WTO Panels Establishes to Review EU Complaints on Chinese Trade Measures

· DS610 China — Measures Concerning Trade in Goods and Services

· DS611 China — Enforcement of intellectual property rights

· DS591 Colombia — Anti-Dumping Duties on Frozen Fries from Belgium, Germany and the Netherlands

· Statement by China regarding the panel report in the dispute DS544, United States — Certain Measures on Steel and Aluminium Products

· Statement by Türkiye regarding the panel report in the dispute DS564, United States — Certain Measures on Steel and Aluminium Products

· Statement by Hong Kong, China regarding the panel report in DS597 — United States — Origin Marking Requirement

· Appellate Body Appointments

· Surveillance of Implementation

· Statements by Norway and Switzerland regarding the panel reports in DS552 and DS556, United States — Certain Measures on Steel and Aluminium Products

At a meeting of the Dispute Settlement Body (DSB) on 27 January, WTO members agreed to requests from the European Union for the establishment of dispute panels to examine Chinese measures affecting trade in goods and services with Lithuania as well as China’s enforcement of intellectual property rights. Members also discussed recent panel rulings regarding interpretations of the WTO’s national security exception.

DS610 China — Measures Concerning Trade in Goods and Services

The European Union submitted its second request for the establishment of a WTO dispute panel to examine its complaint regarding measures attributable to China restricting the trade in goods from or to Lithuania or linked to Lithuania. The EU's first request was blocked by China at the previous DSB meeting on 20 December. The EU said it is regrettable that, despite its efforts to resolve this issue bilaterally, China has not removed its discriminatory and coercive measures. The EU said it is entitled to protect its member states against China's discriminatory measures, which it considers to be in breach of WTO rules.

China said it regretted the EU decision to pursue its request for a panel and said it attaches great importance to its WTO commitments. China said it will vigorously defend its measures in the panel proceedings.

The DSB agreed to the establishment of a panel. The United States, Norway, Switzerland, New Zealand, the United Kingdom, Türkiye, Chinese Taipei, Indonesia, Russia, Brazil, Japan, Korea, Canada, Colombia, Viet Nam and India reserved their third party rights to take part in the proceedings.

DS611 China — Enforcement of intellectual property rights

The European Union submitted its second request for a dispute panel to examine its claims regarding China's enforcement of intellectual property rights. The EU's first request was blocked by China at the previous DSB meeting on 20 December. The EU reiterated the basis for its complaint, namely that the Chinese measures unduly restrict the possibility to enforce intellectual property rights in China and are inconsistent with China's obligation under the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS).

China said it regretted the EU's second request for the panel. Anti-suit injunction in the field of essential patents is a novel issue that has emerged in recent years in many jurisdictions of WTO members, including the EU, and no unified international rules have been established to govern this issue, China said. China added that it will vigorously defend its legitimate measures and is ready to engage further with the EU to resolve the issue.

The DSB agreed to the establishment of a panel. Ukraine, the United States, Chinese Taipei, the United Kingdom, Norway, Switzerland, Russia, India, Korea, Brazil, Canada, Colombia, Indonesia, Singapore and Viet Nam reserved their third party rights to take part in the proceedings.

DS591 Colombia — Anti-Dumping Duties on Frozen Fries from Belgium, Germany and the Netherlands

Colombia made a statement with regards to the arbitration award issued in the dispute case initiated by the European Union in DS591, “Colombia — Anti-Dumping Duties on Frozen Fries from Belgium, Germany and the Netherlands.” The arbitration award was issued to the parties on 19 December, and then notified to the DSB, the Council for Trade in Goods, the Committee on Anti-Dumping Practices and circulated to members on 21 December.

Colombia said that, while it disagreed with some of the findings, it intends to implement the arbitrators' award in a manner that respects Colombia's WTO obligations. Colombia has already begun to evaluate options for doing so but will require a reasonable period of time to implement the award, it said. Colombia added that it stands ready to discuss this matter with the EU.

Colombia noted that this was the first arbitration award issued using the alternative appeals procedures established under the Multi-party interim appeal arrangement (MPIA) to which 25 WTO members are participants. Colombia said the MPIA procedure has now proven to be a viable and well-functioning interim mechanism that can replace, on a temporary basis, the Appellate Body and preserve members' right to appeal.

Eighteen members then took the floor to comment. Most of the speaking members said the proceedings provided an illustration how the MPIA can provide effective and efficient dispute resolution in the absence of the Appellate Body.

Statement by China regarding the panel report in the dispute DS544, United States — Certain Measures on Steel and Aluminium Products

Statement by Türkiye regarding the panel report in the dispute DS564, United States — Certain Measures on Steel and Aluminium Products

China noted the panel in DS544 found that the national security exception under Article XXI(b) of the GATT 1994 is not self-judging, that the US Section 232 measures on steel and aluminum imports violated cornerstone provisions of the WTO regarding tariff bindings and most favoured nation treatment, and that the US measures were not taken in a time of emergency in international relations, thus failing to meet the threshold for invoking the Article XXI(b) national security exception. China had hoped the US would show self-restraint and not appeal every unfavourable panel report “into the void”, a void which the US itself has created through the constant blockage of appointment of Appellate Body members.

In its public statements the US seems to indicate that it will refuse to comply with the result of the proceedings, China said; thus the WTO membership is faced with a situation in which one member has declared itself to be above the law. This is in sharp contradiction with the principle of rule of law embedded in this rules-based organization as well as the binding, enforceable nature of the dispute settlement system, China added.

The United States said it regretted this item was placed on the DSB agenda and that China and certain other WTO members seek to drag issues of national security into the WTO. It noted that appeals have been filed by the US against this and the other three panel rulings on US steel and aluminium duties circulated on 9 December.

The United States will not cede decision-making over its essential security to WTO panels, it said; for over 70 years, the US has held the clear and unequivocal position that issues of national security cannot be reviewed in WTO dispute settlement and the WTO has no authority to second-guess the ability of a WTO member to respond to a wide range of threats to its security. Adjudicating questions of national security in the WTO is not only incompatible with the purpose of the WTO but will not advance WTO members’ shared interests in the WTO as a forum for discussion and negotiation, the US said.

Five WTO members then took the floor to comment on the findings of the panel in this and the other four cases as well as the US decision to file appeals.

Türkiye also made a statement regarding the findings of the dispute panel in its dispute case against the US steel and aluminium safeguard measures (DS5654). Türkiye said it was disappointed the US had chosen to appeal the panel report “into the void”, a move which inflicts great harm upon the multilateral trading system, it said. Türkiye welcomed the panel's finding that the steel and aluminium safeguard measures cannot be justified as a national security exception based on excess global steel capacity, which does not constitute an emergency in international relations.

The United States referred to its earlier remarks regarding China's statement and said that Türkiye has already illegally retaliated against the US. Other members reiterated their comments under the earlier item.

Statement by Hong Kong, China regarding the panel report in DS597 — United States — Origin Marking Requirement

Hong Kong, China said the panel report in DS597, circulated to WTO members on 21 December, categorically reveals the erroneous views of the United States by concluding that the origin marking requirements arbitrarily imposed on goods from Hong Kong, China by the United States is inconsistent with WTO rules. Most specifically, the United States has violated the most favored nation treatment requirement, which is a bedrock principle of the WTO, it said.

The panel also concluded that the United States has not demonstrated that the measure is justified on the grounds of national security under Article XXI(b) of the GATT 1994, with the panel pointing out that while the multilateral trading system allows for sufficient flexibility for members to adopt measures they considered necessary for the protection of their security interests, it also ensures that this flexibility is exercised within the limits intended by its drafters, said Hong Kong, China.

Hong Kong, China criticized the US decision to file an appeal, saying the US is taking advantage of the impasse in the appointment of Appellate Body members and evading its responsibility to bring this measure into conformity with its WTO obligations.

The United States said the challenged actions with respect to Hong Kong, China were based on well-grounded determinations implicating US essential security interests relating to democracy and human rights. The US said it acknowledges that not all WTO members value democratic principles or human rights, or perceive them as relevant to their essential security interests, but the United States does, as is reflected in the U.S. National Security Strategy which was the basis for the adoption of the challenged measure.

The US said it fundamentally disagrees with the panel’s approach, which suggests a state ought to defer consideration of its essential security interests until after a breakdown in relations. A WTO member cannot be expected to wait until it is too late to act, or be required to sever relations, as a prerequisite for other action it considers necessary, the US said.

Several members took the floor to comment on the panel's findings, the US decision to appeal, and the current situation in Hong Kong, China.

Appellate Body appointments

Guatemala, speaking on behalf of 127 members, introduced for the 62nd time the group's proposal to start the selection processes for filling vacancies on the Appellate Body. The extensive number of members submitting the proposal reflects a common concern over the current situation in the Appellate Body which is seriously affecting the overall WTO dispute settlement system against the best interest of members, Guatemala said for the group.

The United States said members are aware of the longstanding US concerns with WTO dispute settlement. Those concerns remain unaddressed, and the US does not support the proposed decision from the 127 members. Fundamental reform is needed to ensure a well-functioning WTO dispute settlement system, and the US feels strongly that the first step towards reform is to better understand the interests of all members in WTO dispute settlement. The United States has been engaging with other members in informal discussions to advance this goal and appreciates the deeply substantive and informative discussions over the past several months, which reflect a significant departure from the stale conversations of past years.

Nearly 20 delegations took the floor, with many reiterating statements made in past meetings that stressed the importance of the WTO's two-tiered dispute settlement system to the stability and predictability of the multilateral trading system and the need to resolve the deadlock. Several expressed regret that five additional panel reports have now been appealed “into the void” and said this underlined the urgent need to restore the two-tiered dispute settlement system. Many members also noted the commitment made by ministers at the WTO's 12th Ministerial Conference (MC12) to engage in discussions aimed at securing a fully functioning dispute settlement system by 2024 and pledged their support for securing an outcome within the prescribed time period.

For the 127 members, Guatemala again came back to say the fact a member may have concerns about certain aspects of the functioning of the Appellate Body cannot serve as pretext to impair and disrupt the work of the DSB and dispute settlement in general, and that there was no legal justification for the current blocking of the selection processes, which is causing concrete nullification and impairment of rights for many members.

The chair of the DSB, Ambassador Athaliah Lesiba Molokomme of Botswana, recalled the commitment by WTO members at MC12 to conduct discussions with the view to having a fully and well-functioning dispute settlement system accessible to all members by 2024. She said it was her understanding that informal discussions in this regard are currently ongoing. The chair also recalled that on 10 November, an informal meeting on WTO reform was held which covered the dispute settlement system, and she hoped that going forward, members will be able to find a solution to this matter.

Surveillance of implementation

The United States presented its status report regarding its implementation of the panel ruling in the dispute case initiated by the European Union in DS577 “United States — Anti-dumping and countervailing duties on ripe olives from Spain”. The panel ruling was circulated on 19 November 2021 and was adopted by the DSB on 20 December 2021. The European Union and the United States later agreed the US would have until 14 January 2023 to implement the ruling.

The United States noted that the US Commerce Department initiated a review of the measure in July 2022 and issued a preliminary determination, followed by a final determination on 20 December in which it revised aspects of its analysis and determinations with respect to the calculation of one respondent's subsidy rate, the determination of specificity, and the calculation of subsidies for processed agricultural products.

On 12 January 2023, the U.S. Trade Representative directed the US Commerce Department to implement the US determinations, with a notice of the completed implementation for the new determination issued the following day and published in the Federal Register on 19 January. The United States has thus completed its implementation of the DSB's recommendations in this dispute, the US said.

The European Union said it disagrees that the US has achieved full compliance with the ruling. For example, regarding the pass-through of the benefit, the US does not appear to have implemented the ‘as such’ finding of the panel, it said. The EU is therefore now considering the next steps to make sure that its rights under the WTO rules are respected, it said.

The United States also presented status reports with regard to DS184, “US — Anti-Dumping Measures on Certain Hot-Rolled Steel Products from Japan”, DS160, “United States — Section 110(5) of US Copyright Act”, DS464, “United States — Anti-Dumping and Countervailing Measures on Large Residential Washers from Korea”, and DS471, “United States — Certain Methodologies and their Application to Anti-Dumping Proceedings Involving China”.

The European Union presented its first status report regarding its implementation of the panel report in the dispute cases initiated by Türkiye in DS595, “European Union — Safeguard Measures on Certain Steel Products”. The panel ruling was circulated on 29 April 2022 and was adopted by the DSB on 31 May 2021. Türkiye and the EU later agreed that the EU would have until 16 January 2023 to implement the ruling.

The EU said that on 13 January the Commission Implementing Regulation (EU) 2023/104 was adopted amending the safeguard measure at issue, with the regulation entering into force on 14 January. The adoption and entry into force of this regulation achieves the EU's full implementation of the ruling, it said.

Türkiye said a proper reassessment by the EU should have led to the conclusion that the safeguard measures must be withdrawn. Türkiye said it will continue to review the EU implementing regulation carefully and, if necessary, will ensure that its rights are fully protected.

One member said the EU measure should be withdrawn while another said the implementing regulation does not address the issues highlighted in the panel ruling, thus it would lead to continued noncompliance.

The European Union came back to say that it addressed the three inconsistencies cited in the panel ruling in the implementing regulation, inconsistencies that could be corrected by complementing the original determination through additional explanations based on the existing facts. It is up to members to choose the way in which to achieve compliance if there is more than one option to do so, the EU said. The EU said it does not see anywhere in the panel report a basis for arguing that the only way to achieve implementation is the withdrawal of the measure.

The European Union also presented a status report with regard to DS291, “EC — Measures Affecting the Approval and Marketing of Biotech Products”.

Indonesia presented its status reports in DS477 and DS478, “Indonesia — Importation of Horticultural Products, Animals and Animal Products.”

Other business

Statements by Norway and Switzerland regarding the panel reports in DS552 and DS556, United States — Certain Measures on Steel and Aluminium Products

Under “other business”, Norway and Switzerland made statements regarding the panel rulings in their respective challenges to the US tariffs on steel and aluminium imports.

Norway regretted the US decision to appeal the panel ruling as this will be another dispute in a long line of cases appealed “into the void” and awaiting a final determination. Norway said it welcomes dialogue with the US on the way forward in this dispute.

Norway said it was pleased with the panel's finding that the additional tariffs are in violation of WTO rules, including its conclusion that they were not justified under the Article XXI(b) security exception. This panel, like the others, has confirmed that Article XXI is an affirmative defence to a claim of WTO inconsistency and that the invocation of the WTO security exception does not preclude a panel from making findings on the complainant's claim.

Switzerland also said it regretted the US decision to appeal the panel ruling and that this showed the need to restore a fully functioning and efficient dispute settlement mechanism. Switzerland will continue to engage in dialogue with all members on this issue, including the United States. Switzerland welcomed the panel's findings on the Article XXI security exception from a systemic point of view; without the possibility of a panel review, any member could simply invoke Article XXI to avoid adhering to their WTO obligations.

The United States referred to its earlier statements on the matter. Several other members took the floor to comment on the Norwegian and Swiss statements.