raw Materials, Rare Earths and Fastener) will be
summarized and analyzed. After analyzing these cases in friction between EU and
China, the author uncovers the features of EU initiated disputes and the reasons why
these disputes arose and what the trends of EU-China disputes are. In Chapter 3, the
1 For example, in response to EU’s investigation on dumping of Chinese-made solar panels on the European
market, on 1st July 2013, the Chinese authorities (MOFCOM) initiated an anti-dumping and anti-subsidy
investigation into European wine exports to China. The EU and China reached amicable agreements on PV and
wine imports, however the trade relation was once exacerbated by these disputes.
5
most controversial but also general issues which China is facing will be dealt with,
especially whether China enjoys MES and the status of China Accession Protocol in
particular on WTO Multilateral Agreements. These China specific obligations in the
Protocol mainly consist the obstacle on china’s way to comply with its WTO
obligations and fulfill its accession commitments. After identifying the difficulties for
China to have full compliance to WTO obligations, Chapter 4 is elaborated in order
highlight China’s role in WTO and a WTO Member that can fully enjoy the advantages
of membership while being WTO compliant at the same time. China has to confront
the obstacles and adopt transformation to solute its issues. Since the protection
period has ended in 2015, it is pertinent to see how China complies with
commitments made with regard to its trade interests and how it has become urgent.
Furthermore, the thesis also provides details on, how China is adapting itself to WTO
law under pressure from the EU and what are the potential transformations, that
China would adopt will be discussed in this chapter. The improvement of China’s
position within the WTO regime and the future prospects of EU-China trade relation
would be concluded in detail in the last chapter.
Chapter 1 Background Description
The main shaping factors of globalization today have been financial market
integration, the tremendous growth of multinational companies and International
Practice Networks (IPNs), new technologies, changes in the nature and form of work
and the rise of new actors on the scene. 2 The WTO, as a very influential
international organization is unanimously considered to be the most successful
mechanism for peacefully setting trade disputes among nations in history,3 counts
163 Members as of 14 July 2016.4 The WTO plays a crucial role in globalization and
internationalization of the world market and greatly promotes financial market
integration. Except settling disputes and reduce trade tensions, the WTO
can stimulate economic growth and employment, cut the cost of doing business
2 Paul Schiff Berman, 'From International Law to Law and Globalization' [July 5, 2005] Bepress Legal Series
Working Paper. 3 Won Mog Choi, 'To comply or not to comply? – Non-implementation problems in the WTO dispute settlement
system' [October 2007] Journal of World Trade vol.41 no.5 ,1043. 4 WTO, 'Members and Observers' (2015) <https://www.wto.org/english/thewto_e/whatis_e/tif_e/org6_e.htm>
accessed July 2016.
6
internationally, encourage good governance, help countries develop, give the weak a
stronger voice and support the environment and health.5
To the EU and China, as two of the biggest traders in the world, smooth trade
relation amongst these two entities is not only vital to the EU-China Strategic
Partnership but also important to world economy and worldwide financial market
integration. After 30 years of implementing the Opening-up and Reform Policy, China
has proved itself to be a competitive player on the stage of global trade. According to
the European Commission, China is the second largest economy, the biggest exporter
and now also is the world's biggest trading nation with an enormous internal market.
The rising of China translates extraordinary growth opportunities for European
businesses.6
There is no doubt that China has benefited greatly from its WTO accession. On the
long term, China’s importance to the EU as a strategic market will continue increasing.
After China’s and Europe’s diplomatic relations established in 1975, bilateral
cooperation between the EU and China broadened during the 1980s to cover fields
such as scientific programs, development, trade, academic and cultural exchanges.7
With time the China’s and Europe’s diplomatic relation has exceled to the EU-China
Strategic Partnership. The EU-China Strategic Partnership developed on the basis of
the 1985 EU-China trade and cooperation agreement, and has grown to include
foreign affairs, security matters and international challenges such as climate change
and global economic governance.8
As a component of the EU-China Strategic Partnership, “the EU and China enjoy one
of the world's biggest and most dynamic trading relationships.”9 The trade between
the EU and China has been increasing dramatically in the past years. China is now the
5 WTO, '10 things the WTO can do' (WTO, 2016) <
https://www.wto.org/english/res_e/publications_e/wtocan_e.pdf> accessed July 2016. 6 European Commission, 'Facts and figures on EU-China trade' (March 2014) <
http://trade.ec.europa.eu/doclib/docs/2009/september/tradoc_144591.pdf> accessed July 2016. 7 Gunther Hauser and Franz Kernic, China: The Rising Power (1st, Peter Lang, 2009) 69. 8 'EU Relations with China' (European Union-European External Action Service) <
http://eeas.europa.eu/china/index_en.htm> accessed July 2016. 9 EU and China, EU-China 2020 Strategic Agenda for Cooperation (2013).
7
EU's second trading partner after the United States (hereafter: the US) and the EU is
China's biggest trading partner.10 Furthermore, China and the EU have become the
biggest source of imports for each other. During the 16th EU-China Summit held on
21 November 2013, both the EU and China have announced the launch of
negotiations of a comprehensive EU-China Investment Agreement.11 Developing
investments now is the priority of the EU's trade policy to China.
The EU is applying its economic and trade policy, which is its guide to defend its
economic interest. Beyond its internal market, the 27 Member States of the EU apply
and share a single trade policy which is aimed at creating a global system for fair and
open trade and subsequently opening up markets with their key partner countries,
such as China. Making sure others play by the rules and ensuring trade is a force for
sustainable development.12 The primary objective of the EU-China partnership and
trade relation is considered respecting the mutual benefit for both the parties.
Nevertheless, even though China is an emerging trader with a promising future, it is
different from the EU in many ways resulting into disputes and frictions with EU. The
close cooperation between the two parties in many areas does not end the concerns
of EU on China’s trade policy. And such concerns are displayed in protecting its own
trading interest. On the other hand, some of the EU policies such as the EU’s
rejection to grant China Market economy status （hereafter: MES） has also created
an adverse impact on China’s stand at WTO on the Anti-Dumping Disputes.13 This
denial will continue to bring disadvantages to China in anti-dumping disputes which
will be elaborated upon later. Alleged by the EU, its trade policy not only serves EU
internal market but also plays a vital role in ensuring international trade rules
designed to ensure fair trade are applied and respected.14 In other words, the EU is
actively using WTO rules to defend its own interest within the WTO regime. The EU is
10 European Commission, 'China' (European Commission) <
http://ec.europa.eu/trade/policy/countries-and-regions/countries/china/> accessed July 2016. 11 Ibid 10. 12 European Commission, ' Trade' (European Commission, 22 February 2016) < http://ec.europa.eu/trade/policy/>
accessed July 2016. 13 The European Parliament has voted by an overwhelming majority to deny China’s market economy status on
12th May, 2016. In 2004, it has also announced its rejection to grant China market economy status. 14 European Commission, 'EU position in world trade' (European Commission, 2014) <
http://ec.europa.eu/trade/policy/eu-position-in-world-trade/> accessed July 2016.
8
also enthusiastic to use WTO rules to settle its disputes with China under WTO
regime, the widest applicable dispute settlement forum, after China’s accession.
China was not a WTO Member before 2001 and had a strong incentive to access the
WTO in particular after it realized globalization is an inevitable trend. Prior to China’s
accession, existing members were unconstrained by WTO rules for how to treat
imports from China. The WTO members are expected to accord each other treatment
of most-favored-nation (MFN) treatment for the application of tariffs. Members were
not required to offer such treatment to nonmembers like China.15 However, for long
time, China has been excluded from the WTO regime for political reasons. China's
accession to the WTO required bold reforms and liberalization of its market rules.
Considering that China plays a vital role in the world market, its integration in the
global economy has benefited the Chinese market as well as WTO members.
The relationship between China and the EU within the WTO-regime has a profound
history which can be dated back to 1947. The EU has been influencing China within
the WTO regime since China’s Accession negotiation. China was an original GATT
signatory, as well as many Member States of the European Union. However, China
lost its status as a member in 1950 during the upheaval revolution. In order to
become a WTO member, China had its long battle ahead. China had applied to join
the GATT, the WTO's predecessor in 1986; after a long period of waiting, the detailed
conditions of entry only have been actively negotiated until 1995. For the process of
accession, China must pass through the set of requirements and the basic set of legal
rights and obligations that China will be expected to accept as a new WTO member.
And the rules are standard to all other countries applying as a WTO member.16
Furthermore, the basic principles governing WTO rules, specifically MFN treatment
and National treatment must be also complied with. In this regard, many of China’s
policies were not reconcilable with the basic tenets mentioned above which lead to
the EU’s disagreement and a long negotiation. The EU is considered as the last
15 Chad P. Bown, 'China's WTO Entry: Antidumping, Safeguards, and Dispute Settlement' University of Chicago
Press.
16 Michaela Eglin, 'China's Entry into the WTO with a Little Help from the EU' [1997] International Affairs.
9
obstacle to China on its accession to the WTO. Subsequently, after the decade long
and tough negotiations with the former EC ended with two parties’ compromising
with each other. The terms of accession of the People’s Republic of China to the WTO
were finally approved in May, 2000 and China officially became a member in 2001.17
The road to the final agreement of China’s accession was long and tough, but these
difficulties pale in comparison to the problems that have not yet been tackled in
terms of achieving real implementation of its provisions throughout the territory of
the People’s Republic of China (PRC).18 The influence of the EU on PRC manifests
more on its compliance of WTO obligation. As member of the WTO and signatories of
other bilateral agreements, the EU undertakes as its obligation to help China comply
with commitments.19 By representing and defending European interests in the
dispute settlement mechanism (hereafter: DSM) of the WTO, the EU helps to ensure
that WTO obligations are met. The EU acknowleges China’s effort for its
determination to carry out challenging reforms and it is fully aware of the
development challenges China is facing.20 Nevertheless, the EU still takes up a stand
that China has not fully reconciled to its WTO commitments and lacks evidently in
Transparency.
Chapter 2 Friction between the EU and China
There is no doubt that the EU and China are endeavoring to build a strategic
partnership. What makes it hard to achieve is that, underlying this partnership, there
are conflicts and friction between these two parties. China has been the EU’s major
Target of trade remedy measures since China—Measures Affecting Imports of
Automobile Parts. This chapter will start with the EU’s comment on China’s trade
policy after which disputes between the EU and China will be discussed. To some
extent, we can say the friction between the EU and China arises from the injury to
17 The European Commission reached bilateral agreement with China on market access issues of foremost
importance to the EU on 19 May 2000. 18 Donald c. Clarke, 'China's Legal System and the WTO: Prospects for Compliance' [2003] Washington
University Global Studies Law Review. 19 European Commission Working Document, ‘Country Strategy Paper (China) 2002–2006’, 1 March 2002 at 10.
Available: <http://europa.eu.int/comm/external_relations/china/csp/02_06en.pdf>. 20 European Union, EU statement on 5th Trade Policy Review of China, (2014).
10
economic interest from restriction on trade. The eagerness to defend national
interest manifests in form of monitoring the compliance with WTO obligations. There
are two means to monitor, by Trade Policy Review (hereafter: TPR) and Dispute
Settlement Mechanism. The friction and conflicts between the EU and China will be
brought to light in analyzing the EU’s Statement on China’s TPR and the disputes
between the EU and China.
2.1 EU’s Statement on China’s Trade Policy Review
Surveillance of national trade policies is a fundamentally important activity running
throughout the work of the WTO.21 The Trade Policy Review Mechanism was
established during the Uruguay Round providing the WTO secretariat with a clear
mandate to monitor and report on trade policies by all WTO Members.22 The WTO
Trade Policy Reviews mainly aim at ensuring Transparency and increasing and
understanding of countries’ trade policies and practices, through regular monitoring.
From the first TPR in April 2006, China has accepted six times TPR. The latest China
TPR took place in 2014.
In the 2014 TPR, the Secretariat has examined China’s economic environment, trade
and investment regime, trade policies and practices by measure and trade policies by
sector.23 The Ambassador on behalf of the EU has pointed out some trade policies
inconsistent to China’s WTO obligation, such as the procedure to set standards,
technical regulations and sanitary and phytosanitary measure, the measures
imposed on exports used as policy instruments to encourage or discourage exports
as necessary to meet industrial development goals, the government support for
state-owned enterprises affecting fair competitiveness, a large number of support
programs at the sector, regional and enterprise level to attain different economic and
social goals and so on.24 Regarding these inconsistencies, the EU specifically pointed
out its major concerns on Transparency issues. By comparing the rhetoric of the
statement from EU in 2010 and 2014 respectively, the EU has admitted that China
21 WTO, ' Trade Policy Review' < https://www.wto.org/english/tratop_e/tpr_e/tpr_e.htm> accessed 4.2016. 22 Petros C. Mavroidis, Trade in Goods (2nd, Oxfords, 19 July 2012) 820. 23 WTO, China trade policy review, (2014) WT/TPR/S/300. 24 Ibid 20.
11
has made great progress when deepening its reform and is facing important
challenges. The EU has acknowledged China’s achievements more than once in its
statement on Trade Policy Review of China, although some specific trade concerns
must be attended to. The topic of transparency seems to be the EU’s permanent and
primary concern. Given China’s unique historical and current practice, the EU
considers that China should have made improvements in notifications and consistent
implementation of legislation at all levels to fulfill its commitment on transparency
on policies. In the fifth Trade Policy Review of China, it was mentioned that:
“the Secretariat has raised concerns about its inability to conduct the
review because China either had not published relevant trade-related
measures or had not made translations of them available in one or more
WTO languages. The fact that the Secretariat has not been able to obtain
key documents is striking. The EU considers that this key Accession
commitment has not been fulfilled and recommends that China promptly
remedies this situation.”25
For the EU, transparency on Members’ policies is essential for the functioning of the
WTO. Besides this, other stated concerns were industrial policies and non-tariff
measures in China which may discriminate against foreign companies, a strong
government intervention in the economy and unequal access to subsidies and cheap
financing, inadequate protection and enforcement of intellectual property rights in
China.26 These factors convince the EU that in order to be further developed and to
become more balanced, the EU-China bilateral trade relations do specifically need to
address several key issues: in particular, access to the Chinese market, the defense of
European norms and standards, the respect of intellectual property rights.
Furthermore, the improvement of China’s trade climate should also happen by easier
market access to the judicial system, competition of enforcement and Foreign Direct
Investment (hereafter: FDI) market opening etc. In a word, EU is dissatisfied with
China’s trade policy.
Compared to China’s policies, the EU trade policy might be more WTO obligation
25 Ibid 20. 26 Ibid 20.
12
compliant. The trade policy of the EU sets the direction for trade and investment in
and out of EU, which conveys its strong will to shape a good environment that is both
good for people and business. The EU is willing to keep markets open within and
outside the EU and help the EU to exit the economic crisis. In order to do so, the EU
trade policy is made suitable to create a global system for fair and open trade, open
up markets with key partner countries, make sure others play by the rules and ensure
trade is a force for sustainable development. EU trade policy aims to open new
markets for European exporters, workers and investors through lifting barriers to the
markets of trading partners. There are close cooperations with countries outside of
the EU to: remove persistent problems for exporters; increase the opportunities for
EU businesses to get equal access to procurement markets outside the EU; reduce
counterfeiting and piracy of European goods and open up new opportunities for
European investment.27 Transparency issues and other inconsistencies to WTO rules
of China, such as export barriers, impede trade and investments and are to some
degree not consistent to the EU’s own trade policy which leads the EU to seek
remedy from the Dispute Settlement Body (hereafter: DSB).
2.2 Disputes between China and the EU within the WTO Regime
Since the first dispute lodged by the EU against China’s export measure in front of
DSB in 2006, by the time of 26th May 2016, there are 11 WTO disputes in total
between the EU and China brought forward to the DSB. Among these disputes, only
four were initiated by China, the rest were initiated by the EU. Since China’s
accession to the WTO in 2001, there are 41 cases involving the EU as complainant. 7
cases, which is approximately 17 percent of these 41 disputes were brought against
China. China has complained in 13 cases against only two Members, one of them
being the United States and the other the European Union. China’s defensive and
offensive positions started to be balance only since it firstly brought a case against
the EU in 2009. The 11 disputes between the EU and China, the agreements cited
and the results are shown in the figure in Annex 1.
27 European Commission, ' Policy' (European Commission, 22 February 2016) < http://ec.europa.eu/trade/policy/>
accessed July 2016.
13
Among the seven cases brought forward by the EU, China’s Protocol of Accession was
cited in three cases, and six cases concern China’s specific obligations. Four disputes
cited the Agreement on Implementation of Article VI of the GATT 199428 and two29
involved subsidies and countervailing measures with the European Union as the
complainant. China and the European Communities had reached an agreement in
China—Measures Affecting Financial Information Services and Foreign Financial
Information Suppliers before it went to the Panel and there is no result for
China—Provisional Anti-Dumping Duties on Certain Iron and Steel Fasteners from the
European Union. China has lost all the other five cases brought forward by the EU.
The two most high-profile cases are related to resources disputes. Three of the seven
cases initiated by the EU were co-complained with the United States and three were
co-complained with Japan. Given how the anti-dumping cases comprise a
proportional amount in China-EU disputes and the “fights for resource” were indeed
attractive to the world, amongst the eleven disputes, two anti-dumping cases and
two resource-related cases are necessary to be elaborated upon. The cases are
namely China—Automobile Parts, European Communities—Fasteners, China—Raw
Materials and China— Rare Earths.
2.2.1 Anti-dumping Disputes
China—Measures affecting imports of Automobile Parts
EU's first case against China’s measure is China—Measures affecting imports of
Automobile Parts. In this case, the EU aimed at China’s 25% customs tariff measures
upon automobile parts being characterized as complete vehicles. Under the above
measure, imported automobile parts, which are used in the manufacture of vehicles
for sale in China are considered to fulfill the characteristics of a whole vehicle if they
are imported in excess of certain thresholds and were charged for 25% tariff. This is
the case when specific combinations of parts of the later assembled vehicle are
28 Which are: China—Provisional Anti-Dumping Duties on Certain Iron and Steel Fasteners from the European
Union, China—Definitive Anti-Dumping Duties on X-Ray Security Inspection Equipment from the European and
China—Measures Imposing Anti-Dumping Duties on High-Performance Stainless Steel Seamless Tubes
(“HP-SSST”) from the European Union. 29 Which are China—Measures Affecting Imports of Automobile Parts and China—Measures Related to the
Exportation of Rare Earths, Tungsten and Molybdenum.
14
imported or when the price of the imported parts attain 60% or more of the vehicle.
If these thresholds are met, the measures provided that imported parts will be
subject to charges equal to the tariffs for a complete vehicle which were 15% higher.
These charges are assessed after the assembly of the parts into complete vehicles. In
this regard, the Appellate Body upheld panel’s findings that the characterization of
the charge as an “internal charge” and the measures were in violation of Articles III:2
and III:4 as it was only applied to imported parts but not domestic parts and placed
imported parts at a disadvantage compared to domestic auto parts. China’s
measures not justifiable under Article XX(d) because China had not proven that the
measures were “necessary to secure compliance” with its Schedule.30
European Communities—Definitive Anti-Dumping Measures on Certain Iron or Steel
Fasteners
As the first case complained by China and it has supported by DSB, European
Communities—Definitive Anti-Dumping Measures on Certain Iron or Steel Fasteners
(hereafter “Fastener”) has great significance to China. “China has never before asked
the WTO to impose trade sanctions since it joined the organization in 2001, but the
end of the seven-year battle leaves the way open to a claim for compensation.”31
In the investigation from October 2006 to September 2007, the Commission of EU
selected nine companies out of one hundred and six companies claimed for market
economy treatment or individual treatment as sample. None of these companies
met the requirements of market economy treatment, only four companies met the
requirements of individual tests. Consequently, a country-wide anti-dumping duties
were imposed upon import of fasteners from China. Therefore, in Fasteners, China
alleged Art. 9(5) of the European Union's basic anti-dumping regulation (“Basic AD
Regulation”), concerning individual treatment of exporters from certain non-market
economies (hereafter: NMEs) in anti-dumping investigations; and the imposition by
the European Union of definitive anti-dumping duties on certain iron or steel
30 China—Measures Affecting Imports of Automobile Parts (18 July 2008) WT/DS342/R, para.4.491. 31 Tom Miles, 'EU loses WTO case, China could seek trade sanctions' (Reuters, 2016) <
http://www.reuters.com/article/us-eu-china-wto-idUSKCN0UX0DO> accessed July, 2016.
15
fasteners from China are inconsistent with WTO requirements.32 The panel has
supported Art. 9(5) of the Basic AD Regulation, concerning individual treatment of
exporters from certain NMEs in anti-dumping investigations inconsistent with WTO
requirements; and partly supported the imposition by the European Union of
definitive anti-dumping duties on certain iron or steel fasteners from China is
inconsistent with WTO requirements. According to Art. 9(5) of the Basic AD
Regulation, the provision that deals with the individual treatment of producers from
NME countries, including China, in the context of dumping determinations in
anti-dumping investigations, as well as the application of that provision in the
fasteners investigation at issue in this dispute, Article 9(5) of the Basic AD Regulation
provides that in case of imports from non-market economy countries, the duty shall
be specified for the supplying country concerned and not for each supplier and that
an individual duty will only be specified for exporters that demonstrate that they
fulfill the criteria listed in that provision. China considers that Article 9(5) of the Basic
AD Regulation is inconsistent with the EC's obligations since these provisions require
an individual margin and duty to be determined and specified for each known
exporter or producer and was endorsed by the Appellate Body and this claim has
been ultimately supported by the DSB.33
2.2.2 Non-antidumping disputes
China — raw materials and China — rare earth
Among all these 11 cases, China — raw materials and China — rare earth are the
most remarkable cases. These two high-profile cases brought forward by the EU in
2009 alongside the US and Mexico and with the US and Japan in 2011 respectively.
China — raw materials is generally considered as a touchstone of the incoming Rare
Earth case. The products at issue include certain forms of bauxite, coke, fluorspar,
magnesium, manganese, silicon carbide, silicon metal, yellow phosphorous, and zinc
which are being exhausted on a large scale in China. In the Appellate Body Report,
32 European Communities—Definitive Anti-Dumping Measures on Certain Iron or Steel Fasteners from China (4
August 2009) WT/DS397/1. 33 European Communities—Definitive Anti-Dumping Measures on Certain Iron or Steel Fasteners from China (3
December 2010) WT/DS397/R and European Communities—Definitive Anti-Dumping Measures on Certain Iron
or Steel Fasteners from China (15 July 2011) WT/DS397/AB/R.
16
the Appellate Body has upheld most of Panel’s ruling. The Appellate Body upheld the
Panel’s recommendation that China should bring its export duty and export quota
measures into conformity with its WTO obligations such that the “series of
measures” did not operate to bring about a WTO-inconsistent result and also upheld
the Panel’s finding that there is no basis in China’s Accession Protocol to allow the
application of GATT Article XX to China’s obligations under para.11.3 of the
Protocol.34 The Panel has concluded that China’s export restraints were not justified
pursuant to Articles XX(b) and XX(g) on the arguendo basis35 and this conclusion was
not appealed. In this context China only appealed the Panel’s interpretation of the
phrase “made effective in conjunction with” in Article XX(g) and failed to achieved
the Appellate Body’s favor.
In Rare Earths, The Panel found that China's export duties on rare earths, tungsten,
and molybdenum were inconsistent with the export duties in its Accession Protocol.
Rare earths, referred to as “the seeds of technology” and “technology metals”, are
essential from both a strategic and environmental perspective. Considering the
significance of rare earths and related materials and out of environmental protection
concerns, China imposed some export restrictions on a number of rare earths,
tungsten, and molybdenum. The export restrictions comprised export duties, export
quotas, and certain limitations on the enterprises permitted to export the products
which are in issue in this case. The Panel acknowledged China’s right to trade and to
put in place environmental and conservation policies but was not persuaded that the
Chinese restrictions served environmental conservation reasons. The Panel found
that China's export quotas on rare earths, tungsten, and molybdenum were
inconsistent with GATT Article XI36 and concluded that the export quotas were not
justified under the exception in GATT Article XX(g), which allows WTO Members to
implement GATT-inconsistent measures “relating to the conservation of exhaustible
natural resources”. 37 The Panel concluded that none of China's arguments
34 China — Measures Related to the Exportation of Various Raw Materials. (30 January 2012) WT/DS398/AB/R,
para.362. 35 China — Measures Related to the Exportation of Various Raw Materials. (5 July 2011) WT/DS398/R, para.8.16 36 China — Measures Related to the Exportation of Rare Earths, Tungsten and Molybdenum WT/DS432:
One-Page Case Summaries. 37 China — Measures Related to the Exportation of Rare Earths, Tungsten and Molybdenum (26 March 2014)
WT/DS432/R, para. 7.104.
17
constituted cogent reasons for departing from the Appellate Body's finding in China –
Raw Materials that the obligation in Paragraph 11.3 of China's Accession Protocol is
not subject to the general exceptions in Art. XX of the GATT 199438 and that the
export quotas were not justified under the exception in GATT Art. XX(g), which allows
WTO Members to implement GATT-inconsistent measures “relating to the
conservation of exhaustible natural resources”.39 China appealed an intermediate
finding made by the panel in reaching its conclusion that Art. XX of the GATT 1994
was not applicable to justify a breach of Paragraph 11.3 of its Accession Protocol
regarding export duties. In upholding the panel's finding, the Appellate Body found
that the Marrakesh Agreement, the Multilateral Trade Agreements, and China's
Accession Protocol form a single package of rights and obligations that must be read
together.40 However, the questions whether there is an objective link between an
individual provision in China's Accession Protocol and existing obligations under the
Marrakesh Agreement and the Multilateral Trade Agreements, and whether China
may rely on an exception provided for in those agreements to justify a breach of its
Accession Protocol, must be answered through a thorough analysis of the relevant
provisions on the basis of the customary rules of treaty interpretation and in light of
the circumstances of the dispute.41 The Appellate Body found that the absence of an
objective link lead to the inapplicability of Article XX GATT to elimination of export
duties.
From Auto parts to Rare Earths, even though most of the arguments in these three
cases were not supported by the DSB, the fact that cannot be denied is that China
has been more mature in formulating arguments. Nevertheless, China still has room
to improve its defense strategy. In Raw Materials, the Panel finds that China’s policy
“does not make any mention of environmental or health concerns”42 even though
China may very well have objectives to protect environment or health, but its
evidence simply was not persuasive enough to prove it. Contrary to China’s stated
38 Ibid 37. 39 Ibid 37, para.7.104. 40 China — Measures Related to the Exportation of Rare Earths, Tungsten and Molybdenum (7 August 2014)
WT/DS432/AB/R, para.5.51. 41 Ibid 40. 42 Ibid 35, 7.501.
18
objectives with its measures, the presented evidence in fact proved that one of the
objectives of the charged measures was economic development. Such similar
“mistakes” on China’s end also happened in Rare Earths. Since US-Gasoline and
US-Shrimp, most measures evaluated in different disputes citing Article XX as
justification have been supported by the Panel and the Appellate Body. Even if the
applicability of Article XX is not excluded by China’s specific obligations set forth in its
Accession Protocol, China still cannot justify its violation. This “failure” uncovers one
of China’s defects in its defense strategy: its shortcoming of finding persuasive
evidence. Therefore, in order to address the defense strategy of China, how it can be
improved will be discussed under chapter 4.
In summary, most of the disputes between the EU and China arose from trade in
goods. There are only 3 cases related to the trade in services or investments. In
comparison to trade in goods, the disputes arising from trade in services and
investments are much less. These disputes are targeted at specific measures imposed
upon either exportation or importation but eventually aim for China’s industrial
Policy and government’s regulation on trade.
2.3 The Economic and Political Reasons
The EU-China trade disputes are the most intensive ones for both sides. In the most
traditional sector, trade in goods, the total worth of goods the EU has exported to
China reached 148.3 billion euros (increasing 80% compared to 2009), while the
imports from China have reached 280.1 billion (30% increase compared to 2009) in
2013.43 The EU is the largest source and destination of FDI in the world measured by
stocks and flows.44 Intrinsically, the EU’s high import dependence is often said to be
one of the most important factors for the EU to secure raw materials. With regard to
the strategic minerals in both WTO cases, the EU's import dependency often
amounts to far more than 50%.45 Being consistent to its trade policy, as a defendant
43 ‘EU-China Relations 2015 and Beyond’ (March, 2015)
<https://www.businesseurope.eu/sites/buseur/files/media/imported/2015-00194-E.pdf> accessed July 2016. 44 European Commission, ' Investment' (European Commission 09 October 2015) <
http://ec.europa.eu/trade/policy/accessing-markets/investment/> accessed 04 July 2016. 45 European Commission, Critical Raw Materials for the EU – Report of the Ad-hoc Working Group on defining
critical raw materials, 77-81.
19
of international trade rules, the EU expresses its clear support for the multilateral
trade system and aims to ensure that others abide by their WTO obligations. China
and the EU are trading in such tremendous volume as depicted in the first chapter of
this thesis and with such close ties to one another that the risk that conflicts arise
increases. The EU believes that while the WTO has helped shape a system of global
trade rules that keeps the global economy open for trade it as well reflects and
respects the needs and concerns of developing countries. Furthermore, the EU
argues that the network of agreements and obligations overseen by the WTO, helps
ensure that trade is open, predictable and fair. 46 Besides, as the EU and China have
not concluded any Free Trade Agreement, the DSM still is the most applicable forum
to settle trade disputes. Therefore, the EU, is more enthusiastic in settling disputes
against China under the rule-based WTO regime.
The fundamental reason behind this phenomenon is simple: the restrictions on trade
are harming one party’s interest. As the trade volume is growing, so too is the (risk of)
harm and therefore, defending trade interest becomes more of a priority. In the
beginning years after China’s accession, the EU only challenged the measures on
importation of China. The lower input in the developing countries (such as China)
promise them an advantage in international competition which in return puts Europe
at an unfavorable place in trade.47 As mentioned above, the EU has great economic
interest in China’s market where consumption capacity is increasing. Moreover, the
2008 financial crash and the subsequent recession led to a drastic decline in global
transactions, which the EU not only did not get rid of it but suffered from a lot too.
This crisis “might have provided fertile ground for drastic changes to dominant ideas
in the EU trade policy, leading to a displacement of the (neo)liberal paradigm with a
more protectionist perspective”. 48 The incoming sovereign debt crisis even
exacerbated the EU’s economy environment. Essentially, the EU policy related to
trade contains the EU’s objectives to achieve in the world trade. After the 2008
financial crisis, the EU has started to focus on (1) the EU’s choice to open bilateral
46 European Commission, Directorate-General for Trade, What is Europe's Trade Policy?,（2009), para 4. 47 Junjie Ma, ' he Dispute between China and the EU—An overview and Its Implication' [2012] CIEIE 1, 17. 48 Yelter Bollen, Ferdi De Ville and Jan Orbie 'EU trade policy: persistent liberalisation, contentious protectionism'
[2016] Journal of European Integration 279, 294.
20
trade negotiations with the US (and also with Canada and Japan); (2) the EU’s use of
trade defense instruments and a new attempt to make their application easier/more
protective and (3) a proposal that would increase the EU’s leverage to ask for more
reciprocity in its own liberal position on government procurement.49 It implies the
EU needs to recover from the recession by trading with the partner who not only has
potential consumption capacity and market shares, but also can provide a more
friendly economic environment and is rule based. Contrary to the friendly trade
partners the EU desires, China provides substantial and potential trade profits but its
economy environment is not considered “friendly” enough.
In some sectors, for example, natural resources, the EU is highly dependent on China
which makes it realize that China’s measure on exportation may affect the EU’s
economy. One of the most important reasons for the EU initiated Raw Material case,
is that “the EU’s economy and its industries rely to a significant extent on raw
materials which – despite their general use in only small quantities – constitute the
foundation of numerous industrial value chains of technologically sophisticated
products within the EU.”50 The EU’s high import dependence is often said to be one
of the most important factors for the EU when it comes to securing raw materials –
making it vulnerable to price volatility and interruption in supply chains.51 Thus to
view the role of China in this supply chain issue, it is interesting to see that many of
the raw materials at issue in both Raw Materials and Rare Earths are produced in
only a few countries and one of them is China. In many cases, China’s high share of
global production of raw materials is accompanied by a low level of substitutability as
well as low recycling rates.52 An additional risk to a secure supply of raw materials is
the environmental risk, that is, the intention of a country to protect its environment
and, in doing so, endangering the supply of raw materials.53 China’s measures on
49 Ibid 48. 50 Korinek Jane and Kim Jeonghoi, 'Export Restrictions on Strategic Raw Materials and Their Impact on Trade
and Global Supply' [2010] OECD, 104-105. 51 Stormy-Annika Mildner, 'Securing Access to Critical Raw Materials: What Role for the WTO in Tackling
Export Restrictions?' [December 2011] Transatlantic Academy, 3. 52 European Commission, Critical Raw Materials for the EU – Report of the Ad-hoc Working Group on defining
critical raw materials, 7. 53 Mirko Woitzik, 'Pure Business, Law Enforcement or Sheer Politics? The EU’s WTO Complaints against
Chinese Export Restrictions on Raw Materials' [June 2013] EU Diplomacy Paper.
21
limiting the exportation of raw materials endangers the EU’s economic interests and
generates supply crisis in Europe without question.
Moreover, the rise of China is considered as a source of competition and challenge to
western countries. As a developing country, China has already been outstanding in
the world trade area. China’s growing trade volume and growing economy are as
significant as the EU’s bilateral trade deficit with China. China’s inward investment to
the EU, which amounted to €0.3 billion in 2009 – a level that remains significantly
lower than that of other industrialized countries – has grown significantly over the
past few years, particularly in strategic areas. 54 The influence the Chinese
government is exerting on European companies in China is significant as well as the
impact it has on the European market constitutes a threat to EU.55
Besides, what cannot be denied is that political reasons play an ancillary role in the
EU-China’s trade conflicts. For a long time, the EU and the US have been and
continue to be close allies because they share similarities in their systems of politics,
economic system, culture and values. The EU and the US have established diplomatic
relations as early as 1953, the EU and US are the biggest economic and military
powers in the world, they dominate global trade and they play leading roles in
international political relations. Together, the EU and the USA have the largest
bilateral trade and investment relationship in the world: roughly 31% of the world
trade and over 49% of the world GDP comes from them.56 The EU and the US have
been working together in various sectors too: justice and home affairs cooperation,
energy and energy security, environmental cooperation, scientific and technological
cooperation, education and training, transport and aviation, developmental
cooperation and both civilian and military crisis management and conflict
prevention.57
54 ‘Rising to the China Challenge’ (October 2011)
<https://www.businesseurope.eu/sites/buseur/files/media/imported/2011-01492-E.pdf> accessed July 2016. 55 Ibid 43. 56 European Union, 'EU Relations with the United States of America' (European Union-European External Action
Service) <http://eeas.europa.eu/us/index_en.htm> accessed July 2016. 57 Ibid 56.
22
Unlike the EU’s relation to its traditional partner the US, the relationship between
the EU and China is more based on mutual interests instead of strong sense of
recognition. A strategic partnership is what states make of it themselves: there is no
clear definition provided by international law nor does it require explicitly identified
common interests and expectations.58 Such partnerships uncover that the basis of
the EU-China’s relation intrinsically is based on mutual interests instead of a strong
sense of recognition. Economic interests currently are the priority of this relation. It
is not a coincidence that the EU and US often stand on the same side in WTO
disputes against China. The latest denial of China's MES is also what the US wants.59
Under the globalization context, economic interests are ranked prior to many other
issues and the political system nevertheless still is an important factor affecting trade
relations. On the opposite, trade measures can also be considered as a means to
press on political issues. Politically, the EU and its traditional partners disagree on
China’s human rights issues, the Taiwan issue etc. and the legal uncertainties and
political uncertainties of China. The EU has expressed its concerns multiple times at
different occasions thereby contributing to EU-China trade conflicts. For Instance, the
EU urges the Chinese government to
“ensure minority rights in the face of the ‘self-immolations in Tibet’, and it
expresses concerns over the ‘arbitrary detention and enforced disappearance,
violations of the right to fair trial, as well as of freedom of expression and
assembly and freedom of religion or belief’”.60
In conclusion, the rapid growth of the Chinese economy and trade account for a
considerable shift of its status in the worldwide economy while the EU’s economy
grows stably but at a relative decline in proportion. Increasing economic exchanges
between China and the EU deepen the trade dependence and China’s actions have a
direct impact on the EU’s economic growth thus ensuring China’s policy and
measures laid down on trade being consistent to WTO obligations is a necessity for
58 Jonathan Holslag, 'The Elusive Axis: Assessing the EU–China Strategic Partnership' [March 2011] JCMS 293,
295. 59 Christian Oliver, Shawn Donnan, Tom Mitchell, ' US warns Europe over granting market economy status to
China' (Financial Times, 2015) <
http://www.ft.com/cms/s/0/a7d12aea-a715-11e5-955c-1e1d6de94879.html#axzz4E1dCqFnp> accessed July 2016. 60 Nikolaj Borreschmidt, 'The EU’s Human Rights Promotion in China and Myanmar: Trading Rights for Might?'
[2014] EU Diplomacy Paper 1, 3.
23
the EU to defend the EU’s economic and political interest. With China’s failure to
comply with these obligations and the economic and political conflicts that continue
to exist, the disputes will not stop even though the trading between the two sides is
growing.
Chapter 3 Difficulties for China to be Fully WTO Compliant
Given China’s growing importance of its economic expansion to world trade, and its
history of state involvement in resource allocation and economic decisions affecting
the market, China’s accession presented the dual challenges of incorporating China
into the WTO’s rule-based system and of China conforming its trade regime to meet
its commitments and obligations under the Protocol of Accession and the WTO
agreements.61 China is overcoming its fear to use WTO rules to defend its own trade
interest. As a country with a long-term preference of traditional political solutions to
settle disputes, China has started and is increasingly using WTO rules as its defense
instruments. From Auto Parts to Fasteners, China has been more and more familiar
with WTO rules and has started using them as a means of defense. Nevertheless,
China is still more a respondent rather than complainant in WTO disputes. China is
frequently involved in WTO disputes because of the economic and political reasons
examined in the last chapter. But the fundamental reasons for involvement in
disputes is its violations of its WTO commitments. In comparison to having initiative
to challenge, being compliant to its WTO commitments and preventing complaints is
also a priority for China. In order to find a more WTO obligations consistent way for
China, three issues in China’s commitment must be addressed to: China’s WTO-plus
obligations, the status of its accession protocol and its non-MES.
China’s accession to the WTO in December 2001 is considered as a milestone both
for this unique country and the world trading system. China is unique in some ways:
China, of the three biggest trading block (EU, US and China) is the only communist
member; It is one of both the largest economic entities and fast merging countries
but still is a developing country. This lead to China having a unique accession
61 Terence P. Stewart, Patrick J. McDonough, Natalie E. Stewart, Anne Ammons, China's Compliance with WTO
Commitments and Obligations: 2005-2007 Update (1st, September 2007) 6.
24
protocol and to bear more China-specific obligations with a big quantity of
China-specific obligations being WTO-plus obligations. The presumption of China’s
NEM status and the unclear status of China’s Accession Protocol create more
obstacles for China to be consistent to its WTO obligations.
3.1 WTO-Plus obligations
The obligations a WTO Member bears can be roughly divided into the rule
obligations and the market access obligations. The WTO rules obligations are set out
in the Marrakesh Agreement and its annexes62 whilst the market access obligations
are set out in the Members’ goods schedules annexed to GATT 1994 or services
schedules annexed to GATS. These two categories of obligations differ in the way in
which they may be modified or changed. Amendment to any provision of the WTO
Agreement or its multilateral agreements and TPR Mechanism can be made only in
accordance with the elaborate and stringent procedures set out in the WTO
Agreement.63 Hence many WTO-Plus obligations set out in the Protocol deemed as
an integral part of WTO agreement can be seen as permanent obligations to China.
China has undertaken these WTO-Plus obligations in areas ranging from the
administration of China’s trade regime to the Chinese economic system and towards
new WTO disciplines on investment. Under China’s trade regime, China undertakes
WTO-Plus obligations in the fields of transparency, judicial review, sub-national
governments and transitional review.64
Amongst the aforementioned areas, from the EU’s point of view, transparency is a
component of WTO rules which China has not fulfilled. For years the EU has
complained about the lack of transparency in the Chinese system. It urges China to
take all measures to ensure that stakeholders are consulted on new policy or draft
legislation and promptly improve its legal order to enhance the efficiency in the
notification and implementation of legislation at all levels to be consistent. The EU
and WTO may, however, have disregarded the fact that these provisions to some
62 GATT 1994 and its related agreements, GATS, TRIPs and TRIM are included in Annexes. 63 Marrakesh Agreement Establishing the World Trade Organization, Article X. 64 Accession of The People's Republic of China (23 November 2001) WT/L/432 Section 2.
25
degree have prescribed some unrealistic terms that China is almost certain to breach.
For example, no Member other than China is required to translate all of its laws,
regulations and measures pertaining to trade into one of the three official languages
of the WTO and obliged to make such translations available within 90 days of their
implementation or enforcement.65 This extra obligation which most members are
not capable of in practice is, for China, more difficult to fulfill because the amount of
regulations is a myriad and the local level authorities are not capable of translating
the technical terms used.
The standardized requirements of transparency for WTO Members are the
publishment of all measures of general application affecting imports and exports
before they are implemented or enforced and promptly in such a manner as to
enable governments and traders to become acquainted with them, and the
notification of the WTO and the other Members of any change in such measures.66
As a specific obligation, China has to endeavor to seek public comment on a broad
range of laws and regulations while the other WTO Members are obliged to seek
comments from the public only in very specifically defined circumstances. To be
precise, China is required to “establish or designate an official journal dedicated to
the publication of all laws, regulations and other measures pertaining to or affecting
trade in goods, services, TRIPS or the control of foreign exchange and, after
publication of its laws, regulations or other measures in such journal, shall provide a
reasonable period for comment to the appropriate authorities before such measures
are implemented, except for those laws, regulations and other measures involving
national security, specific measures setting foreign exchange rates or monetary policy
and other measures the publication of which would impede law enforcement.67
Moreover, the requirement for the Chinese government is to respond to the “request
of any individual, enterprise or WTO Member all information relating to the
65 Working Party on the Accession of China (1 October 2001) WT/ACC/CHN/49, para.334. 66 See e.g., GATT Article X; GATS Article III; TRIPs Article 63; Agreement on Technical Barriers to Trade (the
TBT Agreement) Articles 2 and 10; Agreement on the Application of Sanitary and Phytosanitary Measures (the
SPS Agreement) Article 7 and Annex B; the SCM Agreement, Part VII; Agreement on Safeguards, Article 12; and
Agreement on Trade-Related Investment Measures (TRIM) Article 6.
67 Accession of The People's Republic of China (23 November 2001) WT/L/432 Section 2(C)(2).
26
measures required to be published under paragraph 2(C)1 (measures pertaining to or
affecting trade in goods, services, TRIPS or the control of foreign exchange) and the
response even must be made within a very short period of 30 days in general and 45
days in exceptional cases.”68 This obligation to respond to information inquiries is
limited in some circumstances for other Members but is not limited under any
circumstances for China.
Regarding transparency in judicial review, specific obligations of China are set forth in
Section 2(D) of China’s Accession Protocol and paragraphs 76 through 79 of the
Working Party Report. The provision in the Protocol regarding the right to appeal
imposes more stringent obligations. China is required to establish, or designate, and
maintain tribunals, contact points and procedures for the prompt review of all
administrative actions relating to the implementation of laws, regulations, judicial
decisions and administrative rulings of general application referred to in Article X:1 of
the GATT 1994, Article VI of the GATS and the relevant provisions of the TRIPS
Agreement.69 Under GATT Article X, the possibility of appeal to a court of the
decision by an independent tribunal is merely referred to as a possibility but is
compulsory to China; The judicial review requirements set forth by the Protocol are
unconditional for China, unlike the provisions of GATT, GATS and TRIPS that exempt a
Member from the judicial review obligations should they be inconsistent with its
existing legal system.70
As a principle of international law, pacta sunt servanda has to be respected and a
Member may not invoke its internal law as justification for not performing its
obligations under the WTO. However, international law normally only binds the
national law on the central level. Under the Protocol, the Chinese government has
undertaken the following obligation regarding its sub-central governments which are
more stringent than required by the GATT or GATS: China's local regulations, rules
and other measures of local governments at the sub-national level shall conform to
68 Accession of The People's Republic of China (23 November 2001) WT/L/432 Section 2(C)(3). 69 Accession of The People's Republic of China (23 November 2001) WT/L/432 Section 2(D)(1). 70 Julia Ya Qin, 'WTO-Plus' Obligations and Their Implications for the World Trade Organization Legal System -
An Appraisal of the China Accession Protocol' [2003] Journal of World Trade 483.
27
the obligations undertaken in the WTO Agreement and this Protocol.71 Especially
with regard to complaint mechanism obligations, China is required to establish a
mechanism that provides individuals and enterprises a chance to bring to the
attention of the national authorities cases of non-uniform application of the trade
regime.72 When non-uniform application is established, the Chinese authorities
must ensure that the situation is adressed utilizing the remedies available under
China’s laws, taking into consideration China’s international obligations and the need
to provide a meaningful remedy, with the individual or entity notifying China’s
authorities being informed promptly in writing of any decision and action taken.73
These obligations require China to administer all its laws, regulations, decisions and
rulings to a very exact extent while the other Members are only required to “take
such reasonable measures as may be available to it”.74
Compared to 15 years ago, China has made efforts to be WTO compliant and its
achievements in reforms cannot be neglected. On the one hand, although China has
not fully complied to WTO commitments, in particular the China-specific obligations,
on the other hand. In conclusion, these provisions are the special transparency
provisions of the Protocol far exceeding the general requirements of the existing
WTO rules. These provisions are somehow regarded as important for the
development of democracy and rule of law in China but in essence is too harsh to
fulfill. Since the consequences of a failure to comply with the WTO-plus rules would
be no different from that of a failure to comply with standard WTO rules, in short
term, China will breach its promise to some extents.
3.2 Unclear Relationship between the Accession Protocol and the WTO Agreement
China, the fastest developing economy,75 now is subjected to the rules based system
of the WTO, which is bound to enhance global economic cooperation. Pursuant to
71 Accession of The People's Republic of China (23 November 2001) WT/L/432 Section 2(A)(3). 72 Accession of The People's Republic of China (23 November 2001) WT/L/432 Section 2(A)(4). 73 Ibid 70. Also see Working Party on the Accession of China (1 October 2001) WT/ACC/CHN/49, para.75. 74 See GATT Article XXIV:12 and GATS Article I:3(a). 75 According to the World Bank, “(China’s) GDP growth has averaged nearly 10 percent a year—the fastest
sustained expansion by a major economy in history—and has lifted more than 800 million people out of poverty”.
See http://www.worldbank.org/en/country/china/overview.
28
GATT Article XXXIII, a country acceding to GATT, the most frequently cited agreement
in EU-China disputes, might be subject to special rules contained in its protocol of
accession that would prevail over the provisions of GATT. Unlike many other Member
States' accession protocol, the China Protocol is not a standardized document and
contains many China specific obligations and has significantly revised WTO rules of
conduct applied to China’s trade. As the scope and content of rules set out in
accession protocols vary from member to member, how to define the relation
between these member specific rules and multilateral WTO provisions became a
problem of WTO adjudicators and China as well. The WTO is a rule-based
organization: if the rules China has to use as a basis are not clear, it generates
obstacles for China to regulate its trade policy pursuant to its Accession Protocol. The
measure always considered applicable by the Appellate body to define the relation is
“analysis starts with the text of the relevant provision in China’s Accession Protocol
and takes into account its context, also including the overall architecture of the WTO
system as a single package of rights and obligations and any other relevant
interpretive elements, and these must be applied to the circumstance of each
dispute, including the measure at issue and the nature of the alleged violation.”76 In
other words, such relation should be determined in light of the subject matter and
underlying rationale of specific commitments. Consequently, WTO adjudicators have
had to fill these large gaps through interpretation of commitments and as a
consequence this leads to legal uncertainty for China when implementing WTO rules.
The country-specific rules are made pursuant to Article XII of the Marrakesh
Agreement, which only indicates that the status of such rules is defined by the
“integration clause” contained in each of the accession protocols, stating that the
protocol “shall be an integral part of the WTO Agreement. Similarly, China’s
Accession Protocol, according to Paragraph 1.2 of it, “include the commitments
referred to in paragraph 342 of the Working Party Report, shall be an integral part of
the WTO Agreement.”77 The scope of the WTO Agreement in this paragraph is not
clear. It causes legal uncertainty leading to more risk for China to violate its
76 Ibid 40. 77 Accession of The People's Republic of China (23 November 2001) WT/L/432, Paragraph 1.2.
29
obligation.
The accession protocols contain numerous commitments that go beyond the
requirements of the WTO agreements, but do not provide general exceptions similar
to those in multilateral agreements such as Article XX GATT. The question whether or
not the additional obligations under WTO accession protocols are entitled to such
policy exceptions has been raised in front of WTO adjudicators. WTO adjudicators
gave inconsistent answers to this question separately in China - Publications and
China - Rare Earths: article XX GATT is available to the trading-rights obligations, but
the availability to export-duty obligations is denied. In China-Publications, China
invoked the public morals exception of GATT Article XX(a) to defend a breach of its
trading-rights obligation under Paragraph 5.1 of its Accession Protocol which requires
China to abolish most of its state-trading monopolies even though these are explicitly
permitted under GATT. The Appellate Body held that China may invoke GATT Article
XX(a) in this case, on the ground that Paragraph 5.1 contains a textual link to the
WTO Agreement.78 On the contrary, the Appellate Body held in the Raw Materials
case that China may not invoke the Article XX exceptions in this case in light of “the
lack of any textual reference to Article XX of the GATT 1994” in Paragraph 11.3.79
This ruling was reaffirmed in Rare Earths.
The latest interpretation concerning the relation between China’s Accession Protocol
and the WTO agreement from DSB is in Rare Earth, in which the Appellate body
tackled the issue of the relationship between provisions of China's Accession
Protocol and provisions of the Marrakesh Agreement and Multilateral Trade
Agreements with a strong implication of the status of the Protocol. The Appellate
body first pointed out it is uncontested that provisions of China's Accession Protocol
should be interpreted in accordance with the customary rules of treaty interpretation
as codified in Articles 31 and 32 of the Vienna Convention and it is also uncontested
that China's Accession Protocol is enforceable under the DSU Article 80 as in China
78 China - Measures Affecting Trading Rights and Distribution Services for Certain Publications and Audiovisual
Entertainment Products, (21 December 2009) WT/DS363/AB/R, paras. 229-233. 79 Ibid 34, para. 306. 80 Ibid 40 para.5.19.
30
– Raw Materials, the Appellate Body noted that "Paragraph 1.2 of China's Accession
Protocol provides that the Protocol 'shall be an integral part' of the WTO
Agreement."81 Article XII:1 of the Marrakesh Agreement is one of the two provisions
China relies on for its proposition that each provision of China's Accession Protocol is
an integral part of the Marrakesh Agreement or one of the Multilateral Trade
Agreements to which it intrinsically relates.82 The Appellate Body firstly examined
the interpretation of Paragraph 1.2 of China's Accession Protocol which is “the other
provision China relies upon in support of the proposition that each provision of
China's Accession Protocol is an integral part of the Marrakesh Agreement or one of
the Multilateral Trade Agreements to which it intrinsically Relates”83 and concluded
“the Marrakesh Agreement, the Multilateral Trade Agreements, and China's
Accession Protocol together form one package of rights and obligations that must be
read in conjunction.“84 Since the term "the WTO Agreement" in the second sentence
of Paragraph 1.2 may refer to the Marrakesh Agreement, that is, to "the WTO
Agreement" excluding the Multilateral Trade Agreements”85 such as GATT. On case
by case basis, in this case, Article XX GATT lacks an objective link to the WTO-plus
obligation to eliminate export duties characterizing in China’s Accession Protocol.
China failed to revert the conclusion on applicability of Article XX to China’s
Accession Protocol: it was therefore not able to invoke a general exception to justify
the breach of the obligation to eliminate export duties.
Given the fact that the term "the WTO Agreement", as used throughout China's
Accession Protocol, may have both narrow and broad connotations and is consistent
with the principle of the single undertaking reflected in both Articles II:2 and XII:1 of
the Marrakesh Agreement”,86 and the Appellate Body gave different results in
Publications and Rare Earths, it thus means that, as WTO jurisprudence stands now,
it remains uncertain as to whether, due to an absence of express textual and
contextual references, the general exceptions under the WTO Agreement will be
81 Ibid 34, para.278. 82 Ibid 40, para 5.25. 83 Ibid 40, para.5.39. 84 Ibid 40, para.5.51. 85 Ibid 40, para.5.46. 86 Ibid 40, para.5.47.
31
available to WTO-plus obligations of an accession protocol.
3.3 Market Economy Status
In WTO agreements, there is not prescription of any particular economic system for
the Members since the WTO assumes the market economy system. Compared to
traditional planned economies, China was not a perfectly planned economy when it
was acceding to the WTO but control of the Chinese Government over trade and
economy is obvious in areas such as price control and state trading which are not so
prevailing in the market economies of other WTO Members.87 Thus, contrary to
most of the WTO members, China is assumed to be Non-market economy system.
Treatment of China’s NME status under the WTO regime is set out in Section 15 of
the Chinese WTO Accession Protocol. Under Section 15, China can be treated as a
non-market economy in anti-dumping proceedings on the basis of ‘importing
countries' national laws. The burden of proof of the MES is on China or Chinese
companies. These fundamental consequences urge China to get rid of the NME label
for it often leads to the determination of higher anti-dumping duties. Whether a
State has MES is important in particular in anti-dumping investigations for the reason
that it determines normal value and provides basic index for the calculation of the
dumping margin, therefore China is intensifying its efforts for MES recognition.
Due to the NME presumption sets forth in China’s Accession Protocol, the procedure
for granting China economy-wide MES and the subsequent NME presumption follows
the importing country's legal definition of NME, instead of using the more restrictive
NME definition contained in the Addendum88. The incentive for recognition lies with
the NME: China can change this presumption only by convincing importing countries
on the basis of importing country's domestic law.
These criteria are derived from Article 2(7) of Council Regulation (EC) No 1225/2009.
The NME applying for economy-wide MES in the framework of anti-dumping
investigations must prove to meet five criteria, which are namely : (1) a low degree of
87 Working Party on the Accession of China (WT/ACC/CHN/49) 1 October 2001, para. 9 and para. 221. 88 Accession of The People's Republic of China (23 November 2001) WT/L/432, section 15(d).
32
government influence in the allocation of resources and in decisions of enterprises,
(2) an absence of distortion in the operation of the privatized economy, (3) the
effective implementation of company law with adequate corporate governance rules,
(4) effective legal framework for the conduct of business and proper functioning of a
free-market economy (including intellectual property rights, bankruptcy laws, ...),
and (5) the existence of a genuine financial sector.89 China has only fulfilled the
second criterion, hence why it has not been granted MES by the EU.
Specifically, China did not meet the requirements on the basis as following: the
Chinese state continued direct and indirect restrictions on exports and imports, as
well as subsidization of inputs with their implications on competitive conditions and
domestic prices90; China’s legal framework in place is at the moment not sufficient–
the country must prove that rules are applied in practice (by establishing
independent audit systems that can verify the application of the rules, as well as via
the number of professional accountants operating in the country)91; the actual status
of private property in Chinese law and favored credit access for state-owned
enterprises (hereafter: SOEs) are doubted and the state of implementation and the
effective enforcement of intellectual property rights, the new bankruptcy law, and
competition Law are unclear;92 Other issues are that China continued to favor SOE
access to credit, the role of the Chinese government (and state banks) in the banking
and financial sector, the lack of implementation of international standards for
prudential lending and the role of the Central Bank in setting interest rates for
lending, thus preventing banks from determining interest rates in line with customer
89 Commission staff working document accompanying the Report from the Commission to the Council and the
European Parliament on 32nd Annual Report from the Commission to the Council and the European Parliament on
the EU’s anti-dumping, anti-subsidy and safeguard activities, COM (2015) 43 final, 4 February 2015.
90 European Commission, Report from the European Commission to the Council and the European Parliament -
33rd Annual Report from the Commission to the Council and the European Parliament on the EU's Anti-dumping,
Anti-subsidy and Safeguard activities (2014), 3 August 2015.
91 Commission staff working document on preliminary assessment of the Socialist Republic of Vietnam's request
for graduation to market economy status in trade defence investigations, SEC (2010) 122 final, 5 February 2010.
92 Commission staff working document on progress by the People's Republic of China towards graduation to
market economy status in trade defence investigations, SEC (2008) 2503 final, 19 September 2008.
33
creditworthiness.93
The EU is indifferent to granting MES to China beyond legal respect because of
economic issues and political issues. The market economy and non-market economy
must be treated fundamentally different in anti-dumping investigations in order to
ensure fair trade. The EU worries that strong intervention by Chinese government on
China’s economy may compromise the trading ability of the EU. If the EU uses the
domestic price as the normal price, the EU’s dumping margins will be significantly
narrower than those found when China is not granted MES which is similar as to
what happens to the countries that have granted MES to China.94 Australia might be
a good example to prove the EU’s concerns.
“Australia, a WTO Member, recognised China as a market economy in 2005.
Since then, it has relied on costs adjustments to establish the normal values
of Chinese imports in anti-dumping cases. The dumping margins that
Australia has found are significantly narrower than those found by WTO
members that have not granted China MES. For example, Australia's
investigation into car wheels found that margins were mostly below 10%,
whereas most of the EU margins for the same product were calculated to be
40-60%”.95
Moreover, “the increased number of imports that would occur if China were afforded
MES would reduce EU output by between €114.1bn and €228bn per year.”96
Furthermore, China's MES issue may also have had an influence on the EU's relations
with other trading partners, most notably the US. Negotiations on TTIP with the US
and on other agreements with other trading partners (such as Canada and Japan)
may be negatively affected if the EU were to decide unilaterally to grant China MES,
instead of adopting a coordinated approach.97
93 Ibid 92. 94 Barbara Barone, ' One year to go: The debate over China's market economy status (MES) heats up' [December
2015] Directorate-General for External Policies. 95 Ibid 94. Also see Australian Government Productivity Commission, Australia’s Anti-dumping and
Countervailing System. Inquiry Report, (2009) (No. 48, 18). 96 William Louch, ' Chinese market economy status could put 3.5 million EU jobs at risk' (The Parliament
Magazine, September 2015) <
https://www.theparliamentmagazine.eu/articles/news/chinese-market-economy-status-could-put-35-million-eu-jobs
-risk> accessed July 2016. 97 Ibid 96.
34
With this background, the high profile citing of the ADA to initiate disputes is not a
coincidence for the EU. At least until 2014, China remained the main target of
anti-dumping investigations.98 Empirically, the EU uses its expertise in anti-dumping
as its defense instrument. Since 1979, when the first anti-dumping case against China
was initiated by the European Union, China has been the country most accused of
dumping by the EU.99 One of the factors that seem to be the vulnerability of Chinese
products to EU anti-dumping charges must be China’s non-economy market status. A
MES has been granted to China by over 80 states in the world, included some
developed countries like Switzerland, Australia100. Nevertheless, it is recently denied
by the EU again.
Among the 7 cases brought by the EU against China before the DSB, three disputes
are directly related to anti-dumping. Regarding the frequency of anti-dumping
disputes between the EU and China, it can be argued that if the EU were to grant
MES to China it would improve China’s position. Dumping is, as defined by the WTO,
“a product introduced into the commerce of another country at less than its normal
value, if the export price of the product exported from one country to another is
less than the comparable price, in the ordinary course of trade, for the like product
when destined for consumption in the exporting country”. 101 Therefore, the
determination of “normal price” has a heavy influence on the determination of
“dumping” and the calculation of the dumping margin. In an investigation against
the former Soviet Union, the US firstly used the Federal Republic of Germany as an
analogue market then concluded the dumping margin as 187%, however the
dumping margin was only 1.7% when it chose Canada as the analogue market
afterwards.102 The WTO introduced adjustments be made to the normal value, the
98 'Global anti-dumping trends' (Antidumpigpublishing, 2014) <
http://www.antidumpingpublishing.com/statistics/> accessed July 2016. 99 Robert C. Feenstra and Shang-Jin Wei, 'China’s Growing Role in World Trade' [March 2010] University of
Chicago Press.
100 Switzerland and Australia have recognized the market economy status of China in free trade agreement
with China in 2013 and in 2015 respectively. 101 Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade 1994, Article2.1. 102 Henggang Gong, Discussion on Analogue Prince in Anti-Dumping Investigation, see
http://202.119.108.161:93/modules/showContent.aspx?title=&Word=&DocGUID=8194051738d041d5917ae57aa8
422bab.
35
export price, or both in order to make a fair comparison between the export price
and normal value.103 However, if the methodology cannot fairly determine the
normal price, it also causes de facto unfair treatment to China in anti-dumping
disputes. When China was acceding to the WTO, it was considered by all parties that
China had not yet become a socialist market economy104, therefore the analogue
state methodology was introduced to mitigate the negative effect of unfair
competition. China is one of the countries with the lowest labor cost, and has
abundant resources, thus the substitute price probably cannot represent the
“normal price” of Chinese products even though the analogue state may be similar
to China in many ways.
The expiration of Section 15 of the Chinese WTO Accession Protocol may be a chance
for China to revert the current presumption even though when there is ambiguity in
interpretation of Section 15(d) of the Chinese WTO Accession Protocol. Moreover,
with a question of how to correctly interpret Section 15(d) of the Protocol has come
under debate, as well as whether the latter section stipulates automatic granting of
MES to China after December 2016.
The wording of Section 15(d) only stipulates that “the provisions of sub-paragraph
(a)(ii) shall expire 15 years after the date of accession” without indicating whether
China will be automatically entitled to MES. Section 15 (a)(ii) currently authorizes the
importing WTO Member to use a methodology that is not based on a strict
comparison with domestic prices or costs in China if the producers under
investigation cannot clearly show that market economy conditions prevail in the
industry.105 Before going into further detail about the possible interpretations, what
can be concluded for sure is that, if no amendment is made to this provision, the
importing WTO Member shall use a methodology that is based on a strict
comparison with domestic prices or costs in China according to general WTO rules
after Section 15(d) expires. In Fasteners, the WTO Appellate Body also appears to
103 Peter Van den Bossche and Werner Zdouc, The Law and Policy of the World Trade Organization: Text, Cases
and Materials (3rd, Cambridge University Press, 2013) 688.
104 The statements of both the representative of China and those of other countries set out in the Working Party
Report of China's Accession to the WTO (1 October 2001) WT/ACC/CHN/49, para.4-9. 105 Accession of The People's Republic of China (23 November 2001) WT/L/432, Section 15(a)(ii).
36
suggest the 2016 deadline is the deadline for the methodology not based on
domestic prices that the importing WTO Member can (currently) use.
In Fasteners, China’s argument that section 15 does not contain ‘an official
recognition by China’ that it is an NME, but only a temporary and limited derogation
from the rules in the ADA on the determination of normal value in anti-dumping
investigations initiated with respect to imports from China.”106 It has been greatly
supported by Appellate Body. The Appellate Body concluded that “Section 15 of
China’s Accession Protocol does not authorize WTO Members to treat China
differently from other Members except for the determination of price comparability
in respect of domestic prices and costs in China, which relates to the determination
of normal value. We consider that, while section 15 of China’s Accession Protocol
establishes special rules regarding the domestic price aspect of price comparability, it
does not contain an open-ended exception that allows WTO Members to treat China
differently for other purposes under the Anti–Dumping Agreement and the GATT
1994, such as the determination of export prices or individual versus country-wide
margins and duties”107 for the reason that “the manufacture, production and sale of
that product quoted by the EU does not mean that paragraph 15(a) permits any
derogation with respect to the determination of export prices; instead, the Appellate
Body considered that paragraphs 15(a) and (d) concern exclusively the determination
of normal value. While paragraph 15(a) contains special rules for the determination
of normal value in anti-dumping investigations involving China, paragraph 15(d) in
turn establishes that these special rules will expire in 2016 and sets out certain
conditions that may lead to the early termination of these special rules before
2016.”108
Literally, the Appellate Body has concluded that Section 15 is exclusively used to
determine the “normal price” and that the method of use of prices and costs from
another market economy country will end in December 2016. In this case, the prices
106 European Communities—Definitive Anti-Dumping Measures on Certain Iron or Steel Fasteners from China
(15 July 2011) WT/DS397/AB/R, para 284. 107 Ibid 106, para 290. 108 Ibid 106, para 288-289.
37
and costs shall be collected from China without referring to third countries' prices
and costs. However, it is uncertain whether this expiration will lead to an MES-status
being automatically granted. The uncertainty arises from the application of other
provisions in Section 15(a) besides Section 15(a)(ii) after expiration for the reason
that Section 15(a)(i) places the burden of proof on individual producers to show
qualifications to market economy conditions. This treatment is not applicable to
market economies under the WTO regime, but it is to NME’s. Since this tricky
interpretative issue is not yet solved by WTO adjudicator, what China can do is
actively prove it is already qualified to be market economy in conjunction with the
importing countries’ domestic regulations.
In conclusion, compared to other Member States, China bears more WTO-plus
obligations and more legal uncertainty inasmuch as the status of China’s Protocol of
Accession is concerned and it is not clear yet which make it more difficult for China to
align its trade relating policy to WTO obligations.
Chapter 4 Improvement of China’s Position
Given that the trade interest conflict will continue to exist in the relation between
the EU and China, it is probable that in the long term, China’s involvement in the
WTO dispute subjectively and passively is imperative. China can avoid complaints
being filed to the adjudicator body against it by complying with its WTO obligations,
on the one hand, or improve its defense or complaint strategy on the other hand, to
improve its position in the WTO. To this end it is significant to examine China’s
capability of WTO compliance.
4.1 China’s capability of WTO Compliance
From market access to transparency, China has made large efforts in order to achieve
compliance to WTO rules and regulations by intensifying its economic reforms and
judicial reforms before and after its accession. The scope of the effort can be
appreciated by seeing what the Ministry of Foreign Trade and Economic Cooperation
(MOFTEC) is reported to have achieved by the end of 2000 in anticipation of WTO
membership:” the review of over 1400 laws, regulations, and similar documents,
38
including six statutes (of which five were revised), 164 State Council regulations (of
which 114 were to be repealed and 25 amended), 887 of its own ministry regulations
(of which 459 were to be repealed and 95 amended), 191 bilateral trade agreements,
72 bilateral investment treaties, and 93 tax treaties.”109 In a short period of China’s
accession, the Chinese government also promulgated plenty of new regulations
designed to implement China’s commitments. China is determined to comply. Even
though, after one and half decades, since its accession to WTO, large concession has
been made to open up China market to foreign traders during this period, however,
China is still criticized for not fully compliance to WTO obligations strictly.
Considering China already has difficulties in complying with general WTO
requirements, it is also not surprising that there is no full compliance to WTO-plus
obligations yet. China, however, has no intention of purposefully bypassing its
obligations.
The truth is of the matter is that no member has fully complied with its WTO
obligation. To different extent, Members included the EU are inconsistent to WTO
rules. The EU’s refusal to effectively implement adverse rulings in a number of
well-publicized cases, such as Bananas and Beef Hormones, has been widely
scrutinized in the legal doctrine.110 The main difference between China and the
“model member” is that the original members such as the EU and the US have
largely created WTO and shaped WTO rules, whereas China has only recently joined
them. The requirements of transparency in GATT, GATS, TRIPS and TRIM are to a
great extent based on the administrative law of the US.111 These requirements may
be more suitable for world trade development, however, these are greatly different
from China’s system. For China, to comply with these obligations, especially the
WTO-plus obligations, a nationwide overhaul is necessary. If we look deep at its
achievements in the last 15 years, we can see China is able to and has potential to
comply but at least more time is needed. The government is showing its efforts on
109 Donald c. Clarke, 'China's Legal System and the WTO: Prospects for Compliance' [2003] Washington
University Global Studies Law Review. 110 Antonello Tancredi, ' EC Practice in the WTO: How Wide is the ‘Scope for Manoeuvre?' [2004] EJIL 933, 936. 111 Sijie Chen, China’s Compliance with WTO Transparency Requirement: Institution-Related Impediments [2012]
Amsterdam Law Forum press.
39
deepening reforms which is also a priority of China’s current policy. At the same time,
just like the EU, China has its own interests to defend. For instance, China has to
balance its objectives in environment protection, its own development and its duty
to eliminate export duty concerning certain resources while the demand of other
countries for these resources is increasing.
Seeking the maximum interest and maintaining minimum disruption from
international law and society on domestic legal an economic system without violating
WTO rules is a puzzle China has to solve. How China should balance its national
interests and obligations as a responsible and prominent Member in the WTO is an
enormous challenge to China. In recent years, the economy of China has slowed
down. On top of that, the dramatic decline of exhaustible natural resources and the
increase in severe pollution make China realize it should not develop its economy at
the expense of the environment. The ruling of Raw Materials and Rare Earths have
made it more difficult for China to conserve exhaustible natural resources and to
protect the environment, but it has not hampered its desire of development of
domestic downstream industries. Furthermore, the chaotic hierarchy of China’s
regulations generates obstacles for China to comply, specifically to its obligation of
transparency. The enormous quantities of local regulations and the lack of desire to
create national standards make it more difficult to ensure the compliance on the
local level. China has determination to comply, but the compliance need more time
to be realized.
Apart from internal issues, the glaring issue for China is how to defend its actions in
front of the DSB. China lacks experience in utilizing case law, whereas the WTO
rulings evolve or are also not always consistent. How the adjudicatory body
interprets WTO agreements, to some degree, is beyond China’s control. The
adjudicatory body of the WTO adopts holistic interpretations, as will be described in
the following. Besides the General rules of treaty interpretation—Articles 31 and 32
of the Vienna Convention, many other means of interpretation are taken into
account and there is no specific hierarchy in them. The adjudicator body has a
preference for a case by case analysis, in comparison with most of the WTO
40
Members, China has obligations which are specific for China, therefore, there was no
precedent that can be referred to. For instance, before Raw Materials and Rare
Earths, it was not clear if such obligation can be justified by general exceptions
provided in GATT 1994. Besides, these different means of may result in different
interpretations.
China has established the State Council leading group on WTO Affairs and WTO
Research Centers in cities including Beijing, Shanghai and Shenzhen, supplying
numerous trainings on WTO-related issues to Chinese officials at central, provincial
and local levels and has made public propaganda of WTO basic information to cope
with the challenges it is facing. To sum it up, China has not been capable of being
fully compliant in recent years. However, China is determined to be compliant with
its obligations and improve its position in WTO and can further reform and make
efforts in the following areas.
4.2 Compliant Domestic Policy
A fact we have to admit is that the fundamental reason for China’s failure in
defending itself before the adjudicatory body is that the measures in issues de facto
violated WTO rules. For example, although China maintained that its export
restraints on rare earths and other raw materials were taken for environmental
purposes consistent with WTO rules, domestic consumption has not been similarly
restricted and this was found to be inconsistent to WTO rules.
China undertook in the Working Party Report to meet its WTO commitments
"through revising its existing laws and enacting new ones fully in compliance with the
WTO Agreement. 112 Incorporating WTO rules into China’s domestic law by
continuing to replace and enforce WTO inconsistent laws, regulations and other
relevant rules is the task China should continue to undertake. This incorporation, in
particular, should be further fulfilled on the local level. In general, China should
adopt a more proactive opening-up strategy with less trade barriers by exploring new
112 World Trade Organization Ministerial Conference, Report of the Working Party on the Accession of China,
WT/MIN (01)/3, 10 November 2001.
41
areas, improving its internal system, enhance the quality of the economy, forming a
new pattern of and promoting development, reform and innovation. Its effort should
focus on the approval of its MES and enhance transparency of domestic regulations
and trade policy.
4.2.1 Market Economy Status
As analyzed in previous chapter, given the volume of anti-dumping cases China has
been involved, if the MES of China has been acknowledged, the investigating
authority is obliged to use the domestic Chinese prices and cost. The analogue
country and substitute price will no longer be used in China’s anti-dumping cases,
unless the investigating authority can prove the domestic price cannot represent the
normal value. The burden of proof in respect to China’s economy status will shift. It
will greatly improve China’s position in WTO.
In Fasteners, the Appellate Body made clear that Section 15 of the Accession
Protocol relates only to the determination of normal value; it condemned the IT and
NME country-wide duty under the EU anti-dumping regime; and rejected the
presumption of singularity between the NME State and enterprises. Although the EU
will continue to have great administrative discretion over granting China MES and
China can otherwise only get rid of the NME label when the term mentioned in
Section 15(d) has expired, China should actively apply for new assessment and prove
it is qualified according to requirements of the EU.
Because of its unique history, China lacks experience with market economy and the
criteria for granting MES in the EU are purely technical: the prices and costs are made
without State interference, at market values; accounting records are in line with
international standards; bankruptcy and property laws do provide legal certainty and
stability and exchange rate conversions are carried out at market rate. 113
Nevertheless, lessening the intervention on the market by the government is
necessary in any case. One of the measures China is able to take and has started to
take is the reform of SOEs. The reform of SOE will not be easy task. China’s failure to 113 Ibid 89.
42
pass the 2008 assessment largely was because of the SOEs. Admitted widely,
governments can interfere market via SOEs. Regardless of the performance of SOEs
in recent years, they have play vital role in the rising of China’s economy and were
contributing for the astonishing speed at which a number of infrastructure projects
were completed across China. The reform is necessary perishing inherent interest.
SOEs have been the undisputed fulcrum of Chinese economic growth. Recent figures
suggest that the total asset value of central and local SOEs is about $16.33 trillion.114
China’s central authorities on September 14, 2015, have issued a guideline to deepen
reforms of SOEs: the latest move of the government to invigorate torpid SOEs.
According to the Guideline:
“China will modernize SOEs, enhance state assets management, promote
mixed ownership and prevent the erosion of state assets released by the
Communist Party of China Central Committee and the State Council.
Mixed-ownership reform appeared to be the most significant means to
improve the efficiency of SOEs. SOEs should bring in multiple types of
investors and the government should encourage them to go public. No
specific timetable will be set, but the government will promote it gradually,
the guideline said. In particular, SOEs will be divided into two categories,
for-profit entities and those dedicated to public welfare. The former will be
market-based and stick to commercial operations and should aim to increase
state-owned assets and boost the economy, while the latter will exist to
improve people’s quality of life and provide public goods and services.” 115
These reforms of SOEs will continue deepening privatization and reorganization and
therefore lessen interference by the government.
Furthermore, China can prove in the light of the rest of the EU’s requirements, that
China can establish independent audit systems and have professional accountants
that can verify the application of the rules to ensures adequate corporate
governance. Regarding the actual status of private property in Chinese law, especially
114 Financier Worldwide, 'China’s SOE reform' (Financier Worldwide, February 2015) <
http://www.financierworldwide.com/chinas-soe-reform/#.V15vh_l97X4> accessed July 2016. 115 Communist Party of China Central Committee and the State Council of China, Guideline to Deepen SOE
Reforms, 24 August 2015.
43
with regard to the intellectual property rights, the bankruptcy law, and competition
law, this can be proved by the national courts and tribunals. Clear implementation
and effective enforcement of the rules mentioned above also need to be provided by
China.
4.2.2 Enhance Transparency of Domestic Regulations and Trade Policy
The establishment and implementation of a coherent, effective and transparent set
of laws are WTO obligations of China and the EU’s condition of grating MES. The
difficulties in China’s compliance with WTO transparency requirements are deeply
embedded in its complex legislative structure and in the existence of under-regulated
informal laws, as well as in the country’s distinct legal culture.116 Non-transparency
is specifically caused by problems within the Chinese formal legislative system in
general.
The relationship between judicial, prosecutorial and administrative bodies is complex:
it is neither parallel nor subject to mutual restriction and supervision. Defined by the
Legislation Law of the People's Republic of China,117 the hierarchy of regulations are
the Constitution of the People's Republic of China, National laws (which are issued by
the National People's Congress), Administrative regulations (which are issued by the
State Council), Local decrees, (which are issued by local People's Congresses) and
Administrative and local rules (which are issued by an administrative agency or by a
local People's Government). China has 25 ministries and commissions, 34 provinces,
around 300 hundred Prefecture-level cities.118 In reality, it is hard to coordinate and
supervise local legislation. While the transparency obligation mostly is only binding
on the federal/central level, all of China’s local laws and regulations are also
subjected to WTO rules. The difficulty of China to apply and enforce the compliant
regulations on both central level and local level is higher than that experienced by
many other WTO Members taking into account the enormous amount of these
regulations.
116 Ibid 111, 25. 117 Can be found on http://www.gov.cn/english/laws/2005-08/20/content_29724.htm. 118 The amount of Prefecture-level cities is fluctuating.
44
The aforementioned hierarchy has also helped generate and promulgate local
protectionism. Both the local legislative and administrative governmental bodies
have the power to issue legislative documents, and the local governments consider
regulation as a means to promote local economic development. For the reason of
long-term absence of a “rule of law”, exacerbated by legal culture, local legislators
and government officials possess a lack of respect for international law. Additionally,
“governance is pursued by a sovereign political authority that remains largely
immune to challenge”119: local legislators and government officials are not held
responsible for the decisions they made and boldly interfere the local judicial system.
The “impediments to judicial independence are rooted in social and political
conditions in China, making progress in these areas can only be achieved over
time.”120 For these reasons, provincial-level regulations inconsistent to national laws
and regulations often amplify the effect of inconsistent national laws and regulations.
It has to be ensured that consistent rules are transparent not only on central level
but also on local and provisional level. At the moment this is a tough task China is
facing.
The publication requirement might be the easiest one to start with. The Legislation
Law of the People's Republic of China standardizes the basic transparency
requirements for rule-making in Articles 52 and 62. They require, upon promulgation,
laws enacted by the National People’s Congress and administrative regulations of the
State Council must be published in a timely manner in the Bulletin of the National
People’s Congress Standing Committee, the State Council Bulletin, and in
nationally-circulated newspapers. Local rules are similarly required to publish in a
timely manner. No time limit for publication after promulgation has been set in these
requirements.121 Setting time limit for publication is the least improvement China
can make in next amendment.
119 Pitman B. Potter, ' Globalization and Economic Regulation in China: Selective Adaptation of Globalized Norms
and Practices' [2003] Washington University Global Studies Law Review. 120 Karen Halversom, 'China's WTO Accession: Economic, Legal and Political Implications' [2004] Boston
College International Comparative Law Review 319, 359. 121 Legislation Law of the People's Republic of China [2000], Articles 52 and 62.
45
Besides, establishment of a department which is empowered to coordinate the
publication and translation of the new regulations might be a solution to complex
legislative structure. If the regulations on different levels can firstly be reported to
this department, and further published and translated by this department, the
inconsistent practice on local level can be effectively avoided.
4.3 Defense Strategy
For the long time, China has been receiving the assistance of foreign private counsel.
Nonetheless, the China team has gained experience and become more knowledge
with the rules, jurisprudence and techniques of dispute settlement system and
started settling disputes independently. The adjudicator Body of WTO adopts the
Holistic way to interpret WTO rules based on General rules of treaty
interpretation—Articles 31 and 32 of the Vienna Convention, the text and the
context of the rules, domestic law and legislation history, legitimate expectation,
objective and purpose, principle of effectiveness, subsequent practice, relevant rules
of international law and so on has to be taken into consideration. These factors
mostly have been concerned in the EU-China disputes or other disputes China has
been involved in. China openly admitted in Rare Earths that its export restraints are
aimed at promoting domestic downstream industries, although its main argument
was that the development of downstream industries would help to improve the
environment in the long run.122 The fact and the evidences it raised did not support
its argument. China can improve its defense strategy by making more comprehensive
argument supported by related and persuasive evidence.
In contrast to the Panel and the Appellate Body, China has placed value too much on
the objectives of the measures in question instead of the inherent effects. If a
measure is de facto violation, imposing it with bone fide is not justification will be
adopted by WTO. From Auto Parts to Rare Earths and to Fasteners, China appears to
have followed a pattern with respect to WTO dispute settlement. In Auto parts,
China’s strategy directly serves its national interest and goal. Currently, it has started
looking support from WTO jurisprudence. For a country without case law background, 122 Ibid 37, para.7.514.
46
it is a great improvement. In the future, China should keep constantly making
arguments with considerations of WTO’s rules of interpretation. “It is important to
analysis the WTO ruling relating to explanation of some clauses, which can help
China to improve litigation strategy.” 123 Furthermore, more case studies are
necessary especially for country without jurisprudence tradition like China.
4.4 Amendment of the WTO Agreement and Accession Protocol
As a deviation from the original members, which only have accepted the Marrakesh
Agreement and the Multilateral Trade Agreements and for which Schedules of
Concessions and Commitments are annexed to GATT 1994 and for which Schedules
of Specific Commitments are annexed to GATS, China and other accessed members
are further governed by their accessions protocol which contain many specific
obligations, including WTO-plus obligations. China is not the only Member bearing
WTO-plus obligations. The Members also having obligations akin to WTO-plus
commitments are Mongolia, Latvia, Saudi Arabia and so on. The duty to eliminate
duties on export is also a requirement in the Accession Protocol and Working Party
Report of these Member States. In the current regime of WTO, the discipline on
export tariffs is absent. “While GATT contains a detailed framework for binding
import tariffs and for protecting the bindings from erosion, it sets out no specific
obligation to bind export tariffs.”124 This absence leads to China made specific
commitment on export duties under Accession Protocol.
Having learnt lessons from Raw Materials and Rare Earths, Russia (accessed in 2012)
has explicitly reserved its rights to invoke the exceptions in GATT 1994 with respect
to its export duty. Up until now, Russia is the only acceding country to have
successfully negotiated its export duty commitments within the GATT framework,
thereby avoiding the issues arising from the stand-alone commitments in China’s
Accession Protocol.125 According to the Working Party Report on Russia’s accession,
Russia implements its tariff concessions and commitments contained in Part V of its
123 Qingpo Wei, 'Trade Policy Arrangements and Litigation Strategy under WTO — From the view of China-Auto
Parts and Raw-Materials' [2013] Hebei Science, 1. 124 Julia Ya Qin, 'Reforming WTO Discipline on Export Duties: Sovereignty over Natural Resources, Economic
Development and Environmental Protection' [2012] Wayne State University Law School Research Paper, 4. 125 Ibid 124.
47
schedule which begins with this statement:
“The Russian Federation undertakes not to increase export duties, or to
reduce or to eliminate them, in accordance with the following schedule, and
not to reintroduce or increase them beyond the levels indicated in this
schedule, except in accordance with the provisions with GATT 1994.”126
On the contrary, when China was accessing to the WTO, it was not certain whether or
not China had also given up the rights to adopt export restrictions by invoking
exceptions articles when it made commitments on export duty. China has tried to
rebut the Raw Materials ruling in Rare Earths by making a “subject matters”
argument which failed to persuade the Panel and the Appellate Body. If this situation
cannot be changed by reverting the ruling, China can only adopt non-tariff and
non-quota measure to avoid WTO constraints. However, finding and imposing such
“WTO consistent measure” might be a test for China. As a result of the lax
environmental policy combined with low-cost labor, China’s rare earths are
extraordinarily cheap. While China drives out competition from other countries for
the price advantage, China now supplies more than 95% of global demand, even
though it has only 30% of the world’s known reserves.127 In very recent years, global
demand started soaring for natural resources128 which is going to worsen China’s
situation. In this case, it is more unfair that only China and minor members have
been imposed such obligations.
These rigid obligations, without a possibility to deviate, imposed on the selected
acceding Members (which most are developing countries)129 reflect a strong bias
against theses selected Members. The demand of resources is ascending makes the
relative shortage of resources are more evident. In 2010, there were about half of
126 The Report of Working Party on the Accession of the Russian Federation to the World Trade Organization,
WT/ACC/RUS/70 (17 November 2011), para.638.
127 Ibid 124, 26. Also see 'Rare earths sold at the price of dirt? China should insist on export control over rare
earths' (Zhongxinwang, 7 July 2011) < http://edu.chinanews.com/cj/2011/07- 07/3163654.shtml>. 128 World Trade Organization, World Trade Report 2010: Trade in Natural Resources. 129 WTO, 'Protocols of accession for new members since 1995, including commitments in goods and services'
(WTO, 30 November 2015) < https://www.wto.org/english/thewto_e/acc_e/completeacc_e.htm> accessed July
2016.
48
the WTO members (65 of 128) had imposed export duties the number of countries
applying these duties over the period 2003 to 2009 was higher than in the from 1997
to 2002. 130 Under this background, only minor members are constrained by
exportation duties while the major members can freely restrain exportation has
consisted indeed unfair. One of the fundamental principles is Non-Discrimination
Principle, only imposing these rigid obligations to limited countries is not reconciled
to this principle. A thorough way to get rid of this unfair treatment is by amending
the Accession Protocol and the current WTO disciplines.
Theoretically, the WTO Agreements and Accession Protocol can be amended on the
consensus of all parties on the basis of Article X of the Marrakesh Agreement
Establishing the World Trade Organization (“Marrakesh Agreement”). As the
Accession Protocol of China and the WTO agreement are connected by a bridge:
Paragraph 1.2 of China’s Accession Protocol provides that the Protocol is an integral
part of the WTO Agreement which has repeatedly been confirmed by the adjudicator
body. According to Article X of the Marrakesh Agreement, “[a]ny Member of the
WTO may initiate a proposal to amend the provisions of this Agreement or the
Multilateral Trade Agreements in Annex 1 by submitting such proposal to the
Ministerial Conference”. As an integrated part of the Marrakesh Agreement, the
Accession Protocol shall also be amended following the requirements and procedure
provided for in this Article. In practice, none of the Accession Protocols have been
amended. China, as the first to face the negative legal consequences of “reckless”
commitments, should have the incentive to amend its accession protocol, and
furthermore reform the WTO system.
Conclusion
“As a result of China’s fast-growing export volumes, product diversification, and an
expanding domestic market, China’s economic development has been accompanied
by various trade frictions with its major traditional trading partners, namely the US
and the EU, as well as with newer partners from the developing country group.”131
130 Ibid 51. 131 Wenhua Ji and Cui Huang, 'China’s Experience in Dealing with WTO Dispute Settlement: A Chinese
49
While challenge to solve these disputes amicably will have to be taken by China,
China is in a new era full of opportunities. China can adapt itself by reforming and
perfecting its role in WTO.
As one of the biggest trade-related international organizations, the WTO provides a
major dispute settlement forum for the EU and China. After 15 years, China is no
longer only an acceding member without any experience in dealing with WTO
dispute. From a defendant to complainant, it is very possible that China will continue
to play the role of a leading actor on the WTO dispute settlement stage and even in
rule amending stage. From WTO disputes between China and the EU, China can see
clearly what are the obstacles in its way to perfection. China’s hands are tied by its
WTO-plus obligation, NME status and the unclear status of China’s Accession
Protocol. Beyond the effort China will take related to these obstacles, China may not
only be satisfied with being a qualified member only by complying with its obligation.
To defend its national interest in trade, China will more actively participant in the
new round negotiation and promote new trade discipline.
The friction with the EU will remain, even in the new area in the future, and the
current WTO system should also evolve. Managing a high-profile trade dispute
against a competitive component as the EU is a very delicate and complex process.
China starts utilizing the WTO rules and shall successfully create remedies through
authorized retaliation against the EU. The progress China has made has been
examined and we have also observed the improvements China should make. Thus its
determination convinces that it will achieve its improvement in WTO system sooner
or later.
Perspective' [2011] Journal of World Trade, 2.
50
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54
Annex 1：
The Overview of EU-China WTO disputes from 2001 to 2016132
132 WTO, 'Dispute Settlement: Find disputes cases' (WTO 2016) <
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ue&thirdparty1=false&thirdparty2=false#results> accessed July 2016.
Case
Number
Complaint Name Time Agreement cited Result
DS339 EU China—
Measure
s
Affecting
Imports
of
Automo
bile Parts
30 Mar
ch 200
6
GATT 1994:
Art. II:1, III:1, III:2,
III:4,III:5, XI, XIII:1
, XX(d)
Subsidies and
Countervailing
Measures: Art. 3
Trade-Related
Investment
Measures (TRIM):
Art. 2.1, 2.2
Protocol of
Accession: Part I,
para. 1.2, Part I,
para. 7.2, Part I,
para. 7.3
China’s 25%
“charge” placed
on all imported
auto parts
characterised as
complete vehicles
was labelled an
“internal charge”.
This “charge” was
in violation of
articles III:2 and
III:4 as it was only
applied to
imported parts
and not domestic
parts and placed
imported parts at
a disadvantage
compared to
domestic auto
parts. China’s
55
measures not
justifiable under
article XX(d):
necessity to
secure
compliance with
China’s Schedule
not proven.
DS372 EU China—
Measure
s
Affecting
Financial
Informati
on
Services
and
Foreign
Financial
Informati
on
Suppliers
3 Marc
h 2008
Services (GATS):
Art. XVI:2(a),XVI:2
(e), XVII, XVIII
Intellectual
Property (TRIPS):
Art.39.2
China and the
European
Communities had
reached an
agreement in
relation to this
dispute in the
form of a
Memorandum of
Understanding.
DS395 EU China
— Meas
ures
Related
to the
Exportati
on of
23 Jun
e 2009
GATT 1994:
Art. VIII, VIII:1, VII
I:4, X, X:1,X:3, XI,
XI:1, XI:2 XX
Protocol of
Accession: Part I,
para. 1.2, Part I,
Export restraints
by China were
deemed not in
conformity with
its
WTO-obligations
ex paragraph 11.3
56
Various
Raw
Material
s
para. 5.1, Part I,
para. 5.2, Part I,
para. 8.2, Part I,
para. 11.3,
Protocol of
Accession. The
justification
clause ex article
XX GATT 1994
was considered
not applicable.
Justifiable
“Temporary
application” with
regard to China’s
Bauxite export
quotas to
“prevent or
relieve a critical
shortage” not
demonstrated by
China (article
XI:2(a)).
DS397 China Europea
n
Commun
ities—De
finitive
Anti-Du
mping
Measure
s on
Certain
31 July
2009
Anti-dumping
Agreement
(hereafter: ADA)
(Article VI of GATT
1994):
Art. 1,2, 2.1, 2.2,
2.4, 2.6, 3, 3.1, 3.
2, 3.4, 4, 3.5, 4.1,
5, 5.4, 6, 6.1, 6.2,
6.4, 6.5, 6.10, 9, 9
Article 9(5) of the
EU’s Basic
Anti-Dumping
Regulation
deemed
inconsistent with
articles 6.10 and
9.2 ADA: these
articles only allow
the imposition of
57
Iron or
Steel
Fastener
s from
China
.2, 9.3,9.4, 12.2.2,
17.6, 18.4
GATT 1994:
Art. I, I:1, VI:1, X:3
(a)
Agreement
Establishing the
World Trade
Organization:
Art. XVI:4
Protocol of
Accession,
individual
anti-dumping
duties to
exporters or
producers.
Specific
exceptions can be
made to this rule
in agreements.
The country-wide
anti-dumping
measures
imposed by the
EU on China,
which were
deemed
inconsistent with
the ADA, are not
covered and thus
justified by a
specific exception
in any agreement.
Furthermore, the
EU defined the
phrase “domestic
industry” as in
article 4.1. ADA
inconsistently by
excluding in the
58
definition
producers
“whose collective
output of the
products
constitutes a
major proportion
of the total
domestic
production”
within the
meaning of
article 4.1.”. The
EU did not violate
article 2.4. by not
making
adjustments
because of
physical and
quality
differences as
argued by China.
DS405 China Europea
n
Union—
Anti-Du
mping
Measure
s on
4 Febr
uary 20
10
Anti-dumping
(Article VI of GATT
1994):
Art.1, 2.1, 2.2.2, 2
.4, 2.6, 3.1, 3.2, 3.
3, 3.4,3.5, 5.3, 6.1
.1, 6.1.2, 6.2, 6.4,
The Panel found
Article 9(5) of the
Basic AD
Regulation
inconsistent with
the European
Union's WTO
59
Certain
Footwea
r from
China
6.5, 6.5.1,6.5.2, 6.
8, 6.9, 6.10, 6.10.
2, 9, 9.1, 17.6,9.2,
9.3, 9.4, 11.3, 12.
2.2, 17.6, 18.1, 18
.4
GATT 1994:
Art. I, I:1, VI:1, XVI
:4, X:3(a)
Agreement
Establishing the
World Trade
Organization:
Art. XVI:4
Protocol of
Accession,
obligations, and
that the
European Union
had acted
inconsistently
with the AD
Agreement in
some aspects of
the original
investigation and
expiry review, but
rejected the bulk
of China's specific
claims of
violation in
connection with
the original
investigation and
expiry review, and
resulting
Definitive and
Review
Regulations.
DS407 EU China—P
rovisiona
l
Anti-Du
mping
Duties
7 May
2010
Anti-dumping
(Article VI of GATT
1994):
Art.2.4, 2.6, 3.1, 3
.2, 3.4, 3.5, 6.1, 6.
2, 6.4,6.5, 6.5.1, 6
No result as of
yet. The dispute is
still in the
consultations
stage.
60
on
Certain
Iron and
Steel
Fastener
s from
the
Europea
n Union
.9, 12.2.1, 12.2.2
GATT 1994:
Art. VI:1, VI:6
DS425 EU China—
Definitiv
e
Anti-Du
mping
Duties
on X-Ray
Security
Inspectio
n
Equipme
nt from
the
Europea
n Union
25 July
2011
Anti-dumping
(Article VI of GATT
1994):
Art.2.4, 2.6, 3.1, 3
.2, 3.4, 3.5, 6.1, 6.
2, 6.4,6.5, 6.5.1, 6
.9, 12.2.1, 12.2.2
GATT 1994:
Art. VI:1, VI:6
The Panel
found China
violated first and
second sentence
in article 12.2.2 of
the Anti-Dumping
Agreement, and
rejected China’s
other claims.
DS432 EU China—
Measure
s Related
to the
Exportati
13 Mar
ch 201
2
GATT 1994:
Art. I, III:1, III:4, III
:5, XI, XX
Subsidies and
Countervailing
China’s export
duties on rare
earths, tungsten
and molybdenum
was deemed
61
on of
Rare
Earths,
Tungsten
and
Molybde
num
Measures:
Art. 1.1, 3.1(b), 3.
2
Marrakesh
Agreement;
Protocol of
Accession of
China, par. 11.3;
Trade-Related
Investment
Measures (TRIM):
Art. 2.1, 2.2
inconsistent with
China’s Protocol
of Accession
(paragraph 11.3).
Referring back to
dispute number
DS395, it was
furthermore
determined that
the exception
clause of article
XX GATT was not
applicable with
regard to China’s
obligations ex
paragraph 11.3.
China’s export
quotas on rare
earths, tungsten
and molybdenum
were deemed
inconsistent with
article XI GATT
and not justified
under article
XX(g) GATT by the
panel. Claims
made by China
against the
62
justification of
this decision by
the panel were
refuted by the
Appellate Body.
DS452 China Europea
n Union
and
Certain
Member
States
— Certai
n
Measure
s
Affecting
the
Renewab
le Energy
Generati
on
Sector
5 Nove
mber 2
012
GATT 1994:
Art. I, III:1, III:4, III
:5
Subsidies and
Countervailing
Measures:
Art. 1.1, 3.1(b), 3.
2
Trade-Related
Investment
Measures (TRIM):
Art. 2.1, 2.2
No result as of
yet. The dispute is
still in the
consultations
stage.
DS460 EU China—
Measure
s
Imposing
Anti-Du
mping
Duties
13 Jun
e 2013
Anti-dumping
Agreement/ADA
(Article VI of GATT
1994):
Art. 1,2.2, 2.2.2.,
2.4, 2.4.2, 3.1, 3.2
, 3.4, 3.5, 6.4, 6.5,
China acted
inconsistently to
article 2.2.2. ADA
for failing to
determine selling,
general and
administrative
63
on
High-Per
formanc
e
Stainless
Steel
Seamless
Tubes
(“HP-SSS
T”) from
the
Europea
n Union
6.5.1, 6.7, 6.9, 7.4
, 12.2, 12.2.2, Ann
ex I, Annex II
GATT 1994: Art. VI
costs based on
actual data
related to
production and
sales. China also
violated article
6.7 and
paragraph 7 of
Annex 1 to the
ADA for the
refusal of a
request to correct
certain
information.
Furthermore, an
inconsistency
with regard to
article 6.5 as to
confidential
information was
determined as
China had not
objectively
assessed the
arguments of
“good cause” (for
confidentiality)
brought forward
by petitioners.
64
Finally, China also
acted
inconsistently
with regard to
articles 3.1, 3.2,
3.4 and 3.5, for
failing to make a
proper price
effects, causation
and impact
analysis.
DS492 China Europea
n
Union—
Measure
s
Affecting
Tariff
Concessi
ons on
Certain
Poultry
Meat
Products
8 April
2015
GATT 1994:
Art. I, I:1, II, II:1, II
:2, XIII,XIII:1, XIII:2
, XXVIII
Panel composed,
but no result as
of yet.