WTO

1. WTO China v U.S.- Various Products from China (#449) U.S. v China- Auto Parts (#450) China v. EU- Reusable Energy Sector (#452) Japan v China- Steel (#454) CASES Vaishnavi Venkatesh Jessica Weeks Lucien Ziegler

2. Countervailing and Anti-Dumping Measures on Certain Products from China DSU 449China vs. United States Third Parties: Australia, Canada, European Union, Japan, Turkey, Vietnam, India, Russian Federation

3. HISTORY AND CONTEXT • 8 other cases prior to this filing on US trade remedy measures • 1930 Tariff Act • March 13, 2012- signing of the Public Law 112-99 by President Obama and approved by House and Senate • “An act to apply the countervailing duty provisions of the Tariff Act of 1930 to non market countries, and for other purposes” • applied to countries that the US designated as non market economies • Why is China a Non Market Economy? • Furthermore, PL 112-9 amended Tariff Act of 1930 by adding two sections: • 701(F)- "Applicability to Proceedings Involving Nonmarket Economy Countries" • countervailing duty provisions now apply particularly to countries designated as nonmarket economies • US authorities could look at duties dating back to November 20,2006 • 777A (F)- "Adjustment to Antidumping Duty in Certain Proceedings Relating to Nonmarket Economy Countries" • provide the USDOC with legal authority to identify and avoid double remedies on or after March 13, 2012

4. PRINCIPLE WTO ARTICLES Consultations: Requested: September 17th, 2013 Held: November 5, 2012 Agreements Cited: GATT Agreement of 1994 Article X- Publication and Administration of Trade Regulations all trade measures of members should be published and therefore transparent Article VI- Anti-dumping and Countervailing Measures members may apply duties and other measures can be applied to goods originating in other members which are dumped and/or enjoy export subsidies subject to specific conditions Agreement on Subsidies and Countervailing Measures: Articles 10, 15, 19, 21, 32 Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade 1994 Articles 9 & 11 (Anti-dumping) Main Issues: Anti-dumping and CVD

5. CHINA’S COMPLAINTS (IN-DEPTH) • Public Law 112-99 • explicitly applies countervailing measures to non market economies • Countervailing duty between November 20, 2006 and March 13, 2012 against Chinese products • US did not apply these trade remedy laws “in a uniform, impartial and reasonable manner’’ • Anti-dumping measures associated with the concerned countervailing duty measures as well as their effects • causes price of goods to increase, which would affect sales • United States’ failure to provide the US Department of Commerce with legal authority to identify and avoid the double remedies dating between 20 November 2006 and 13 March 2012 • difference in effective dates • no basis by US domestic law to determine which to identify and avoid double remedies

6. Date of Final Report to be Issued: December 2013 Potential Implications and Observations: US- Amendment for more transparency and correction in effective dates for PL 112-99 US- recommendation to change countervailing and AD measures POSITION OF PARTIES Panel Composed: March 4, 2013 U.S. defends itself: Article X - • US claims to be completely transparent in reference to CVDs • Claims China misinterprets laws for its own use • Rejects China’s claims SCM- • US is aware of decision of DS379 • claims to have already acted to investigate double remedies • also questions decision of DS379 • Claims China has not sufficiently proved its case

7. DSU 450United States vs. China Consultation stage- Unresolved Auto and Auto Parts Industries Export Subsidies in China

8. HISTORY AND CONTEXT OF THE AUTO TRADE SUBSIDY DISPUTE Timeline • October 2011: US submits information to WTO identifying 200 undeclared Chinese subsidy programs • September 17th 2012:United States requested consultations with China on measures providing subsidies in the form of grants, loans, forgone government revenue, provision of goods and services, and other incentives to stimulate export performance of automobile and auto part enterprises in China • September 28th 2012:EU requests to join consultations • November 6th and 7th 2012: Consultations held in Geneva, but dispute remains unresolved Prior Proceedings • Political Context • Less than two months prior to U.S. presidential election • Key concern of labor unions and workers in battleground states • Previous auto parts cases • DS 339, 340, 342 • Second consecutive WTO challenge that US has brought against China within auto sector, the first being on AD/CVD measures

9. Main WTO Issue Inconsistent with Subsidies and Countervailing Measures The U.S. contested 84 policies that the Chinese government established to develop a series of “export bases” Policies provide export subsidies such as cash grants for exporting, R&D, paying interest on loans and preferential tax treatment Charges are twofold Policies are prohibited under WTO’s Agreement on Subsidies and Countervailing Measures China failed to notify WTO members of these policies and administer them through WTO stipulations

10. PRINCIPLE WTO ARTICLES Subsidies and Countervailing Measures Agreement • Article 3, Paragraph (a)- Subsidies contingent upon export performance are prohibited • Article 25: Notifications • 25.1- members shall submit notification of subsidies no later than 30 June of each year, in accordance to provisions of paragraph 1 of Article XVI of GATT • 25.2- members shall notify any subsidy defined in paragraph 1 of Article 1, granted/maintained within their territories • 25.3- content of notifications should be sufficiently specific to enable members to evaluate trade effects and operation of subsidy programmes. • 25.4- explanation of subsidies should be provided in the notification itself, if not elsewhere Article XVI:1 of GATT • If any contracting party grants or maintains any subsidy to increase exports or reduce imports of any product form, it shall notify the contracting parties the extent, nature and estimated effect of subsidization. If a “serious prejudice” to the interests of any other contracting party is caused or threatened by subsidization, the contracting party granting the subsidy must discuss the possibility of limiting the subsidization. Accession Protocol • Part 1, Paragraph 1.2- China must provide translation of measures in an official WTO language • Part 1, Paragraph 2 (C)(1)- any laws, regulations and other measures affecting trade in goods, services, TRIPS should be readily available to the other WTO members • Part 1, Paragraph 2(C)(2)- China must establish or designate an official journal dedicated to the publication of all laws and regulations and other measures affecting trade in goods, services or TRIPS

11. China United States • Policies have yielded a net of $1 billion to Chinese manufacturers between 2009-2011 • Value of China’s exports of autos and auto parts increased more than nine-fold, from $7.4 billion to $69.1 billion between 2002-2011 • U.S. was China’s largest export market for auto parts between 2002 to 2011, and by 2011, sales rose 26% to $12.9 billion • 400,000 jobs in the U.S. auto supply chain have been forgone since 2000 due to China’s persistent violations of WTO rules • $62 billion worth of Chinese auto parts have been imported into the U.S. causing the auto parts deficit b/w U.S. and China to increase by more than 850% IMPACT OF EXPORT SUBSIDIES

12. Actions of Main Parties Implication of winners and losers • June 2012, WTO’s Trade Policy Review, issued for China every two years, highlighted the fact that subsidies were important features of China’s trade policy and industrial policy making • China requests WTO consultations with the U.S. regarding US Public Law-99, and several AD and CVD measures on the same day as DS450 complaint • If China refuses to terminate these policies, the United States will have the right to impose retaliatory tariffs on a range of imports outside of the auto sector from China • Even if successful, however, the U.S. case may not lead to the removal of export subsidies or to the imposition of retaliatory tariffs on unfairly traded automobiles and auto parts from China Observations on Current Actions • Current case fails to address majority of other subsidies and unfair trade practices that China has used to support domestic auto industry • Currency manipulation • Provision of preferential loans and loan guarantees • Favorable tax incentives • Import tax exceptions • Does not preclude companies injured by China’s unfair trade practices, such as AD/CVD, from seeking alternative forms of relief CURRENT STATE OF PLAY

13. HOW WILL THE PROPOSAL BE RESOLVED? Assuming consultations are unsuccessful… Dispute Settlement Panel will notlead to China withdrawing subsidy policies or the U.S. imposing retaliatory tariffs WHY?? Looking at one of China’s “export bases” in Tianjin, only means of government support include the following: • A fund of no less than 100 million yuan ($15.9 million) to support activities such as research and development (R&D), third-party testing, overseas market research, product development, and training on the laws and regulations and intellectual property registration in overseas countries. • Preferential tax policies that provide tax deductions equal to 150 percent of actual R&D expenditures • Certain tax discounts for companies buying key foreign technologies and equipment and for those companies purchasing environmental protection, energy-saving, water-saving and safety equipment • A lower, 15 percent corporate income tax rate for qualified high-tech enterprises. • Interest-free loans to encourage the cooperation between auto parts companies and assemblers. • Financial support of no more than 50 percent of the total expenses required to build public service platforms. In other words, it is difficult to find $1 billion worth of subsidies, even across 12 export bases & most items deal with R&D and training which Commerce Dept. regularly engages to promote American exports and develop higher tech products

14. DSU 452China vs. European Union [Consultation Stage – Unresolved] Renewable Energy Feed-in Tariffs (FIT) in the E.U.

15. HISTORY AND CONTEXTWhat is the DS-452 Trade Dispute About? • At issue is what China views as unfair promotion of feed-in tariffs (FIT) for renewable energy production in EU states, specifically Italy and Greece. • The complaint regards, in its own words, “certain measures affecting the renewable energy generation sector. These measures include but may not be limited to domestic content restrictions relating to the feed-in tariff programs of EU Member States including but not limited to Italy and Greece.” Afeed-in tariff (FIT) is “an instrument for promoting investment in renewable energy and typically sets a fixed price for purchases of renewable power, providing electricity producers with a premium above the market price for electricity—per kilowatt-hour (kWh)—fed into the grid.” Doing so incentivizes renewable energy production. The FITs alone are not the problem and are common in many countries. At issue is the prioritization of domestic suppliers of instruments, equipment, or services over international that violates the national principal and other WTO accords

16. Why the complaint?Italy – Conto Energia V - “Fifth Energy Plan” • Commissioned by EU directive 2009/28/EC requiring an energy roadmap for EU member states, requires Italy to produce 17% of energy with renewables by 2020. • Conto Energia V follows Conto Energia IV, which called for a €6 billion photovoltaic feed-in tariff (FIT). • Articles 4(5)(d), 5(2)(a) and 2(1)(v) of Italy’s Fifth Energy Bill call for the “incentivizing of the production of electrical energy from photovoltaic solar installations.” China alleges that this includes a premium for the installation of those that use main components produced within the EU/EEA states.

17. Greece – Law 4062/2012 • Greece' Law 4062/2012 (FEK A'70/30.03.2012) of 27 March 2012 on the “Development of the Athens former international airport Hellinikon - Project HELIOS - Promotion of the use of energy from renewable sources (Integration of Directive 2009/28/EC) Sustainability criteria of biofuel and bioliquids (integration of Directive 2009/30/EC)” • A new incentive to use equipment produced within the EU or the EEA was recently introduced by Law 4062/2012. In particular, article 39, paragraph 12 of this Law stipulates that the FiT for electricity generated by PV stations may be increased by up to 10% provided that at least 70% of the costs for the equipment of the PV station derives from products from an EU or EEA member state.

18. What laws and agreements are Italy and Greece and the E.U allegedly violating? • Article III:1 of the GATT 1994 • Article III:4 of the GATT 1994 • Article III:5 of the GATT 1994 • Article I of the GATT 1994 • Articles 3.1(b) and 3.2 of the SCM Agreement (Agreement on Subsidies and Countervailing Measures) • Articles 2.1 and 2.2 of the TRIMs Agreement

19. Projected Outcome • Although the current status of the complaint is in the consultations/mediation phase, it is likely it will never make it past this. • The E.U.’s regulations alone prioritizing and incentivizing the use of E.U. components in the production of renewable technology appears to be in clear violation of the above GATT, SCM and TRIMs agreements as previously highlighted in this presentation • Domestic-incentivizing language is likely to need to be removed from Italian, Greek, and EU laws pertaining to renewable energy

20. Why is this complaint important? The big business of renewable energy and Sino domination of the PV production • A tale of two economies • A Greek tragedy and one (former) minister’s plan to save it • Project Helios – will it survive?? • Trade law versus Climate/Energy regulation • A related ruling in EU/Japan vs Canada

21. China — Measures Imposing Anti-Dumping Duties on High-Performance Stainless Steel Seamless Tubes from Japan DSU 454 Japan vs. China Third Parties:European Union, India, Republic of Korea, Russian Federation, United States, Turkey, Kingdom of Saudi Arabia

22. History and Context DSU 454 precedes, but is strikingly similar in detail to DSU 460 filed by the European Union (concerns the same high-performance stainless steel seamless tubes (HP-SSST)). Consultations: Requested: December 20, 2012 Panel Composed: July 19, 2013 Japan requested consultations with China concerning measures imposing anti-dumping duties on high-performance stainless steel seamless tubes (“HP-SSST”) from Japan, as set forth in Ministry of Commerce of the People's Republic of China (“MOFCOM”) Notice No. 21 [2012] and Notice No. 72 [2012]. The tariff ranges from 9.2 percent to 14.4 percent and will last 5 years from 2012

23. PRINCIPLE WTO ARTICLES Agreements Cited: GATT Agreement of 1994 Article VI- Anti-Dumping and Countervailing Duties “No countervailing duty shall be levied … in excess of an amount equal to the estimated bounty or subsidy determined to have been granted…” Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade 1994 Articles 1, 3.1, 3.2, 3.4, 3.5, 5.3, 5.8, 6.5, 6.5.1, 6.8, 6.9, 7.4, 12.2, 12.2.2, Annex II Main Issue: Anti-dumping

24. Current State of Play and Analysis China and Japan, the E.U., and the US are locked in a tit-for-tat over anti-dumping, particularly in the industry for high-quality steel products The heart of Japan’s complaint, as previously itemized in the principle WTO articles cited, is that China’s actions seemed motivated by retaliation and were not “based on an objective examination of all relevant evidence” China is both the world’s biggest producer and consumer of steel, and was repeatedly cited by major trade partners for alleged dumping in its massive exports of steel products before the financial crisis in 2008, but China still relies on importing high-grade steel from Japan, the E.U. and the United States

25. Current State of Play and Analysis (Cont) • Filed case after an election in Japan • Was Japan’s second, official trade complaint against China in the WTO • filed the day after it won a WTO ruling against Canada • It challenged Beijing's claim that Japanese steel firms were competing unfairly in the world's biggest steel market • China can legitimately apply such duties if it suspects imports are being sold at unfairly cheap prices on its market. • But Japan is challenging the duties and the way China applied them, alleging it did not have enough evidence and kept what it did have secret, shielding the companies who had complained.

26. Impact of the forthcoming resolution • Could affect the price of steel on global markets, and lower price of Japanese Steel as an import of China • Japanese steel is claimed to be of better quality, so it could cause the standard of Chinese domestic steel quality to be raised if Japanese steel is able to be sold at a lower price • Would allow Japanese businesses to potentially export more steel • Could help to balance out price of steel on world market