DS339, DS340 and DS342: China — Measures affecting imports of automobile parts

The Appellate Body (AB) reports, dealing with the complaints by the EC, the US and Canada, were circulated on 15 December 2008. According to Article 17.14 of the Dispute Settlement Understanding (DSU), Appellate Body reports have to be adopted by the Dispute Settlement Body (DSB) within 30 days of circulation. Hence, the DSB held a meeting on 12 January 2009 for this purpose.

Canada, the EC and the US expressed their satisfaction with the findings of the AB and the Panel on the scope of Articles II and III of the General Agreement on Tariffs and Trade (GATT) 1994 and the overall conclusion that the specific Chinese measures at issue violated GATT Article III by imposing an internal charge and an administrative burden on imported auto parts that were not borne by domestic parts. They noted that the measures compelled auto producers to purchase auto parts from domestic producers and also to transfer technology to China to enable it to become a major player in the automobiles sector. They also welcomed the ruling that obligations in Protocols of Accession, including commitments incorporated in those protocols from Working Party Reports were binding. They expressed, however, some reservations against certain findings of the AB.

Canada stated that it was unfortunate that the AB reversed the finding by the Panel that the measures at issue violated paragraph 93 of China's Working Party Report. The US said that it disagreed with the AB's statement of its authority to review the meaning of a municipal law. The manner in which a challenged measure operated within a WTO member's domestic system was a factual issue in a dispute, not a legal issue concerning the applicability of and conformity with the covered agreements of that measure. Notwithstanding these reservations, Canada, the EC and the US expressed their support for the adoption of the reports and urged China to bring its measures into conformity with the DSB's recommendations and rulings.

China said that it was satisfied with the finding that the measures at issue were not inconsistent with China's obligations under paragraph 93 of its Accession Working Party Report. It was, however, regrettable that the AB did not consider the Harmonized System (HS) as appropriate context in interpreting relevant GATT articles leading it to uphold the Panel's finding concerning the “threshold” issue and the alleged violation of GATT Articles III:2 and 4.

China welcomed, however, the AB's finding that a Panel's interpretation of a WTO member's municipal law was a matter of legal interpretation which could be reviewed by AB under DSU Article 17.6. The interpretation of a member's municipal law was central to a determination of whether that member had complied with its WTO commitments, particularly in “as such” challenges and should not therefore escape appellate review under DSU Article 17. The process of interpreting municipal law was not materially different from the process of interpreting the covered agreements.

China said that given that the AB had found it unnecessary to rule on the Panel's “alternative” findings and related conclusions with respect to the consistency of the challenged measures with Articles II:1(a) and (b) of the GATT 1994 even though China had appealed against them, they should not be considered as part of the recommendations and rulings which the DSB would be adopting. This flowed from DSU Article 16.4, which made it clear that the adoption of panel reports by the DSB was contingent upon a party's right to seek review by the AB under DSU Article 17. This right could not be realized unless the AB addressed the claims of error on appeal, as required by DSU Article 17.12. China concluded by saying that it would be examining the reports carefully and would advise the DSB of its intentions with respect to the implementation of its recommendations and rulings as provided under DSU Article 21.3.
 

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Next meeting 

The next regular meeting of the DSB is due to take place on 20 January 2009.