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Henry Gao
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Brett, I fully agree with you that is wrong to say that "the country itself or its citizens are morally bankrupt", which is why I didn't make the statement. Instead, I was just saying that the current US administration is morally bankrupt, as they have betrayed the letter and spirit of multilateralism with the unilateral measures. Putting aside the difficult issue of morality aside, I also agree with you that there are different ways of interpreting the US memo. The following hints, however, would push me to the more skeptical side: 1. Timing: Note that the memo was issued on July 26, and the USTR was given 60 days to "secure changes at the WTO". As July and August both have 31 days, this would give USTR until Sept 24. As Sept 24 is a Tuesday, realistically the USTR only has until Sept 20 (Friday) to do anything. As you are well aware of, August is the holiday season for the WTO, and the first week of Sept only has 3 working days as both Sept 5 & 6 are WTO non-working days. Thus, this would only give USTR 13 working days to solve a long-standing practice that has existed for 54 years, if we use 1965, the year when GATT Part IV was added, as the starting year. Can this really happen? My guess is that it probably won't even make it to the official agenda to the WTO. As this is a systemic issue, the best forum would be the General Council, and it held its last meeting on July 24, which, rather conveniently, is two days BEFORE the memo was released. And you need advance notice to put things on its agenda. My bet is that the US has not tabled the matter on the agenda at the last GC meeting, and does not have the intention of tabling this on its agenda, until at least after the August holidays. If they were really keen to address the issue, why choose such an inconvenient timing? 2. Substance: The US memo doesn't provide any specific benchmark on how developing country status should be determined (granted, they have submitted other proposals earlier with more details). More importantly, they have not provided any proposal on what should happen after a Member is disqualified. Having seen the high-quality works the US government, including the USTR, has produced, especially on topics that they are genuinely interested in, I don't believe that this can be explained by sloppy drafting of the bureaucrats. As it often happens in negotiations, lack of substance simply reflects lack of interest, which again confirms my suspicion that the issue was only thrown out as a red herring to derail rather than to facilitate the negotiations.
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To paraphrase DG Azevedo, "this guy comes along, and he begins to shake the tree pretty hard". Some people starts to cheer for him while eyeing the fruits they have longed for. Little do they know, however, that the guy is not here to get the fruits, but to kill the tree. And whatever fruit they might get will be rather sour as it is most likely unripe.
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Thanks Brett. I agree with you that protectionism might not be the best policy and the lack of a graduation mechanism is the root of the problem. I wonder, however, whether you are giving too much credit to the current US administration by interpreting the memo as a signal that they are still interested in multilateralism, especially as they have resorted to all kinds of unilateral measures against every one, not just developing countries. Why would the developing countries abandon the S&D treatment if they knew that the US can renege on its own obligations any time and just fire at will? The Trump administration needs to show some more self-restraint to make its claim of moral high-ground more credible. I'm amazed that after all that Trump has done for the past 3 years, people still try to give him the benefit of doubt and examine his actions in the most flattering light possible. I think it is about time that we give up the illusion and recognize them as what they are. Let's face it: The US is morally bankrupt. Nothing good to multilateralism can come out of a government that itself has zero faith or respect in multilateralism.
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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.
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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.
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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"?
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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.
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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.
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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.
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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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