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World Trade Organization DS340 China-Measures Affecting Imports of Automobile Parts

World Trade Organization DS340 China-Measures Affecting Imports of Automobile Parts. Andrea Currie Chad DeHartchuck Leysan Dickenson . Business & Political Context. China ’ s Accession to the WTO: 11 December 2001 China Agreed to Fair Commitments in Trade

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World Trade Organization DS340 China-Measures Affecting Imports of Automobile Parts

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  1. World Trade Organization DS340China-Measures Affecting Imports of Automobile Parts Andrea Currie Chad DeHartchuck Leysan Dickenson

  2. Business & Political Context • China’s Accession to the WTO: 11 December 2001 • China Agreed to Fair Commitments in Trade • Other WTO Members Seek Fair Treatment of their Automobile Parts & Products in China

  3. Dispute Proceedings • Pursuant to Articles 1 and 4 of the Understanding on Rules and Procedures Governing the Settlement of Disputes, Article XXII of the General Agreement on Tariffs and Trade 1994 (GATT), the United States submits a Request for Consultations, 30 March 2006 • Under Article 6.2 of the DSU, the United States circulates its Request for the Establishment of a Panel, 15 September 2006 • On 26 October 2006, the DSB Establishes a single Panel at the Requests o the European Communities, the United States and Canada • On 18 July 2008, the DSB Panel Issues its Report Regarding China-Measures Affecting Imports of Automobile Parts

  4. Final Appellate Proceeding • Under Articles 16.4 and 17 of the Understanding on rules and Procedures Governing the DSU and Under Rule 20(1) of the Working Procedures for Appellate Review, the People’s Republic of China Issues a Notification of Appeal on 15 September 2008 • On 15 December 2008, the DSB Issues an Appellate Report Regarding China-Measures Affecting Imports of Automobile Parts

  5. Main WTO Issues • National Treatment • Agreements Cited • GATT Agreement • TRIMS Agreement: Articles 2 • SCM Agreement • Was China charging automobile parts inconsistently with other members sold from overseas?

  6. Position: European Communities • Argued that the sale of automobile parts manufactured for sale in China were subject to charges equal to tariffs imposed on complete vehicles. • Inconsistent with: • GATT 1994 • TRIMS Agreement • Article 2 • Article 3 of Subsidies and Countervailing Measures Agreement • Prohibition of subsides • China’s Accession Protocol • Part 1, Paragraph 7.3

  7. Position: United States • Claimed that manufacturers were penalized for using auto parts in the manufacture of automobiles for sale in China • Inconsistent with • TRIMS Agreement: Article 2 • GATT Agreement: Articles 2 and 3 • SCM Agreement: Article 3 • The Protocol of Accession • Parts I.1.2 and I.7.3, and paras. 93 and 203

  8. Position: Canada • Argued that different charged were imposed on manufacturers and received an advantage if they used domestic produced parts • Inconsistent with: • Protocol of Accession • GATT Agreement: Articles 2 and 3 • TRIMS Agreement: Article 2 • SCM Agreement: Article 3 • Agreement on Rules of Origin: Article 2

  9. Position: China • Erroneous interpretation of GATT 1994 • Article II • Failed to take into context the Harmonized System • Custom duties authorities determine: • What is the product • The corresponding duties

  10. Decision • October 26, 2006 The WTO established a dispute settlement panel. This was the first time that the WTO had established a panel to review the WTO-consistency of a Chinese measure. • July 18, 2008 The WTO dispute settlement panel found that China's additional charge on imported auto parts unlawfully discriminated against U.S. auto parts under WTO rules.

  11. Decision • September 15,2008 China notified about its decision to appeal to the Appellate Body • December 15, 2008 After an appeal filed by China, Appellate Body confirmed the findings of the WTO Panel

  12. Implementation • 27 February 2009 Communication from Delegation of China and the delegation of the United States to the Chairman of the Dispute Settlement Body: “Reasonable period for implementation shall be 7 months and 20 days from the date of adoption of the DSB recommendations and rulings”

  13. Implementation • 28 August 2009 The General Administration on Customs and relevant agencies had promulgated a joint decree to repeal Decree 125 • 31 August 2009 China informed the DSB that on 15 August 2009, the Ministry of Industry and Information Technology, and National Development and Reform Commission, had issued a joint decree to stop the implementation of relevant provisions concerning the importation of auto parts in the Automobile Industry Development Policy

  14. US Reaction • August 28, 2009 The United States welcomed Beijing's decision to eliminate additional charges on imported auto parts in a landmark case that ended a grace period for China after it joined the World Trade Organization. • "We are pleased that China has informed us that it is eliminating the additional charges on imported auto parts in response to the WTO ruling. We look forward to carefully reviewing the changes announced by China," U.S. Trade Representative Ron Kirk said in a statement.

  15. Outcome for the US • China's move to comply with the WTO ruling in the auto parts case came weeks before President Barack Obama was required to decide by Sept. 17 whether to restrict imports of Chinese-made tires in a case brought by union workers. • If Obama imposed restrictions, that could set the stage for China to bring its own complaint at the WTO.

  16. Outcome for the US • First Case Lost by China • Ended China’s grace period • Motor-vehicle manufacturing directly and indirectly supports 1.6 million jobs • China practices of before DS340 case hurt employment in these auto parts sectors. • US stance on China has been consistent throughout the past two administrations regarding WTO violations

  17. Outcome for the US • Auto parts sector employment dropped 10.2 percent in 2008 to 604,000 and 23 percent more in 2009 to 464,000. Employment stabilized in 2010 and increased for the first time in over a decade to 487,000 in 2011. • China’s auto parts exports to the United States have increased 43 percent from 2004 to 2009 • Automotive parts imports from China declined slightly in 2009, but are expected to increase again • Numbers are according to U.S. Automotive Parts Industry Annual Assessment, International Trade Administration

  18. Outcome for the US • Other cases were filed, for example DS440, Anti-Dumping and Countervailing Duties on Certain Automobiles from the United States • 13 cases filed against China by the U.S. since the first case • Countries avoided bringing complaints against China during the first five years of its membership in the WTO to give it time to adjust to world trade rules.

  19. Recommendation for US • China’s automotive aftermarket is expected to continue to grow at an annual rate of 40 percent, as the market increases for both new and used autos • The Chinese government’s emphasis on developing electric vehicles and other types of alternative energy vehicles could also be an impetus for its industry to lead the development of this new product market • US has to continue to monitor the practices of China is developing new technologies and make sure that they are not violating WTO rules.

  20. China’s Recommendation • All parties agree to the same rate of subsidy, if the industry is considered an infant industry for China. • China’s domestic policy makers are tasked with balancing their WTO obligations with their domestic automobile manufacturers.

  21. Sources • http://www.wto.org/english/tratop_e/dispu_e/cases_e/ds340_e.htm • http://www.wto.org/english/docs_e/legal_e/gatt47_01_e.htm • http://www.wto.org/english/docs_e/legal_e/18-trims.pdf • http://www.wto.org/english/docs_e/legal_e/24-scm.pdf • http://www.wto.org/english/docs_e/legal_e/legal_e.htm#finalact • http://www.wto.org/english/docs_e/legal_e/03-fa.pdf • http://www.worldtradelaw.net/misc/chinaaccessionprotocol.pdf • http://www.ustr.gov/archive/assets/Document_Library/Reports_Publications/2005/asset_upload_file293_8580.pdf • https://docs.wto.org/dol2fe/Pages/FE_Search/FE_S_S006.aspx?Query=%28%40Symbol%3d+wt%2fds340%2f*%29&Language=ENGLISH&Context=FomerScriptedSearch&languageUIChanged=true

  22. Sources • http://www.trade.gov/mas/manufacturing/oaai/build/groups/public/@tg_oaai/documents/webcontent/tg_oaai_003753.pdf • http://www.trade.gov/mas/manufacturing/oaai/static/Auto%20Parts%20Paper%202012%20final_Latest_tg_oaai_003966.pdf • http://www.wto.org/english/tratop_e/dispu_e/cases_e/ds340_e.htm • http://www.ustr.gov/about-us/press-office/press-releases/2009/august/ambassador-kirk-comments-regarding-china-and-auto-p • http://www.epi.org/publication/bp336-us-china-auto-parts-industry/ • http://www.autonewschina.com/en/printarticle.asp?id=3217

  23. Picture Sources • https://www.cia.gov/library/publications/the-world-factbook/geos/us.html • https://www.cia.gov/library/publications/the-world-factbook/geos/ch.html • http://www.proeurope.org/content/delta2/EU_Flag.jpg • https://www.cia.gov/library/publications/the-world-factbook/flags/flagtemplate_ca.html • http://automotivepartsz.info/2013/02/warehouse-auto-parts.html • freedomismist.blogspot.com

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