He, Yiyang (Anita) --- "Us-China Trade War: An Analysis Of Selected Issues In The Phase One Deal And Future Negotiations" [2021] UNSWLawJlStuS 5; (2021) UNSWLJ Student Series No 21-5

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US-CHINA TRADE WAR: AN ANALYSIS OF SELECTED ISSUES IN THE PHASE ONE DEAL AND FUTURE NEGOTIATIONS

YIYANG (ANITA) HE

ABSTRACT

Since 2018, the US-China Trade War has continued to challenge the multilateral trading system, which is the foundation for a stable and flourishing international economy. This had manifested from the US’s longstanding perception that the existing WTO rules and dispute resolution mechanism cannot adequately address Chinese trade issues. Through a close study of industrial policies and subsidies, the paper rejects this claim and argues that the WTO is well-equipped to address systemic US concerns over ‘Chinese’ trade practices which are in fact common to most nations. The paper encourages China and the US to negotiate on the applicability of WTO rules governing such practices and possible reforms. It is hoped that a consensus reached between the world’s two largest economies will further induce WTO-wide discussions among all Members to reinstate the utility of the multilateral framework. The paper also identifies pitfalls for WTO-violations under the Phase One Deal in attempt to caution the US and China from further eroding the multilateral trading system.

I INTRODUCTION

The Trade War between China and the United States (‘US’) is one of the most erosive challenges to the multilateral trading system, which has for decades promoted fair trade and competition through rules of the World Trade Organization (‘WTO’) and an impartial dispute settlement mechanism.^[1] This challenge has manifested from the US’s longstanding dissatisfaction with the WTO in dealing with what it perceives as China-specific trade issues.^[2] This paper aims to contribute to existing debates over this challenge by examining systemic US concerns toward Chinese trade practices which underpin the Trade War.

The rest of the paper is organized as below. Section II explains the ongoing US concerns toward State interventions by the Chinese government and Communist Party in economic activities. In particular, China endorses industrial policies at both central and non-central government levels to establish targets and guidance over economic developments in key industries. In order to fulfil such policies, China is said to utilize trade-distortive measures including industrial subsidies which inject financial contributions into domestic industries. This allegedly distorts competition in both Chinese and overseas markets. However, such systemic issues were not addressed in the Phase One Deal^[3] and are thereby left for future negotiations.

Section III then studies two Chapters in the Phase One Deal to exemplify its potential in undermining the multilateral system. Under Chapter Six, China is obliged to increase US imports by at least USD$200 billion over the 2017 baseline within two years. Depending on China’s fulfilment mechanisms, imports from other nations may be quantitatively restricted and any favouritism towards US firms may violate China’s Most Favoured Nation^[4] obligations. China ought to work around the flexibility of existing rules to avoid WTO-violations. However, with economists condemning this purchase target as impracticable, the two nations may resort to the retaliation-based dispute resolution framework under Chapter Seven without independent adjudication. This places the law into the hands of the US to retaliate with further unilateral sanctions and may thereby push China to withdraw from the Deal altogether. Further tariff escalations would then ensue to erode the multilateral trading system.

Given the above, section IV argues that the two nations should engage in further negotiations over systemic US concerns to relieve the longstanding trade tensions. The paper illustrates this by examining WTO rules that govern industrial policies and subsidies, in light of US proposals to amend the Agreement on Subsidies and Countervailing Measures.^[5] A consensus reached between the world’s two largest economies shall not only encourage greater uses of the DSM instead of unilateral sanctions, but also catalyze broader discussions among all WTO Members given the ubiquity of these trade practices. Such greater engagement of the multilateral framework shall in turn promote fairness and openness in international trade through consistent rules and impartial adjudication. Finally, section V sets forth the conclusion.

II BACKGROUND & CONTEXT

A Key US Concerns

The US’s dissatisfaction with the multilateral trading system has been largely catalyzed by its perception that many Chinese trade issues remain unaddressed. This resulted in unilateral sanctions, mainly in the form of tariffs, over a large list of Chinese goods. China then responded with retaliatory tariffs to result in one of the most erosive challenges on the multilateral system, namely the Trade War.^[6] The US has repeatedly condemned China as a non-market economy with considerable State intervention over domestic productions, which in turn distorts international trade activities at both macroeconomic and microeconomic levels. As an example, the US alleges that Chinese policies induce households to deposit large portions of income in State-controlled banks to provide low-cost financing to Chinese firms,^[7] especially State-owned enterprises.^[8] The government allegedly hinders these households from depositing abroad where rates are more competitive than the mere 1.5% in China, which is said to be below the consumer inflation rate. This then enables domestic industries to obtain loans at much lower borrowing rates than would otherwise be available without State intervention.^[9]

At the microeconomic level, the Chinese government plans critical sectors for the country’s future economic development through industrial policies. This is exemplified through its Five-Year Plans, under which the State establishes economic targets and guidance over production and resource distributions in strategic sectors which are deemed as important to China’s economic development.^[10] The latest Plan (2016-2020) focused on indigenous innovation,^[11] as supplemented by the Made in China 2025 initiative. This industrial policy seeks to shift China from a major manufacturer of lower-end products to a key competitor in higher-end technologies in ten strategic sectors, including robotics, information technology and new materials.^[12] China’s ambition in technological development supplements its longstanding foreign direct investment regime, which allegedly provides ground for forced technology transfers from foreign firms under non-market-based terms. The US has investigated into alleged commercial damages caused by such policies and its findings subsequently gave rise to the Trade War.^[13]

Along with many other WTO Members, China has utilized subsidies as an interventionist measure to facilitate industrial policies. The US has expressed concerns over the impact of industrial subsidies to promote Chinese industries and distort international competition where subsidized products enter third country markets. Moreover, the US suggests that China presently implements over 200 unnotified subsidies, which are either prohibited under the ASCM or are allegedly adverse to American interests.^[14] Such lack of transparency is said to hinder the assessment of any benefit that Chinese industries receive. The US is also dissatisfied with the Appellate Body definition of subsidies for perceived failures to capture financial contributions by Chinese SOEs to downstream producers.^[15] Such entities are further accused of following State, rather than market, directions in key sectors because Communist Party members are appointed to their management board to oversee major business and investment decisions.^[16] The US has repeatedly emphasized such concerns at both domestic and international forums, including a recent trilateral meeting with Japan and the EU.

More recently, policies under China’s forthcoming Five Year Plan (2021-2015) and 2035 Vision Plan have also been revealed at its Fifth Plenum.^[17] Despite a growing internal focus, Gao argues that China shall continue to pursue aforementioned industrial policies, subsidies and technology-based development models.^[18] In the instance that the US provides sufficient evidence of these trade issues, it ought to be disputed before WTO Tribunals rather than sanctioned through unilateral countervailing actions and bilateral arrangements that completely overlook the WTO. To illustrate this point, the paper shall focus on key issues underpinning industrial policies and subsidies, which are analyzed in detail in Part IV.

B Overview of the Trade War

Evidently, the tariff escalations that resulted in the Trade War manifested from these continued US concerns over Chinese trade practices. More precisely, it was triggered by a Section 301 investigation by the US into alleged violations of intellectual property^[19] rights and forced technology transfers under China’s foreign direct investment policies and practices. These were said to inhibit US exports, cause trade deficits with China and undermine US innovation bases.^[20] Such investigations provided ground for the US to enforce China-only tariffs since March 2018,^[21] which started at 25% on a USD$50 billion worth of Chinese imports. This then triggered retaliatory responses from China on an equivalent amount of US products. Continued tariff escalations from both nations then manifested into a Trade War, which has lasted for over two years as attempted bilateral negotiations were largely ineffective until the Phase One Deal was signed in January 2020.^[22] However, this Deal did not address the unilateral imposition of tariffs which remain enforceable until this day.

Such trade tensions also induced multiple policy responses from both nations. Bown and Lovely noted China’s attempt to enhance relations with non-US trading partners by lowering tariff rates for their products.^[23] For instance, tariffs on US farm and fish products current stand at 42.4%, whilst other exporters enjoy a lower tariff of 18.9%.^[24] This renders non-US products much more attractive to Chinese importers. Such determination to enhance trade relations with non-US nations is also reflected through the State Council’s recent approval of six new pilot free trade zones aimed at deepening trade with Japan, Korea, Southeast Asian countries as well as those taking part in China’s One Belt, One Road initiative.^[25] On the other hand, the US’s subsequent policies continue to be unilateral and retaliatory in nature, as they targeted the Chinese telecommunications giant, Huawei, in ways that reflected the outcomes of any trade negotiations with China. For instance, the US first placed Huawei and affiliated companies on the Entity List that bars their access to purchasing components from US companies.^[26] It then held off the decision to award temporary licences to Huawei upon China’s intention to halt purchases of US agricultural products,^[27] but was eventually granted as the trade negotiations continued.^[28] This then triggered a similar Chinese order whereby foreign entities included on the Unreliable Entity List may face restrictions on trade activities and investments in China.^[29] Whilst no company has been listed as of today, the threat nonetheless remains imminent. Evidently, such uses of unilateral trade policies by the world’s two largest economies continue to threaten the stability of the multilateral trading system.

III PHASE ONE DEAL

A Overview

The extended tariff tensions were only suspended upon signature of the Phase One Deal between China and the US in January 2020. The Deal opens with two Chapters addressing the direct catalysts of the Trade War, namely IP rights and forced technology transfers. China promises to improve IP protections and transparency in dealing with US investors^[30] and to refrain from forcing technology transfers in admitting foreign investments.^[31] These are followed by two Chapters of non-reciprocal obligations on China to improve market access for US agricultural producers^[32] and investors in the financial services sector.^[33] Chapter Five then imposes the only mutually-applicable requirement on both nations^[34] to disclose macroeconomic policies and exchange rate data.^[35] The final two Chapters again contain China-exclusive obligations to meet purchase targets for specified US products, as well as a dispute resolution mechanism that predominately polices China’s implementation of the Deal. This paper shall examine these final Chapters in detail as they raise the most significant challenges to the multilateral trading system.

B Chapter Six

1 Potential WTO Violations

China is obliged to increase purchases of US products listed in annex 6.1^[36] by no less than USD$200 billion over the 2017 baseline within two years. Included therein are manufactured, agricultural and energy products as well as services.^[37] When read in light of the General Agreement on Tariffs and Trade,^[38] Chapter Six potentially pushes China to breach longstanding WTO rules that discipline trade-distortive behaviour and thereby draws it away from the multilateral framework. However, any allegations of breach require detailed evidence and it is up to China to fulfil Chapter Six targets within the boundaries of WTO rules.

(a) MFN Rule

The fundamental MFN rule^[39] obliges all WTO Members to extend trade advantages and favourable competitive opportunities to all other Members.^[40] Since the extensive bilateral tariffs are not removed,^[41] there are no customs unions^[42] or free-trade areas^[43] formed between China and the US to neglect the MFN rule. In examining possible breaches, it is useful to compare with the US-Japan semi-conductor agreement which had also established purchase targets. The GATT Panel held in Japan – Trade in Semi-Conductors that bilateral arrangements do not prima facie suggest preferential treatment towards the US. However, whilst a targeted 20% growth in foreign sales was held not violate the MFN rule,^[44] Chapter Six is far more explicit in benefiting US producers by a USD$200 billion increase in sales to China. Although China has pledged to fulfil this target in WTO-consistent manners, there is no guarantee until detailed examinations of Chinese purchase statistics and policies for 2020 are made. These are closely tracked by other WTO Members, including the EU which expressed openness to dispute any MFN-violations.^[45] Such examinations are especially needed because on the face of Chapter Six, it is difficult to assert general and prospective inconsistencies ‘as such’.^[46]

In fulfilling purchase targets, China may rely upon customs duties or charges^[47] that either relate to the importation process or impact the actual imports of covered products.^[48] For instance, China has recently imposed an 80.5% tariff on Australian barley^[49] for 5 years following anti-dumping^[50] and subsidy investigations.^[51] Since May 2020,^[52] this increased tariff has pushed the market towards US producers with only a 3% tariff^[53] in effort to fulfil purchase obligations. Alternatively, China may implement rules and formalities over imports through inspections or quotas. In 2019, the Customs clearing time for Australian coal was reportedly doubled in comparison to the US and other exporters. This decreases Australian competitiveness and benefits other major coal providers in China’s energy market.^[54] Such measures may be revitalized to assist the fulfilment of the purchase target. As shall be explained below, China may also impose quotas on non-US exporters of covered products in attempt to divert the gravity of purchases to the US. This would require detailed assessments of Chinese purchase data^[55] to evidence any de facto^[56] advantages granted to the US over like products.^[57]

It follows that the MFN rule requires China to treat all like products equally regardless of their country of origin.^[58] However, until actually disputed, it is difficult to assess the likeliness in physical characteristics and end-uses^[59] of any product to predict China’s potential MFN-violation.^[60] Moreover, additional information on the Chinese measure is required to assess whether trade advantages are conditional, in law or in fact,^[61] upon extraneous factors such as its Chapter Six commitments or countries of origin.^[62] As of today, China has not adopted any explicit measure that clearly advantages the US. However, as 2020 comes to an end, other countries may conduct more detailed examinations of China’s annual import data to assess whether an MFN claim would be plausible.

(b) Quantitative Restrictions

Furthermore, China must not quantitatively restrict imports from other producers via non-tariff measures,^[63] such as quotas,^[64] in attempt to force its domestic entities to purchase US products.^[65] In this regard, China is unlikely to endorse explicit measures and any potential breaches would be de facto in nature.^[66] Once disputed, WTO Tribunals must give weight to any evidence of restrictive trade impacts caused by de facto restrictions^[67] by considering official import and export statistics.^[68] A causal link between such impact and the contested Chinese measure may then be established if the data reveals unusually low levels of imports from the complainant State.^[69] Causation is particularly important within the COVID-19 context, because domestic lockdowns have inevitably contributed to decreases in Chinese imports.^[70] This renders the proof of alleged breaches of art XI:1 a difficult task. On a different note, China may also impose informal directives for SOEs to purchase covered products in attempt to fulfil Chapter Six targets. However, the mere fact that such imports are effected through SOEs do not of itself constitute quantitative restrictions, unless the SOEs specifically operate to such ends.^[71] Overall, it would be difficult to establish an art XI breach.

(c) Non-Discriminatory Administration Of Quantitative Restrictions

Even where a quota is permitted, China must impose it on a non-discriminatory basis.^[72] That is, in order to ensure fair competition, ^[73] any quota must be equally applied to like products originating from all trading partners^[74] through the same means.^[75] Furthermore, China should apply quotas in the least trade-distortive manner^[76] by closely replicating the market shares that each exporting nation would have obtained but for the quantitative restrictions.^[77] China must engage all countries with substantial interests^[78] in the supply of disputed products to agree on the allocation of quota shares,^[79] rather than just the US through subsequent bilateral negotiations. This shall be based upon trade statistics for the previous representative period of three years prior to China notifying its intention to modify quota shares.^[80]As an illustration, specific quota shares over cereals (including barley) must be agreed upon between China and its main suppliers, including Australia, Canada, the US and three other nations.^[81] Otherwise, it shall be allotted in accordance with import proportions in the previous representative period.^[82] Such allocation should also reflect any special factors affecting trade,^[83] including notable changes in Chinese purchases of barley following its anti-dumping and subsidy investigations against Australia.^[84] A failure to observe such WTO obligations may then be disputed. However, as of today, China’s administration of quotas and/or tariff-rate-quotas^[85] over most covered products are not in breach of art XIII. As an illustration, China’s TQR over cotton imports^[86] have remained at 894,000 tonnes^[87] for numerous years without being challenged.^[88] In fact, the only WTO dispute concerning China’s quota allocation in China – Certain Measures Concerning Imports of Sugar has remained static since 2018. Thus, with China providing public notices of total TQR amounts, it is unlikely to have breached art XIII.^[89]

(d) General Exceptions

In response to the above allegations, China may raise an exception under art XX(b) of the GATT that any discrimination or import quotas was necessary to protect the life or health of its citizens in light of COVID-19. Given a global death count of almost 1.4 million from COVID-19,^[90] China would easily prove the existence of a health risk.^[91] However, strong scientific evidence is needed to justify its discriminatory measures or quotas as necessarily contributing^[92] to the policy objective of reducing such risk.^[93] This may be difficult without evidence rebutting current publications which suggest that covered farm animals are immune from COVID-19.^[94]Alternatively, China may argue that the virus survives on the surface of animal products being imported for consumption. In this regard, Chinese scientists have found that COVID-19 remains on salmon for at least 8 days if stored at below 4^oC.^[95] Moreover, China has reported numerous COVID-positive imports of frozen meat and seafood from South American nations.^[96] This had triggered a minor resurgence of COVID-19 infections in Beijing and a brief pause in Chinese purchases of frozen food in June 2020.^[97] It is then up to the complaining nation to nominate reasonably available alternatives^[98] to achieve this same end of reducing COVID-19 in China.^[99] However, it must be recognized that such exception is likely to excuse agricultural imports only.

Overall, the above analysis remains a matter of speculation until Chinese measures are actually disputed before WTO Tribunals. However, it is clear that the Phase One Deal has not only failed to amend the damages to the multilateral system caused by previous tariff escalations, but further commits China to a burdensome purchase target which induces the possibility of WTO-violations.

2 China’s Fulfilment

Based on current trends in Chinese import and US export data,^[100] economists have condemned Chapter Six as an impracticable target. In fact, as of August 2020, Chinese purchases are only 43-45% of its year-to-date targets for agricultural goods, 56-60% for manufactured products, 21-27% for energy,^[101] and 46% for services.^[102] This is largely attributable to COVID-19 lockdowns that affected a plethora of manufacturers and industries across the globe. Especially given the severity of the pandemic in the US, China should actively invoke art 6.2.7 of the Phase One Deal to request consultations regarding the fulfilment of purchase targets. This is because the failure to meet such targets may trigger a re-endorsement of the WTO-inconsistent^[103] and unilateral sanctions. Such outcomes would greatly undermine the utility of the Phase One Deal in other Chapters and draws the two largest economies even further away from the multilateral trading system.

Even as China begins to increase its imports upon recovery from COVID-19,^[104] the purchase target remains burdensome because its retaliatory tariffs against US products have not been removed.^[105] As such, China may be inclined to divert imports away from other trading partners toward the US at the risk of WTO-violations. In attempt to avoid directly breaching such rules, China may (ab)use the flexibilities available under anti-dumping and countervailing measures to push its domestic market to trade with the US. As explained above, China has imposed an 80.5% tariff on Australian barley following these investigations.^[106] Previously, Australia was China’ top trading partner in cereal (including barley)^[107] and enjoyed tariff exemptions under the China-Australia Free Trade Agreement.^[108] This enabled Australia to export over 4 million tonnes of cereal at a total worth of USD$10.2 trillion in 2018.^[109] However, the post-investigation tariffs on Australian barley are now 77.5% higher than that of the US. China is thus able to capitalize on the outcome of such investigations to fulfil purchase obligations under the Phase One Deal.

However, anti-dumping and subsidy investigations require time and justification. This means that China’s private sector alone is unlikely to meet all purchase targets. Thus, the government may informally direct its SOEs to shift their purchases toward US suppliers, especially since China is frequently accused of providing State guidance on major purchase decisions of SOEs. As an illustration of such State influence, China’s Ministry of Agriculture and Rural Affairs had required SOEs to stop purchasing US agricultural products in June 2020.^[110] More recently, China has been reportedly providing informal directives to four state-owned steel makers and power plants to stop importing Australian coal.^[111] Yet despite the capacity of SOEs to intervene, economists remain convinced that Chapter Six targets will be not be met by 2021. This is because not all covered products are currently purchased or constitute substitutes for State-trading purposes.^[112] In fact, SOEs continue to have a declining market share in China, except in key industries where many continue to implement government functions and industrial policies.^[113] These entities predominantly trade in crude oil, metal ores and soybeans, which represent only a small portion of covered products under annex 6.1. Under such circumstances, China must not then abuse State-trading in law or in effect to fulfil purchase targets in other sectors. It follows that Chapter Six not only induces risks of WTO-violations, but are also confronted with practical fulfilment barriers. This is especially if China continues to avoid breaching WTO rules and thereby attempt to adhere to the multilateral framework as far as possible.

C Chapter Seven

1 Bilateral Evaluation & Dispute Resolution

If Chapter Six only creates possibilities for breaches of WTO rules, Chapter Seven is an outright deviation from the multilateral rules-based system for settling trade disputes. Here, dispute resolution is predominately based on consultation and retaliation in monitoring China’s implementation of the Phase One Deal.^[114] Bilateral Evaluation and Dispute Resolution Arrangements^[115] and Offices are established in both countries to resolve implementation issues^[116] and consult on any disagreements.^[117] It completely overlooks the WTO DSM, by allowing the Complaining Party to either suspend an obligation under the Deal or to adopt proportionate ‘remedial measure(s)...it considers appropriate’^[118] instead of referring the dispute to an independent adjudicative panel. Since the US has very limited obligations, it will likely resort to more tariffs on Chinese products.^[119] This arguably nullifies the effect of the Phase One Deal as a ceasefire to the tariff escalations. It follows that China will then assess whether such remedial measures are implemented in good faith. Only a finding of bad faith will allow China to retaliate, which is in itself limited to withdrawing from the Deal altogether.^[120] China’s withdrawal may then trigger resumed impositions of unilateral and WTO-inconsistent^[121] measures from both sides. Such continued tension between the two largest economies shall thus further erode the multilateral trading framework.

2 Key Implications For The Multilateral System

To begin with, ‘remedial measures’ under art 7.4.4(b) risks violating WTO rules, especially if they take the form of increased tariffs. The Panel ruled that the US tariffs which had initiated the Trade War were inconsistent with the MFN rule.^[122] Whilst the US standard of ‘right and wrong’ concerning fair competition constituted public morals, it failed to satisfy the necessity test to trigger an art XX(a) exception.^[123] Thus, any remedial tariffs that the US subsequently implements would also violate the MFN rule. Since the US Trade Representative was openly dismissive of the Panel ruling,^[124] the US will likely resort to such WTO-inconsistent measures if it becomes dissatisfied with China’s implementation of the Deal. In this respect, Chapter Seven arguably facilitates the US’s divergence away from multilateral trade rules to endorse unilateral sanctions on its trading partners. As Zhou notes, although theoretically China is also capable of utilizing these WTO-inconsistent measures, the non-reciprocal nature of the Deal is likely to see China suspend its own obligations as a remedial response.^[125]

As explained above, the Phase One Deal is predominantly focused on China committing to purchase, market access and IP protection obligations. On the other hand, the US has very little binding commitments. Within such context, Chapter Seven provides almost unilateral power for the US to police China’s implementation and creates a large scope for retaliation through remedial measures. In comparison, China’s only practicable retaliation is to withdraw from the Deal altogether, which may itself be hindered by prospects of resumed tariff confrontations. To a certain degree, China is locked into a plethora of obligations that economists predict to be unfulfillable. Thus, as suggested by Zhou, this consultation and retaliation-based dispute resolution framework encourages the abuse of power in a manner that is unfavourable to China.^[126] Such unilateral power instilled in the US explicitly hinders the essence of fair competition in international trade that is promoted by the multilateral framework.

Furthermore, Chapter Seven does not establish a standard adjudicative model with independent rulings on any disputes. This again evidences a divergence away from the WTO. In the past, both China and the US have included provisions for independent arbitration in trade agreements with other nations. For instance art 15.7 of the ChAFTA establishes an arbitral tribunal upon failure to resolve disputes via consultations. These arbitrators must be independent of either Party,^[127] and their findings of inconsistency with terms of the ChAFTA should bind the respondent Party to bring its measure into conformity.^[128] Similar provisions are evident in the Chile-US FTA^[129] and the Dominican Republic-Central America FTA.^[130] In contrast to these frameworks that model off the DSM, the Phase One Deal relies on unilateral retaliation if consultation fails. It diverts the world’s two largest economies away from the multilateral framework and continues to undermine the central role of the WTO. This is unsurprising given the US’s growing dissatisfaction with the Appellate Body that eventually led to its paralysis.^[131] The US’s response to the recent Panel ruling in US – Tariff Measures also supports this distancing attitude, where its trade representative stated that ‘the WTO provides no remedy for such misconduct. The US must be allowed to defend itself.’^[132] Sidelining the WTO and a rules-based multilateral framework is greatly undesirable for global free trade and provides capacity for countries with greater economic and political say to abuse its powers. As such, subsequent negotiations between China and the US should depart from this unilateral focus, and reinstate the significance of a multilateral trading system. In doing so, it should also take into account aspects of the recent trade tensions between China and Australia which could not have been resolved using the ChAFTA provisions and needed to resort to the WTO dispute settlement forum.^[133] By recognizing the limitations in such prior models, the two nations should aim to develop a framework that is tailored to practically deal with the trade tensions in a DSM-like manner.

IV PHASE TWO NEGOTIATIONS: INDUSTRIAL POLICIES & SUBSIDIES

A Importance Of Subsequent Negotiations

There is a general consensus among critics that the Phase One Deal serves as a temporary truce and does not completely resolve the trade tensions between the US and China.^[134] As discussed above, the Deal not only establishes burdensome purchase obligations and a retaliation-based dispute resolution framework, but also leaves many fundamental US concerns unaddressed. Thus, the two nations should continue to negotiate on these trade issues with a mindset to contribute to the betterment of the multilateral framework. As Zhou explains, the multilateral trading system has for decades promoted international cooperation on trade liberalization and regulation. This rules-based framework disincentivizes governments from implementing protectionist policies that distort international trade.^[135] In particular, China has maintained a good record of compliance with adverse rulings, which renders the DSM more effective and predictable than unilateral sanctions.^[136] As such, subsequent negotiations should focus on utilizing existing WTO rules where possible and otherwise propose amendments which may consistently apply to the trade practices of all WTO Members. This then allows WTO Tribunals to rule upon allegations of trade distortions and thereby reinstates fairness and order in international trade. It is also hoped that such consensus reached between the world’s two largest economies would catalyze broader discussions among all WTO Members, which would re-engage the multilateral framework. Part IV of the paper shall illustrate this through two related systemic issues which were left unaddressed in the Phase One Deal, namely industrial policies and subsidies.

B Industrial Policies & Subsidies

1 Non-Chinese WTO Members

As reported during a United Nations Conference on Trade and Development, industrial policies are almost ubiquitous in modern economies. At least 101 nations across both the developed and developing world have adopted formal policies that stipulate detailed measures and targets within specific industries. These account for over 90% of the global GDP.^[137] Within the Asian region, South Korea and Japan have long relied upon industrial policies to promote domestic economic growth and exports by providing State-contributed infrastructure and human capital to particular sectors and firms, alongside export and interest rate subsidies.^[138] In the European context, Landesmann and Stöllinger noted that industrial policies are annually published at both the EU and member-State levels.^[139] Some of the notable measures include financial support for strategic investments in transport and digital infrastructures under the Connecting Europe Facility,^[140] and a €7.5 billion funding for research and development^[141] in key industries as part of the Horizon 2020 programme.^[142] In particular, the German Industry 4.0 programme radically increased spending on innovation for research enterprises,^[143] by granting subsidies and tax benefits in targeted industries deemed important by the government.^[144] Furthermore, whilst accusing China of imposing trade-distortive policies, the US government itself remains active in promoting particular industries through interventionist policy measures. Stensrud noted that the Obama Administration frequently sets industrial goals in agriculture, military construction and energy sectors. To this end, a USD$787 trillion stimulus package under the American Recovery and Reinvestment Act of 2009^[145] was imposed in attempt to extend the US’s international leadership in technologically advanced industries.^[146] Similarly, the Trump Administration called for industrial policies to support growth in national security efforts^[147] and expanded direct investments in the industrial and manufacturing bases.^[148] More recently within the COVID-19 context, the US government further provided a USD$765 million loan to Kodak for domestic productions of generic drug ingredients.^[149]

Similarly, as suggested by the Kommerskollegium National Board of Trade Sweden, China is not alone in its use of subsidies as a dominant measure to facilitate industrial policies.^[150] These measures are frequently justified by their granting States as addressing market failures in industries that generate negative externalities or are lacking in investments. However, subsidies may also serve a protectionist function to support domestic producers from foreign competition, and may result in excess productions and distort international competition in third markets.^[151] In order to analyze such effects, the Global Trade Alert^[152] database has attempted to record export subsidies, loans, direct support measures and tax reliefs granted by both advanced and developing nations since 2008.^[153] At least 46% of those recorded are prohibited export subsidies, which are predominantly granted to domestic producers of machinery, vehicles and aircrafts.^[154] However, these data are incomplete because subsidies under USD$10 million are not recorded and they do not reveal the actual amount that each country injects into their domestic industries.^[155]

Despite such incomplete data, it is nonetheless apparent that industrial policies and subsidies are widespread across most economies. In fact, 130 out of 594 WTO disputes since 1995 have been filed under the ASCM,^[156] and many of which concerned subsidies issued by non-China major economies. Figure 1 tabulates the number of WTO disputes over such subsidies. These include matters where each nation’s subsidies are directly disputed as well as where countervailing measures targeting these subsidies are disputed.

Evidently, the most high-profile subsidy disputes do not actually involve China, but other major economies. A prominent example is the US-EU tension towards subsidies to their national champions in the aviation sector. In US – Large Civil Aircraft (Second Complaint), the Appellate Body found that the US government provided subsidies of over USD$5 billion to Boeing.^[157] Lower levels of government, such as the Washington state, also provided subsidies of USD$66.2 million.^[158] Similarly, subsidies granted by the EC and four member States to Airbus were found to total over billions of euros.^[159] In both instances, WTO Tribunals found the disputed subsidies to be seriously prejudicial to the complainant. Clearly, China is not alone in implementing industrial policies and subsidies. It is thus beneficial for all international market players to be subjected to a consistent set of multilateral rules instead of China-specific disciplines, which are inapplicable to other subsidy imposing countries.

2 China

Whilst China is certainly not alone in utilizing industrial policies and subsidy measures, its growing presence in the international trade market attracts particular attention from the US. The US accuses the Chinese government of heavy State intervention through industrial policies that protect domestic sectors deemed to be critical for the country’s future growth. In upholding constitutional mandates for the State-owned economy to lead the nation,^[160] the Chinese government publishes Five-Year Plans to establish targets and economic development guidelines to fulfil such goals.^[161] In the most recent Thirteenth Five-Year Plan,^[162] the Chinese government has established 25 targets for its economy.^[163] This includes an overarching framework for innovation by increasing funding and human capital investments on R&D as well as a shift to higher-value skilled manufacturing.^[164] The US alleges that in promoting such industrial policies, the Chinese government significantly limits market access for foreign producers, and simultaneously offers financial and regulatory advantages to the Chinese industries.^[165] Such alleged financial preferences take the form of subsidies and other governmental support to both state-trading and private entities.^[166] In comparison, regulatory advantages are more frequently accorded to SOEs alone. These entities are said to have monopolistic presences in the market^[167] and are subjected to exemptions from disclosure requirements and bankruptcy rules.^[168] Whilst acknowledging that all nations should enjoy reasonable policy space for the State to interact with the market, the US argues that the Chinese government’s particularly strong grasp over its industrial policies cause ‘markets from all over the world’^[169] to be less efficient as they compete with subsidized products in both Chinese and third country markets. In this regard, the US should adduce greater evidence to prove that Chinese industrial policies and subsidies are actually in breach of WTO rules.

More recently, the US also raised concerns over China’s focus on promoting indigenous innovation and technologies through the National Medium and Long-Term Science and Technology Development Plan Outline and MIC2025. These policies set ambitious goals for China to achieve self-sufficiency in strategic technologies and to lead the global market in the longer term.^[170] In particular, MIC2025 aims to expand China’s ten strategic sectors and develop an advanced manufacturing base. Whilst such objectives are legitimate for any nation wishing to be more competitive in a digitalized world, the European Union Chamber of Commerce in China alleges that China largely relies upon trade distortive measures to facilitate MIC2025 at both national, municipal and local levels.^[171] These include subsidies, state-investment funds of over RMB200 trillion^[172] as well as the merging of SOEs into domestic monopolies in order to eliminate competition among themselves on the international market.^[173] In particular, the Chinese government is said to provide direct finances and loans from State-owned banks on non-commercial terms to domestic companies in robotics and other priority industries. Such entities are also said to make purchases at reduced costs.^[174] The EUCCC then contrasts these measures to the more limited funding of only €200 million R&D tax credits under Germany’s equivalent Industry 4.0 policy. Whilst such arguments may support aspects of the US’s accusations, one must not overlook the State Council’s notification which established goals of fair market competition, continued SOE reforms and reductions in industrial overcapacity.^[175] Moreover, the US ought to gather more evidence to support all of its allegations and to dispute any WTO violations before the Tribunals. This shall enable other WTO Members with similar concerns over Chinese policy measures to contribute as third parties to the dispute and have access to an impartial and binding ruling.

To date, there has been no WTO disputes initiated against China that specifically concerns MIC2025. In the past, however, the US was successful in using the DSM to push China to amend or remove a range of subsidy programs. For example, in China – Certain Measures Granting Refunds, Reductions or Exemptions from Taxes and Other Payments,^[176] China either agreed to repeal challenged measures including its FIE Income Tax Law or promised to ensure US products receive equal VAT treatments. Similarly in China – Measures Relating to Demonstration Bases and Common Service Platform Programmes,^[177] the US alleged that China provided export-contingent subsidies in the form of discounted or free services and cash grants to enterprises in selected industries at both central and sub-central levels. The dispute was resolved with China agreeing to terminate all financial support and preferential service agreements concerning disputed policies and promised to revise its programs to exclude export-dependent language. Such active resolutions suggest that the DSM provides an effective platform to restrain China’s use of industrial subsidies. More recently, in China – Subsidies to Producers of Primary Aluminium,^[178] the US alleged that Chinese producers of primary aluminium have been financed by State-owned banks at lower-than market interest rates. In particular, China Hongqiao Group Co Ltd was said to receive coal, aluminium and electricity from Binzhou Gaoxin Aluminium & Electricity Co Ltd at less than adequate remuneration. Interestingly, neither Binzhou Gaoxin^[179] nor its parent company^[180] has State shareholding. The dispute has remained in consultations for two years and the US is unlikely pursue its claim any further. Overall, the US should put forth strong evidence before the Tribunal to justify any accusations that China has violated WTO trade rules or its accession obligations. An impartial ruling by the WTO Tribunal will not only restrain China’s use of subsidies, but also provide basis for a more informed assessment of whether the following rules require reform.

C WTO Rules Governing Industrial Policies & Subsidies

Industrial policies are not a priori inconsistent with WTO rules^[181] under the ASCM, GATT and Anti-Dumping Agreement.^[182] Given the limited space, this section only offers a brief discussion of WTO subsidy rules and hence a preliminary observation on whether these rules may be used to address Chinese subsidies.

1 Rules On Subsidies

A general regulation on the use of subsidies is outlined in art XVI:1 of the GATT, which requires the notification of subsidies affecting imports and exports in addition to their nature and estimated effects. It also authorizes discussion where serious prejudice is found. In addition, arts XVI:3 and 4 prohibit the use of export subsidies causing undue disturbances to the Members’ commercial interests.^[183] As subsidies become an increasingly common policy tool used by many WTO Members, art XVI is then expanded upon in the ASCM which details the types of subsidies and corresponding disciplines to offset any injury caused therein.^[184] It also regulates the imposition of countervailing measures subject to domestic investigations over the existence, degree and effect of alleged subsidies.^[185] This paper argues that existing instruments are predominately sufficient to cope with Chinese subsidies. However, notification rules should be amended to improve transparency and competition for the benefit of all WTO Members.

The ASCM opens with the definition of a subsidy as a ‘financial contribution by the government or any public body’.^[186] The Appellate Body confirmed that public bodies only cover those entities possessing, exercising or are vested with government authority.^[187] The US is particularly concerned with this ruling in the context of China, because it alleges that heavy State intervention allows for financial assistance to be passed from SOEs to China’s domestic industries.^[188] The Appellate Body rejected the US’s argument that majority shareholding by the government in any entity would render it a ‘public body’ for the purposes of subsidies. It was held that this fact alone is insufficient to demonstrate meaningful control over any entity, let alone the bestowment of government authority therein.^[189] The ASCM then categorizes such contributions into four types and provides examples of each. This includes direct transfers in the form of grants, loans and equity infusion^[190] including shares,^[191] as well as potential transfers irrespective of whether payment subsequently occurs.^[192] Subsidies may also take the form of funding,^[193] and forgone government revenue otherwise due^[194] when compared with the income of other taxpayers.^[195] Central and sub-central governments may also purchase goods from subsidized enterprises or provide them with goods and services.^[196] Whilst financial contributions falling outside of these categories are not considered to be subsidies for purposes of the ASCM,^[197] art 1.1(a)(1) should nonetheless cover all common types of subsidies imposed by most WTO Members.

Furthermore, such contribution must confer a benefit on the recipient.^[198] Unless the alleged subsidy is prohibited under art 3,^[199] it must be specific to certain enterprises, industries^[200] or geographic regions^[201] in order for WTO Tribunals to rule on the dispute. This may be explicitly spelt out in official documents,^[202] or if the automatic eligibility criterion are objectively applied,^[203] de facto specificity may be found in light of factors outlined in art 2.1(c). The Tribunal ought to consider whether subsidies are provided to alleged recipients pursuant to any programmes, in addition to the duration^[204] and recency of such scheme.^[205] If predominantly enjoyed by certain enterprises, the diversification of economic activities within the granting nation should also be considered.^[206] In absence of such programmes, it is also possible that certain enterprises receive disproportionately large amounts of subsidies to trigger a finding of de facto specificity.^[207] In this regard, China’s Accession Protocol provides that if SOEs are the predominant recipients or beneficiaries of disproportionately large amounts of subsidies, it is deemed to be specific.^[208] Such WTO-extra commitment greatly assists subsidy disputes concerning the involvement of SOEs, which have been a continued US concern.

Upon satisfaction of specificity, subsidies are further categorized as prohibited, actionable and non-actionable. The final category, which covers R&D subsidies and financial contributions to non-specific disadvantaged regions,^[209] has expired as of 1 January 2000.^[210] Prohibited subsidies include those contingent upon export performance,^[211] as well as the use of domestic over imported goods^[212] which are consumed or incorporated into the manufacturing of a product.^[213] The former category encapsulates export contingency contained explicitly or implicitly within legal instruments,^[214] as well as instances where the subsidy is conditioned upon export performance in practice.^[215] On the other hand, the domestic goods condition only applies to de jure contingency.^[216] If subsidies are found to be prohibited within the meaning of art 3.1, the WTO Tribunal shall then recommend the subsidizing State to withdraw without delay.^[217] That is, to remove or take away the prohibited subsidy.^[218] However, failure to comply with such recommendation within a specified time period provides ground for the Tribunal to authorize countermeasures^[219] from the complaining State to effectively induce the withdrawal.^[220]

Oftentimes, WTO disputes^[221] concerning subsidies are initiated by the subsidizing Member in response to countervailing measures imposed after investigations into the alleged subsidies.^[222] The US has conducted numerous investigations into Chinese subsidies, including those on coated sheet paper and passenger vehicles.^[223] Such investigations aim to determine the existence, degree and effect of alleged subsidies^[224] for purposes of art 1.1(b) and to calculate the amount of benefit received by alleged recipients. Such assessment may be based upon external benchmarks,^[225] but only in the instance that private prices of the subsidizing country are distorted owing to the government’s predominant role in providing the disputed goods. This is because the government may establish pricing strategies in ways that induce private prices to align with the governmental ones to result in artificially low or no benefit at all.^[226] However, since the government being a significant supplier alone cannot justify distortion, such high threshold may hinder the capacity of investigating authorities. In this regard, Zhou, Gao and Bai highlights section 15(b) of China’s Accession Protocol, which offers a lower threshold of ‘special difficulties’ covering instances where access to information and transparency is limited. Such WTO-extra commitment greatly reduces the evidentiary burden on complaining States to dispute alleged industrial subsidies in China.^[227]

Where alleged benefits are established through such investigations, Singh and Jose argues that actionable subsidies are comparatively less disputed before WTO Tribunals and more frequently subjected to unilateral countervailing measures.^[228] This is because a complaining State must prove that actionable subsides cause adverse effects to its interests in one of the three manners specified in art 5. In analyzing adverse effects, the Tribunal should recognize that the impact of subsidies dissipates over time,^[229] and intervening events may either increase or decrease the expected life of subsidies.^[230] Whilst injury to domestic industries and the impairment of GATT benefits are also grounds to establish adverse effects,^[231] complaining States more commonly succeed through evidence of serious prejudice to its interests.^[232] The alleged subsidy need not be the sole reason for such prejudice. However, it must represent a genuine and substantial cause,^[233] which depend upon the magnitude of the impact and circumstances of each case.^[234] Serious prejudice is deemed to have occurred where one or several of the factors in art 6.3 is established. This includes evidence of declining sales volumes or where such decline was intensified by competition from subsidized products.^[235] Serious prejudice may also be justified if there is significant price undercutting in the subsidized product which reduces the sales of like products from the complaining Member within the same market.^[236] Similarly, a competitive advantage gained through increased market shares by the subsidizing Member may also satisfy this evidentiary ground.^[237] Once the WTO Tribunal rules on an actionable subsidy, the subsiding Member does not need to withdraw the measure if it chooses to remove any adverse effects caused^[238] within 6 months.^[239] Non-compliance with such rulings enables the Tribunal to authorize complaining Members to impose countermeasures proportionate to the degree and nature of adverse effects^[240] found to exist subject of the dispute.^[241]

The above provisions under the ASCM are largely competent in regulating Chinese subsidies. As an illustration, China and the US reached agreement in China – Demonstration Bases over allegations of export subsidies in breach of art 3. China did not deny the existence of such prohibited subsidies and promised to terminate any alleged government funding ‘that have export performance as the designation criteria’.^[242] China’s removal of prohibited subsidies thus demonstrates the effectiveness of the ASCM in restraining trade distortive behaviour, which is also supplemented by China’s WTO-extra commitments toward specificity concerning SOEs and the use external benchmarks to calculate alleged benefits. However, notification rules require more careful consideration because most WTO Members fail to notify their subsidies. Under art 25.1, Members are obliged to submit annual notifications which ought to include sufficiently specific content to enable other States to evaluate the trade effects and operations of notified subsidy programs.^[243] China also reinforced its notification obligations upon accession to the WTO.^[244] However, neither source of rules provide sanctions or other forms of inducement for Members to comply with notification duties. Since non-compliance is not a China-only phenomenon, the effectiveness of such notification rules should be examined in detail via subsequent negotiations between China and the US, as well as broader multilateral discussions.

2 Other Rules

Additionally, where subsidized raw materials are used in production, that final product may also be subjected to anti-dumping investigations.^[245] The logic is that using subsidized materials in the manufacturing process renders production much cheaper and results in greater quantities. This then provides room for the recipient entity to sell goods in foreign markets at a lower price than the normal value,^[246] which endangers the financial viability of the producers in the importing nation. In determining the normal value of the end product, the investigating authority need not consider the effect of subsidies on the price of the raw material.^[247] Many WTO Members engage the Anti-Dumping Agreement against China as a perceived non-market economy. On such account, dumping margins are often determined using the price of ‘like goods’ from a surrogate third country rather than Chinese domestic prices. At least prior to 11 December 2016,^[248] s 15 of China’s Accession Protocol authorized such treatment, which renders it easier for other WTO Members to impose higher anti-dumping duties on Chinese products.^[249] However, China now disputes being treated as a non-market economy for purposes of anti-dumping investigations.^[250] If the WTO Tribunal rules in China’s favour, anti-dumping actions may no longer be popular among other nations to correct perceived distortions. It should be further noted that anti-dumping and subsidy investigations must not be conducted concurrently on the same product,^[251] as it constitutes double remedy against art 19.3 of the ASCM and art VI:5 of the GATT.^[252] In such instances, countervailing measures under the ASCM should prevail. Zhou, Gao and Bai highlights that external benchmarks continue to be authorized for subsidy investigations under China’s Accession Protocol without an expiration date. As such, the ASCM provides greater protection against alleged unfair trade practices through Chinese subsidies.^[253]

The US has also queried the role of SOEs in facilitating China’s industrial policies as both recipients and alleged providers. The GATT prohibits discriminatory conducts and anti-competitive behaviour in State-trading enterprises.^[254] This requires any purchases or sales by STEs to be based purely on commercial considerations, and to afford foreign competitors with adequate opportunities to participate in trade.^[255] China had reiterated this obligation in its Accession Protocol, where it promises to render the STEs’ purchasing procedures fully transparent and to provide full information on its pricing mechanisms for exported goods. The Chinese government also promises to refrain from influencing or directing STEs in a WTO-inconsistent manner.^[256] As shall be examined below, China has recently reformed its SOE regime. Zhou, Gao and Bai argues that all categories of Chinese SOEs would be covered by art XVII:1, on the condition that their rights or privileges enable them to influence trade through purchases and sales.^[257] Additionally, State-trading operations are also subject to more general regulations on import and export restrictions.^[258] Such rules arguably provide comprehensive regulations over the trading activities of SOEs, which supplement the ASCM.

D Proposals For Subsequent Negotiations

Whilst existing WTO rules are arguably sufficient to address Chinese subsidies, there has been ongoing political and academic debate as to the necessity of reforming these rules. This is because new varieties of financial contributions are endorsed by many nations without adequate notification. China inevitably lies at centre of this debate because of its growing international influence and concerns over its State involvement in the economy.^[259] In this regard, the US, EU and Japan issued a Joint Statement of proposed amendments to the ASCM.^[260] Three major areas were identified as requiring reform, namely the definition of ‘subsidies’, the evidentiary burden to dispute alleged subsidies and notification rules. These provide basis for subsequent negotiations between China and the US to focus on rules of the multilateral system rather than China-specific disciplines. This is because industrial subsidies are utilized by most, if not all, WTO Members. In particular, the area that genuinely requires reform, being subsidy notification rules, is also violated by a majority of WTO Members. As such, a consistent framework that regulates the subsidy activities of all international market players would then facilitate fairness in trade. China and the US should utilize these as the starting point to negotiate on a bilaterally agreeable outcome, which may be further introduced to the multilateral trading system under art X of the Marrakesh Agreement Establishing the World Trade Organization.^[261] With the two largest economies reaching a consensus, other WTO Members may also be inclined to form a two-thirds majority in accepting amendments to notification rules.

To begin with, the US proposes to redefine ‘subsidies’ under art 1.1(a)(1) of the ASCM, especially in light of what constitutes a ‘public body’. The Appellate Body in US – Anti-Dumping and Countervailing Duties (China) ruled that for the purposes of art 1.1(a)(1), ‘public bodies’ only covered those entities possessing, exercising or are vested with government authority.^[262] In the context of SOEs and State-invested enterprises,^[263] it was further held that the mere existence of formal links to the government through State majority shareholding is unlikely to render any entity a ‘public body’ that provides financial contributions.^[264] Bown and Hillman explained the US’s concern that this definition does not adequately address economies where the line between the State and private sector is blurred.^[265] This is particularly evident in China because its SOEs must establish collective decision-making systems to enable the Communist Party to intervene in major business decision-making, personnel changes and large movement of funds under the ‘3-Major 1-Large’^[266] regime.^[267] As such, the US proposes to expand the existing definition.^[268] This could be achieved either by proposal to the Ministerial Conference^[269] or disputed before the WTO Tribunal. The US will likely argue that meaningful government control or influence over the resource allocation of an entity would render it a ‘public body’.^[270] Such proposals should be explicitly raised during Phase Two negotiations.

China is unlikely to support any amendments that focus on government control rather than the performance of governmental functions by entities in question. This is because its recent SOE reform re-classified SOEs based on their functions and degree of State intervention, if any. General commercial SOEs are expected to operate independently in the market like privately-owned companies. In comparison, special commercial SOEs with mixed ownership must ensure that the State is the controlling shareholder determining the entities’ core businesses for security or essential national economic reasons.^[271] State control is even more explicit in public welfare SOEs that are intended to exercise social functions and provide for public goods and services, without market competition.^[272] Such reform clearly distinguishes general commercial SOEs from the latter two categories that either undertake government functions or dominate in key strategic industries.^[273] As such, China is likely to endorse the argument by Zhou, Gao and Bai that the existing Appellate Body definition of ‘public body’ is reasonable as it avoids casting too wide a net to capture all SOEs and SIEs.^[274] The reformed classification of SOEs in China clarifies the role of the State over different categories and provides sufficient ground for finding ‘public bodies’ based on the present definition.^[275] By bringing both perspectives to the Phase Two negotiations, it is hoped that the two nations would make meaningful progress to formulate an agreement on the definition of ‘subsidies’.

Furthermore, the US argues that China’s limited transparency and distorted domestic economy render it difficult to assess any benefits conferred through alleged subsidies for purposes of art 11 investigations.^[276] In addition to the US’s perceived concern over Chinese SOEs as ‘public bodies’, such difficulty in proving a benchmark further intensifies the evidentiary burden on complaining nations.^[277] As such, the US proposes to specify in the ASCM, circumstances where external benchmarks may be adopted^[278] and to shift the evidentiary burden onto respondent nations to rebut a presumption of subsidies in WTO disputes.^[279] However, as Zhou, Gao and Bai explained, external benchmarks may already be utilized to investigate Chinese subsidies at relatively low thresholds under existing WTO documents.^[280] Whilst art 14(d) of the ASCM requires a government’s predominant role in goods provision to distort private prices in the subsidizing nation,^[281] China’s WTO-extra commitments are much less demanding on complaining nations. Section 15(b) of its Accession Protocol authorizes the use of external benchmarks so long as there exists ‘special difficulties’ in using Chinese prices. Since this has not been explicitly defined, Zhou, Gao and Bai argues that China’s lack of notification is sufficient to justify the use of external benchmarks, which need not be adjusted to the prices, marketability and other conditions of purchase.^[282] Moreover, this WTO-extra commitment is not subjected to an expiration period,^[283] and would thereby resolve the US dilemma. During the Phase Two negotiations, China is likely to argue that since SOEs are adequately covered by the current subsidies definition and external benchmarks are readily accessible, the US’s evidentiary burden can be easily discharged without the need to reverse it onto China. Nonetheless, the two nations may still negotiate to add clarifications to the legal elements of these provisions to render their application easier in practice.

Whilst Chinese subsidies may be investigated and assessed using an external threshold, the two nations should still negotiate on revising the subsidy notification scheme for the benefit of the multilateral system. In a 2019 Meeting of the Subsidies and Countervailing Measures Committee, it was revealed that 77 WTO members have yet to make subsidy notifications due in 2017, including 55 notifications due from 2013.^[284] As such, the US has proposed a counter-notification scheme that automatically prohibits subsidies in question unless the respondent country provides adequate information in a timely manner.^[285] Such increased transparency and access to subsidies information would then enable WTO Members to adopt a similar approach used to address agricultural subsidies in the 1980s. The OECD played a significant role in developing the PSE and CSE indicators to monitor and regulate policies that imposed agricultural subsidies.^[286] These relied upon OECD countries to offer information on their domestic subsidies to extrapolate indicators applicable to subsequent financial contributions by the governments.^[287]

In this regard, the two nations should negotiate for China to join the OECD because it is an economy with substantial influence and a major provider of subsidies. This shall enable both Chinese and US^[288] information to be used in developing an accurate indicator to assess and regulate industrial subsidies imposed by all nations. This is a viable option because China has recently enhanced its co-operation with the OECD by collaborating with its affiliated bodies, including the OECD Development Centre, and participated in the “1+6” Roundtable discussions on challenges faced by the global economy.^[289] Such active engagement has been perceived by the OECD as ‘potential in the future to lead to membership’,^[290] which is beneficial for both China and the international trade market. This is because China will have greater opportunities to voice its perceptions on industrial subsidies and other trade measures through OECD committees, and its membership will also lead to a greater variety of statistics being available to develop an indicator targeted at industrial subsidies.^[291] In doing so, the overall transparency of subsidies is improved for the WTO to regulate this trade mechanism more effectively in a fair, open and equitable manner. Furthermore, in attempt to address such notification and transparency issues, the two nations may also take into consideration the proposal by Zhou and Fang, which calls for a scheduling approach to subsidies. That is, each WTO Member is to record their subsidized sectors, the magnitude of such subsidies and any foreseeable exceptions, ^[292] just as the tariff concessions had been provided for under the GATT.^[293] Since industrial policies and subsidies are adopted by almost all nations, there is a significant need to maintain an adequate policy space for each WTO Member to promote legitimate development objectives.^[294] Zhou and Fang’s approach reflects this because a schedule of subsidies does not impose an all-encompassing set of rules that subject all countries to the same level of regulations over their use of subsidies. Instead, it recognizes the different needs of each economy and operates by preventing governments from granting subsidies beyond their commitments under the schedule.^[295] Since the US is particularly concerned with China’s use of industrial subsidies, it should utilize the opportunities during the Phase Two discussions to negotiate with China the extent of its commitments. This will also provide room for China to flexibly operate within the ASCM framework given its substantial use of industrial subsidies. Since this schedule can be tailored to the interests of each country, it is hoped that governments will be more willing to adhere to the multilateral framework instead of unilaterally adopting unnotified measures.

V CONCLUSION

For decades, the multilateral trading system has contributed to the consistent regulation over the trade practices of its Members. It also leaves ample policy space for governments to accommodate any non-trade-related interests.^[296] This intricate balance has enabled China to expand its international trade activities since 2001, and has continued to advance US economic interests in foreign markets.^[297] As such, the US and China must continue to uphold WTO obligations and utilize the DSM to resolve trade disputes, rather than wholly relying on unilateral sanctions and bilateral arrangements as demonstrated through the Trade War.

Whilst the Phase One Deal has brought a temporary truce to the Trade War, it also introduced greater risks of WTO-violations as evident in Chapter Six. Economists have condemned the USD$200 billion purchase target as impracticable, especially in light of the COVID-19 disturbances to international trade. Under such market conditions, China may (ab)use the flexibility of existing WTO rules governing anti-dumping and subsidy investigations, in addition to increasing State purchases of US products. However, such practices may not be applicable to all covered products and more extensive trade statistics are required to assess the WTO-consistency of Chinese trade measures. In the instance that China fails to fulfil purchase obligations, the US is likely to abuse its policing powers under Chapter Seven and reverse back to unilateral retaliation. This is because the Deal fails to provide a DSM-style adjudication framework to resolve disputes. Overall, the Phase One Deal represents a divergence away from the multilateral rules-based system.

Moreover, the Deal also failed to address the most systemic and fundamental concerns over State intervention in the market that underpin US-China trade tensions. This paper closely examined industrial policy plans for national economic growth, which are facilitated through subsidies that inject financial contributions into domestic industries. The US perceives existing WTO rules as ineffective to address such trade-distortive measures in China and thus endorses unilateral sanctions. In order to revitalize the utility of the multilateral system, the US should recognize that these trade measures are not unique to China. Such mindset shall underpin subsequent negotiations to assess the applicability of existing WTO rules and propose necessary reforms which are applicable to all WTO Members. This paper argues that the ASCM is largely sufficient to regulate industrial subsidies, except for notification rules which are not complied with by a majority of WTO Members. Once reformed, all nations would benefit from a consistent set of notification rules that enhance overall transparency and facilitate subsidy investigations. China and the US should address SOEs and other concerns in a similar way, because they too are not unique to China. A consensus reached between the world’s two largest economies would then catalyze broader discussions among all WTO Members. This in turn draws all international market players closer to the multilateral system, which shall continue to promote fair competition, openness and stability within the global trade market.

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Appellate Body Report, Brazil – Export Financing Programme for Aircraft, WTO Doc WT/DS46/AB/RW (31 July 2000, adopted 4 August 2000)

Appellate Body Report, Canada – Certain Measures Affecting the Automotive Industry, WTO Doc WT/DS139/AB/R (31 May 2000, adopted 19 June 2000)

Appellate Body Report, Canada – Certain Measures Affecting the Renewable Energy Generation Sector, WTO Doc WT/DS412/AB/R (6 May 2013, adopted 24 May 2013)

Appellate Body Report, European Communities – Measures Affecting Importation of Certain Poultry Products, WTO Doc WT/DS69/AB/R (13 July 1998, adopted 23 July 1998)

Appellate Body Report, European Communities – Regime for the Importation, Sale and Distribution of Bananas, WTO Doc WT/DS27/AB/R (9 September 1997, adopted 25 September 1997)

Appellate Body Report, European Communities and Certain Member States – Measures Affecting Trade in Large Civil Aircraft, WTO Doc WT/DS316/AB/R (18 May 2011, adopted 1 June 2011)

Appellate Body Report, United States – Continued Existence and Application of Zeroing Methodology, WTO Doc WT/DS350/AB/R (4 February 2008, adopted 19 February 2009)

Appellate Body Report, United States – Countervailing Duties on Certain Corrosion-Resistant Carbon Steel Flat Products from Germany, WTO Doc WT/DS213/AB/R (28 November 2002, adopted 19 December 2002)

Appellate Body Report, United States – Countervailing Duty Measures on Certain Products from China, WTO Doc WT/DS437/AB/R (18 December 2014, adopted 16 January 2015)

Appellate Body Report, United States – Definitive Anti-Dumping and Countervailing Duties on Certain Products from China, WTO Doc WT/DS379/AB/R (11 March 2011, adopted 25 March 2011)

Appellate Body Report, United States – Final Countervailing Duty Determination with respect to certain Softwood Lumber from Canada, WTO Doc WT/DS247/AB/R (19 January 2004, adopted 17 February 2004)

Appellate Body Report, United States – Measures Affecting Trade in Large Civil Aircraft – Second Complaint, WTO Doc WT/DS353/AB/R (12 March 2012, adopted 23 March 2012)

Appellate Body Report, United States – Subsidies on Upland Cotton, WTO Doc WT/DS267/AB/R (3 March 2005, adopted 21 March 2005)

Appellate Body Report, United States – Tax Treatment for “Foreign Sales Corporations”, WTO Doc WT/DS108/R (8 October 1999, adopted 20 March 2000)

China – Anti-dumping and Countervailing Duty Measures on Barley from Australia, WTO Doc G/ADP/D135/1; G/L/1382; G/SCM/D130/1; WT/DS598/1 (16 December 2020) (Request for Consultations by Australia)

China – Certain Measures Granting Refunds, Reductions or Exemptions from Taxes and Other Payments, WTO Doc WT/DS358/14 (19 Dec 2007) (Communication from China and the United States)

China – Measures Relating to Demonstration Bases and Common Service Platform Programmes, WTO Doc WT/DS489/7 (19 February 2015) (Communication From China the United States)

China – Subsidies to Producers of Primary Aluminium, WTO Doc G/L/1173; G/SCM/D113/1; WT/DS519/1 (17 January 2017) (Request for Consultations by the United States)

Decision by the Arbitrator, Brazil – Aircraft (Article 22.6 – Brazil), WTO Doc WT/DS46/ARB (28 August 2000)

Decision by the Arbitrator, United States – Upland Cotton (Article 22.6 – US II), WTO Doc WT/DS267.ARB/2 (31 August 2009)

European Union – Measures Related to Price Comparison Methodologies, WTO Docs G/ADP/D116/1, G/L/1170 and WT/DS516/1 (15 December 2016) (Request for Consultations by China)

GATT Panel Report, European Economic Community – Payments and Subsidies Paid to Processors and Producers of Oilseeds and Related Animal-Feed Proteins, WTO Doc DS28/R – 39S/91

GATT Panel Report, Japan – Trade in Semi-Conductors, WTO Doc L/6309 – 35S/116 (24 March 1988, adopted 4 May 1988)

GATT Panel Report, Spain – Tariff Treatment of Unroasted Coffee, WTO Doc L/5135 – 28S/102 (27 April 1981, adopted 11 June 1981)

Panel Report, Argentina – Measures Affecting the Export of Bovine Hides and the Import of Finished Leather, WTO Doc WT/DS155/R (19 December 2000, adopted 16 February 2001)

Panel Report, Australia – Subsidies Provided to Producers and Exporters of Automotive Leather, WTO Doc WT/DS126/R (25 May 1999, adopted 16 June 1999)

Panel Report, Brazil – Export Financing Programme for Aircraft, WTO Doc WT/DS46/R (14 April 1999, adopted 20 August 1999)

Panel Report, Brazil – Measures Affecting Imports of Retreaded Tyres, WTO Doc WT/DS332/R (12 June 2007, adopted 17 December 2007)

Panel Report, China – Tariff Rate Quotas for Certain Agricultural Products, WTO Doc WT/DS517/R (18 April 2019, adopted 28 May 2019)

Panel Report, European Communities – Regime for the Importation, Sale and Distribution of Bananas, WTO Doc WT/DS27/97 (22 May 1997, adopted 25 September 1997)

Panel Report, European Communities and Certain Member States – Measures Affecting Trade in Large Civil Aircraft, WTO Doc WT/DS316/R (30 June 2010, adopted 1 June 2011)

Panel Report, European Union – Measures Affecting Tariff Concessions on Certain Poultry Meat Products, WTO Doc WT/SD492/R (28 March 2017, adopted 19 April 2017)

Panel Report, India – Quantitative Restrictions on Imports of Agricultural, Textile and Industrial Products, WTO Doc WT/DS90/R (6 April 1999, adopted 22 September 1999)

Panel Report, Indonesia – Importation of Horticultural Products, Animals and Animal Products, WTO Doc WT/DS478/R (22 December 2016, adopted on 22 November 2017)

Panel Report, United States – Certain Measures Affecting Imports of Poultry from China, WTO Doc WT/DS392/R (29 September 2020, adopted 25 October 2010)

Panel Report, United States – Tariff Measures on Certain Goods from China, WTO Doc WT/DS543/R (15 September 2020)

C Chinese Legislations and Regulatory Documents

《国务院关于印发6个新设自由贸易试验区总体方案的通知》[Notice of the State Council on the Printing and Distributing Overall Plans for 6 New Pilot FTZs] (People’s Republic of China) State Council, 26 August 2019

《国务院关于印发《中国制造2025》的通知》[Notice of the State Council on Printing and Distributing ‘Made in China 2025’] (People’s Republic of China) National People’s Congress, The State Council, 8 May 2015

《国资委、财政部联合引发《关于完善中央企业功能分来考核的实施方案》》[‘Joint Publication of the ‘Implementing Plan for Perfecting Central Enterprise Functional Classification and Performance Evaluation’ by the SASAC and Ministry of Finance] (People’s Republic of China) State-owned Assets Supervision and Administration Commission of the State Council, 26 September 2016

《海关总署公告2020年第65好（关于进口美国大买植物检疫要求的公告）》[Customs Notice Number 65 of 2020 (Notice Regarding Import of US Barley)] (People’s Republic of China) General Administration of Customs, 13 May 2020 <http://www.customs.gov.cn/customs/302249/2480148/3054041/index.html>

《商务部公告2020年第14号 关于原产于澳大利亚的敬酒大麦反倾销调查最终裁定的公告》[Ministry of Commerce Announcement No. 14 of 2020 on the Final Ruling of the Anti-Dumping Investigation on Imported Barley Originating in Australia] (People’s Republic of China) Ministry of Commerce, 18 May 2020

《商务部公告2020年第15号 关于原产于澳大利亚的进口大麦反补贴调查最终裁定的公告》[Ministry of Commerce Announcement No. 15 of 2020 on the Final Ruling of the Countervailing Investigation of Imported Barley Originating in Australia] (People’s Republic of China) Ministry of Commerce, 18 May 2020

《商务部令2020年第4号 不可靠实体清单规定》[MOFCOM Order No. 4 of 2020 on Provisions on the Unreliable Entity] (People’s Republic of China) Ministry of Commerce, 19 September 2020

《中华人民共和国国家发展和改革委员会公告2020年第6号》[National Development and Reform Commission, People’s Republic of China Announcement No. 6 of 2020] (People’s Republic of China) National Development and Reform Commission, 14 September 2020

中华人民共和国海关总署 [General Administration of Customs, P.R.China],《（2）2020年1至2月进出口商品国别（地区）总值表（美元值）》[(2) Table of the Total Value of Import and Export Commodities by Country (Region) From January to February 2020 (USD)] (Web Page, 23 March 2020) <http://www.customs.gov.cn/customs/302249/302274/302277/302276/2913816/index.html>

中华人民共和国农业农村部 [Ministry of Agriculture and Rural Affairs of the People’s Republic of China], 《境外涉农信息快报（第107期）》[Report on Information Concerning Agriculture Beyond Chinese Borders (107^th Edition)] (Media Release, 2 June 2020) <http://www.gjs.moa.gov.cn/gzdt/202006/t20200602_6345771.htm>

《中华人民共和国宪法》[Constitution of the People’s Republic of China]

中华人民共和国中央人民政府 [The State Council of the People’s Republic of China], 《推进国企贯彻落实“三重一大”决策制度的意见》[‘Opinions on Further Promoting the Implementation of the ‘Three-Major One-Large’ Decision-Making System’] (Media Release, 15 July 2010) <http://www.gov.cn/jrzg/2010-07/15/content_1655395.htm>

中华人民共和国中央人民政府 [The State Council of the People’s Republic of China],《中共中央关于制定国民经济和社会发展第十四个五年规划和二〇三五年远景目标的建议》[Proposals of the Central Committee of the Communist Party of China on Formulating the Fourteenth Five-Year Plan for National Economic and Social Development and the Long-Term Goals for 2035] (Media Release, 3 November 2020) <http://www.gov.cn/zhengce/2020-11/03/content_5556991.htm>

中华人民共和国中央人民政府 [The State Council of the People’s Republic of China], 《中华人民共和国国民经济和社会发展第十三个五年规划纲要》[Outline of the 13th Five-Year Plan for the National Economic and Social Development of the People’s Republic of China] (Media Release, 17 March 2016) <http://www.gov.cn/xinwen/2016-03/17/content_5054992.htm>

D American Legislations

American Recovery and Reinvestment Act of 2009 Pub.L. 111-5

E Treaties

Accession of the People’s Republic of China, WTO Doc WT/L/432 (23 Nov 2001)

Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade 1994, open for signature 15 April 1994, 1868 UNTS 201 (entered into force 01 January 1995)

Chile-US Free-Trade Agreement, signed 6 June 2003 (entered into force 1 January 2004)

China-Australia Free Trade Agreement, signed 17 June 2020 (entered into force 20 December 2015)

Dominican Republic-Central America Free-Trade Agreement, 5 August 2004 (entered into force 1 July 2006, 1 March 2007 and 1 January 2009)

Economic and Trade agreement Between the Government of the United States of America and the Government of the People’s Republic of China, signed 15 January 2020 (entered into force 14 February 2020)

Marrakesh Agreement Establishing the World Trade Organization, opened for signature 15 April 1994, 1867 UNTS 3 (entered into force 1 January 1995)

Marrakesh Agreement Establishing the World Trade Organization, opened for signature 15 April 1994, 1867 UNTS 14 (entered into force 1 January 1995)

Marrakesh Agreement Establishing the World Trade Organization, opened for signature 15 April 1994, 1867 UNTS 154 (entered into force 1 January 1995)

F Other

Alden, Edward, ‘Preparing for a World Without the World Trade Organization’, World Politics Review (Blog Post, 22 September 2020) <https://www.worldpoliticsreview.com/articles/29074/after-the-trump-trade-wars-prepare-for-a-world-without-the-wto>

BBC News 中文 [BBC News Chinese], 《新冠疫情：病毒频现冷冻食品引公众担忧 专家称更要警惕“超级传播者”》[COVID-19: Frequent Discoveries of Coronavirus on Frozen Food Arouse Public Concerns, Experts Warns to be More Aware of ‘Super Spreaders’], BBC News 中文 [BBC News Chinese] (online, 19 August 2020) <https://www.bbc.com/zhongwen/simp/chinese-news-53819662>

BBC News 中文 [BBC News Chinese], 《中共五中全会：五年规划的便于不变 关于中国是发展计划五个你需要知道的关键问题》[Fifth Plenary Session of the Communist Party of China: The Changes and Non-Changes of the Five-Year Plans, Five Key Issues You Need To Know About China’s Development Plan], BBC News 中文 [BBC News Chinese] (online, 27 October 2020) <https://www.bbc.com/zhongwen/simp/chinese-news-54655860>

Bermingham, Finbarr, Orange Wang and Keegan Elmer, ‘Coronavirus: China’s Freeze on Imported Salmon Stirs Concern About Wider Impact on European Foods Trade’, South China Morning Post (online, 17 June 2020) <https://www.scmp.com/economy/china-economy/article/3089404/coronavirus-chinas-freeze-imported-salmon-stirs-concern-about>

Bown, Chad and Jennifer Hillman, ‘The October Truce on US-China Trade Failed to Address Subsidies’, PIIE (Blog Post, 22 October 2019) <https://www.piie.com/blogs/trade-and-investment-policy-watch/october-truce-us-china-trade-failed-address-subsidies>

Bown, Chad and Mary Lovely, ‘Trump’s Phase One Deal Relies on China’s State-Owned Enterprises’, PIIE (Blog Post, 3 March 2020) <https://www.piie.com/blogs/trade-and-investment-policy-watch/trumps-phase-one-deal-relies-chinas-state-owned-enterprises>

Bown, Chad and Melina Kolb, ‘Trump’s Trade War Timeline: An Up-to-Date Guide’, Peterson Institute for International Economics (‘PIIE’) (Blog Post, 28 September 2020) <https://www.piie.com/sites/default/files/documents/trump-trade-war-timeline.pdf>

Bown, Chad, Euijin Jung and Eva Zhang, ‘Trump Has Gotten China to Lower Its Tariffs. Just Toward Everyone Else’, PIIE(Blog Post, 12 June 2019) <https://www.piie.com/blogs/trade-and-investment-policy-watch/trump-has-gotten-china-lower-its-tariffs-just-toward>

Committee on Subsidies and Countervailing Measures, ‘Notification Provisions under the Agreement on Subsidies and Countervailing Measures’, WTO Doc G/SCM/W/546/Rev.10 (29 March 2019)

Gao, Henry, ‘China to Turn Inward for Growth Prospects, But Conflicts with the US will Continue’ (Blog Post, 30 October 2020) <https://www.hinrichfoundation.com/research/article/us-china/us-china-conflict-continues/>

Global Trade Alert, ‘Data & Methodology’, Global Trade Alert (Web Page) <https://www.globaltradealert.org/data_extraction>

Hufbauer, Gary and Euijin Jung, ‘Industrial Policy Makes a Comeback’, East Asia Forum (Blog Post, 16 August 2020) <https://www.eastasiaforum.org/2020/08/16/industrial-policy-makes-a-comeback/>

Iglesia, María, ‘The Benefits of Being an OECD Member’, Conexion Intal (Blog Post 29 January 2016) <https://conexionintal.iadb.org/2016/01/29/costos-y-beneficios-de-formar-parte-de-la-ocde/?lang=en>

Johnson, Ben, ‘Explainer: What’s the Difference Between a Free Trade Union and a Customs Union?’, Acton Institute (Blog Post, 20 March 2017) <https://www.acton.org/publications/transatlantic/2017/03/20/explainer-difference-free-trade-union-customs-union>

Leonard, Jenny, Ian King and Jennifer Jacobs, ‘U.S. Holds Off on Huawei Licenses as China Halts Crop-Buying’, Bloomberg (online, 9 August 2019) <https://www.bloomberg.com/news/articles/2019-08-08/u-s-holds-off-on-huawei-licenses-as-china-halts-crop-buying?srnd=premium-asia>

OECD, ‘China and the OECD’, OECD (Webpage) <https://www.oecd.org/china/china-and-oecd.htm>

OECD, ‘List of OECD Member countries – Ratification of the Convention on the OECD’, OECD (Web Page, 2020) <https://www.oecd.org/about/document/list-oecd-member-countries.htm>

Office of the United States Trade Representative, ‘Joint Statement of the Trilateral Meeting of the Trade Ministers of Japan, the United States and the European Union’ (Press Release, 14 January 2020) <https://ustr.gov/about-us/policy-offices/press-office/press-releases/2020/january/joint-statement-trilateral-meeting-trade-ministers-japan-united-states-and-european-union>

ProFarmer, ‘Soybeans Surge on Chinese Demand’ ProFarmer (online, 19 September 2020) <https://www.profarmer.com/system/files/inline-files/Pro%20Farmer%20-%20Sept.%2019%2C%202020.pdf>

Smith, Michael and Andrew Tillett, ‘China Orders Steel Makers to Stop Buying Australia Coal, Says Traders’, Financial Review (online, 13 October 2020) <http://www.customs.gov.cn/customs/302249/2480148/3054041/index.html>

Stearns, Jonathan, ‘Europe Threatens Legal Challenger to U.S.-China Trade Pact at WTO’, Bloomberg (online, 17 January 2020) <https://www.bloomberg.com/news/articles/2020-01-16/europe-threatens-legal-challenge-to-u-s-china-trade-pact-at-wto>

The White House, ‘Presidential Executive Order on Assessing and Strengthening the Manufacturing and Defense Industrial Base and Supply Chain Resilience of the United States’ (Media Release, 21 July 2017)

Trump, Donald, ‘Presidential Memorandum for the United States Trade Representative’ (Media Release, 14 August 2017)

United States Department of Commerce, ‘Commerce Department Further Restricts Huawei Access to U.S. Technology and Adds Another 38 Affiliates to the Entity List’ (Media Release, 17 August 2020) <https://www.commerce.gov/news/press-releases/2020/08/commerce-department-further-restricts-huawei-access-us-technology-and>

United States Trade Representative, ‘Public Body’, United States Trade Representative (Web Page) <https://ustr.gov/sites/default/files/uploads/Mar25%20Stmt%20US%20AD-CVD%20fin.pdf>

Wang, Heng, ‘US-China Phase One Trade Deal: What Does it Mean?’, UNSW Newsroom (Blog Post, 29 January 2020) <https://newsroom.unsw.edu.au/news/business-law/us-china-phase-one-trade-deal-what-does-it-mean>

World Integrated Trade Solution, ‘China Cereals; Barley Imports by Country in 2018’, World Bank (Web Page) <https://wits.worldbank.org/trade/comtrade/en/country/CHN/year/2018/tradeflow/Imports/partner/ALL/product/100300>

Worldometer, ‘COVID-19 Coronavirus Pandemic’, Worldometer (Web Page, 23 November 2020) <https://www.worldometers.info/coronavirus/?utm_campaign=homeAdUOA?Si>

Xu, Muyu and Melanie Burton, ‘Chinese Coal Traders Hunt for Short-Term Buys Amid Virus Disruption’, Reuters (online, 11 February 2020) <https://fr.reuters.com/article/china-health-coal-idUKL4N2AB1H6>

Zhou, Weihuan, ‘Getting Back to Harvest: The Way Forward After China’s Barley Tariff’ (Blog Post, 26 May 2020) < https://www.law.unsw.edu.au/news/getting-back-to-harvest-the-way-forward-after-chinas-barley-tariff>

Zhou, Weihuan, ‘The Phase One Dispute Settlement Mechanism – A Poor Alternative to WTO Appellate Body’ Hinrich Foundation (Blog Post, 30 January 2020) <https://www.hinrichfoundation.com/research/article/wto/phase-one-settlement-poor-alternative-to-wto-appellate-body/>

Zhou, Weihuan and Henry Gao, ‘US-China Phase One Deal: A Brief Account’, Regulating for Globalization (Blog Post, 22 January 2020) <http://regulatingforglobalization.com/2020/01/22/us-china-phase-one-deal-a-brief-account/?doing_wp_cron=1591410437.4294590950012207031250>

《滨州高新铝电股份有限公司》[Binzhou Gaoxin Aluminium & Electricity Co Ltd], 启信宝 [Qixinbao] (Web Page) <https://www.qixin.com/company/279ec287-bb9f-4425-a05b-904e3ad15530>

《山东魏桥创业集团有限公司》[Shandong Weiqiao Pioneering Group Co Ltd], 启信宝 [Qixinbao] (Web Page) <https://www.qixin.com/company/f990788e-b972-45b6-8631-6657ad236519>

生物谷 [Bioon], 《Nature：动物传播冠状病毒的风险有多大？》[Nature: Extent of Risk for Animals to Transmit Coronavirus?], 生物谷 [Bioon] (online, 23 June 2020) <https://news.bioon.com/article/6757695.html>

中华人民共和国中央人民政府 [The State Council of the People’s Republic of China], 《国务院新闻办就2020年上半年进出口情况举行发布会》[The State Council Information Office Press Conference Concerning Import and Export Trade Conditions in the First Half of 2020] (Media Release, 14 July 2020) <http://www.gov.cn/xinwen/2020-07/14/content_5526721.htm>

---

^[1] ‘DSM’.

^[2] Weihuan Zhou, ‘In Defense of the WTO: Why Do We Need a Multilateral Trading System?’ (2020) 47(1) Legal Issues of Economic Integration 9, 9.

^[3] Economic and Trade agreement Between the Government of the United States of America and the Government of the People’s Republic of China, signed 15 January 2020 (entered into force 14 February 2020) <https://ustr.gov/sites/default/files/files/agreements/phase%20one%20agreement/Economic_And_Trade_Agreement_Between_The_United_States_And_China_Text.pdf> (‘Phase One Deal’).

^[4] ‘MFN’.

^[5] Marrakesh Agreement Establishing the World Trade Organization, opened for signature 15 April 1994, 1867 UNTS 14 (entered into force 1 January 1995) (‘ASCM’).

^[6] Zhou (n 2).

^[7] Congressional Research Service, China-U.S. Trade Issues (Report, 30 July 2018) 30.

^[8] ‘SOEs’.

^[9] Jorge Miranda, ‘How China Did not Transform into a Market Economy’ in James Nedumpara and Weihuan Zhou (eds) Non-market Economies in the Global Trading System (Springer, 2018) 65, 76-77.

^[10] BBC News 中文 [BBC News Chinese], 《中共五中全会：五年规划的便于不变 关于中国是发展计划五个你需要知道的关键问题》[Fifth Plenary Session of the Communist Party of China: The Changes and Non-Changes of the Five-Year Plans, Five Key Issues You Need To Know About China’s Development Plan], BBC News 中文 [BBC News Chinese] (online, 27 October 2020) <https://www.bbc.com/zhongwen/simp/chinese-news-54655860>.

^[11] 中华人民共和国中央人民政府 [The State Council of the People’s Republic of China], 《中华人民共和国国民经济和社会发展第十三个五年规划纲要》[Outline of the 13th Five-Year Plan for the National Economic and Social Development of the People’s Republic of China] (Media Release, 17 March 2016) <http://www.gov.cn/xinwen/2016-03/17/content_5054992.htm> .

^[12] 《国务院关于印发《中国制造2025》的通知》[Notice of the State Council on Printing and Distributing ‘Made in China 2025’] (People’s Republic of China) National People’s Congress, The State Council, 8 May 2015 (‘MIC2025’).

^[13] Weihuan Zhou, Huiqin Jiang and Qingjiang Kong, ‘Technology Transfer under China’s Foreign Investment Regime: Does the WTO Provide a Solution?’ (2020) 54(3) Journal of World Trade 455, 455-6.

^[14] United States Trade Representative, 2017 Report to Congress On China’s WTO Compliance (Report, January 2018) 52.

^[15] United States Trade Representative, 2018 Report to Congress On China’s WTO Compliance (Report, Feb 2019) 16.

^[16] Ibid 13.

^[17] 中华人民共和国中央人民政府 [The State Council of the People’s Republic of China],《中共中央关于制定国民经济和社会发展第十四个五年规划和二〇三五年远景目标的建议》[Proposals of the Central Committee of the Communist Party of China on Formulating the Fourteenth Five-Year Plan for National Economic and Social Development and the Long-Term Goals for 2035] (Media Release, 3 November 2020) <http://www.gov.cn/zhengce/2020-11/03/content_5556991.htm> .

^[18] Henry Gao, ‘China to Turn Inward for Growth Prospects, But Conflicts with the US will Continue’ (Blog Post, 30 October 2020) <https://www.hinrichfoundation.com/research/article/us-china/us-china-conflict-continues/>.

^[19] ‘IP’.

^[20] Donald Trump, ‘Presidential Memorandum for the United States Trade Representative’ (Media Release, 14 August 2017).

^[21] Office of the United States Trade Representative, Findings of the Investigation into China’s Acts, Policies, and Practices Related to Technology Transfer, Intellectual Property, and Innovation Under Section 301 of the Trade Act of 1974 (Report, 22 March 2018).

^[22] Chad Bown and Melina Kolb, ‘Trump’s Trade War Timeline: An Up-to-Date Guide’, Peterson Institute for International Economics (‘PIIE’) (Blog Post, 28 September 2020) <https://www.piie.com/sites/default/files/documents/trump-trade-war-timeline.pdf> 7-13.

^[23] Chad Bown and Mary Lovely, ‘Trump’s Phase One Deal Relies on China’s State-Owned Enterprises’, PIIE (Blog Post, 3 March 2020) <https://www.piie.com/blogs/trade-and-investment-policy-watch/trumps-phase-one-deal-relies-chinas-state-owned-enterprises>.

^[24] Chad Bown, Euijin Jung and Eva Zhang, ‘Trump Has Gotten China to Lower Its Tariffs. Just Toward Everyone Else’, PIIE(Blog Post, 12 June 2019) <https://www.piie.com/blogs/trade-and-investment-policy-watch/trump-has-gotten-china-lower-its-tariffs-just-toward>.

^[25] 《国务院关于印发6个新设自由贸易试验区总体方案的通知》[Notice of the State Council on the Printing and Distributing

Overall Plans for 6 New Pilot FTZs] (People’s Republic of China) State Council, 26 August 2019.

^[26] United States Department of Commerce, ‘Commerce Department Further Restricts Huawei Access to U.S. Technology and Adds Another 38 Affiliates to the Entity List’ (Media Release, 17 August 2020) <https://www.commerce.gov/news/press-releases/2020/08/commerce-department-further-restricts-huawei-access-us-technology-and>.

^[27] Jenny Leonard, Ian King and Jennifer Jacobs, ‘U.S. Holds Off on Huawei Licenses as China Halts Crop-Buying’, Bloomberg (online, 9 August 2019) <https://www.bloomberg.com/news/articles/2019-08-08/u-s-holds-off-on-huawei-licenses-as-china-halts-crop-buying?srnd=premium-asia>.

^[28] United States Department of Commerce, ‘Temporary General License: Extension of Validity, Clarifications to Authorized Transactions, and Changes to Certification Statement Requirements’ (2019) 84(162) Federal Register 43487 <https://www.federalregister.gov/documents/2019/08/21/2019-17920/temporary-general-license-extension-of-validity-clarifications-to-authorized-transactions-and>.

^[29] 《商务部令2020年第4号 不可靠实体清单规定》[MOFCOM Order No. 4 of 2020 on Provisions on the Unreliable Entity] (People’s Republic of China) Ministry of Commerce, 19 September 2020, art 10.

^[30] Phase One Deal (n 3) art 1.2.

^[31] Ibid art 2.2.

^[32] Ibid art 3.1.

^[33] Ibid art 4.1.

^[34] Weihuan Zhou and Henry Gao, ‘US-China Phase One Deal: A Brief Account’, Regulating for Globalization (Blog Post, 22 January 2020) <http://regulatingforglobalization.com/2020/01/22/us-china-phase-one-deal-a-brief-account/?doing_wp_cron=1591410437.4294590950012207031250> .

^[35] Phase One Deal (n 3) art 5.3.

^[36] ‘covered products’.

^[37] Phase One Deal (n 3) art 6.2.1.

^[38] Marrakesh Agreement Establishing the World Trade Organization, opened for signature 15 April 1994, 1867 UNTS 3 (entered into force 1 January 1995) annex 1A (‘General Agreement on Tariffs and Trade 1994’) (‘GATT’).

^[39] Ibid I:1.

^[40] Panel Report, European Communities – Regime for the Importation, Sale and Distribution of Bananas, WTO Doc WT/DS27/97 (22 May 1997, adopted 25 September 1997) [7.239] (‘EC – Bananas III’).

^[41] Ben Johnson, ‘Explainer: What’s the Difference Between a Free Trade Union and a Customs Union?’, Acton Institute (Blog Post, 20 March 2017) <https://www.acton.org/publications/transatlantic/2017/03/20/explainer-difference-free-trade-union-customs-union>.

^[42] GATT (n 38) art XXIV:1.

^[43] Ibid art XXIV:4.

^[44] GATT Panel Report, Japan – Trade in Semi-Conductors, WTO Doc L/6309 – 35S/116 (24 March 1988, adopted 4 May 1988) [126]-[127] (‘Japan – Semi-Conductors’).

^[45] Jonathan Stearns, ‘Europe Threatens Legal Challenger to U.S.-China Trade Pact at WTO’, Bloomberg (online, 17 January 2020) <https://www.bloomberg.com/news/articles/2020-01-16/europe-threatens-legal-challenge-to-u-s-china-trade-pact-at-wto>.

^[46] Appellate Body Report, United States – Continued Existence and Application of Zeroing Methodology, WTO Doc WT/DS350/AB/R (4 February 2008, adopted 19 February 2009) [179].

^[47] GATT (n 38) art I:1.

^[48] Panel Report, United States – Certain Measures Affecting Imports of Poultry from China, WTO Doc WT/DS392/R (29 September 2020, adopted 25 October 2010) [7.410] (‘US – Poultry (China)’).

^[49] Phase One Deal (n 3) annex 6.1 item HS-1003.

^[50] 《商务部公告2020年第14号 关于原产于澳大利亚的敬酒大麦反倾销调查最终裁定的公告》[Ministry of Commerce Announcement No. 14 of 2020 on the Final Ruling of the Anti-Dumping Investigation on Imported Barley Originating in Australia] (People’s Republic of China) Ministry of Commerce, 18 May 2020.

^[51] 《商务部公告2020年第15号 关于原产于澳大利亚的进口大麦反补贴调查最终裁定的公告》[Ministry of Commerce Announcement No. 15 of 2020 on the Final Ruling of the Countervailing Investigation of Imported Barley Originating in Australia] (People’s Republic of China) Ministry of Commerce, 18 May 2020.

^[52] 《海关总署公告2020年第65好（关于进口美国大买植物检疫要求的公告）》[Customs Notice Number 65 of 2020 (Notice Regarding Import of US Barley)] (People’s Republic of China) General Administration of Customs, 13 May 2020 <http://www.customs.gov.cn/customs/302249/2480148/3054041/index.html> .

^[53] Weihuan Zhou, ‘Getting Back to Harvest: The Way Forward After China’s Barley Tariff’ (Blog Post, 26 May 2020) < https://www.law.unsw.edu.au/news/getting-back-to-harvest-the-way-forward-after-chinas-barley-tariff>.

^[54] Muyu Xu and Melanie Burton, ‘Chinese Coal Traders Hunt for Short-Term Buys Amid Virus Disruption’, Reuters (online, 11 February 2020) <https://fr.reuters.com/article/china-health-coal-idUKL4N2AB1H6>.

^[55] Panel Report, Argentina – Measures Affecting the Export of Bovine Hides and the Import of Finished Leather, WTO Doc WT/DS155/R (19 December 2000, adopted 16 February 2001) [11.20] (‘Argentina – Hides and Leather’).

^[56] Appellate Body Report, Canada – Certain Measures Affecting the Automotive Industry, WTO Doc WT/DS139/AB/R (31 May 2000, adopted 19 June 2000) [78] (‘Canada – Autos’).

^[57] Panel Report, EC – Bananas III (n 40) [7.239].

^[58] Appellate Body Report, EC – Bananas III, WTO Doc WT/DS27/AB/R (9 September 1997, adopted 25 September 1997) [190].

^[59] GATT Panel Report, Spain – Tariff Treatment of Unroasted Coffee, WTO Doc L/5135 – 28S/102 (27 April 1981, adopted 11 June 1981) [4.7] (‘Spain – Unroasted Coffee’).

^[60] Report By the Working Party on Border Tax Adjustments (20 Nov 1970) WTO Doc L/3464, 18.

^[61] Panel Report, Canada – Autos, WTO Doc WT/DS139/R (11 February 2000, adopted 19 June 2000) [10.45].

^[62] Ibid [10.23].

^[63] GATT (n 38) art XI:1.

^[64] GATT Panel Report, European Economic Community – Payments and Subsidies Paid to Processors and Producers of Oilseeds and Related Animal-Feed Proteins, WTO Doc DS28/R – 39S/91 [150] (‘EEC – Oilseeds’).

^[65] GATT Panel Report, Japan – Semi-Conductors (n 44) [104].

^[66] Panel Report, Argentina – Hides and Leather (n 55) [11.17].

^[67] Ibid [11.20].

^[68] Panel Report, Indonesia – Importation of Horticultural Products, Animals and Animal Products, WTO Doc WT/DS478/R (22 December 2016, adopted on 22 November 2017) [7.5] (‘Indonesia – Importing Licensing Regimes’).

^[69] Panel Report, Argentina – Hides and Leather (n 55) [11.21].

^[70] 中华人民共和国海关总署 [General Administration of Customs, P.R.China],《（2）2020年1至2月进出口商品国别（地区）总值表（美元值）》[(2) Table of the Total Value of Import and Export Commodities by Country (Region) From January to February 2020 (USD)] (Web Page, 23 March 2020) <http://www.customs.gov.cn/customs/302249/302274/302277/302276/2913816/index.html> .

^[71] Panel Report, India – Quantitative Restrictions on Imports of Agricultural, Textile and Industrial Products, WTO Doc WT/DS90/R (6 April 1999, adopted 22 September 1999) [5.134] (‘India – Quantitative Restrictions’).

^[72] GATT (n 38) art XIII:1.

^[73] Panel Report, European Union – Measures Affecting Tariff Concessions on Certain Poultry Meat Products, WTO Doc WT/SD492/R (28 March 2017, adopted 19 April 2017) [7.431] (‘EU – Poultry Meat (China)’).

^[74] Ibid [7.422].

^[75] Panel Report, EC – Bananas III (n 40) [7.69].

^[76] Ibid [7.68].

^[77] GATT (n 38) art XIII:2.

^[78] Appellate Body Report, European Communities – Measures Affecting Importation of Certain Poultry Products, WTO Doc WT/DS69/AB/R (13 July 1998, adopted 23 July 1998) [93] (‘EC – Poultry’).

^[79] GATT (n 38) art XIII:2(d), first sentence.

^[80] Panel Report, EU – Poultry (China) (n 73) [7.321].

^[81] World Integrated Trade Solution, ‘China Cereals; Barley Imports by Country in 2018’, World Bank (Web Page) <https://wits.worldbank.org/trade/comtrade/en/country/CHN/year/2018/tradeflow/Imports/partner/ALL/product/100300>.

^[82] GATT (n 38) art XIII:2(d), second sentence.

^[83] Ibid art XIII:4.

^[84] Panel Report, EU – Poultry (China) (n 73) [7.322], [7.354]-[7.356].

^[85] ‘TQR’.

^[86] Phase One Deal (n 3) annex 6.1 items HS-5201, HS-5202 and HS-5203.

^[87] 《中华人民共和国国家发展和改革委员会公告2020年第6号》[National Development and Reform Commission, People’s Republic of China Announcement No. 6 of 2020] (People’s Republic of China) National Development and Reform Commission, 14 September 2020.

^[88] ProFarmer, ‘Soybeans Surge on Chinese Demand’ ProFarmer (online, 19 September 2020) 1 <https://www.profarmer.com/system/files/inline-files/Pro%20Farmer%20-%20Sept.%2019%2C%202020.pdf>.

^[89] Panel Report, China – Tariff Rate Quotas for Certain Agricultural Products, WTO Doc WT/DS517/R (18 April 2019, adopted 28 May 2019) [7.197].

^[90] Worldometer, ‘COVID-19 Coronavirus Pandemic’, Worldometer (Web Page, 23 November 2020) <https://www.worldometers.info/coronavirus/?utm_campaign=homeAdUOA?Si>.

^[91] Panel Report, Brazil – Measures Affecting Imports of Retreaded Tyres, WTO Doc WT/DS332/R (12 June 2007, adopted 17 December 2007) [7.42] (‘Brazil –Retreaded Tyres’).

^[92] Ibid [7.104].

^[93] Ibid [7.42].

^[94] 生物谷 [Bioon], 《Nature：动物传播冠状病毒的风险有多大？》[Nature: Extent of Risk for Animals to Transmit Coronavirus?], 生物谷 [Bioon] (online, 23 June 2020) <https://news.bioon.com/article/6757695.html>; Kore Schlottau et al, ‘SARS-CoV-2 in Fruit Bats, Ferrets, Pigs, and Chickens: An Experimental Transmission Study’ (2020) 1 Lancet Microbe 218.

^[95] Manman Dai et al, ‘Long-term Survival Salmon-Attached SARS-CoV-2 at 4^oC as a Potential Source of Transmission in Seafood Markets’ (2020) BioRXiv, 1-2 <https://www.biorxiv.org/content/10.1101/2020.09.06.284695v1>.

^[96] BBC News 中文 [BBC News Chinese], 《新冠疫情：病毒频现冷冻食品引公众担忧 专家称更要警惕“超级传播者”》[COVID-19: Frequent Discoveries of Coronavirus on Frozen Food Arouse Public Concerns, Experts Warns to be More Aware of ‘Super Spreaders’], BBC News 中文 [BBC News Chinese] (online, 19 August 2020) <https://www.bbc.com/zhongwen/simp/chinese-news-53819662>.

^[97] Finbarr Bermingham, Orange Wang and Keegan Elmer, ‘Coronavirus: China’s Freeze on Imported Salmon Stirs Concern About Wider Impact on European Foods Trade’, South China Morning Post (online, 17 June 2020) <https://www.scmp.com/economy/china-economy/article/3089404/coronavirus-chinas-freeze-imported-salmon-stirs-concern-about>.

^[98] Panel Report, Brazil – Retreaded Tyres (n 91) [7.162].

^[99] Ibid [7.155].

^[100] Phase One Deal (n 3) art 6.2.6.

^[101] Chad Bown, ‘US-China Phase One Tracker: China’s Purchases of US Goods’, PIIE (Research Paper, 6 October 2020) <https://www.piie.com/research/piie-charts/us-china-phase-one-tracker-chinas-purchases-us-goods>.

^[102] 陈李 [Chen Li]，《中美第一阶段贸易协定中期成果不及目标，但两国短期不会出现贸易冲突》[China-US Phase One Deal Mid-Term Results Does Not Reach Target, But No Trade Tensions Between the Two Countries In the Short Term] (Media Release, Soochow Securities, 10 July 2020) 3.

^[103] Panel Report, United States – Tariff Measures on Certain Goods from China, WTO Doc WT/DS543/R (15 September 2020) [8.1]-[8.2] (‘US – Tariff Measures’).

^[104] 中华人民共和国中央人民政府 [The State Council of the People’s Republic of China], 《国务院新闻办就2020年上半年进出口情况举行发布会》[The State Council Information Office Press Conference Concerning Import and Export Trade Conditions in the First Half of 2020] (Media Release, 14 July 2020) <http://www.gov.cn/xinwen/2020-07/14/content_5526721.htm> .

^[105] Bown, Jung and Zhang (n 24).

^[106] 《商务部公告2020年第14号 关于原产于澳大利亚的敬酒大麦反倾销调查最终裁定的公告》[Ministry of Commerce Announcement No. 14 of 2020 on the Final Ruling of the Anti-Dumping Investigation on Imported Barley Originating in Australia] (n 50) ; 《商务部公告2020年第15号 关于原产于澳大利亚的进口大麦反补贴调查最终裁定的公告》[Ministry of Commerce Announcement No. 15 of 2020 on the Final Ruling of the Countervailing Investigation of Imported Barley Originating in Australia] (n 51).

^[107] Zhou (n 53).

^[108] China-Australia Free Trade Agreement, signed 17 June 2020 (entered into force 20 December 2015) (‘ChAFTA’).

^[109] World Integrated Trade Solution (n 81).

^[110] 中华人民共和国农业农村部 [Ministry of Agriculture and Rural Affairs of the People’s Republic of China], 《境外涉农信息快报（第107期）》[Report on Information Concerning Agriculture Beyond Chinese Borders (107^th Edition)] (Media Release, 2 June 2020) <http://www.gjs.moa.gov.cn/gzdt/202006/t20200602_6345771.htm> .

^[111] Michael Smith and Andrew Tillett, ‘China Orders Steel Makers to Stop Buying Australia Coal, Says Traders’, Financial Review (online, 13 October 2020) <http://www.customs.gov.cn/customs/302249/2480148/3054041/index.html> .

^[112] Bown and Lovely (n 23).

^[113] Alexander Hammer and Lin Jones, ‘State-Owned Enterprises Play a Smaller, But Still Strategic, Role in China’s External Sector’ (USITC Executive Briefings on Trade, Research Paper, January 2018) 1-2.

^[114] Zhou (n 2) 13-14.

^[115] Phase One Deal (n 3) art 7.1.1.

^[116] Ibid art 7.1.2.

^[117] Ibid art 7.2.2.

^[118] Ibid art 7.4.4(b).

^[119] Zhou (n 2) 13-14.

^[120] Phase One Deal (n 3) art 7.4.4(b).

^[121] Panel Report, US – Tariff Measures (n 103).

^[122] Ibid [8.2].

^[123] Ibid [7.238].

^[124] Edward Alden, ‘Preparing for a World Without the World Trade Organization’, World Politics Review (Blog Post, 22 September 2020) <https://www.worldpoliticsreview.com/articles/29074/after-the-trump-trade-wars-prepare-for-a-world-without-the-wto>.

^[125] Weihuan Zhou, ‘The Phase One Dispute Settlement Mechanism – A Poor Alternative to WTO Appellate Body’ Hinrich Foundation (Blog Post, 30 January 2020) <https://www.hinrichfoundation.com/research/article/wto/phase-one-settlement-poor-alternative-to-wto-appellate-body/>.

^[126] Zhou (n 2) 13-14.

^[127] ChAFTA (n 108) art 15.7.8.

^[128] Ibid art 15.3.1.

^[129] Chile-US Free-Trade Agreement, signed 6 June 2003 (entered into force 1 January 2004) art 22.6.

^[130] Dominican Republic-Central America Free-Trade Agreement, 5 August 2004 (entered into force 1 July 2006, 1 March 2007 and 1 January 2009) art 20.6.

^[131] Zhou (n 125).

^[132] Alden (n 124).

^[133] China – Anti-dumping and Countervailing Duty Measures on Barley from Australia, WTO Doc G/ADP/D135/1; G/L/1382; G/SCM/D130/1; WT/DS598/1 (16 December 2020) (Request for Consultations by Australia)

^[134] Chad Bown and Jennifer Hillman, ‘The October Truce on US-China Trade Failed to Address Subsidies’, PIIE (Blog Post, 22 October 2019) <https://www.piie.com/blogs/trade-and-investment-policy-watch/october-truce-us-china-trade-failed-address-subsidies>; Heng Wang, ‘US-China Phase One Trade Deal: What Does it Mean?’, UNSW Newsroom (Blog Post, 29 January 2020) < https://newsroom.unsw.edu.au/news/business-law/us-china-phase-one-trade-deal-what-does-it-mean>.

^[135] Zhou (n 2) 13-4.

^[136] Weihuan Zhou, China's Implementation of the Rulings of the World Trade Organization (Oxford and Portland, Oregon: Hart Publishing, 2019) 183.

^[137] United Nations Conference on Trade and Development, World Investment Report 2018 (Report, 2018) xii-xiii <https://unctad.org/system/files/official-document/wir2018_overview_en.pdf>.

^[138] Bijit Bora, Peter Lloyd and Mari Pangestu, Industrial Policy and the WTO’, UNCTAD/ITCD/TAB/7 (2000) 15.

^[139] Michael Landesmann and Roman Stöllinger, The European Union’s Industrial Policy: What are the Main Challenge? (Report, January 2020) 1-2.

^[140] Ibid 7.

^[141] ‘R&D’.

^[142] Landesmann and Stöllinger (n 139) 13.

^[143] Konrad Poplawski and Rafal Bajczuk, ‘Industry 4.0: Germany’s New Industrial Policy’, Ośrodek Studiów Wschodnich (Report, April 2019) 9.

^[144] Ibid 10-11.

^[145] Pub.L. 111-5.

^[146] Christian Stensrud, Industrial Policy in the United States (Research Paper, CIVITAS, October 2016) 1-4.

^[147] The White House, ‘Presidential Executive Order on Assessing and Strengthening the Manufacturing and Defense Industrial Base and Supply Chain Resilience of the United States’ (Media Release, 21 July 2017); Department of Defense Interagency Task Force, ‘Assessing and Strengthening the Manufacturing and Defense Industrial Base and Supply Chain Resiliency of the United States’ (Report, September 2018) 4.

^[148] Department of Defense Interagency Task Force (n 147) 54.

^[149] Gary Hufbauer and Euijin Jung, ‘Industrial Policy Makes a Comeback’, East Asia Forum (Blog Post, 16 August 2020) <https://www.eastasiaforum.org/2020/08/16/industrial-policy-makes-a-comeback/>.

^[150] Kommerskollegium National Board of Trade Sweden, The Use of Industrial Subsidies by Major Economies (Report, July 2020) 10.

^[151] Ibid 3-6.

^[152] ‘GTA’.

^[153] GTA, ‘Data & Methodology’, Global Trade Alert (Web Page) <https://www.globaltradealert.org/data_extraction>.

^[154] Kommerskollegium National Board of Trade Sweden (n 150) 12.

^[155] Ibid 10-11.

^[156] Ibid 10.

^[157] Appellate Body Report, United States – Measures Affecting Trade in Large Civil Aircraft – Second Complaint, WTO Doc WT/DS353/AB/R (12 March 2012, adopted 23 March 2012) [434], [439] (‘US – Large Civil Aircraft (Second Complaint)’).

^[158] Ibid [457]-[460], [464].

^[159] Panel Report, European Communities and Certain Member States – Measures Affecting Trade in Large Civil Aircraft, WTO Doc WT/DS316/R (30 June 2010, adopted 1 June 2011) [7.1055] (‘EC and Certain Member States – Large Civil Aircraft’).

^[160] 《中华人民共和国宪法》[Constitution of the People’s Republic of China] art 7.

^[161] United States Trade Representative (n 15) 12.

^[162] 中华人民共和国中央人民政府 [The State Council of the People’s Republic of China] (n 11).

^[163] U.S.-China Economic and Security Review Commission, The 13th Five-Year Plan (Report, 14 February 2017) 5.

^[164] Ibid 6-9.

^[165] Congressional Research Service (n 7) 29-30.

^[166] Junji Nakagawa, ‘The Emerging rules on State Capitalism and Their Implications for China’s Use of SOEs’ in Lisa Toohey, Colin Pricker and Jonathan Greenacre (eds) China in the International Economic Order (Cambridge University Press, 2015) 112, 113.

^[167] Ibid 117.

^[168] Ibid 113-4.

^[169] United States Trade Representative (n 15) 11.

^[170] Joshua Meltzer and Neena Shenai, ‘The US-China Economic Relationship: A Comprehensive Approach’, American Enterprise Institute (Report, February 2019) 13.

^[171] European Union Chamber of Commerce in China (‘EUCCC’), China Manufacturing 2025: Putting Industrial Policy Ahead of Market Forces (Report, 2017) 6.

^[172] Ibid 1.

^[173] Ibid 18-19.

^[174] Ibid 16-17.

^[175] 《国务院关于印发《中国制造2025》的通知》[Notice of the State Council on Printing and Distributing ‘Made in China 2025’] (n 12).

^[176] China – Certain Measures Granting Refunds, Reductions or Exemptions from Taxes and Other Payments, WTO Doc WT/DS358/14 (19 December 2007) (Communication from China and the United States).

^[177] China – Measures Relating to Demonstration Bases and Common Service Platform Programmes, WTO Doc WT/DS489/7 (19 February 2015) (Communication From China the United States) (‘China – Demonstration Bases’).

^[178] China – Subsidies to Producers of Primary Aluminium, WTO Doc G/L/1173; G/SCM/D113/1; WT/DS519/1 (17 January 2017) (Request for Consultations by the United States).

^[179] 《滨州高新铝电股份有限公司》[Binzhou Gaoxin Aluminium & Electricity Co Ltd], 启信宝 [Qixinbao] (Web Page) <https://www.qixin.com/company/279ec287-bb9f-4425-a05b-904e3ad15530>.

^[180] 《山东魏桥创业集团有限公司》[Shandong Weiqiao Pioneering Group Co Ltd], 启信宝 [Qixinbao] (Web Page) <https://www.qixin.com/company/f990788e-b972-45b6-8631-6657ad236519>.

^[181] Harsha Vardhana Singh and Rashmi Jose, ‘Industrial Policy and the WTO Rules-Based System’ (Research Paper, World Economic Forum, September 2016) 2.

^[182] Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade 1994, open for signature 15 April 1994, 1868 UNTS 201 (entered into force 01 January 1995) (’Anti-Dumping Agreement’).

^[183] GATT (n 38) art XVI:2.

^[184] Bora, Lloyd and Pangestu (n 138) 20.

^[185] ASCM (n 5) part V.

^[186] Ibid art 1.1(a)(1).

^[187] Appellate Body Report, United States – Definitive Anti-Dumping and Countervailing Duties on Certain Products from China, WTO Doc WT/DS379/AB/R (11 March 2011, adopted 25 March 2011) [317] (‘US – Anti-Dumping and Countervailing Duties (China)’).

^[188] United States Trade Representative, ‘Public Body’, United States Trade Representative (Web Page) <https://ustr.gov/sites/default/files/uploads/Mar25%20Stmt%20US%20AD-CVD%20fin.pdf> 1.

^[189] Appellate Body Report, US – Anti-Dumping and Countervailing Duties (China) (n187) [317]-[318].

^[190] ASCM (n 5) art 1.1(a)(1)(i).

^[191] Panel Report, EC and certain member States – Large Civil Aircraft (n159) [7.1291].

^[192] Panel Report, Brazil – Export Financing Programme for Aircraft, WTO Doc WT/DS46/R (14 April 1999, adopted 20 August 1999) [7.70] (‘Brazil – Aircraft’).

^[193] ASCM (n 5) art 1.1(a)(1)(iv).

^[194] Ibid art 1.1(a)(1)(ii).

^[195] Appellate Body Report, United States – Tax Treatment for “Foreign Sales Corporations”, WTO Doc WT/DS108/R (8 October 1999, adopted 20 March 2000) [91]-[92] (‘US – FSC (Article 21.5 – EC)’).

^[196] ASCM (n 5) art 1.1(a)(1)(iii).

^[197] Appellate Body Report, Canada – Certain Measures Affecting the Renewable Energy Generation Sector, WTO Doc WT/DS412/AB/R (6 May 2013, adopted 24 May 2013) [5.120] (‘Canada – Renewable Energy’).

^[198] ASCM (n 5) art 1.1(b).

^[199] Ibid art 2.3.

^[200] Ibid art 2.1(a).

^[201] Ibid art 2.2.

^[202] Appellate Body Report, United States – Countervailing Duty Measures on Certain Products from China, WTO Doc WT/DS437/AB/R (18 December 2014, adopted 16 January 2015) [4.120] (‘US – Countervailing Measures (China)’).

^[203] ASCM (n 5) art 2.1(b).

^[204] Appellate Body Report, US – Countervailing Measures (China) (n 202) [4.141]-[4.142].

^[205] Panel Report, EC and certain member States – Large Civil Aircraft (n 159) [7.976].

^[206] Ibid [7.975].

^[207] Ibid [7.964].

^[208] Accession of the People’s Republic of China, WTO Doc WT/L/432 (23 Nov 2001) s 10(2) (‘China’s Accession Protocol’).

^[209] ASCM (n 5) art 8.2(a) and (b).

^[210] Mark Wu, ‘Re-examining ‘Green Light’ Subsidies in the Wake of New Green Industrial Policies’ (Research Paper, World Economic Forum, August 2015).

^[211] ASCM (n 5) art 3.1(a).

^[212] Ibid art 3.1(b).

^[213] Appellate Body Report, United States – Countervailing Duties on Certain Corrosion-Resistant Carbon Steel Flat Products from Germany, WTO Doc WT/DS213/AB/R (28 November 2002, adopted 19 December 2002) [5.8] (‘US – Carbon Steel’).

^[214] Appellate Body Report, Canada – Autos (n 56) [100].

^[215] Panel Report, Australia – Subsidies Provided to Producers and Exporters of Automotive Leather, WTO Doc WT/DS126/R (25 May 1999, adopted 16 June 1999) [9.55] (‘Australia – Automotive Leather II’).

^[216] Appellate Body Report, US – Carbon Steel (n 213) [5.8].

^[217] ASCM (n 5) art 4.7.

^[218] Appellate Body Report, Brazil – Export Financing Programme for Aircraft, WTO Doc WT/DS46/AB/RW (31 July 2000, adopted 4 August 2000) [45] (‘Brazil – Aircraft (Article 21.5 – Canada)’).

^[219] ASCM (n 5) art 4.10.

^[220] Decision by the Arbitrator, Brazil – Aircraft (Article 22.6 – Brazil), WTO Doc WT/DS46/ARB (28 August 2000) [3.44]-[3.45].

^[221] E.g. US – Anti-dumping and Countervailing Duties on Ripe Olives From Spain; Peru – Anti-dumping and Countervailing Measures on Biodiesel from Argentina.

^[222] ASCM (n 5) art 10.

^[223] United States Trade Representative (n 14) 55.

^[224] ASCM (n 5) art 11.1.

^[225] Ibid art 14(d).

^[226] Appellate Body Report, United States – Final Countervailing Duty Determination with respect to certain Softwood Lumber from Canada, WTO Doc WT/DS247/AB/R (19 January 2004, adopted 17 February 2004) [90], [100] (‘US – Softwood Lumber IV’).

^[227] Weihuan Zhou, Henry Gao and Xue Bai, ‘Building a Market Economy Through WTO-Inspired Reform of State-Owned Enterprises in China’ (2019) 68 ICLQ 977, 1016.

^[228] Singh and Jose (n 181) 4.

^[229] Appellate Body Report, EC and certain member States – Large Civil Aircraft, WTO Doc WT/DS316/AB/R (18 May 2011, adopted 1 June 2011) [713].

^[230] Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), WTO Doc WT/DS316/RW (22 September 2016) [6.863], [6.911].

^[231] ASCM (n 5) art 5(a) and (b).

^[232] Ibid art 5(c).

^[233] Appellate Body Report, US – Large Civil Aircraft ( Second Complaint) (n157) [914].

^[234] Ibid [1193].

^[235] Appellate Body Report, EC and certain member States – Large Civil Aircraft (n229) [1162].

^[236] Ibid [1214]-[1216].

^[237] Appellate Body Report, United States – Subsidies on Upland Cotton, WTO Doc WT/DS267/AB/R (3 March 2005, adopted 21 March 2005) [7.1464] (‘US – Upland Cotton’).

^[238] ASCM (n 5) art 7.8.

^[239] Ibid art 7.9.

^[240] Decision by the Arbitrator, US – Upland Cotton (Article 22.6 – US II), WTO Doc WT/DS267.ARB/2 (31 August 2009) [4.37].

^[241] Ibid [4.50].

^[242] China –Demonstration Bases (n 177).

^[243] ASCM (n 5) art 25.3.

^[244] China’s Accession Protocol (n 208) s 10.1.

^[245] Xuewei Feng, ‘The Termination of the Grandfather Clause in China’s Accession Protocol and the Normal Value Construction After Fifteen Years of Accession’ in James Nedumpara and Weihuan Zhou (Eds) Non-market Economies in the Global Trading System (Springer, 2018) 110, 111-113.

^[246] Zhou, Gao and Bai (n 227) 996.

^[247] Feng (n 245) 112.

^[248] China’s Accession Protocol (n 208) s 15(d).

^[249] Zhou, Gao and Bai (n 227) 1006.

^[250] European Union – Measures Related to Price Comparison Methodologies, WTO Docs G/ADP/D116/1, G/L/1170 and WT/DS516/1 (15 December 2016) (Request for Consultations by China) (‘EU – Price Comparison Methodologies’).

^[251] Feng (n 245) 113.

^[252] Appellate Body Report, US – Anti-Dumping and Countervailing Duties (China) (n 187) [582]-[583].

^[253] Zhou, Gao and Bai (n 227) 1015.

^[254] ‘STEs’.

^[255] GATT (n 38) art XVII:1.

^[256] China’s Accession Protocol (n 208) s 6.

^[257] Zhou, Gao and Bai (n 227) 999.

^[258] Ibid 995; interpretive note to GATT (n 38) arts XI, XII, XIII, XIV and XVIII.

^[259] Zhou, Gao and Bai (n 227) 978.

^[260] Office of the United States Trade Representative, ‘Joint Statement of the Trilateral Meeting of the Trade Ministers of Japan, the United States and the European Union’ (Press Release, 14 January 2020) <https://ustr.gov/about-us/policy-offices/press-office/press-releases/2020/january/joint-statement-trilateral-meeting-trade-ministers-japan-united-states-and-european-union>.

^[261] Open for signature 15 April 1994, 1867 UNTS 154 (entered into force 1 January 1995) (‘Marrakesh Agreement’).

^[262] Appellate Body Report, US – Anti-Dumping and Countervailing Duties (China) (n 187) [317].

^[263] ‘SIEs’.

^[264] Appellate Body Report, US – Anti-Dumping and Countervailing Duties (China) (n 187) [318].

^[265] Chad Bown and Jennifer Hillman, ‘WTO’ing a Resolution to the China Subsidy Problem’ (Working Paper, PIIE, October 2019) 11 <https://www.piie.com/sites/default/files/documents/wp19-17.pdf>.

^[266] 中华人民共和国中央人民政府 [The State Council of the People’s Republic of China], 《推进国企贯彻落实“三重一大”决策制度的意见》[‘Opinions on Further Promoting the Implementation of the ‘Three-Major One-Large’ Decision-Making System’] (Media Release, 15 July 2010) <http://www.gov.cn/jrzg/2010-07/15/content_1655395.htm> .

^[267] United States Trade Representative (n 14) 75-76.

^[268] Office of the United States Trade Representative (n 260).

^[269] Marrakesh Agreement (n 261) art X.

^[270] Bown and Hillman (n 265) 13.

^[271] 《国资委、财政部联合引发《关于完善中央企业功能分来考核的实施方案》》[‘Joint Publication of the ‘Implementing Plan for Perfecting Central Enterprise Functional Classification and Performance Evaluation’ by the SASAC and Ministry of Finance] (People’s Republic of China) State-owned Assets Supervision and Administration Commission of the State Council (‘SASAC’), 26 September 2016.

^[272] Zhou, Gao and Bai (n 227) 983.

^[273] Ibid 1019.

^[274] Ibid 1018.

^[275] Ibid 1020.

^[276] Office of the United States Trade Representative (n 260).

^[277] Bown and Hillman (n 265) 12.

^[278] Office of the United States Trade Representative (n 260).

^[279] Bown and Hillman (n 265) 18-19.

^[280] Zhou, Gao and Bai (n 227).

^[281] Appellate Body Report, US – Softwood Lumber IV (n 226) [90].

^[282] Zhou, Gao and Bai (n 227) 1016-1017.

^[283] Ibid 1015.

^[284] Committee on Subsidies and Countervailing Measures, ‘Notification Provisions under the Agreement on Subsidies and Countervailing Measures’, WTO Doc G/SCM/W/546/Rev.10 (29 March 2019).

^[285] Office of the United States Trade Representative (n 260).

^[286] Wilfrid Legg, ‘Presidential Address Agricultural Subsidies: Measurement and Use in Policy Evaluation’ (2003) 54(2) Journal of Agricultural Economics 175, 184.

^[287] Ibid 181.

^[288] OECD, ‘List of OECD Member countries – Ratification of the Convention on the OECD’, OECD (Web Page, 2020) <https://www.oecd.org/about/document/list-oecd-member-countries.htm>.

^[289] OECD, Active with the People’s Republic of China (Report, March 2018) 2.

^[290] OECD, ‘China and the OECD’, OECD (Webpage) <https://www.oecd.org/china/china-and-oecd.htm>.

^[291] María Iglesia, ‘The Benefits of Being an OECD Member’, Conexion Intal (Blog Post 29 January 2016) <https://conexionintal.iadb.org/2016/01/29/costos-y-beneficios-de-formar-parte-de-la-ocde/?lang=en>.

^[292] Weihuan Zhou and Mandy Meng Fang, ‘Subsidizing Technology Competition: China’s Evolving Practices and International Trade Regulation in the Post-Pandemic Era’ [2020] UNSWLRS 66, 5.

^[293] GATT (n 38) art II.

^[294] Zhou and Fang (n 292) 51.

^[295] Ibid 53.

^[296] Zhou (n 2).

^[297] Office of the United States Trade Representative (n 260).