A World Trade Organization (WTO) dispute settlement panel has ruled that China acted inconsistently with its WTO obligations by imposing additional duties on specific imports from the United States (US). These duties were in response to the Section 232 duties that the US adopted in 2018 for steel and aluminum products.
The panel's ruling considered and rejected China's request to dismiss the US complaint due to alleged deficiencies. Furthermore, it examined China's claim that it was entitled to suspend its obligations under the General Agreement on Tariffs and Trade (GATT) 1994. The panel found that China's additional duties were not covered by specific articles of the Agreement on Safeguards and GATT 1994, thus ruling the duties inconsistent with Articles I and II of the GATT 1994.
The US had initiated WTO panel proceedings against various countries regarding measures adopted in response to the US steel and aluminum measures between 2018 and 2019. Some disputes have been resolved or terminated, while others remain in progress with expected resolutions later in 2023.
Background of the Dispute: In March 2018, the US imposed duties on steel and aluminum imports under Section 232 of its Trade Expansion Act of 1962. China considered these to be safeguard measures and announced additional duties on certain US imports. The US challenged China's measures as inconsistent with GATT 1994.
The Panel's Findings: The panel considered compliance issues, applicable agreements, and claims under GATT 1994. Key findings include:
Compliance with Article 6.2 of the DSU: The panel rejected China's preliminary objection, finding that the US' panel request clearly identified the claims under GATT 1994.
Applicability of Relevant Agreements: The panel held that China's additional duties did not fall within the scope of the Safeguards Agreement or specific provisions of GATT 1994.
Claims under GATT 1994: The panel found China's additional duties inconsistent with Articles I and II of the GATT 1994, noting the measure's discrepancies with most favoured nation treatment and China's Schedule of Concessions.
Next Steps: The panel report should be adopted by the WTO's Dispute Settlement Body within 20 to 60 days unless appealed or other arrangements are agreed upon. The adoption could be delayed due to the current non-functioning of the Appellate Body.
"The United States is pleased with the World Trade Organization (WTO) panel report released today, recognizing that the U.S. Section 232 actions on steel and aluminum are security measures, and that the People’s Republic of China (China) illegally retaliated with sham “safeguard” tariffs.
"China’s decision to pursue this dispute highlights its hypocrisy by both suing the United States in the WTO and at the same time unilaterally retaliating with tariffs. The panel rightly rejected China’s argument that the U.S. Section 232 actions are safeguard measures that may be “rebalanced” under WTO rules.
China’s use of the WTO dispute settlement system to challenge the U.S. Section 232 national security actions has caused grave systemic damage to the WTO. The WTO does not have the authority to second-guess a WTO Member’s response to threats to its security, and WTO reform must ensure that issues of national security cannot be reviewed in WTO dispute settlement. Furthermore, the WTO has proven ineffective at addressing non-market excess capacity from China and others that is an existential threat to market-oriented steel and aluminum sectors and, through the effects on imports, a threat to U.S. national security, including by eroding U.S. steel and aluminum manufacturing capacity.
"The United States condemns China’s refusal to correct its severe and persistent non-market excess capacity for steel and aluminum that is at the heart of a global crisis that led to the U.S. Section 232 national security actions. The Biden Administration is committed to standing up for U.S. workers, and all workers of market-oriented companies and industries, and creating and maintaining a fair, worker-centered trading system."
The Chinese Ministry of Commerce released a statement calling for the removal of the Section 232 tariffs after the ruling.
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