United States — Countervailing Duty Measures on Certain Products from China DISPUTE DS437 Joanna Walker and Michael Williamson March 3, 2015 Dr. Malawer, ITRN 603

Overview: DS 437 Who? China (Complainant) versus United States What? DSU Articles 4, 6, 16, 17; Article XXIII: 1 GATT 1994; and SCM Article 30 Consultation Preliminary Ruling Panel Recommendation China and US Appeals Appellate Body Recommendation AB Report Adopted by DSB Why? China was not happy with the conduct of 22 US Dept of Commerce countervailing duty investigations; challenges consistency and the definition of “public body” When? May 25, 2012 to January 16, 2015

Business and Political Context ●Public Body: Are state-owned enterprises a government entity or a commercial company? ●United States: Most extensive case in history ●China: Claiming products identified in the case are worth over $7 Billion dollars in export sales

History of the Case: Timeline Date(s)EventAuthority May 25, 2012 China requests consultations with the United StatesArticle 4, DSU, Article XXIII: 1, GATT 1994, and Article 30, SCM Agreement Jun 25 and Jul Consultations take place between US and China to reach a mutually agreed to solution; consultations fail to resolve the dispute Aug 20, 2012 China requests the establishment of a panelArticle 6, DSU Sep 28, 2012 DSB establishes panel in accordance with China's requestArticle 6, DSU Dec 14, 2012 US requests Panel to review and provide preliminary ruling concerning the consistency of China's request; Article 6.2, DSU Feb 8, 2013 Panel issues preliminary ruling, concluding China's request was consistent with Article 6.2 of the DSU Article 6.2, DSU

Contested Issue China’s Main Claims: ●Chinese state-owned suppliers aren’t public bodies. ●The alleged subsidies weren’t only made available to Chinese producers ●These subsidies didn’t solely benefit Chinese producers.

Main Agreements and Provisions When China filed its consultation request, it claimed the US violated: ●Uruguay Round’s Agreement on Subsidies and Countervailing Measures ●GATT’s Article VI (Anti-dumping and Countervailing Duties) ●GATT’s Article XXIII (Nullification or Impairment) ●China’s Protocol of Accession

Additional Chinese Claim ●Beijing said US based its subsidy findings on faulty data. ●Specifically, China said the USDOC illegally used “adverse facts available.”

Initial US Reaction ●Spokeswoman for U.S. Trade Representative defended the USDOC findings. ●Section 421 Safeguards

Included Products ●22 Investigations, 17 of which were Pursued ●Thermal Paper, Pressure Pipe, Line Pipe, Citric Acid, Lawn Groomers, Kitchen Shelving, Oil Country Tubular Goods, Wire Stand, Steel Grating, Wire Decking, Magnesia Bricks, Seamless Pipe, Print Graphics, Drill Pipe, Aluminum Extrusions, Wood Flooring, Steel Wheels, Steel Wire, Steel Cylinders, Solar Panels, Wind Towers, Steel Sinks

Claims in DS347 ●Panel reviewed 10 claims pertaining to the 17 products ●Subsidies and Countervailing Measures Agreement Articles: o Article 1.1 (a)(1) and 1.1(b), Definition of a Subsidy o Article 2.1, 2.2, and 2.4, Specificity o Article 11, Initiation and Subsequent Investigation o Article 12.7, Evidence o Article 14, Calculation of the Amount of a Subsidy in Terms of the Benefits to the Recipient

Selected Claims In Detail

Claim: Whether the US DOC's findings that certain SOEs were public bodies are inconsistent Article 1.1 (a)(1) of the SCM Agreement China: ●US acted inconsistently w/ Article 1.1(a)(1) of SCM Agreement; ●References key points from previous Appellate Body Rulings USA: ●Misinterpretation of the term "public body" in Article 1.1(a)1, SCM Agreement; ●Relies on dictionary definitions of "public" and "body"; 3rd Party Participants: ●Australia; Brazil; Canada; EU; India; Japan; Korea; Norway; Saudi Arabia; Turkey

Claim: Whether the uses of "adverse facts available" by the USDOC are inconsistent Article 12.7 of the SCM Agreement: China: ●US determinations lack factual foundation; objects to US claim on utilizing "adverse facts available"; ●References key points from former case USA: ●China failed to establish a prima facie case; ●China mischaracterized the way US uses “facts available” 3rd Party Participants: ●European Union; Canada; India

Panel Recommendations ●3 of the 10 claims upheld ●2 Cases Previously Discussed: o Upholds “public body” claim: USDOC acted inconsistently o Rejects “adverse facts available” claim: China failed to prove US DOC acted inconsistently

Appeals to the Panel: Summary China: ●Filed an appeal on Aug 22, 2014 ●Included most issues that the Panel did not rule in its favor USA: ●Filed an appeal on Aug 27, 2014 ●Main issue: Consistency of China’s panel request within Article 6.2, DSU The United States did NOT appeal: ●Panel’s findings concerning the US DOC inconsistency of the term “rebuttable presumption” in determining what was classified as a “public body” (Article 1.1(a)(1), SCM Agreement) ●Panel’s findings concerning US DOC inconsistency of 14 countervailing duty investigations (Article 1.1(a)(1), SCM Agreement) ●Panel’s findings concerning the US DOC’s treatment of certain export restraints in two of the identified investigations

Appellate Body Recommendations ●Of the 7 claims appealed, 5 were reversed ●AB and Panel recommends US to remedy inconsistencies

Implementation of Sanctions ●Not applicable ●DSB Adopted report on Jan 16, 2015 ●Agreement between US and China: o Remedy Inconsistencies by July 22, 2015

Observations and Overview ●Demonstrates China’s desire to be a player in “green” energy marketplace

Additional Observations ●Demonstrates shifting Chinese economy ●High third party interest ●Highlights some mistrust of the U.S.? ●Further shows China’s willingness to participate in the world trade system

Questions?

Sources Works Consulted: ●Brian Baschuk, “U.S. Must Align Chinese CVD Measures With World Trade Rules by This Summer,” Bloomberg BNA, Feb. 25, ●Stephanie Cohen, “WTO Dispute Panel Upholds China's Claims That Commerce Investigations ‘Inconsistent,’” Bloomberg BNA, July 15, ●Bill Donahue, “China Wants Full WTO Case Over US Countervailing Duties,” Law 360, Aug. 23, 2012, ●Brian Flood, “China Appeals Mixed WTO Ruling Against U.S. Countervailing Duties,” Bloomberg BNA, Aug. 25, ●Brian Flood, “China Wins Appeal at WTO Against U.S. CVD Investigations,” Bloomberg BNA, Dec. 19, ●Stephanie Henry, “China Files WTO Case against US over Countervailing Duties Applied to Chinese Products,” The US-China Business Council, chinese. chinese ●“United States — Countervailing Duty Measures on Certain Products from China,” World Trade Organization, Feb. 6, 2015, ●Wayne M. Morrison, “China-U.S. Trade Issues,” Congressional Research Service, Dec. 5, 2014, ●Daniel Pruzin, “China Initiates WTO Dispute Proceedings Over U.S. Duties on Solar, Wind Products,” Bloomberg BNA, May 29, ●“USTR Requests Public Comment on China's Request for WTO Consultations,” Bloomberg BNA, June 22, ●“W.T.O. Rules Against U.S. on Tariffs Placed on Chinese Products,” Reuters, July 15, 2014, ●Ka Zeng, “China, America and the WTO,” The Diplomat, Feb. 7, 2007,

Sources Images: ●Slide 1: ●Slide 3: To-Dominate-World-1728x800_c.jpghttp://kingworldnews.com/wp-content/uploads/2014/12/Global-Gold-Rush-To-Intensify-As-Currency-Wars-Rage-China-Moves- To-Dominate-World-1728x800_c.jpg ●Slide 6: ●Slide 8: g?itok=y_QoHSiV g?itok=y_QoHSiV ●Slide 9: 162_The_American_flag_flies_prominently_during_the_World_Patriot_Tour_performance_at_Hickam_Air_Force_Base.jpg; 162_The_American_flag_flies_prominently_during_the_World_Patriot_Tour_performance_at_Hickam_Air_Force_Base.jpg ●Slide 10: ; ●Slide 12: a21d-a0ee436c904a%257D.gifhttp://3.bp.blogspot.com/_Cxj2tgSj4kU/TP0Wvb-QKhI/AAAAAAAAENo/qKei_JHAx3c/s1600/%257B3c8b9d96-94b a21d-a0ee436c904a%257D.gif ●Slide 17: ●Slide 18: ●Slide 19 :

10 Claims Included in DS347 (Appendix) To determine if: 1.Preliminary determinations in Wind Towers and Steel Sinks are within the Panel's terms of reference 2.The US DOC's findings that certain SOEs were public bodies are inconsistent with Article 1.1 (a)(1), SCM Agreement 3.The US DOC's "rebuttable presumption" is inconsistent "as such" with Article 1.1(a)(1) of the SCM Agreement 4.The US DOC's initiations of investigations are inconsistent with Article 11 of the SCM Agreement due to insufficient evidence of a financial contribution (Articles 11.2 and 11.3 of the SCM Agreement) 5.The USDOC's determinations that SOEs provided inputs for less than adequate remuneration are inconsistent, as applied, with Articles 1.1(b) and 14(d) of the SCM Agreement

To determine if: 6.The US DOC's determinations regarding the specificity of alleged input subsidies are inconsistent with Articles 2.1 and 2.4 of the SCM Agreement 7.The US DOC's initiations of investigations are inconsistent with Article 11 of the SCM Agreement due to insufficient evidence of specificity 8.The uses of "adverse facts available" by the US DOC are inconsistent with Article 12.7 of the SCM Agreement 9.The US DOC's findings of regional specificity are inconsistent with Articles 2.2 and 2.4 of the SCM Agreement 10.The US DOC's treatment of certain export restraints in Magnesia Bricks and Seamless Pipe is inconsistent with the SCM Agreement (Articles 11.2 and 11.3) 10 Claims Included in DS347 (Appendix)

Panel Recommendations: Summary (Appendix) 1.Upholds US DOC Claim: Not within Panel's terms of reference 2.Upholds China's Claim: In 12 countervailing duty investigations, the US DOC acted inconsistently; 3.Upholds China's claim: The US DOC acted inconsistently with Article 1.1(a)(1) 4.Panel rejects China's claim: China has failed to establish that the USDOC acted inconsistently IAW Article 11, SCM Agreement 5.Panel rejects China's claim: China has failed to establish that the US DOC acted inconsistently IAW Article 14(d) or Article 1.1(b), SCM Agreement 6.Panel rules (upholds/ rejects) specific arguments 7.Panel rejects China's claim: China has failed to establish that the US DOC acted inconsistently IAW Article 11, SCM Agreement 8.Panel rejects China's claim: China has failed to establish that the US DOC acted inconsistently IAW Article 12.7, SCM Agreement; 9.Panel rules (upholds/ rejects) specific arguments 10.Upholds China's claim: US DOC initiation of 2 countervailing duty investigations in respect of certain export restraints is inconsistent w/ Article 11.3; the US acted inconsistently

Appellate Body Recommendations: Summary (Appendix) 1.Upholds Panel’s finding that claims under 12.7 are within the Panel’s terms of reference; 2.Reverses Panel’s findings which upholds US DOC rejection of private prices as possible benchmarks 3.Reverses Panel’s findings that China failed to establish that the US DOC acted inconsistently, IAW Article 14(d) or Article 1.1(b), SCM Agreement 4.Upholds Panel’s finding that the US DOC did not act inconsistently under Article 2.1, SCM 5.Reverses Panel’s finding that China failed to establish that US DOC acted inconsistently with the obligations IAW Article 2.1 by failing to identify a “subsidy programme” 6.Reverses Panel’s finding that China failed to establish that US DOC acted inconsistently with the obligations IAW Article 2.1 by failing to identify a “granting authority” 7.Reverses Panel’s finding that China failed to establish that US DOC acted inconsistently with the obligations IAW Article 12.7, SCM