WTO Roundup: New Safeguard Consultation Requests on US Tariffs, Biodiesel Case Update

8 February 2018

The past few weeks have seen a series of developments within WTO dispute settlement, including the filing of new cases as well as the release of a long-awaited panel report on European duties involving imported biodiesel from Indonesia.

Outside the realm of formal dispute settlement, China, Chinese Taipei, and South Korea have all tabled requests over the past week for consultations on the US’ new global safeguard duties, which affect imported solar cells and modules as well as residential washing machines.

Biodiesel disputes move forward

In recent weeks, the row between the European Union and two of the world’s top biodiesel exporters, namely Argentina and Indonesia, has seen some significant developments – both within WTO dispute settlement and in the EU judicial system.

The EU had begun investigating imports of biodiesel from both countries in 2012, following industry complaints which alleged that the fuel was being sold on the European market at prices below normal value – a practice known as dumping. The bloc ultimately deemed that dumping was occurring and was causing material injury to the EU’s own producers, and moved to impose anti-dumping duties as a result.

The EU move prompted both Buenos Aires and Jakarta to file cases at the global trade club, challenging different aspects of the investigation and the duties, as well as the European bloc’s anti-dumping regulation.

The WTO Appellate Body later issued its findings on the EU-Argentina dispute (DS473) in October 2016, largely agreeing with an earlier dispute panel which had issued a mixed ruling in the case. (See Bridges Weekly, 13 October 2016)

The EU subsequently adjusted the duties for Argentina downwards, but left those for Indonesia intact, according to the European Commission’s implementing regulation from September 2017 in response to the WTO ruling.

More recently, a dispute panel (DS480) issued its ruling on the EU-Indonesia case in late January, largely upholding Indonesia’s claims in the case, with the exception of claims involving the calculation of provisional level of dumping and the subsequent collection of duties from one of the Indonesian biodiesel producers being investigated. It also issued a mixed assessment on a separate claim involving the EU’s alleged failure to determine whether “significant price undercutting” was in play.

The claims and related findings focused largely on the EU’s approach to calculating production costs and how it set up the “normal value” that would be used to determine whether dumping was at work. Indonesia had also questioned whether the EU had imposed duties that were above the “dumping margin,” in other words the difference between normal value and the export price used for comparison, among other concerns. 

There is now a 60-day window from when the report was published for either the EU or Indonesia to appeal the dispute panel’s findings, which would then lead to a review by the WTO’s Appellate Body. Otherwise, the report would be adopted by the Dispute Settlement Body.

In related news, the past month has also seen the biodiesel row enter a new chapter in the EU’s judicial process. Over a year ago, the European Court of Justice (ECJ) had moved to annul the application of definitive anti-dumping duties and the collection of provisional duties from Argentina and Indonesia. The ECJ serves as the bloc’s highest court.

The EU’s foreign affairs council announced in late January, days before the WTO dispute panel report was released, that it would terminate its appeals at the ECJ involving six judgements involving the biodiesel duties.

“The Court had initially annulled two articles in a Council implementing regulation imposing a definitive anti-dumping duty and collecting definitively the provisional duty imposed on imports of biodiesel originating in Argentina and Indonesia,” explained the 22 January Council conclusions, noting that the Council had moved to appeal the ECJ judgements in November 2016.

South Korea, China, Chinese Taipei ask for safeguard consultations with US

US President Donald Trump’s move to impose hefty safeguard tariffs on imported solar cells or modules and washing machines, with some country exceptions, has prompted consultations requests from three WTO members in the organisation’s Committee on Safeguards. (See Bridges Weekly, 25 January 2018)

In the case of the washing machine tariffs, the US has imposed these safeguard measures for three years. Solar cells and modules face a four-year tariff. In both cases, those tariffs decrease over time, and in case of the washing machines, the measure has been applied as a tariff-rate quota.

Under global trade rules, WTO members can temporarily curb imports in cases of import surges that either cause substantial harm to domestic industry or pose a threat of doing so.  However, that same WTO member must also give affected countries who have “substantial interest” in exporting the good in question with “adequate” opportunity to hold consultations beforehand.

China submitted this week two separate consultations requests, dealing with solar cells and washing machines, respectively, and citing various aspects of the WTO’s Agreement on Safeguards and the General Agreement on Tariffs and Trade (GATT). It has also asked for these discussions to be held within days, suggesting the dates of 9 or 12 February.

South Korea had already tabled two consultations requests in late January, with one referring specifically to the safeguard tariffs that the US has imposed on washing machines and the other to the safeguards planned for imported solar cells. The request by Chinese Taipei was circulated shortly thereafter, and involves the safeguards applied to solar cells. Neither South Korea nor Chinese Taipei have suggested specific dates for such talks, though they have called for these to happen soon.

Seoul’s consultations requests alleged that the US actions are not in line with the substantive and procedural requirements set forth in WTO safeguard rules, as well as most-favoured nation treatment obligations and other related requirements under the GATT. The two South Korean consultations requests flag in particular the importance of providing a “sufficient amount of time for a meaningful exchange” in that context.

WTO members can apply safeguard measures under the organisation’s rules, but in turn are usually meant to compensate the targeted exporting members. How much they would have to provide in terms of compensation would be agreed on during the consultation process, and the members involved would have approximately one month to agree on those terms. The three requesting members each indicated that they would like to address the trade compensation issue with the US in relation to the safeguard measures.

Should a mutually acceptable arrangement not be reached in that month-long timeframe, the affected exporting members have up to three months from when the safeguards were applied to suspend “substantially equivalent concessions or other obligations,” though this response could get blocked by the WTO’s Goods Council and also faces other limitations, which are outlined in the organisation’s safeguard rules. 

Other cases put forward

Returning back to formal dispute settlement, some new cases have also arrived at the WTO in recent weeks, such as a complaint (DS538) from the United Arab Emirates involving anti-dumping measures that Pakistan applies on a type of packaging used for foodstuffs, along with a consultations request from Australia on the use of various measures which it says makes it harder to sell imported wine in the supermarkets of certain Canadian provinces (DS537).

In both of those cases, the WTO members involved have a minimum period of 60 days in which to hold consultations and attempt to find a mutually agreed solution, after which the complainant can ask for a dispute panel to hear the case.

ICTSD reporting.

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