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China-U.S. (Steel Safeguards) (DS252)

China-U.S. (Steel Safeguards) (DS252). Galya Brown Katarzyna Conolly Lauren Cisek. 1. Dispute Settlement WT/DS252 U.S. – Definitive Safeguard Measures on Imports of Certain Steel Products. Complainant: China Respondent: United States

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China-U.S. (Steel Safeguards) (DS252)

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  1. China-U.S. (Steel Safeguards) (DS252) Galya Brown Katarzyna Conolly Lauren Cisek 1

  2. Dispute Settlement WT/DS252U.S. – Definitive Safeguard Measures on Imports of Certain Steel Products Complainant: China Respondent: United States Third Parties: Brazil, Canada, Chinese Taipei, Cuba, European Union, Japan, Korea, Mexico, New Zealand, Norway, Switzerland; Thailand; Turkey; Venezuela, Bolivarian Republic Claims made by China with regard to violation of: • Agreement on Safeguards: Art. 2,2.1, 2.2, 3, 3.1, 3.2, 4, 4.1, 4.2, 5, 5.1, 5.2, 7, 7.1, 8, 8.1, 9, 9.1, 12, • GATT 1994: Art. I:1, II, X:3, XIII, XIX:1, XIX:2 2

  3. Key facts of China-US Steel Safeguards Dispute 5 March 2002 President George W. Bush announces the imposition of safeguard measures on imports of certain steel products under proclamation NO 7529 26 March 2002 China requests for consultations under the DSU (WT/DS252) in regard with the imposition of definitive safeguard measures by the U.S. on imports of certain steel products. (China was one of eight complainants among: The EU, Japan, Korea, Switzerland, Norway, New Zealand, and Brazil) 11-12 April 2002 Consultations with parties in Geneva 7 May 2002 China’s first request for the establishment of a Panel since none of the dispute settlement consultations succeeded in resolving the dispute 7 June 2002 The United States opposes China's first panel request at the DSB meeting 3

  4. Key facts of China-US Steel Safeguards Dispute (cont’d.) 25 July 2002 A single Panel is composed under Article 9.1 of the DSU 11 July 2003 WTO Panel issues the report on Definitive Safeguard Measures on Steel Imports and rules in favor of complainants that the US steel safeguards are inconsistent with WTO regulations 11 August 2003 The U.S. appeals to the Appellate Body 10 November 2003 The Appellate Body issues the report on Definitive Safeguard Measures on Steel Imports and upholdsthe Panel report that the US failed to provide a reasoned and adequate explanation regarding unforeseen developments, increased imports, and exclusion of imports from certain sources 4 December 2003 President George W. Bush terminates the remaining steel tariffs that were the subject to this dispute, pursuant to section 204 of the US Trade Act of 1974. 4

  5. Factual BackgroundOn The 2002 U.S. Steel Safeguard Action 22 June 2001 The USTR requests from the USITC to initiate a safeguard investigation under Section 201 of the Trade Act of 1974 to verify whether certain steel products are being imported to the US territory in such increased quantities as to cause or threaten to cause of serious injury to the domestic industry. Four groups of products are being investigated: • certain carbon and alloy flat products; • certain carbon and alloy long products; • certain carbon and alloy pipe and tubes; • stainless steel and alloy tool steel products. 28 June 2001 The USITC initiates its investigation 4 July 2001 The United States reports the initiation of the safeguard investigation to the Committee on Safeguards 19 December 2001 The USITC notifies the President about affirmative determinations of serious injury to the domestic industry. 5

  6. Factual BackgroundOn The 2002 U.S. Steel Safeguard Action (cont’d.) Key findings of the USITC investigation: • It covered more than half of total US imports of steel in 2001 (approximate value of imports was $17 billion); • It determined that 85% of the imported certain steel products cause or threaten to cause serious injury to the domestic industry; • It found out that the US steel prices were at 20-year lows because of the cheap surge of imports; • It concluded that a significant part of steel industry, accounted for about 30% of crude steel making capacity, is in bankruptcy; • Poor steel industry condition in spite of strong demand. 6

  7. President George W. Bush’s action in response to the USITC report • The US President decided to impose the definitive safeguard measures on imports of certain steel products under Proclamation No. 7529 • The emergency safeguard measures were adopted in the form of temporary tariff quotas and tariffs ranging from 8, 13, 15 and up to 30 percent and for a 3-year period, starting on 20 March 2002 • President Bush in his statement argued that the imposition of those safeguards would “give America's steel industry and its workers the chance to adapt to the large influx of foreign steel” • Nonetheless, definitive safeguard measures were imposed not only on products for which the USITC established affirmative determinations, but also on two of the four products for which the USITC made divided determinations • The President imposed tariffs that were notably higherthan the USITC recommendation (approximately 10 percent higher in the first and second group of certain steel products). 7

  8. The Business and Political Context of the US Action on Steel Products • The US action on definitive safeguard measures can be considered more as “the political economy of protection” rather than the prevention of domestic harm as a consequence of a surge of imports • In the absence of adequate evidence in support of the Article XIX of GATT and the Articles 2,3,4 of SA, the introduction of emergency safeguard measures can be seen as the response to: • the poor international competitiveness of the US steel industry; • the decline of the US economy at the end of the 1990s; • the strength of the US dollar in the 1990s that lowered the prices of imported steel products and thus increased its amount, reaching a peak of 34 million tonnes in 2000 (30%); • the strength of the steel industry lobby; • political expediency, President Bush and the Republican Party needed to win the key steel-producing states of Ohio and Pennsylvania in the November 2002 mid-term elections if they wanted to have a majority in both Houses of Congress; • the U.S. counteraction to a high degree of government intervention and the wide use of unfair trading practices by Chinese steel exporters to the United States e.g. Chinese subsidies to the domestic steel industry was estimated as $6 billion in 2001. . 8

  9. US Action Contested • March 5, 2002 President Bush announced that beginning March 20th Article 201 of the Trade Act of 1974 would be implementedfor the next three years. • Article 201: The President has the authority to take action if ““an article is being imported into the United States in such increased quantities as to be a substantial cause of serious injury, or threat thereof, to the domestic industry producing an article like or directly competitive with the imported article.”

  10. Uruguay Round Agreement on Safeguards • Article 2- Conditions • 2.1: “A Member may apply a safeguard measure to a product only if that Member has determined, pursuant to the provisions set out below, that such product is being imported into its territory in such increased quantities, absolute or relative to domestic production, and under such conditions as to cause or threaten to cause serious injury to the domestic industry that produces like or directly competitive products.” • Article 3-Investigation • 3.1: “A Member may apply a safeguard measure only following an investigation by the competent authorities of that Member pursuant to procedures previously established and made public…” • Article 5-Application of Safeguard Measures • 5.1: “A Member shall apply safeguard measures only to the extent necessary to prevent or remedy serious injury and to facilitate adjustment.”

  11. Uruguay Round Agreement on Safeguards (cont’d.) • Article 8- Level of Concessions and Other Obligations • 8.1: “A Member proposing to apply a safeguard measure or seeking an extension of a safeguard measure shall endeavor to maintain a substantially equivalent level of concessions and other obligations to that existing under GATT 1994 between it and the exporting Members which would be affected by such a measure…” • Article 9-Developing Country Members • 9.1: “Safeguard measures shall not be applied against a product originating in a developing country Member as long as its share of imports of the product concerned in the importing Member does not exceed 3 percent…”

  12. GATT 1994 • Article I: General Most-Favored-Nation Treatment • 1.1- “With respect to customs duties and charges of any kind imposed on or in connection with importation or exportation or imposed on the international transfer of payments for imports or exports…any advantage, favour, privilege or immunity granted by any contracting party to any product originating in or destined for any other country shall be accorded immediately and unconditionally to the like product originating in or destined for the territories of all other contracting parties.”

  13. GATT 1994 (cont’d.) • Article XIII: Non-discriminatory Administration of Quantitative Restrictions • 8.1: “No prohibition or restriction shall be applied by any contracting party on the importation or any product of the territory of any other contracting party or on the exportation of any product destined for the territory of any other contracting party, unless the importation of the like product of all third countries or the exportation of the like product to all third countries is similarly prohibited or restricted.”

  14. GATT 1994 (cont’d.) • Article XIX: Emergency Action on Imports of Particular Products • 19.1a: “If, as a result of unforeseen developments and of the effect of the obligations incurred by a contracting party under this Agreement, including tariff concessions, any product is being imported into the territory of that contracting party in such increased quantities and under such conditions as to cause or threaten serious injury to domestic producers in that territory of like or directly competitive products, the contracting party shall be free, in respect of such product, to suspend the obligation in whole or in part or to withdraw or modify the concession.”

  15. Position of the main parties • Regarding “unforeseen development,” GATTArticle XIX:1(a), SA Article 3.1 The United States’ arguments: • The USITC determined the unforeseen developments that led to increased imports of certain steel products in a manner that was consistent with the GATT Article XIX and SA Article 3.1; • The Russian crisis, the Asian crisis, the increased strength of the United States' economy, and the appreciation of the US dollar, each amounted to unforeseen developments and thus increased imports. China’s arguments: • The United States acted inconsistently with SA Article 3.1 and GATT Article XIX:1(a) by not providing an adequate and reasoned explanation of unforeseen developments and their logical connections to increased imports; • None of the events, cited by the U.S. above, amounted to unforeseen developments, nor did any combination of them; • A lack of adequate explanation of the link between those events and the increase in imports. 15

  16. Position of the main parties (cont’d.) • Regarding “increased imports,” SA Article 2.1, 3.1, The United States’ arguments: • The USITC determined harmful effects of the increased imports of certain steel products in a manner that was consistent with the SA Article 2.1, 3.1; • The United States emphasized that the wording of Article 2.1 does not consists any reference to the terms "recent", "sudden", "significant" and "sharp." China’s argument: • United States acted inconsistently with SA Articles 2.1 and 3.1 by failing to provide a reasoned and adequate explanation of how the facts support the determination on "increased imports;“ • The increased imports should be recent enough, sudden enough, sharp enough, and significant enough, both quantitatively and qualitatively, to cause or threaten to cause serious injury. 16

  17. Position of the main parties (cont’d.) • Regarding “parallelism,” SA Article 2, 4 The United States’ arguments: • Imports from developing countries of the WTO, whose share of total imports does not exceed 3% individually and 9% collectively, should be exempted from the safeguard measures; • “When the volume of FTA imports is extremely small, the authority's conclusions with respect to all imports are applicable to imports from all sources other than FTA sources, with no need for additional explanation." China’s arguments: • The U.S. acted inconsistently with SA Articles 2.1 and 4.2 by failing to establish that “imports from sources not excluded from the scope of the measures alone satisfy the conditions required for the application of the measures;” • The USITC did not "establish explicitly that non-FTA imports are able to cause serious injury distinctively from injury possibly caused, at the same time, by other sources of imports;“ • There should not be “a double standard,” depending on the level of imports. 17

  18. Position of the main parties (cont’d.) • Regarding “causation,” SA Article 2.1, 3.1, 4.2(b) The United States’ arguments: • The United States argued that it had a "genuine and substantial" causal link between imports and serious injury before imposing affirmative safeguard measures; • The USITC argued that it did not have to conduct a non-attribution analysis of factors - analysis of factors other than increased imports, making only a "minor" contribution to injury. China’s arguments: • The United States acted inconsistently with SA Articles 2.1, 3.1 and 4.2(b) by failing to establish a causal connection between increased imports and serious injury; • The USITC did not assess the cumulative effect of factors other than increased imports while determining injury to the domestic industry; a lack of non-attribution analysis; • The USITC had not provided a reasoned and adequate explanation that factors other than imports made only a minor contribution.

  19. The Panel • The single panel was established by the Dispute Settlement Body on July 25, 2002 to examine the consistency of ten safeguard measures applied by the United States on imports of certain steel products. • The Panel issued 8 Panel Reports to the Members of the WTO on 11 July 2003stating that all ten safeguard measures imposed by the U.S. were inconsistent with the Agreement on Safeguards and the GATT 1994. • The United States decides to Appeal certain findings by the Panel.

  20. China’s Recommendations • Find that the United States safeguard measures on certain steel products, imposed by Proclamation No. 7529 of 5 March 2002, entitled "To Facilitate Positive Adjustment to Competition from Imports of Certain Steel Products" and explained in a Memorandum of 5 March 2002, entitled "Action Under Section 203 of the Trade Act of 1974 Concerning Certain Steel Products by the President of the United States of America” are inconsistent with: • Article XIX:1 of the GATT 1994, Articles 2.1, 4.2(a) and 4.2(b) in conjunction with Article 4.1(c) , Article 5.1 , Article 5.2 of the Agreement on Safeguards and Article XIII of the GATT 1994, Article 9.1 , Article I:1 of the GATT 1994, Article 3.8 • Recommend that the DSB request that the United States bring its safeguard measures into conformity with the WTO Agreement; and • Suggest to the DSB that in order to conform, the United States must terminate the measure.

  21. The Appellate Body Decisions • GATT XIX:1(a) Unforeseen Developments • The Appellate Body upheld the Panel's findings that an investigating authority must provide a "reasoned conclusion" in relation to "unforeseen developments" for each specific safeguard measure at issue. • Therefore the USITC's relevant explanation is inconsistent with GATT Art. XIX:1(a) 21

  22. SA Articles 2.1, & 3.1Increased Imports • Appellate Body upheld the Panel's conclusions that the measures on CCFRS, hot-rolled bar and stainless steel rod were inconsistent with these articles because the U.S failed to provide reasonable explanation and support. • However, they reversed the Panel's finding with respect to "tin mill products and stainless steel wire.” • The International Trade Commission (ITC) contained alternative explanations for these that are valid determination support under the Safeguards Agreement.

  23. SA Articles 2 & 4 Parallelism • The Appellate Body upheld the Panel's finding that the USITC did not satisfy the "parallelism.” • Determined it should have considered imports excluded from the application of the measure as an "other factor" in the causation and non-attribution analysis based on a reasoned and adequate explanation on whether imports from sources OTHER than the FTA partners (Canada, Israel, Jordan, and Mexico),satisfied the conditions for the application of a safeguard measure.

  24. SA Articles 2.1, 3.1 and 4.2(b) Causation • Appellate Body reversed the Panel's findings with respect to tin mill and stainless steel wire based on its reversal of the Panel's decision on increased imports, and declined to rule on the issue of causation for all the other seven products. 24

  25. Implementation • At the DSB meeting of 10 December 2003, the US informed Members that, on 4 December 2003, the President of the United States had issued a proclamation that terminated all of the safeguard measures subject to this dispute, pursuant to section 204 of the US Trade Act of 1974. • "These safeguard measures have now achieved their purpose, and as a result of changed economic circumstances, it is time to lift them” --- George, W Bush. December 4, 2003 25

  26. Dispute in Context of Global Trading System • Defined and clarified what the US was allowed to do through Article 201 • Removed trade restrictions imposed by the United States, not just for China but for all countries • Gave other developing countries confidence to bring actions against larger, developed countries • Bringing certain cases before the WTO allows governments to rationalize unpopular actions that needed to be made to be able to comply with WTO regulations • Bush did not remove safeguards until EU threatened to impose tariffs on Florida oranges and Harley Davidson’s.

  27. Resources Bush, George W. Temporary Safeguards for Steel Industry. The White House Archives. http://georgewbush-whitehouse.archives.gov/infocus/steel/ European Commission. Trade, Documents and Publications. http://trade.ec.europa.eu/doclib/docs/2004/april/tradoc_114162.pdf Perdikis, Nicholas, and Read, Robert. “Chapter 7: The EU–US WTO Steel Dispute: the Political Economy of Protection and the Efficacy of the WTO Dispute Settlement Understanding.”The WTO and the regulation of international trade: recent trade disputes between the European Union and the United States. Edward Elgar Publishing,2001. The World Trade Organization. Dispute Settlement: Dispute DS252. United States - Definitive Safeguard Measures on Imports of Certain Steel Products. http://www.wto.org/english/tratop_e/dispu_e/cases_e/ds252_e.htm The World Trade Organization. Dispute Settlement: WTDS248-259. United States - Definitive Safeguard Measures on Imports of Certain Steel Products. http://docsonline.wto.org/imrd/gen_searchResult.asp?RN=0&searchtype=browse&q1=%28%40meta%5FSymbol+WT%FCDS252%FC%2A%29&language=1 The World Trade Organization. Uruguay Round Agreements, Agreement on Safeguards. http://www.wto.org/english/docs_e/legal_e/25-safeg.doc The World Trade Organization. The General Agreement on Tariffs and Trade (GATT 1947), LEGAL TEXTS: GATT 1947. http://www.wto.org/english/docs_e/legal_e/gatt47_e.doc The World Trade Organization. “One-page summary of key findings of this dispute,” WTO’s Legal Affairs Division, 2010. http://www.wto.org/english/tratop_e/dispu_e/cases_e/1pagesum_e/ds252sum_e.pdf 27

  28. Resources (cont’d.) "Steel Tariffs Ended -- December 4, 2003." PBS: Public Broadcasting Service. 04 Dec. 2003. Web. 01 Oct. 2011. <http://www.pbs.org/newshour/bb/international/july-dec03/steel_12-4.html>. Tran, Mark. "Bush Lifts Steel Tariffs to Avert Trade War | World News | Guardian.co.uk." The Guardian. 04 Dec. 2003. Web. 05 Oct. 2011. http://www.guardian.co.uk/world/2003/dec/04/usa.wto1 "International Trade Administration." Safeguards. International Trade Administration, 19 05 2011. Web. 2 Oct 2011. http://trade.gov/mas/ian/tradedisputes-enforcement/tg_ian_002099.asp. China Trade Remedy Information, . "Global Times." 2002 US Steel Safeguard Measures. N.p., 26 08 2011. Web. 2 Oct 2011. http://www.globaltimes.cn/NEWS/tabid/99/ID/672784/2002-US-Steel-Safeguard-Measures.asp&xgt; 28

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