The U.S. blocked first requests by China, the EU, Canada, Mexico, Norway, Russia and Turkey for establishment of dispute panels to rule whether Section 232 duties imposed by the U.S. on steel and aluminum comply with WTO rules, the official said.
Those countries allege that the U.S. measures fail to respect requirements under the WTO Safeguards Agreement and questioned the U.S. claims that the tariffs are based on national security considerations and are therefore exempt from WTO rules applying to safeguard remedies.
But the U.S. countered that WTO adjudicators cannot review exceptions from WTO rules based on national security claims and that such a review would undermine the legitimacy of the WTO dispute settlement system and “even the viability of the WTO as a whole,” the official said.
China during the meeting said the United States’ Section 232 tariffs are “egregiously inconsistent” with the WTO’s national security exception, and the U.S. countered that China is using WTO dispute settlement to promote nonmarket economic policies, which have led to excess capacity in steel and aluminum and distortions of world markets that are damaging the interests of market-oriented economies, their businesses and workers.
The U.S. added that it won’t allow China’s “party-state” to “fatally undermine” U.S. steel and aluminum industries, on which the U.S. military, “and by extension, global security, rely,” the trade official said.
The seven complainants can renew their requests at the next DSB meeting, the official said, which is currently scheduled for Nov. 21.
In a related but separate dispute settlement track, Canada, China, the EU and Mexico blocked U.S. requests for establishment of panels to rule on whether duties imposed by the four governments in retaliation to U.S. Section 232 duties violate WTO rules, specifically the organization’s most-favored nation principle, which holds WTO members to certain bound tariff rates.
“The U.S. said it was ‘hypocritical’ for these members to criticize the U.S. for failing to respect WTO rules when their own actions had no basis in the WTO Agreements,” the Geneva official said. “Canada, China, the EU and Mexico all said their actions were justified and a direct response to the ‘unwarranted’ U.S. tariffs on steel and aluminum.”
The U.S. can renew its request at the next DSB meeting.
In addition to developments related to U.S. Section 232 duties, China blocked a first request from the U.S. for establishment of a dispute panel to rule on certain Chinese measures related to intellectual property rights protection, according to the Geneva trade official.
The U.S. claimed that China denies foreign patent holders the ability to enforce patent rights against a Chinese joint venture party after a technology transfer contract ends and that China imposes “mandatory adverse contract terms” that set an unequal playing field for imported foreign technology, in violation of the WTO Agreement on the Trade-Related Aspects of Intellectual Property Rights (TRIPS).
China claimed the United States’ allegations are without merit.
The U.S. can renew its request during the next DSB meeting.
Finally, WTO members failed to agree to initiate a selection process to fill four vacancies on the WTO Appellate Body after the U.S. said “it was not in a position” to accept a proposal supported by 68 WTO members calling for the process to start as soon as possible, the trade official said.
“Many members once again underlined the urgency of resolving the issue,” the official said.
During the meeting, the U.S. delivered a long statement challenging the legitimacy of the practice of advisory opinions issued by the Appellate Body and dispute panels, according to the official.
Several members “intervened,” including the EU, Brazil, Japan, China, Canada, New Zealand, Chile and India, with some questioning the notion that WTO rules prohibit the issuance of such opinions.
The U.S. has been blocking the launch of a selection process to fill vacancies on the seven-slot Appellate Body since August 2017.
Skeptics say that the existing system goes too far in compelling countries to change their trade policies at a national level.
U.S. Trade Representative Robert Lighthizer during a September 2017 discussion at the Center for Strategic and International Studies in Washington said the Appellate Body has overreached its authorities spelled out in the WTO’s Dispute Settlement Understanding, a set of rules governing the settlement of WTO disputes.
A multilateral meeting held Wednesday and Thursday in Ottawa to address the functioning of the WTO dispute settlement system was not attended by any U.S. representative and failed to reach any concrete outcomes, as indicated by a joint communique issued at the meeting’s conclusion.
The delegations of Canada, Australia, Brazil, Chile, the EU, Japan, Kenya, South Korea, Mexico, New Zealand, Norway, Singapore and Switzerland, in the statement expressed an urgency in filling the Appellate Body vacancies.
Referring to the functional aspects of WTO dispute settlement, they said that they are “ready to work on solutions, while preserving the essential features of the system and of its Appellate Body.”