WTO ruling on safeguard duty a shot in arm for US
The WTO ruling on safeguard duty helps the US justify its tariffs slapped on India, China, Mexico, EU and Norway
A controversial ruling by the highest court for global trade disputes on 15 August is going to come in handy for the US to justify its unilateral crowbar trade measures slapped on India, China, Canada, the European Union, Mexico and Norway, among others, legal analysts said.
In a ruling by the World Trade Organization’s highest court for trade disputes, the appellate body (AB), on Thursday, a three-member bench affirmed that claims against Indonesia under the WTO agreement on safeguards should be dismissed on grounds that the duty was not a safeguard measure.
The three parties involved in the dispute—the complainants, Taipei and Vietnam, and the defendant Indonesia—had argued that the duty imposed by Jakarta on iron and steel was a safeguard measure. “But the appellate body rejected this consensus position,” according to Brenden McGivern, a former Canadian dispute settlement official and now an attorney on trade disputes for White and Case LLP, in Geneva.
The ruling was “unusual”, given that the appellate body rejected the concurring views of the complaining parties (Taipei and Vietnam) and the defending party, on the critical threshold issue of whether the measure was a safeguard, he said.
WTO members are entitled to impose safeguard measures to curb sudden and unforeseen surges in imports that cause “serious injury to a member’s domestic industry”. Members subjected to safeguard duties can challenge them if the safeguard-imposing country fails to follow the conditions set out in the WTO’s agreement on safeguards.
In the ruling, three members of the appellate body, Hong Zhao, Shree Baboo Chekitan Servansing, and Peter Van den Bossche, concurred with the findings of an earlier panel. “Having reviewed the design, structure, and expected operation of the measure (the duties imposed by Indonesia on steel items from Taipei and Vietnam), together with all the relevant facts and arguments on record, we find that this measure does not present the constituent features of a safeguard measure for purposes of applicability of the WTO safeguard disciplines,” the three judges observed.
In the proceedings before the judges, India along with China, the EU, Japan, Korea, Australia, Russia, the US, and Ukraine had participated as third parties. India, China, the EU, Korea, and Japan said the measures imposed by Indonesia must be treated as safeguard measures.
“The ruling has come as a huge surprise for us because the appellate body’s reasoning is flawed and was aimed at helping the US to argue that Section 232 duties on steel and aluminium were acceptable,” argued a trade diplomat who participated in the proceedings. “Clearly, the WTO’s AB has changed its stance to satisfy the US and this has serious repercussions for the trade law and jurisprudence.”
The US has justified the punitive duties of 20% on steel and 10% on aluminium under Section 232, which deals with national security provisions as “sovereign determinations” that fall under Article 21 of the GATT (General Agreement on Tariffs and Trade) 1994.
The US repeatedly dismissed complaints by India, China, Canada, the EU, Mexico, and Norway that the punitive duties imposed by the Trump administration constituted a “disguised safeguard” measure.
Consequently, the six countries maintained before a dispute settlement panel proceedings last month that they were justified to impose retaliatory measures. The US, however, disagreed with the arguments by the six countries. US trade representative, ambassador Robert Lighthizer, had argued that “the US has not taken a safeguard measure”.
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