Transcript US – CHINA TYRES (DS399) Dispute By: Andrew Chaney, Mahlet

US – CHINA TYRES (DS399) Dispute
By: Andrew Chaney, Mahlet Daniel and
Emrah Degismen
• Measure at issue
US transitional product-specific safeguard measure
applied under para. 16 of China's Accession
Protocol pursuant to Section 421 of the US Trade
Act of 1974.
• Product at issue
Certain passenger vehicle and light truck tyres from
China.
US – TYRES (CHINA)
(DS399)
• United States
• Tire manufacturers
• Auto manufacturers
• China
• Tire manufacturers
National/International
Interests
PROVISIONS
Section 421 of the US Trade Act of 1974
• Enacted as part of October 2000 statute addressing various
issues affecting China’s WTO accession.
• Commission determines whether or not particular Chineseproduct imports have been imported to the United States in
such increased quantities or under conditions that dictate the
causation or threat of market disruption to the domestic
producers of like or directly competitive products.
• Grants the President the executive power to impose safeguards
on Chinese products imports have resulted in market disruption
in the United States.
• Article 1:1 → inconsistent application of the transitional safeguard
measure as US did not apply the same treatment to passenger vehicle and
light truck tyre imports from other countries…Only China
• Article XIX and the Agreement on Safeguards: Higher tariffs are
improperly justified
Article 2.1 of the Agreement on Safeguards reproduces and confirms the
language of Article XIX of the GATT 1994 (also the provision referred to
in this case) with one notable exception:
The clause in Article XIX:1(a) requiring that the increase in imports occurs
as a result of unforeseen developments and of the effect of the
obligations incurred by the contracting party
GATT 1994
The Accession Protocol provision defines “market
disruption” as occurring:
…”whenever imports of an article, like or directly
competitive with an article produced by the
domestic industry, are increasing rapidly, either
absolutely or relatively, so as to be a
significant cause of material injury, or threat of
material injury to the domestic industry.”
China’s Accession
Protocol
The safeguard measure contained within
China’s Accession protocol may be applied
only to goods of Chinese origin, a significant
difference from the WTO Safeguards
Agreement, which requires that a safeguard
be imposed on the subject product
regardless of its source.
China’s Accession
Protocol
• US imposition
• Market disruption
• China’s request
History of the Case
• Inconsistency with the Protocol of Accession and the
GATT 1994
• Unjustified Higher Tariffs
• Improperly Justified Measures
• Use of “Significant Cause” phrase in paragraph 16.4
China’s Allegations
• Inconsistent Measures
• Tyres are not “in such increased quantities”
• Beyond the “extent necessary to prevent or remedy”
• More than necessary time restrictions
China’s Allegations
(Continued)
❖Appalled at the the evidence entailing the surge in
Chinese tyre imports
❖Contends that over the period of the investigation by the
ITC, import of tyres from China grew by 215%
increasing from 14 million in 2004 to over 45 million in
2008
❖More than tripled their share of the US market growing
from 4.7% to 16.7% in a span of 4 years (2004-2008)
The United States’ Point of
View
◆Pointed out that the economic crisis of 2008 adversely affected
countries worldwide including US tyres industry.
◆Safeguard investigation not warranted by the American tyres
industry.
◆Trade flow which indicated that the declined imports from China
were originating from other countries as total imports of tyres
increased by 20.2% in 2010 and further increased by 9% in 2011
◆US measures merely distorted international trade and is disappointed
that the Panel and Appellate Body upheld the US Safeguard
measures.
China’s Point of View
The Appellate Body determined that the US did
define the term “Contributes significantly”
properly and affirmed the USITC’s authority to
determine, under the auspices of the
investigation conducted, whether the imports in
question are in fact a “significant cause” of
material injury, granted there exist no other
factors to blame.
Panel and Appellate Body
The Commission’s Findings: 2004-2008 imports of
subject tyres increased by 34% whereas there was a
10.8% increase in 2008 alone.
The AB found:
1. The USITC did not err in its analysis and
findings that the Chinese subject tyre imports were to
blame for the rapid surge in imports which caused
domestic injury in the US tyre market.
2. The Panel correctly analyzed the US industry’s
business strategy and the reasons for certain auto plant
closures and also in its conclusions that China’s imports
caused shifts in demand, adversely affecting the US
domestic tyre industry.
The Appellate Body and Panel upheld the
panel’s findings contending that the USITC had
correctly determined imports of Chinese tyres
were increasing at a rapid pace and had met that
“threshold” as outlined in paragraph 16.1 and
16.4 of China’s Accession protocol.
AB…
Interesting Take on US-China Tyre Dispute
➢National interests: As China pointed out, the safeguard
measure imposed on the subject tyres from China has in
fact reallocated the import source to other countries, but
this time the imports are entering the US domestic
markets not only in smaller quantities but also at higher
cost.
➢International interests: The implications imposing this
safeguard will have upon US-China foreign relations
within and beyond the domain of partnership in trade.
Factors to Consider
Our proposal is that guidelines and technical jargons
contained within accession protocols and general trade
agreements that are used in referencing WTO disputes
should be written with more objective standards with which
to make accurate measurement assertions. Without clear
and unmistakable benchmarks to use as reference points,
international dispute settlements run the risk of being
motivated by reasons other than non-conformance to
common and agreed upon trade rules and policies.
Proposal
This case was extremely important in demonstrating the
precedent for protecting domestic industry from “material
injury.”
Observations
• The case arose out of a subjective observation of the
following terms from the Protocol of Accession:
• “such increased quantities”
• “increasing rapidly”
• “market disruption”
• “material injury”
Proposal
We’ve come to the end, but that doesn’t
mean the discussion concludes here,
whose side do you contend with?
Any questions???