Respecting the WTO decision sends a positive signal for maintaining the authority, efficiency, and rationality of the multilateral economic and trading system.
A forum on the 20th anniversary of China’s participation in the WTO dispute settlement mechanism is held at the University of International Business and Economics in Beijing on December 6, 2021.
On January 26, 2022, the Arbitrator of the World Trade Organization (WTO) issued a ruling on the trade dispute between China and the U.S. regarding countervailing measures; in accordance with Article 22 of the WTO Dispute Settlement Understanding, China may request authorization from the Dispute Settlement Body (DSB) of the WTO to suspend concessions or other obligations at a level not exceeding US $645.121 million per year. Although this amount represents only about 25 percent of China’s claim (US $2.4 billion), the WTO decision confirms that the interests of Chinese companies have been harmed due to the violation by the U.S. of its commitments to the WTO, and sends a positive signal for maintaining the authority, efficiency, and rationality of the multilateral economic and trading system.
On May 25, 2012, China requested WTO consultations with the United States regarding the imposition of countervailing duty measures by the U.S. on certain products from China. China challenged various aspects of certain identified countervailing duty investigations, including their opening, conduct, and the determinations that led to the imposition of countervailing duties. China also challenged the U.S. presumption that majority government ownership is sufficient to treat an enterprise as a “public body.” China’s action at the WTO is not only a response to the unfair treatment meted out to the companies and products involved in the case, it is also aimed at the process of developing relevant rules. In its decision, the WTO found that the American approach to the determination of “public bodies” was inconsistent with WTO rules.
Conversely, if China did not challenge the increased use of countervailing measures by the U.S. and did not oblige it to respect the obligations to which it committed when it joined the WTO, this could have significant repercussions on a broader range of business activities in the future. Although this dispute concerns China and the U.S. only, when the WTO arbitration panel was established in September 2012, Australia, Brazil, Canada, the EU, India, Japan, the Republic of Korea, Norway, Russia, Turkey, and Vietnam reserved the right to participate as third parties in the dispute settlement process due to its significance. Saudi Arabia also joined later.
In April 2013, the arbitration panel informed the WTO that the final report was due in January 2014. However, due to the complexity of the issue, the report was not submitted until July 2014. Subsequently, China and the U.S. both appealed and the WTO Appellate Body completed its report at the end of 2014. As the WTO dispute settlement mechanism is a system of two-tiered final review, Appellate Body rulings must be implemented by both parties. There were still nearly five years before the shutdown of the Appellate Body on December 11, 2019.
In February 2015, the U.S. notified the WTO that it intended to respect and implement the Appellate Body ruling, but needed a reasonable period of time to do so. The Director General of the WTO appointed the arbitrator to determine the deadline at the request of the Chinese side, and the arbitrator decided that the reasonable period of time would expire on April 1, 2016. But the American side failed to implement the decision in time. Therefore, in July 2016, China requested the establishment of a compliance panel under WTO rules, which completed and released its report in March 2018. In April, the U.S. requested an explanation of certain legal issues covered in this report. In October 2019, China requested the authorization of the DSB to suspend concessions and other obligations on the grounds that the U.S. had failed to comply with the DSB’s recommendations and rulings within the agreed reasonable period of time, to which the U.S. lodged an objection. Overall, this Sino-U.S. trade dispute caused by the improper countervailing measures of the U.S. has been the subject of two rounds of ruling and two rounds of arbitration, a complex process that has taken a decade. Above all, the Appellate Body was paralyzed when the U.S. insisted on obstructing the judges, casting a shadow over the effective functioning of the multilateral economic and trading system.
Since joining the WTO in 2001, China has always been a supporter and practitioner of the WTO dispute settlement mechanism. As of December 10, 2021, China had issued 22 lawsuits, been sued 47 times, and participated as a third party in 190 cases, making it one of the largest users of the dispute settlement mechanism. As trade continues to grow, it is no surprise that the increasingly closer and complex trade ties between China and global economies have given rise to contradictions and conflicts. However, China has not shunned the multilateral economic and trading system simply because it has been subjected to trade remedies such as anti-dumping, countervailing, and special safeguard measures from various parties for over 20 years. On the contrary, it has been honoring its commitments made upon joining the WTO and exploring with the parties concerned effective ways and rules to achieve the fundamental concepts and objectives of the WTO.
Of course, the multilateral economic and trade mechanism is far from perfect. For the WTO, created in 1995, the scale and dynamism of trade activities are no longer what they were before. As new business models and content appear, and the institutional environment is constantly changing, the international economic and trading rules must be improved through dialogue and consultation. Certainly, questions have always been raised as to whether the dispute settlement mechanism adjudicates beyond its mandate, but at the same time, it is not desirable to take direct measures such as those taken by the U.S. to make the mechanism ineffective. Within the framework of the global economic and trading system, only positive and cooperative action by all parties will create more reasonable space for rules that protect the interests of consumers and relatively vulnerable economies or market players, while giving full play to the role of economic and trade cooperation in promoting economic and social growth. Moreover, the COVID-19 pandemic poses an even greater challenge to global economic and trade activities, which requires each party to be more concerned of the safety requirements of other parties in its development.
ZHOU MI is a researcher at the Chinese Academy of International Trade and Economic Cooperation, the Ministry of Commerce.