US, China Comment on China's Agricultural TRQs Ahead of WTO Dispute Settlement Meeting

Since China failed to implement the recommendations from the World Trade Organization's Dispute Settlement Body on how to bring tariff-rate quotas on agricultural products in line with WTO commitments, the U.S. is seeking to implement countermeasures on the TRQs, the U.S. delegation to the DSB said in July 16 comments. Submitting their rationale in a one-page brief to the DSB ahead of the July 26 meeting, the U.S. delegation discussed how it is seeking the countermeasures under the Understanding on Rules and Procedures Governing the Settlement of Disputes (DSU).

The development comes from the U.S.'s successful bid to find that China's TRQs on wheat, rice and corn were inconsistent with WTO obligations on a "transparent, predictable, and fair basis, using clearly specific requirements and administrative procedures, and in a manner that would not inhibit the filling of each TRQ." The DSB subsequently released recommendations on how to bring the trade restrictions into compliance with WTO rules and set a June 29 deadline for implementation. The U.S. believes China failed to properly implement the recommendations and now seeks retribution in the form of suspension of concessions, including most-favored nation obligations under the General Agreement on Tariffs and Trade 1994.

Responding with their own brief ahead of the DSB meeting, the Chinese delegation claimed it had engaged, and continues to engage, in good faith negotiations with the U.S. on its implementation of the DSB recommendations. In fact, it did implement the DSB's measures by "promulgating" two publications through key government agencies, the delegation said. Despite these purported efforts, the U.S. proceeds with its DSU claim.

China also alleged a procedural violation. The Chinese delegation pointed out that the U.S. did not initiate compliance proceedings of the DSU to seek a "multilateral review of actions taken by China to comply." In order to get the DSB to warrant the lifting of WTO concessions, the U.S. must have first initiated a dispute settlement process in which it "challenges the consistency with the covered agreements of a measure taken by another Member."

"Indeed, absent a multilateral finding that measures taken to comply have failed to achieve compliance, there is no basis for an Article 22.6 arbitrator to determine a level of nullification or impairment resulting from such an alleged non-compliance," the comments said. "Moreover, the DSB cannot grant authorization to suspend concessions in any amount where the responding Member concerned has come into compliance."