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Henry Gao
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Yes, I guess it proves once again that history goes in circles.
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Thanks Rob. You are right that there have been problems with market access in China, but: 1. WTO accession does help foreign firms in expanding their access in China. For example, a recent WSJ article (https://www.wsj.com/articles/when-the-world-opened-the-gates-of-china-1532701482) notes that "foreign investment in Beijing mushroomed from $47 billion in 2001 to $124 billion a decade later." 2. On the other hand, even without WTO accession, China's exports to the US would still grow. The same WSJ article notes that "in the 15 years before its WTO entry, U.S. imports from China grew at a faster rate than in the 15 years after, albeit from a much lower base." To sum up, even without WTO accession, US firms might not get the market access they now have in China, while Chinese exports to the US would still grow. Most importantly, the US would not be able to use WTO to challenge the trade policies of China. I'm not sure anyone really wants that.
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Great post Simon. What I found most amusing is this sentence: "They also forget that China’s heterodox policies have generated not only significant domestic economic growth and poverty reduction, they have also created a huge market for western exports and investment — a market that surely would not have been as large if China had been hemmed in by western textbook economic policies." The period that China strayed furthest from "western textbook economic policies" was 1949-1978, and look at the poverty it has generated and the reduction in growth!
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Well said Joel! I can't agree more. He thinks that "[t]he problem is not with China’s policies as much as it is with the world trading regime", i.e., the WTO is the problem. That can't be further from the truth. The problem is with domestic redistribution of wealth, rather than international trade per se. He also states that "[i]f the WTO has become dysfunctional, it is because our trade rules have over-reached." Again I'd say the problem is that the rules have under-reached, esp. in failing to capture various problematic domestic policies by some major Members.
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Thanks Julia. Fully agree with your comments. I don't have the records of the GATT meetings, but my impression is that the earlier discussions have focused mainly on the issue of public ownership.
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Thanks Mark for the interesting point. The HK origin of the "private rights" language was first mentioned by Prof. Frederick M. Abbott, who noted that the Hong Kong delegation "wanted clarification that the enforcement of IPRs is the responsibility of private rights holders, and not of governments". I'm not sure if there's a linkage with China's WTO accession. See Frederick M. Abbott, Technology and State Enterprise in the WTO, in 1 World Trade Forum: State Trading in the Twenty-First Century 121 (Thomas Cottier and Petros Mavroidis eds. 1998), at footnote 11.
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As to the negotiating history, we have not found much either. However, I think that the most likely explanation is that, at the time of China's accession, the US did not apply CVD law to non-market economies. Thus, 15(b) was put in place as the logical extension of the expiration of the NME for AD after 15 years, when presumably market economy conditions would prevail in China and thus the CVD law would apply.
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Thanks Julia for the helpful comments, which also provide an opportunity to further elaborate our thoughts on these issues: 1. Lack of evidence and burden of proof: We agree that this is a problem with many WTO obligations, including China's broad commitments on market economy that we discussed in pp. 51-53 of our paper. However, we do not think this is a problem for Section 15(b), as the language on “special difficulties” affords considerable latitude to the investigating authorities, esp. in case of lack of sufficient info (pp.54-55); 2. While we agree that there could be risks of misuse of Section 15(b), just like any other provision, we do not think this is because 15(b) has no built-in time limit or detailed conditions. To the contrary, we think that we must give effect to the fact that 15(b) was drafted in such a way so as to: i. do away with a time limit; and ii. relax the conditions with loose languages such as "special difficulties" and "where practicable". We think that the differences between subsections (a) and (b) are deliberate, as the drafters probably realized that the problem of below-cost dumping would be a short-term problem (which would go away when the Chinese economy develops) while subsidies would be a more permanent issue. Thus, in most cases, active utilization of 15(b) per se would not be abuse or misuse, but doing exactly what the drafters have intended. Moreover, as the provision was drafted in a fuzzy manner, the more frequent it is used (and litigated), the clearer the detailed rules would be. 3. We fully agree that benchmarking is an important issue. However, we think that the choice of benchmarks would largely be case-specific, as one has to consider whether a particular sector is fully competitive, partially competitive, or subject to government monopoly as you have explored in your excellent paper. Thus, we chose not to discuss the issue in our paper. Hopefully we can tackle it in the next one!
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Thanks Mr. Abbott for the interesting suggestion. I guess that'd be the first thing Mr. Trump would do if he could time-travel back to 1986, when China sought to "resume" it GATT membership. That's the limitations of GATT Art. XXXV and its successor WTO Agreement Art XIII, as they could only be invoked at the time of the initial formation of GATT/WTO or accession of one party.
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They could, but whoever is the first to seek waiver will have to spend a lot of political capital. Thus, it's much better to start with unilateral actions first and then wait for China to fall into the waiver trap. Then everyone else can follow suit.
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Thanks Julia. It is very unlikely for China to get a waiver (even under the 3/4 voting mechanism) given the current political environment in the WTO. It's very likely for the US, EU, Japan & others to follow such waiver requests as they have been looking for ways to address the problems they had with China since the joint statement on overcapacity & tech transfer at MC11. For the legal question, my understanding is that a waiver waives a Member from WTO obligations but the underlying reason for the waiver doesn't have to be something already mentioned in the covered agreements. Actually, if it is already part of the WTO agreements, there is no need to seek a waiver in the first place as the Member can simply rely on that provision/exception.
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The 232 case was filed last night.
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I guess that's another proof that there is foreign influence in US policy, as China has imposed the same restrictions on outward investment by Chinese firms last year.
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Thanks Simon. This is very interesting. In the same Congressional testimony, Barshefsky also stated the following: "a guarantee we will be able to employ special "non-market economy" methods of calculating and counteracting dumping for fifteen years." "Third, we gain substantial new leverage by creating the product-specific safeguard, as well as guaranteeing our right to use non-market economy antidumping methodologies." As neither of these are prefaced by "our current", I guess the earlier statement of "our current" was just a slip of the tongue? Moreover, even if "our current" may be read together with the NME methodology, I doubt it means that the US can continue with a new NME methodology. The reason is that before China's WTO accession, the US could do whatever it wishes to do in AD investigations, but after the accession, the US cannot use any methodology that is not found in the ADA, unless of course there are special clauses in the Accession Protocol.
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It is interesting as it addressed both the issue of developing country status in general and under the SG Agreement. The parties did not agreed not to raise the issue before the Panel. Instead they went into quite some depth in debating on the issue.
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Hi Marc, You are right that there has been no challenge of developing country status per se, but the issue has arisen in several cases. In China's first WTO case, US-Steel Safeguards, for example, China claimed that it should enjoy the higher de minimus level in the Safeguards Agreement as it is a developing country. The US challenged China's self-designation and there were some interesting discussions on the issue in the case.
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You are right Brett. This is as close as it can get without using the actual words "bad faith". china's strategy, as shown in Amb. Zhang's statement, is emphasising that the EU and US have broken their "promises", a word which appeared 6 times in the statement. Here are some nice sound bites that drive the point home: "More importantly though, this dispute is really about a fundamental principle in international law: pacta sunt servanda, or “agreements must be kept”. China brought this matter to dispute settlement with the objective to establish that promises made must be respected, and treaty terms struck must be honored." "Apparently for the European Union, the expiry of Section 15(a)(ii) means nothing; the promise it undertook 16 years ago means nothing." There's also another issue worth pondering, even though is was not raised in the statement. What kind of example are the US and EU setting for China? Bending the very rules that they tailor-made for China just for some short-term benefits? Wait until the moment when China becomes the No. 1 World Power.
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Thanks. I've put my replies as a separate comment to make it easier to read.
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Thanks for the clarifications Anonymous. You raised some important issues and it is good that the Qatari complaints provide an opportunity to examine them in detail: 1. Art. 9: I agree that the same principle might provide an argument for applying similar approach to the parallel situation of multiple respondents. However, I think there could also be a strong argument against applying the same principle, because both 9.1 and 9.3 refer to complaint on "the same matter", i.e., the same measure by one Respondent. In the current case, however, no matter how similar the trade measures by UAE, Bahrain and Saudi Arabia, they are still measures by three different Members. This might make it difficult to apply Art. 9.3. 2. Art. 4.11: I agree that merely stating that "the first sentence of Article 4.11 of the DSU shall not apply" does not, by itself, precludes other Members from seeking to join the consultations. Instead, the Complainant has to make sure that the request for consultations is brought under Art. XXIII rather than Art. XXII. This is exactly what Qatar has done in the 2 sentences preceding this statement. Thus, I think Qatar's statement on Art. 4.11 is, in a way, trying to put a big sign "for invitees only" in case any "persona non grata" is trying to gatecrash into the consultation room. I also have slight reservations on your point that " Article 4 conditions 3rd party participation in consultations on agreement of the Member receiving the request -- not on the wishes of the Member that issued the request." Assuming "request" refers to "request for consultations", you are basically saying that 3rd party participation is up to the Respondent, or "the Member receiving the consultation request", rather than the Complainant, or "the Member that issued the request". I agree that the Respondent may deny another Member to participate as 3rd party. This rarely happens but has happened in the China - VAT on Integrated Circuits case, as I discussed in my paper (https://ssrn.com/abstract=1095803) in 2007. However, I do not agree that the Complainant has no role to play here. Instead, as I mentioned earlier, the Complainant can shut the door completely by simply making the consultation request under Art. XXIII, as Qatar has done here. In other words, there are two doors to other Member's participation as 3rd parties in consultations, the first guarded by the Complainant, and the second guarded by the Respondent. Only when both doors are open can a WTO Member join the consultation as a 3rd party. But if the Complainant shuts the first door with Art. XXIII, there's no way that such Member may proceed to the second door.
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Sure Simon. It is Administrative Regulations on Market Access of New-energy Automobile Manufacturers and Products. I can only find the Chinese version at http://www.miit.gov.cn/n1146295/n1146557/n1146624/c5462995/content.html. But the FT has reported on this at https://www.ft.com/content/adb80896-1462-11e7-80f4-13e067d5072c?mhq5j=e1. Also, the EU Chamber of Commerce in China has analyzed the new rule in its recent publication at http://www.europeanchamber.com.cn/en/china-manufacturing-2025.
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The new regulations on new energy cars seem to make tech transfer a requirement for the approval, and this is probably why the US is stepping up the efforts now.
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Thanks for raising these interesting points, but I have some slightly different opinions: 1. DSU Art. 9.3: I'm not sure if it would apply to the Qatar case, as the clause refer to the situation where "more than one Member requests the establishment of a panel", which means that it is supposed to apply to cases with multiple complainants. I'm not sure if it would apply to cases with the same Complainant against multiple Respondents. 2. Art. 4.11: Thanks for pointing out that other WTO Members will be able to join the disputes. What I meant by "other WTO Members will not be able to join the disputes as 3rd parties" is that they won't be able to join the consultations. I agree that they might be able to join the dispute, but with two provisos: first, the case must proceed beyond the consultation stage. They wouldn't be able to join the bilateral consultations if the cases are settled. Second, even if they can join as third parties, that would be under DSU Art. 10, which is a totally different process versus Art. 4.11. I guess that's why Qatar specified this article in the first place.
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I agree that the ban will have an effect on the consumption of Korean services, but it is not a direct restriction because Chinese citzens can still book the hotel and tours from other non-Chinese websites such as Expedia.com and visit Korea. If China directly bans Chinese tourists from visiting certain places or staying at certain hotels in Korea, then it will be a Mode 2 violation. But that's not what China did here, they just banned the sale of tours in China by Chinese firms.
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Interesting thought Simon. If the US and China could reach a deal, why not do it in the WTO instead? This is what was suggested by Aaditya Mattoo a few years ago: https://piie.com/publications/working-papers/china-round-multilateral-trade-negotiations
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Dear Julia, you are right that Mode 2 applies to consumption of foreign services by one's own citizens/tourists abroad. However, what we have here is Chinese government asking Chinese travel agents in China to stop selling tour packages to Chinese citizens in China. Thus it is not covered by Mode 2.
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