27 Nov 2018
WTO Disputes over U.S. Actions on Imported Steel and Aluminium, Certain Mainland Chinese IPR Policies Move Forward
The World Trade Organisation Dispute Settlement Body agreed at its 21 November meeting to establish a panel to examine allegations by seven economies – mainland China, the European Union, Canada, Mexico, Norway, Turkey and Russia – that the Section 232 tariffs the United States imposed earlier this year on imported steel and aluminium contravene U.S. multi-lateral obligations. India and Switzerland also filed first requests for a panel; these requests were blocked by the United States but a panel will automatically be formed upon the filing of second requests. Additionally, more than 20 countries have reserved their third-party rights to participate in the Section 232 proceedings and the DSB also agreed to establish separate panels to examine the countermeasures that each of the seven economies mentioned above has imposed on a range of products from the United States.
According to the WTO, the seven complainants reiterated their belief that the U.S. measures, allegedly taken for national security reasons, are in their content and substance safeguard measures taken to protect the U.S. steel and aluminium industries from the economic effects of imports. The seven economies disagree with U.S. arguments that the national security exception under Article XXI of the General Agreement on Tariffs and Trade precludes WTO panels from examining the claims, arguing that while national security was a sensitive matter panels were fully within their right to examine whether such claims are justified under the exception. Several complainants also argued that resort to Article XXI by the United States would frustrate the purpose of WTO dispute settlement and could render all WTO obligations effectively unenforceable. The seven added that because the complaints involve the same U.S. measures and essentially the same arguments, a single panel should be established to examine their claims.
The United States, for its part, said the Section 232 tariffs are necessary for the protection of its essential security interests given the key role steel and aluminium plays in U.S. national defence. According to the United States, these measures are therefore justified under Article XXI of the GATT and not subject to review by a WTO panel. The United States argues that its position on the national security exception has been consistent for 70 years and is a position the EU and others supported in the past, most notably in 1982 when certain EU actions were examined before the GATT Council. The United States at the time supported the EU’s argument that an Article XXI defence required neither notification, justification, nor approval. If these members maintain their misguided requests for panels on the steel and aluminium tariffs, the United States noted, there is no finding a panel could make other than to note the United States has invoked Article XXI.
Separately, the United States submitted a second request for a panel to examine certain mainland Chinese measures pertaining to the protection of intellectual property rights. A panel was established and various economies, including Japan, the EU, Switzerland, Norway, Russia, Singapore and Turkey, reserved their third-party rights to participate in the proceedings.
The United States contends in this dispute that mainland China has implemented policies that consistently seek to disadvantage foreign companies for the benefit of mainland Chinese industry. This includes denying foreign patent holders, including U.S. companies, basic patent rights to stop a mainland Chinese entity from using the technology after a licencing contract ends and imposing mandatory adverse contract terms that discriminate against, and are less favourable for, imported foreign technology. The United States argues that these policies are in violation of the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights and estimates the annual economic harm to the United States alone at US$50 billion.
Mainland China claims the so-called “forced technology transfer” alleged by the United States is not within the request for consultations or panel and therefore not relevant to this dispute. According to Beijing, the U.S. accusations on this point are meritless and founded on the deliberate misrepresentation of mainland Chinese laws and practices. Mainland China added that it takes its WTO commitments seriously and would safeguard its legitimate interests in the proceedings.