27 April 2018
U.S. Agrees to Hold WTO Consultations with Mainland China over Section 232 and 301 Tariffs
The United States has agreed to hold consultations with mainland China under the World Trade Organisation dispute settlement mechanism over the recently imposed Section 232 tariffs on most U.S. imports of steel and aluminium, including mainland Chinese products, as well as a proposal to impose an additional 25 percent tariff on a range of mainland Chinese products as part of the U.S. response to a Section 301 investigation concluding that mainland China is coercing U.S. companies into transferring their technology and intellectual property to mainland Chinese enterprises. In both instances, however, the United States maintains that mainland China has no basis for requesting the consultations under WTO rules.
On the one hand, Beijing believes the duties imposed by Washington on steel and aluminium appear to be inconsistent with the United States’ obligations under the following WTO provisions.
- Articles XIX:1(a) and XIX:2 of the General Agreement on Tariffs and Trade 1994, as well as Articles 2.1, 2.2, 4.1, 4.2, 5.1, 7, 11.1(a), 12.1, 12.2 and 12.3 of the Agreement on Safeguards, because with regard to the measures at issue that constitute safeguard measures in substance the United States has failed to make proper determination and to provide reasoned and adequate explanation of “unforeseen developments,” imports “in such increased quantities” and “under such conditions,” and “cause or threaten to cause serious injury to domestic producers.” Additionally, the United States has failed to follow proper procedural requirements including, for example, notification and consultation procedures, and has also failed to apply the measures in a proper manner (e.g., application irrespective of source of supply and only for necessary period of time).
- Article II:1(a) and (b) of the GATT 1994 because the United States has imposed import duties on certain steel and aluminium products in excess of the duties set forth and provided in the U.S. schedule of concessions and commitments annexed to the GATT 1994, and has failed to exempt products of mainland China subject to the measures at issue from ordinary customs duties in excess of those set forth and provided in the schedule of concessions and commitments and from all other duties or charges in excess of those imposed on the date of the GATT 1994 or those directly and mandatorily required to be imposed thereafter by legislation in force in the United States on that date.
- Article I:1 of the GATT 1994 because the selective application by the United States of the additional import duties on certain steel and aluminium products originating in different members, including providing exemption or applying alternative means, has failed to extend immediately and unconditionally to mainland China any “advantage, favour, privilege or immunity” granted by the United States “[w]ith respect to customs duties and charges of any kind imposed on or in connection with” the importation of products originating in the territory of other members, as well as with respect to “the method of levying such duties and charges” and the “rules and formalities in connection with importation.”
- Article X:3(a) of the GATT 1994 because the United States has failed to administer its laws, regulations, decisions and rulings in relation to the measures at issue in a uniform, impartial and reasonable manner.
Separately, Beijing contends that the proposed Section 301 tariffs violate the following WTO provisions.
- Article I.1 of the GATT 1994 because the measures at issue fail to extend immediately and unconditionally to mainland China an “advantage, favour, privilege or immunity” granted by the United States "[w]ith respect to customs duties and charges of any kind imposed on or in connection with" the importation of products originating in the territory of other members.
- Article II.1(a) and (b) of the GATT 1994 because the measures at issue fail to accord to certain products originating in mainland China the treatment no less favourable than that provided for in the U.S. schedule of concessions and commitments annexed to the GATT 1994.
- Article 23 of the Dispute Settlement Understanding because the measures at issue fail to recourse to, and abide by, the rules and procedures of the DSU, when the United States seeks the redress of a violation of obligation or other nullification or impairment of benefits under the covered agreements or an impediment to the attainment of any objective of the covered agreements.
For its part, the United States contends that there is no basis for WTO consultations over these measures because, in the case of the steel and aluminium tariffs, those tariffs are not safeguard measures but rather tariffs on imports that threaten to impair the national security of the United States. With respect to the proposed Section 301 measures, the United States argues that it has not yet adopted any tariff measures with respect to mainland China. Nonetheless, Washington agreed to accept Beijing’s requests for consultations likely in an attempt to strike a deal that includes favourable concessions on a number of matters of concern.