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The United States announced on December 22, 2010 that it has sought the World Trade Organization’s (WTO) intervention to address US concerns over support for the domestic wind power industry in the People’s Republic of China. This request is the first step in a potential WTO case.

China’s government provides official support, in the form of monetary grants and other benefits, to develop its domestic wind power manufacturing industry. In its filing, the United States asserts that the program provides subsidies and other support that is contingent on the use of domestic Chinese parts and components, which is prohibited by the WTO Agreement on Subsidies and Countervailing Measures (SCM). The United States also claims that China failed to notify the WTO of its wind power program, which is inconsistent with China’s obligations under the SCM Agreement.

After a 60-day consultation period (or shorter if the parties agree), the United States could ask the WTO to establish a dispute settlement panel. If the panel agrees with the United States and any related appeals fail, the WTO could permit the United States to raise tariffs on Chinese imports. The amount of permitted US retaliation generally would be proportional to any injury the WTO panel finds. Potential US retaliation could be substantial—the United States alleges that the program provides prohibited support worth several hundred million dollars.

The December 22 action has major implications for the US-China relationship. Businesses that produce or trade wind power-related, or other “green industry” products, should follow this issue closely. This dispute could also impact the broader US-China trade relationship, and potential retaliatory measures could affect businesses and investment unrelated to green technology.

The US action may also mean the resurrection of Section 301 as a tool for US businesses and workers to address international trade issues. In recent years the United States has frequently rejected Section 301 petitions, and thus Section 301 has been considered an ineffective tool for prompting government action on trade issues. However, the current action may signal that the US government is now more receptive to Section 301 petitions.

Here are two alternative takes on the case:

In response to the Guardian article linked above, I would like to clarify the basic legal elements of a claim under Article 3.1(b) of the SCM Agreement, which is the provision invoked by the US in this case. There are only two legal elements: (i) there must be a “subsidy” as defined in the SCM Agreement, and (ii) that subsidy must be contingent on the use of domestic over imported goods. There is no requirement for the US to demonstrate or a WTO panel to find that “China’s green fund targets only specific sectors”. In addition, there is no requirement for the US to demonstrate or a WTO panel to find “that the funds are channelled to trade activities that harm US firms and workers”.

The US complaint (DS419) also includes a new claim under the China Accession Protocol: China has not made available a translation of the measures at issue into one or more official languages of the WTO. As part of its accession commitments on transparency, China agreed to make such translations available within 90 days of the implementation of any measure affecting trade. Given the sheer number of trade-related measures issued in China on a daily basis, this obligation was bound to be breached. Now it has actually become a target in a WTO complaint!

Does anyone know whether any other acceding country has undertaken a similar translation obligation?

To get a perspective on accession agreements, look at the most recent Secretariat technical note on accessions, WT/ACC/10/Rev.4 (which summarizes the issues and concerns generally expressed) and its annex, WT/ACC/10/Rev.4/Add.1 (which sorts and presents accession provisions). Both are updated to early 2010.

WT/ACC/10/Rev.4/Add.1 shows (p. 187ff) that Taiwan agreed to

“ensure that from the date of accession, all laws, regulations, judicial decisions and administrative rulings of general application relating to trade in goods, as well as measures subject to the transparency provisions of the GATS and TRIPS Agreement would be translated and published in an official WTO language no later than 90 days after enactment or issuance.”

For an interesting comparison, here is the China commitment (Working Party Report, para. 334, incorporated into the Protocol):

“The representative of China confirmed that China would make available to WTO Members translations into one or more of the official languages of the WTO all laws, regulations and other measures pertaining to or affecting trade in goods, services, TRIPS or the control of forex, and to the maximum extent possible would make these laws, regulations and other measures available before they were implemented or enforced, but in no case later than 90 days after they were implemented or enforced.”

Note how the wording is different from Taiwan’s commitment.


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