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WTO Finds Again For US In Steel Case Against China

by Mike Godfrey, Tax-News.com, Washington

22 October 2012


In its report circulated on October 18, 2012, the Appellate Body of the World Trade Organization (WTO) has upheld a previous panel decision against China's imposition of countervailing and anti-dumping duties on imports of grain oriented flat-rolled electrical steel (GOES) from the United States.

GOES is a high-tech, high-value magnetic specialty steel that is used primarily by the power generating industry in transformers, rectifiers, reactors, and large electrical machines.

China had imposed the duties, alleging that American GOES manufacturers were being given subsidies by the US government; in particular the ‘Buy America’ provisions of the American Recovery and Reinvestment Act of 2009 and also state government procurement laws.

In September 2010, the US requested consultations with China with respect to the imposition of the duties GOES from the US, following a final determination released by the Chinese Ministry of Commerce (MOFCOM) in April that year. In its determination, MOFCOM calculated ad valorem subsidy rates of 11.7% and 12% for the respondent companies, and dumping margins of 7.8% and 19.9%.

After consultations failed to resolve US qualms, the WTO established a panel in March 2011, which reported its findings in June. In the case, the US argued that China had contravened the Subsidies and Countervailing Measures Agreement, and the Anti-Dumping Agreement, in assessing damage said to have been caused to the Chinese industry as a result of these US measures.

In its argument, apart from various procedural and due process obligations, impairing the ability of the US companies to defend their interests, the US alleged that China's findings of injury to its domestic industry were unsupported by the evidence on the record, as was China's calculation of the subsidy rates for US companies.

The WTO panel agreed with the majority of the US arguments that China had failed to properly assess the impact of the US measures, and did not adequately communicate what data was used when calculating margins in its final determination. The panel also agreed China had failed to adequately demonstrate that US dumped and subsidized imports had had a significant price effect, and caused injury to Chinese exporters.

In an appeal filed in July this year, China requested that the WTO Appellate Body "reverse the findings and conclusions of the panel that are based on the errors of law and legal interpretation”, In particular, it appealed against the panel’s conclusions in relation to MOFCOM’s price effects finding and the related disclosure of underlying facts.

However, the Appellate Body has now rejected all of MOFCOMs arguments and has found no basis to reverse the panel’s decisions in the case.

Within 30 days, the WTO Dispute Settlement Body should adopt the panel and Appellate Body reports and recommend that China take appropriate steps to bring its measures into conformity with its obligations within a reasonable period of time.

The US Trade Representative Ron Kirk commented that the WTO’s final decision showed that “American manufacturers and workers can compete and win on a level playing field, but China’s unfair duties choked off nearly all US GOES exports to its market. Today we are again plainly stating that we will continue to take every step necessary to ensure that China plays by the rules and does not unfairly restrict exports of US products.”

MOFCOM, on the other hand, only noting the report of the Appellate Body, suggested that there were still contentious areas with the WTO’s findings, and confirmed that it would give those findings due consideration.

The GOES dispute is only one in an apparent escalation of trade friction between the two countries as the US presidential election draws nearer, and President Barack Obama and his challenger, Mitt Romney, each vies to portray himself as the tougher in disputes with China.

Last month, the Obama Administration requested consultations with the Chinese government at the WTO concerning China’s auto and auto parts subsidy programme, adding to a previous US demand for a WTO panel to address China’s imposition of countervailing and antidumping duties on exports of American-produced autos, after the failure of previous consultations.

In addition, there is a long list of other actions the US government has taken against China at the WTO – from China’s subsidies to wind power equipment manufacturers and the imposition of ADs on imports of solar cells from China, to disputes regarding duties imposed by China on US poultry products and challenges to China’s export restraints on rare earths.

TAGS: tax | law | tariffs | anti-dumping | World Trade Organisation (WTO) | China | enforcement | trade disputes | United States | import duty | trade

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