Saturday, March 12, 2011
WTO Appellate Body decision in favor of China over the US
On March 11, the WTO's Appellate Body (AB) issued a decision in a dispute between China and the US. As with most decisions, some things went one party's way and some things went the other party's way, but it's basically a win for China (WSJ report here). Certainly that's how it was perceived by USTR Ron Kirk, who said he was "deeply troubled" by the AB's report. "It appears to be a clear case of overreaching by the Appellate Body."
Two of the major issues were (1) whether state-owned enterprises should be counted as "public bodies" for purposes of Article 1 of the Agreement on Subsidies, and (2) whether it was permissible to impose duties under both the Antidumping Agreement and the Agreement on Subsidies for the same price advantage - that is, to double count, resulting in duties amounting to more than the extent of "unfair" competition.
On the first issue, the problem with the US approach was that it insisted that majority state ownership per se made an enterprise into a "public body", and that there was no need to look at any other facts. The AB rejected this per se rule, but left the door wide open to arguments that particular SOEs could be "public bodies".
On the second issue, the AB decision has been reported as saying that it’s a violation to impose both antidumping (AD) duties and countervailing (CV) (antisubsidy) duties at the same time. This is almost true, but not quite. As I read the AB decision, it’s saying that double-counting (i.e., imposing antidumping and countervailing duties that amount to more than the total unfair price advantage that is to be offset) is a violation. I think the AB decision still allows for simultaneous AD and CV duties provided they don’t present a double-counting problem, and (for reasons explained in the decision) it’s theoretically possible they wouldn’t.
I am not a trade law expert, but but the idea that the AB overreached or did something awful in finding against the US on this strikes me as absurd. The US position was not that there was no double counting; it was that double counting was quite OK because the relevant agreements didn’t specifically prohibit it. This argument, if raised by some other country to the disadvantage of the US and accepted at the WTO, would surely provoke hyperventilation in Congress. At least as far as it’s reflected in the AB report, the US made no policy-based arguments as to why its interpretation would be a good thing for the international trade regime; it just said, "Hey, the agreements don’t bar it, so we can do it." I don’t see how this argument can be defended with a straight face as anything other than protectionist in the most pejorative sense of the term. It is asking for relief for domestic industry that goes beyond any damage caused by “unfair” trade practices. (The WTO does allow this kind of relief in some cases, but there are special rules about it in the Agreement on Safeguards.) I might add that the US Court of International Trade, which is a trade law expert and can't be accused of anti-US bias, took the AB's position on the same issue in the same case in 2009 (the US government is currently appealing the decision to the Court of Appeals for the Federal Circuit). If there's overreaching being done, it's not by the AB.
The common theme running throughout the decision seems to be a rejection of per se approaches and an insistence on looking at the particular facts of any question.