This is Henry Gao's Typepad Profile.
Join Typepad and start following Henry Gao's activity
Join Now!
Already a member? Sign In
Henry Gao
Recent Activity
Dear Julia and Marc, You are both right, but I think Julia's point on "special difficulties" can be supported by fn. 611 in p. 71, which states: The USDOC further observed that, in any event, it was "unable to reliably undertake such an analysis on the limited records of these investigations", and "it would be very difficult for the Department and interested parties to identify and obtain sufficient evidence to analyze whether SIEs were exercising market power in such a way that they were causing private supplier prices to align with the SIE prices." This highlights the "special difficulties" investigating authorities face when they try to obtain info. This is where Section 15(b) can be useful, as discussed in detail in pp. 54-56 of my paper with Weihuan Zhou: Zhou, Weihuan and Gao, Henry S. and Bai, Xue, China's SOE Reform: Using WTO Rules to Build a Market Economy (July 1, 2018). International and Comparative Law Quarterly, 2019, Vol 68, Issue 3 (Forthcoming); Society of International Economic Law (SIEL), Sixth Biennial Global Conference. Available at SSRN: https://ssrn.com/abstract=3209613 or http://dx.doi.org/10.2139/ssrn.3209613. As we argued in the paper, it is now high time for other WTO Members to make more active use of Section 15(b), as both the lack of info and "public body" problems have been solved by recent developments. In our view, CVD rather than AD is a much more effective way to help build market economy in China.
1 reply
Thanks theoriginalanon99 for the kind comments. It is great to find validation of our proposal in the actual practice. Hopefully our paper can help the Members to institutionalize the practice and thus enhance the Member's control over the DSS.
1 reply
I was wondering whether the reference of "errare Humanum est" is to “Errare humanum est, sed perseverare diabolicum”, or “errare Humanum est, sed Concedere Divinum"?
1 reply
If China and US does reach agreement on cloud computing as reported by the NYT (https://www.nytimes.com/2019/04/30/us/politics/china-trade-data-technology.html), then China could agree to both freedom of data flow and ban on data localisation.
1 reply
Thanks Simon for kindly recommending our paper, and thanks to Julia and Sungjoon for your kind comments. I do share some of your concerns, but I guess, if one were to put oneself in the shoes of President Xi, the BRI is probably the only rational option given the US containment against China with the TPP, and the stagnation of domestic growth within China. It provides much needed market for China's surplus capacity, and in time, it will help to diversify China's exports away from the US. Of course, whether the strategy will succeed depends on a lot of factors, and it's probably too early to say. But our paper makes an attempt to outline the contours of a possible China model, which can help to inform some of the policy decisions.
1 reply
Like Simon, I'm also uneasy with the concept of "social dumping". However, if I understand Greg correctly, I think his main point is this: "If provisions to safeguard against social dumping are incorporated into trade agreements, they should be subject to strict procedural, substantive, and injury requirements to combat abuse." In other words, Greg is concerned less with the desiribility of social dumping, but how to prevent its abuse by putting in place proper legal rules, just like anti-dumping. All things considered, if we have to have rules against social dumping, I think something with strict legal requirements is much better than just banning them on a whim, which could lead to all kinds of WTO violations.
1 reply
Yes, I guess it proves once again that history goes in circles.
1 reply
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.
1 reply
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!
1 reply
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.
1 reply
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.
1 reply
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.
1 reply
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.
1 reply
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!
1 reply
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.
1 reply
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.
1 reply
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.
1 reply
The 232 case was filed last night.
1 reply
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.
1 reply
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.
1 reply
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.
1 reply
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.
1 reply
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.
1 reply
Thanks. I've put my replies as a separate comment to make it easier to read.
1 reply