China’s Implementation of the Rulings of the World Trade Organization 9781509913558, 9781509913589, 9781509913565

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CHINA’S IMPLEMENTATION OF THE RULINGS OF THE WORLD TRADE ORGANIZATION Amid the ongoing crisis surrounding the WTO, China’s role and behaviour in the multilateral trading system has attracted overwhelming attention. This timely monograph provides the first comprehensive and systemic analysis of China’s compliance with the rulings of the WTO’s dispute settlement m ­ echanism (DSM). It covers all the disputes in which China has been a respondent during its 17-year WTO membership and offers a detailed discussion of China’s implementation of adverse WTO rulings, its approaches to settling WTO disputes, the possible explanations for such approaches, and post-compliance issues. The book shows how China has utilised the limitations and flexibilities of WTO rulings to ensure that its implementation of the rulings not only delivers adequate compliance but also maintains its own interests. Overall, this book argues that the issues relating to the quality of China’s compliance and post-compliance practices concern the loopholes within the DSM itself which may be utilised by all WTO Members. However, despite the loopholes, China’s record of compliance suggests that the DSM has been largely effective in inducing compliance and influencing domestic policy-making. It is therefore in the interest of all WTO Members and other stakeholders to protect the DSM as the ‘crown jewel’ of the multilateral trading system.

CHINA AND INTERNATIONAL ECONOMIC LAW SERIES General Editors: Qing Zhang & Xin Zhang Volume 1: The Legal Framework of EU–China Investment Relations: A Critical Appraisal Wenhua Shan Volume 2: International Trade Regulation in China: Law and Policy Xin Zhang Volume 3: The European Union and China, 1949–2008: Basic Documents and Commentary Edited by Francis Snyder Volume 4: The EU, the WTO and China: Legal Pluralism and International Trade Regulation Francis Snyder Volume 5: Arbitration in China: A Legal and Cultural Analysis Kun Fan

China’s Implementation of the Rulings of the World Trade Organization Weihuan Zhou

HART PUBLISHING Bloomsbury Publishing Plc Kemp House, Chawley Park, Cumnor Hill, Oxford, OX2 9PH, UK HART PUBLISHING, the Hart/Stag logo, BLOOMSBURY and the Diana logo are trademarks of Bloomsbury Publishing Plc First published in Great Britain 2019 Copyright © Weihuan Zhou, 2019 Weihuan Zhou has asserted his right under the Copyright, Designs and Patents Act 1988 to be identified as Author of this work. All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying, recording, or any information storage or retrieval system, without prior permission in writing from the publishers. While every care has been taken to ensure the accuracy of this work, no responsibility for loss or damage occasioned to any person acting or refraining from action as a result of any statement in it can be accepted by the authors, editors or publishers. All UK Government legislation and other public sector information used in the work is Crown Copyright ©. All House of Lords and House of Commons information used in the work is Parliamentary Copyright ©. This information is reused under the terms of the Open Government Licence v3.0 (http://www.nationalarchives.gov.uk/doc/ open-government-licence/version/3) except where otherwise stated. All Eur-lex material used in the work is © European Union, http://eur-lex.europa.eu/, 1998–2019. A catalogue record for this book is available from the British Library. Library of Congress Cataloging-in-Publication data Names: Zhou, Weihuan, author. Title: China’s implementation of the rulings of the World Trade Organization / Weihuan Zhou. Description: Chicago : Hart Publishing, 2019.  |  Series: China and international economic law  |  Includes bibliographical references and index. Identifiers: LCCN 2019021134 (print)  |  LCCN 2019022042 (ebook)  |  ISBN 9781509913572 (EPub)  |  ISBN 9781509913558 (hardback : alk. paper) Subjects: LCSH: Foreign trade regulation—China.  |  Dispute resolution (Law)—China.  |  World Trade Organization—Rules and practice.  |  International commercial arbitration.  |  Arbitration (International law). Classification: LCC KNQ3405 (ebook)  |  LCC KNQ3405 .Z483 2019 (print)  |  DDC 382/.920951—dc23 LC record available at https://lccn.loc.gov/2019021134 ISBN: HB: 978-1-50991-355-8 ePDF: 978-1-50991-356-5 ePub: 978-1-50991-357-2 Typeset by Compuscript Ltd, Shannon To find out more about our authors and books visit www.hartpublishing.co.uk. Here you will find extracts, author information, details of forthcoming events and the option to sign up for our newsletters.

Foreword

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hina’s record of compliance with the rulings of the World Trade Organization (WTO) provides one of the strongest evidence of China’s full commitments to and respect for the rules-based multilateral trading system. This is amply demonstrated and persuasively argued in this book, which is the very first comprehensive and meticulous study of China’s implementation of WTO rulings. This book provides an opportunity for me to reflect on the subject matter drawing on my 18 years of experience at China’s Ministry of Commerce (MOFCOM) between 1996 and 2014 during which I was intimately involved in China’s WTO accession negotiations, implementation of accession commitments, and settlement of disputes. China’s accession to the WTO was a momentous event not only in the history of globalisation and multilateralism but also in China’s opening-up and economic reforms and integration into the world economy. In implementing the accession commitments, China revamped its regulatory framework by rewriting thousands of legislations, also treating this as an important step in its own rule of law reforms. China’s efforts in this regard were unparalleled and have never been seen in any other WTO Member. These facts are well-known, although there have been concerns about whether China has adequately delivered its accession commitments. When it comes to dispute settlement, China has been very willing to use the WTO’s dispute settlement mechanism (DSM) to resolve trade disputes and has participated in the system actively and frequently as a complainant, respondent or third party. As a respondent, which is the focus of this book, China treated WTO rulings highly seriously and has always allocated considerable time and resources to ensure compliance within the relevant implementation periods. To complement the analysis and strengthen the observations advanced in this book, I would share some personal experience in three selected disputes below. The WTO decision in China – IPR (DS362) required China to revise its Copyright Law. The amendments of a statutory law in China are a time-consuming process involving complex substantive and procedural matters. In this particular case, it involved the preparation of amendment proposals by the MOFCOM, the review and approval of the proposals by the State Council, and the discussions of the proposals at the National People’s Congress (NPC) before the proposed changes could be adopted. Despite the complex process, there was a consensus that WTO rulings must be implemented. The NPC was concerned about the limited time it was given to adopt the changes as its legislative process usually takes several years. This difficulty was successfully overcome by the legislators

vi  Foreword and the administrative departments involved working together hard and closely to facilitate the process. However, this outcome was possible only because the Chinese Government is strongly and genuinely committed to international ­obligations. As this book rightly observes, the WTO rulings in China – Publications and Audiovisual Products (DS363) were the most difficult to implement. This time, the difficulty was not in the legislative process (due to the mere involvement of regulations of the State Council and departmental rules) but in the political sensitivity of the required implementation which affected the values and interests fundamental to China’s social and political system. I was one of the officials tasked to manage the implementation and hence was intensely worried and stressed. It was a huge relief when the implementation process was successfully completed after long and hard negotiations among many competent authorities. With this success, I was confident that China would be able to implement any unfavourable WTO rulings in the future. The source of this confidence was the shared belief within the Chinese Government that implementation of WTO rulings is China’s obligation and responsibility. Indeed, one may question China’s implementation relating to films in this dispute. However, China worked within the parameters of the DSM which provides the flexibility for the resolution of dispute by compensation. China – Raw Materials (DS394, 395, 398) and China – Rare Earths (DS431, 432, 433) presented some different challenges for implementation. It was not about legislative complexities or political sensitivity but was about how China may use WTO-consistent policy instruments to pursue legitimate regulatory goals. China’s full compliance in these disputes shows that China would seek to achieve domestic policy objectives in a way that conforms to international obligations. However, inadvertent breaches may occur when the WTO-legality of a measure is controversial and different departments of the government are divided on whether the measure should be introduced. In this regard, China’s experience and legal expertise in the system remains incomparable with that of the advanced economies and will need to be further developed to allow a full comprehension of the boundaries of various WTO rules. WTO rulings and compliance not only help China build such expertise but also have had the effect of resolving differences of opinions and sometimes competing interests among different regulators and authorities. This book argues that China’s WTO compliance in trade remedy disputes has created distinctive issues particularly due to the MOFCOM’s use of re­investigation of anti-dumping and/or countervailing measures as the approach to implementing WTO rulings. My experience in working with the investigating authorities (IAs) in such implementations, however, suggests that the IAs actually endeavoured to rectify the practical deficiencies in re-­investigations, and in some cases even when WTO consultations were held, long before panel rulings were released. Given the technical complexities of trade remedy cases, a failure

Foreword  vii in compliance may have more to do with the lack of knowledge and understanding of WTO rulings than resistance to compliance. As an insider, I know that the IAs hold the view that WTO rulings and their involvement in compliance have helped improve the quality of investigations. Many observations and analysis in this book resonated with me. My personal experience in handling and in various matters leading China’s WTO disputes and implementation of WTO rulings confirms that the Chinese Government has endorsed the importance of WTO rulings and has always endeavoured to comply with the implementation deadlines. This has become the standard practice of the government in implementing unfavourable WTO decisions. Admittedly, there have been and will be no shortage of disagreements with the views and interpretations offered in this book. China’s role and behaviour in the multilateral trading system will also continue to be subject to debate. However, this book has provided such abundant materials and analysis that will be ­beneficial to a constructive debate. Yang Guohua Professor, School of Law, Tsinghua University Beijing, China

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Preface and Acknowledgements

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hina’s compliance with World Trade Organization (WTO) rulings was the first research project (Project) that I was keen to undertake after I accomplished my PhD degree at the University of Sydney in October 2012. At the time, China had been involved in a number of WTO disputes although there were only three disputes in which China lost and had completed the implementation of WTO decisions. Perhaps due to the limited materials, academic studies of the subject matter were sparse. For various reasons, however, I was unable to undertake the Project to fill the gap in the literature until more recently. I restarted my academic career in 2015 after several years in trade and commercial law practice. That made it possible for me to eventually embark on the Project and produce two articles: (1) ‘Fifteen Years on: Has China Implemented WTO Rulings? – A Perspective on “Trade in Goods” Dispute’ published in Vol 11, Issue 1 of the Asian Journal of WTO & International Health Law and Policy in 2016 and (2) ‘Anti-Dumping and China’s Implementation of WTO Rulings’ published in Vol 230 of the China Quarterly in 2017. Chapters 3 and 4 of this book are based heavily on the first article and Chapter 7 uses various parts of the second article. Professor Colin Picker and Professor Ross Buckley encouraged me to turn the  Project into a book. It was with their encouragement and continuous support that I submitted a book proposal to Hart Publishing. Roberta Bassi, one of the Commissioning Editors at Hart, has since provided tremendous guidance and assistance in various matters from the review of the book proposal to the completion, promotion and publication of this book. The editors of the China and International Economic Law Series at Hart and two anonymous reviewers provided valuable and constructive comments and suggestions which allowed me to improve the structure and content of this book. Compared with six years ago, China has become one of the major users of the WTO’s dispute settlement mechanism. As a respondent, China has fully participated in the adjudication process including implementation of adverse WTO rulings in twelve disputes. Yet, the gap in the literature remains unfilled and debates over China’s compliance with WTO decisions have been based on inadequate information and analysis. With the ongoing crisis around the WTO and the growing attention on China’s behaviour in the world trading system, this book could not come at a better time. I benefited enormously from a series of talks with Professor Guohua Yang who generously and enthusiastically shared with me not only his teaching materials which set out the details of the major WTO disputes involving China as

x  Preface and Acknowledgements a complainant or respondent but also his personal experience in handling and managing China’s WTO disputes and compliance with WTO rulings. Professor Jianguo Hu read the whole monograph and provided valuable insights into various disputes that he was involved. I also benefited from talks and/or comments from a group of leading experts in the field. Professors Ernst-Ulrich Petersmann, Valerie Hughes, Tania Voon, Andrew Mitchell, Henry S Gao, Markus Wagner, Qingjiang Kong, Heng Wang either read and commented on various parts of this book or offered insights and suggestions on the topic in general. Huan Zhu at the Cato Institute discussed with me the recent disputes over the so-called ‘forced technology transfer’ by China and the prospects of China’s compliance with unfavourable WTO rulings. Their knowledge, observations and advice are invaluable to the completion of the book. My sincere gratitude must also go to Xue Bai for her excellent research assistance, Joanna Lee who provided editorial comments on each chapter of this book, and Dan Xie who checked all footnotes against the Hart Style and prepared the first draft of the lists of abbreviations, Chinese legislations and reports of the WTO tribunals. Without their assistance, I may well have missed the deadline for submission. Last, but not least at all, I am deeply indebted to my family. Without their generosity, patience and tireless support, it would have been impossible for me to devote time for this book. It was an extreme challenge to have this book completed within the first seven months of my son Shuchen (Aaren) Zhou. I must also thank him for his understanding and inspiration. Weihuan Zhou Sydney, 23 February 2018

Table of Contents Foreword�������������������������������������������������������������������������������������������������������v Preface and Acknowledgements�������������������������������������������������������������������� ix List of Abbreviations�����������������������������������������������������������������������������������xv List of WTO Panel and Appellate Body Reports����������������������������������������� xix List of Chinese Legislation and Regulatory Documents���������������������������� xxiii 1. Introduction��������������������������������������������������������������������������������������������1 I. Introduction������������������������������������������������������������������������������������1 II. The DSM and its Function���������������������������������������������������������������2 III. Compliance under the DSM������������������������������������������������������������6 IV. China’s Participation in the DSM�����������������������������������������������������8 V. This Book�������������������������������������������������������������������������������������13 A. Analytical Framework��������������������������������������������������������������14 B. Structure���������������������������������������������������������������������������������15 2. Disputes Settled Without WTO Rulings�������������������������������������������������17 I. Introduction����������������������������������������������������������������������������������17 II. The Ten Disputes��������������������������������������������������������������������������17 A. China – VAT on Integrated Circuits (DS309)����������������������������17 B. China – Taxes (DS358, 359)�����������������������������������������������������19 C. China – Financial Information Services (DS372, 373, 378)���������20 D. China – Grants, Loans and Other Incentives (DS387, 388, 390)���������������������������������������������������������������������23 E. China – Fasteners (DS407)�������������������������������������������������������25 F. China – Wind Power Equipment (DS419)���������������������������������28 G. China – Autos and Auto Parts (DS450) & China – Demonstration Bases (DS489)�������������������������������������30 H. China – Apparel and Textile Products (DS451)�������������������������33 I. China – Aircraft (DS501)���������������������������������������������������������34 III. An Assessment of China’s Approach to Settling Disputes by Agreement and Implications������������������������������������������������������38 IV. Conclusion������������������������������������������������������������������������������������40 3. China’s Regulation of Imports and Implementation of WTO Rulings������������������������������������������������������������������������������������41 I. Introduction����������������������������������������������������������������������������������41 II. China’s Regulation of Imports�������������������������������������������������������41

xii  Table of Contents III. China – Auto Parts������������������������������������������������������������������������44 A. Background�����������������������������������������������������������������������������44 B. The Measures��������������������������������������������������������������������������45 C. WTO Rulings��������������������������������������������������������������������������46 D. China’s Implementation and an Assessment�����������������������������48 E. Reasons for China’s Compliance����������������������������������������������49 F. Challenges and Implications����������������������������������������������������50 IV. China – Publications and Audiovisual Products������������������������������52 A. Background�����������������������������������������������������������������������������52 B. The Measures��������������������������������������������������������������������������54 C. WTO Rulings��������������������������������������������������������������������������56 D. China’s Implementation and an Assessment�����������������������������57 i. Catalogue 2011����������������������������������������������������������������58 ii. Publications���������������������������������������������������������������������59 iii. Audiovisual Products�������������������������������������������������������60 iv. Several Opinions 2005������������������������������������������������������62 v. Films�������������������������������������������������������������������������������64 E. Reasons for China’s (Partial) Compliance���������������������������������65 F. Challenges and Implications����������������������������������������������������67 V. Conclusion������������������������������������������������������������������������������������68 4. China’s Regulation of Exports and Implementation of WTO Rulings������������������������������������������������������������������������������������70 I. Introduction����������������������������������������������������������������������������������70 II. China’s Regulation of Exports�������������������������������������������������������70 III. China – Raw Materials & China – Rare Earths������������������������������72 A. China – Raw Materials������������������������������������������������������������72 i. Measures and WTO Findings�������������������������������������������72 ii. China’s Implementation and an Assessment���������������������77 B. China – Rare Earths����������������������������������������������������������������78 i. Measures and WTO Findings�������������������������������������������78 ii. China’s Implementation and an Assessment���������������������81 C. Reasons for China’s Compliance����������������������������������������������83 D. Challenges and Implications����������������������������������������������������85 IV. Conclusion������������������������������������������������������������������������������������89 5. China’s Regulation of Trade in Services and Implementation of WTO Rulings������������������������������������������������������������������������������������91 I. Introduction����������������������������������������������������������������������������������91 II. China’s Regulation of Trade in Services������������������������������������������93 III. China – Publications and Audiovisual Products������������������������������98 A. Background�����������������������������������������������������������������������������98 B. The Measures������������������������������������������������������������������������ 100

Table of Contents  xiii C. WTO Rulings������������������������������������������������������������������������ 101 i. Distribution of Reading Materials���������������������������������� 101 ii. Conditions on FIEs in Distributing Reading Materials����������������������������������������������������������������������� 103 iii. Distribution of Audiovisual Products������������������������������ 104 D. China’s Implementation and an Assessment��������������������������� 107 i. Publications Regulation 2011����������������������������������������� 108 ii. Publications Market Rule 2011 & Electronic Publications Rule 2008��������������������������������������������������� 109 iii. Catalogue 2011 & Circular on Internet Culture 2011������ 110 iv. Several Opinions 2005���������������������������������������������������� 111 E. China’s Compliance Approach and Implications�������������������� 114 IV. China – Electronic Payment Services�������������������������������������������� 117 A. Background��������������������������������������������������������������������������� 117 B. The Measures������������������������������������������������������������������������ 119 C. WTO Rulings������������������������������������������������������������������������ 121 D. China’s Implementation and an Assessment��������������������������� 124 E. China’s Approach to Compliance and Implications���������������� 125 V. Conclusion���������������������������������������������������������������������������������� 128

6. China’s Regulation of Intellectual Property and Implementation of WTO Rulings���������������������������������������������������������������������������������� 129 I. Introduction�������������������������������������������������������������������������������� 129 II. China’s Regulatory Regime for Intellectual Property��������������������� 131 III. China – Intellectual Property Rights�������������������������������������������� 138 A. Background��������������������������������������������������������������������������� 138 B. The Measures������������������������������������������������������������������������ 139 C. WTO Rulings������������������������������������������������������������������������ 140 D. China’s Implementation and an Assessment��������������������������� 142 E. China’s Compliance Approach and Implications�������������������� 144 IV. The Pending Disputes������������������������������������������������������������������ 147 A. China – IPRs II���������������������������������������������������������������������� 147 B. China – Transfer of Technology��������������������������������������������� 148 V. Conclusion���������������������������������������������������������������������������������� 150 7. China’s Trade Remedy Regime and Implementation of WTO Rulings���������������������������������������������������������������������������������� 152 I. Introduction�������������������������������������������������������������������������������� 152 II. China’s Trade Remedy Regime and Practice��������������������������������� 154 III. WTO Trade Remedy Disputes and China’s Implementation��������� 158 A. China – GOES����������������������������������������������������������������������� 158 i. WTO Rulings���������������������������������������������������������������� 160 ii. China’s Implementation������������������������������������������������� 162

xiv  Table of Contents B. China – X-Ray Equipment����������������������������������������������������� 163 i. WTO Rulings���������������������������������������������������������������� 164 ii. China’s Implementation������������������������������������������������� 165 C. China – Broiler Products�������������������������������������������������������� 166 i. WTO Rulings���������������������������������������������������������������� 168 ii. China’s Implementation������������������������������������������������� 169 D. China – Autos (US)���������������������������������������������������������������� 170 i. WTO Rulings���������������������������������������������������������������� 171 ii. China’s Implementation������������������������������������������������� 171 E. China – HP-SSST������������������������������������������������������������������ 172 i. WTO Rulings���������������������������������������������������������������� 173 ii. China’s Implementation������������������������������������������������� 174 F. China – Cellulose Pulp����������������������������������������������������������� 175 i. WTO Rulings���������������������������������������������������������������� 176 ii. China’s Implementation������������������������������������������������� 177 IV. China’s Approach to WTO Compliance and Implications������������ 179 V. Conclusion���������������������������������������������������������������������������������� 182 8. Conclusion������������������������������������������������������������������������������������������ 183 I. Introduction�������������������������������������������������������������������������������� 183 II. China’s Compliance with WTO Rulings��������������������������������������� 183 A. ‘Non-Trade-Remedy’ Disputes����������������������������������������������� 183 B. ‘Trade Remedy’ Disputes������������������������������������������������������� 185 C. Overall Assessment���������������������������������������������������������������� 186 III. Implications for WTO Members and the DSM����������������������������� 186 IV. The ‘Crown Jewel’ of the Multilateral Trading System����������������� 188 Index��������������������������������������������������������������������������������������������������������� 191

List of Abbreviations AD

anti-dumping

APEC

Asia-Pacific Economic Cooperation

AQSIQ

General Administration for Quality Supervision, Inspection and Quarantine

ATM

automated teller machine

AVHE

audiovisual home entertainment

BFT

Bureau of Fair Trade for Imports and Exports

BII

Bureau of Industry Injury Investigation

CAAA

China Animal Agriculture Association

CBRC

China Banking Regulatory Commission

CEIS

China Economic Information Service

CKD

Complete Knock Down

CPC

Communist Party of China

CSCSE

Chinese Service Center for Scholarly Exchange

CUP

China UnionPay Co. Ltd.

CV

countervailing

DSB

Dispute Settlement Body

DSM

dispute settlement mechanism

DSU

Dispute Settlement Understanding or Understanding on Rules and Procedures Governing the Settlement of Disputes

DVDs

digital video discs

EC

European Communities

EPS

electronic payment services

EU

European Union

FDI

foreign direct investment

FIEs

foreign-invested enterprises

FTO

foreign trade operator

GAC

General Administration of Customs

xvi  List of Abbreviations GAPP

General Administration of Press and Publication

GATS

General Agreement on Trade in Services

GATT

General Agreement on Tariffs and Trade

GOES

grain oriented flat-rolled electrical steel

HP-SSST

high-performance stainless steel seamless tubes

IA

investigating authority

ICs

integrated circuits

ICTSD

International Centre for Trade and Sustainable Development

IP

intellectual property

IPRs

intellectual property rights

JV

joint venture

MAS

mutually agreed solution

MFN

most favoured nation

MIIT

Ministry of Industry and Information Technology

MOC

Ministry of Culture

MOF

Ministry of Finance

MOFCOM

Ministry of Commerce

MOFTEC

Ministry of Foreign Trade and Economic Cooperation

MOU

Memorandum of Understanding

MST

Ministry of Science and Technology

NAFTA

North American Free Trade Agreement

NCA

National Copyright Administration

NDRC

National Development and Reform Commission

NEV

new energy vehicle

NME

non-market economy

NPC

National People’s Congress

NT

national treatment

PBOC

People’s Bank of China

POS

point of sale

RPT

reasonable period of time

SAFE

State Administration of Foreign Exchange

List of Abbreviations  xvii SAIC

State Administration for Industry and Commerce

SAMR

State Administration for Market Regulation

SARFT

State Administration of Radio, Film and Television

SAT

State Administration of Taxation

SCM

Subsidy and Countervailing Measures

SETC

State Economic and Trade Commission

SG

safeguards

SG&A

administrative, selling and general

SIPO

State Intellectual Property Office

SKD

Semi Knock Down

SOEs

state-owned enterprises

SPC

State Planning Commission

TCSC

Tariff Commission of the State Council

TRIB

Trade Remedy and Investigation Bureau

TRIMs

Trade-Related Investment Measures

TRIPs

Agreement on Trade-Related Aspects of Intellectual Property Rights

TRQs

tariff-rate quotas

US

United States

USTR

United States Trade Representative

VAT

value-added tax

VCD

video compact discs

VCLT

Vienna Convention on the Law of Treaties

WFOE

Wholly Foreign-Owned Enterprise

WIPO

World Intellectual Property Organization

WTO

World Trade Organization

xviii

List of WTO Panel and Appellate Body Reports Short title

Full case title and citation

Brazil – Retreaded Tyres

Appellate Body Report, Brazil – Measures Affecting Imports of Retreaded Tyres (WT/DS332/AB/R, adopted 17 December 2007).

China – Auto Parts

WTO Panel Report, China – Measures Affecting Imports of Automobile Parts (WT/DS339/R, WT/DS340/R, WT/DS342/R and Add 1 and Add 2, adopted 12 January 2009). Appellate Body Report, China – Measures Affecting Imports of Automobile Parts (WT/DS339/AB/R, WT/DS340/AB/R, WT/DS342/AB/R, adopted 12 January 2009).

China – IPRs

WTO Panel Report, China – Measures Affecting the Protection and Enforcement of Intellectual Property Rights (WT/DS362/R, adopted 20 March 2009).

China – Publications and Audiovisual Products

WTO Panel Report, China – Measures Affecting Trading Rights and Distribution Services for Certain Publications and Audiovisual Entertainment Products (WT/DS363/R, adopted 19 January 2010). Appellate Body Report, China – Measures Affecting Trading Rights and Distribution Services for Certain Publications and Audiovisual Entertainment Products (WT/DS363/AB/R, adopted 19 January 2010).

US – Poultry

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

xx  List of WTO Panel and Appellate Body Reports China – Raw Materials

WTO Panel Report, China – Measures Related to the Exportation of Various Raw Materials (WT/DS394/R, WT/DS395/R, WT/DS398/R, adopted 22 February 2012, as modified by Appellate Body Report). Appellate Body Report, China – Measures Related to the Exportation of Various Raw Materials (WT/DS394/ AB/R, WT/DS395/AB/R, WT/DS398/AB/R, adopted 22 February 2012).

China – Electronic Payment Services

WTO Panel Report, China – Certain Measures Affecting Electronic Payment Services (WT/DS413/R, adopted 31 August 2012).

China – GOES

WTO Panel Report, China – Countervailing and Anti-Dumping Duties on Grain Oriented Flat-Rolled Electrical Steel from the United States (WT/DS414/R, adopted 16 November 2012). Appellate Body Report, China – Countervailing and Anti-Dumping Duties on Grain Oriented Flat-Rolled Electrical Steel from the United States (WT/DS414/AB/R, adopted 16 November 2012).

China – X-Ray Equipment

WTO Panel Report, China – Definitive Anti-Dumping Duties on X-Ray Security Inspection Equipment from the European Union (WT/DS425/R, adopted 24 April 2013).

China – Broiler Products

WTO Panel Report, China – Anti-Dumping and Countervailing Duty Measures on Broiler Products from the United States (WT/DS427/R, adopted 25 September 2013).

China – Auto (US)

WTO Panel Report, China – Anti-Dumping and Countervailing Duties on Certain Automobiles from the United States (WT/DS440/R, adopted 18 June 2014).

China – Rare Earths

WTO Panel Report, China – Measures Related to the Exportation of Rare Earths, Tungsten and Molybdenum (WT/DS431/R, WT/DS432/R, WT/DS433/R, adopted 29 August 2014, as modified by Appellate Body Report). Appellate Body Report, China – Measures Related to the Exportation of Rare Earths, Tungsten and Molybdenum (WT/DS431/AB/R, WT/DS432/AB/R, WT/DS433/AB/R, adopted 29 August 2014).

List of WTO Panel and Appellate Body Reports  xxi China – GOES (Recourse to Article 21.5)

WTO Panel Report, China – Countervailing and Anti-Dumping Duties on Grain Oriented Flat-Rolled Electrical Steel from the United States, Recourse to Article 21.5 of the DSU by the United States (WT/DS414/RW, adopted 31 August 2015).

China – HP-SSST

WTO Panel Report, China – Measures Imposing Anti-Dumping Duties on High-Performance Stainless Steel Seamless Tubes (‘HP-SSST’) from Japan; China – Measures Imposing Anti-Dumping Duties on High-Performance Stainless Steel Seamless Tubes (‘HP-SSST’) from the European Union (China – HP-SSST) (WT/DS454/R, WT/DS460/R, adopted 28 October 2015). Appellate Body Report, China – Measures Imposing Anti-Dumping Duties on High-Performance Stainless Steel Seamless Tubes (‘HP-SSST’) from Japan; China – Measures Imposing Anti-Dumping Duties on High-Performance Stainless Steel Seamless Tubes (‘HP-SSST’) from the European Union (China – HP-SSST) (WT/DS454/AB/R, WT/DS460/AB/R, adopted 28 October 2015).

European Communities – Definitive Anti-Dumping Measures on Certain Iron or Steel Fasteners from China (Recourse to Article 21.5)

WTO Appellate Body Report, European Communities – Definitive Anti-Dumping Measures on Certain Iron or Steel Fasteners from China, Recourse to art 21.5 of the DSU by China (WT/DS397/AB/RW, adopted 12 February 2016).

China – Cellulose Pulp

WTO Panel Report, China – Anti-Dumping Measures on Imports of Cellulose Pulp from Canada, (WT/DS483/R, adopted 22 May 2017).

China – Broiler Products (Recourse to Article 21.5)

WTO Panel Report, China – Anti-Dumping and Countervailing Duty Measures on Broiler Products from the United States, Recourse to Article 21.5 of the DSU by the United States (WT/DS427/RW, adopted 28 February 2018).

xxii

List of Chinese Legislation and Regulatory Documents Short title

Full title and citation

Equity JV Law 1979

《中华人民共和国中外合资经营企业法》(1979) [Law of the PRC on Sino-Foreign Equity Joint Ventures 1979], adopted by the 2nd session of the 5th National People’s Congress on 1 July 1979, effective on 8 July 1979; amended on 4 April 1990, 15 March 2001, and 3 September 2016, effective on 1 October 2016.

Criminal Law 1979

《中华人民共和国刑法》 (1979) [Criminal Law of the People’s Republic of China 1979], promulgated by Order No 5 of the Chairman of the Standing Committee of the National People’s Congress on 6 July 1979, effective on 1 January 1980; revised on 14 March 1997 and effective on 1 October 1997; amended on 25 December 1999, 31 August 2001, 29 December 2001, 28 December 2002, 28 February 2005, 29 June 2006, 28 February 2009, 25 February 2011, 29 August 2015, 4 November 2017.

Trademark Law 1982

《中华人民共和国商标法》 (1982) [Trademark Law of the People’s Republic of China 1982], adopted by the Standing Committee of the National People’s Congress, 23 August 1982; amended on 22 February 1993, on 27 October 2001, and subsequently on 30 August 2013, effective 1 May 2014.

JV Regulation 1983

《中华人民共和国中外合资经营企业法实施条例》 (1983) [Rules on the Implementation of the Law of the PRC on Sino-Foreign Equity Joint Ventures 1983], promulgated by the State Council on 20 September 1983, effective on the same date, amended on 22 July 2001 and 8 January 2011, effective on 8 January 2011.

Patent Law 1984

《中华人民共和国专利法》 (1984) [Patent Law of the People’s Republic of China 1984], adopted by the Standing Committee of the National People’s Congress, 12 March 1984; amended on 4 September 1992, on 25 August 2000, and subsequently on 27 December 2008, effective 1 October 2009.

xxiv  List of Chinese Legislation and Regulatory Documents WFOE Law 1986

《中华人民共和国外商独资企业法》 (1986) [Law of the PRC on Wholly Foreign-Owned Enterprise 1986], adopted by the 4th session of the 6th National People’s Congress on 12 April 1986; amended on 31 October 2000, and on 3 September 2016, effective on 1 October 2016.

Customs Law 1987

《中华人民共和国海关法》 (1987) [Customs Law of the People’s Republic of China 1987], adopted by the 19th Session of the Standing Committee of the 6th National People’s Congress on 22 January 1987, effective on 1 July 1987; revised on 8 July 2000, 29 June 2013, 28 December 2013, 7 November 2016, and 4 November 2017.

Cooperative JV Law 1988

《中华人民共和国中外合作经营企业法》 (1988) [Law of the PRC on Sino-Foreign Cooperative Joint Venture Enterprise 1988], adopted by the 5th session of the 7th National People’s Congress on 13 April 1988, effective on the same date; amended on 31 October 2000, and 7 November 2016, effective on the same date.

Copyright Law 1990

《中华人民共和国著作权法》 (1990) [Copyright Law of the People’s Republic of China 1990], adopted by the Standing Committee of the National People’s Congress on 7 September 1990; amended on 27 October 2001, and subsequently on 26 February 2010, effective 1 April 2010.

Rules on the Implementation of the Law of the PRC on Wholly Foreign-Owned Enterprise 1990

《中华人民共和国外资企业法实施细则》 (1990) [Rules on the Implementation of the Law of the PRC on Wholly Foreign-Owned Enterprise 1990], promulgated on 12 December 1990, amended on 12 April 2001 and 19 February 2014, effective 1 March 2014.

Interim Rules on the Administration of Master Distribution of Books 1991

《图书总发行管理的暂行规定》 (1991) [Interim Rules on the Administration of Master Distribution of Books 1991], Order No 7 of the General Administration of Press and Publication and the State Administration for Industry and Commerce, promulgated on 11 May 1991, effective on the same date.

Anti-Unfair 《中华人民共和国反不正当竞争法》 (1993) Competition Law [Anti-Unfair Competition Law of the People’s Republic of 1993 China 1993], adopted by the Standing Committee of the National People’s Congress, 2 September 1993; amended on 4 November 2017, effective 1 January 2018.

List of Chinese Legislation and Regulatory Documents  xxv Foreign Trade Law 1994

《中华人民共和国对外贸易法》 (1994) [Foreign Trade Law of the People’s Republic of China 1994], adopted by the 7th Session of the Standing Committee of the 8th National People’s Congress on 12 May 1994, effective on 1 July 1994; revised on 6 April 2004, and on 7 November 2016, effective on the same date.

Catalogue 1995

《外商投资产业指导目录》 (1995) [Catalogue of Industries for Guiding Foreign Investment 1995], promulgated by the State Planning Commission, State Economic and Trade Commission and the Ministry of Foreign Trade and Economic Cooperation, effective on 20 June 1995; amended in 1997 (by Order No 9 of the State Planning Commission, the State Economic and Trade Commission and the Ministry of Foreign Trade and Economic Cooperation), in 2002 (by Order No 21 of the State Planning Commission, the State Economic and Trade Commission and the Ministry of Foreign Trade and Economic Cooperation), in 2004 (by Order No 24 of the National Development and Reform Commission and the Ministry of Commerce), in 2007 (by Order No 57 of the National Development and Reform Commission and the Ministry of Commerce), in 2011 (by Order No 12 of the National Development and Reform Commission and the Ministry of Commerce), in 2015 (by Order No 12 of the National Development and Reform Commission and the Ministry of Commerce, effective on 10 April 2015), and in 2017 (by Order No 4 of the National Development and Reform Commission and the Ministry of Commerce, effective on 28 July 2017).

Rules on the Implementation of Law of the PRC on Sino-Foreign Contractual Cooperative Enterprises 1995

《中华人民共和国中外合作经营企业法实施细则》 (1995) [Rules on the Implementation of Law of the PRC on Sino-Foreign Cooperative Joint Venture Enterprise 1995], promulgated on 4 September 1995, amended on 19 February 2014 and 1 March 2017, effective on 1 March 2017.

xxvi  List of Chinese Legislation and Regulatory Documents Notice Authorising Xinhua News Agency to Implement Centralised Administration over the Release of Economic Information in China by Foreign News Agencies and their Subsidiary Information Institutions 1995

《国务院办公厅关于授权新华社通讯社对外国通讯 社及其所属信息机构在中国境内发布经济信息实行 归口管理的通知》 (1995) [Notice Authorising Xinhua News Agency to Implement Centralised Administration over the Release of Economic Information in China by Foreign News Agencies and their Subsidiary Information Institutions 1995], issued by the General Office of the State Council Decree No 1 on 31 December 1995, effective on the same date.

AD and CV Regulation 1997

《中华人民共和国反倾销和反补贴条例》 (1997) [Regulation on Anti-Dumping and Countervailing Measures 1997], Decree No 214 of the State Council, promulgated on 25 March 1997, effective on the same date.

Electronic 《电子出版物管理规定》 (1997) [Rules on the Publications Rule Administration of Electronic Publications 1997], 1997 Order No 11 of the General Administration of Press and Publication, promulgated on 30 December 1997, effective on 1 January 1998. Measures for the Administration of Bank Card Business 1999

《银行卡业务管理办法》 (1999) [Measures for the Administration of Bank Card Business 1999], Order No 17 of the People’s Bank of China, issued on 5 January 1999, effective on 1 March 1999.

Legislation Act 2000

《中华人民共和国立法法》 (2000) [Legislation Act of the People’s Republic of China 2000], adopted at the Third Session of the Ninth National People’s Congress on March 15, 2000 and promulgated by Order No 31 of the President of the People’s Republic of China on 15 March, 2000; revised by the Decision of the National People’s Congress on Revising the Legislation Law of the People’s Republic of China, adopted at the Third Session of the Twelfth National People’s Congress on 15 March 2015.

List of Chinese Legislation and Regulatory Documents  xxvii Opinions on the Implementation of the Work in Bank Card Interoperability 2001

《2001年银行卡联网联合工作实施意见》 (2001) [Opinions on the Implementation of the Work in Bank Card Interoperability 2001], Circular No 37 of the People’s Bank of China, issued and effective on 19 February 2001.

Circular on Universal Use of ‘UnionPay’ Logo and its Holographic Label for Anticounterfeiting 2001

《中国人民银行关于统一启用‘银联’标识及其全息防 伪标志的通知》 (2001) [Circular on Universal Use of ‘UnionPay’ Logo and its Holographic Label for Anti-counterfeiting 2001], Circular No 57 of the People’s Bank of China, issued and effective on 13 March 2001.

Notice on the Issuance of Business Practices for the Interoperable Service of Bank Cards 2001

《中国人民银行关于印发的通知》 (2001) [Notice on the Issuance of Business Practices for the Interoperable Service of Bank Cards 2001], Circular No 76 of the People’s Bank of China, issued on 29 March 2001, effective on 15 April 2001.

Regulations on Procedures for the Formulation of Rules 2001

《规章制定程序条例》 (2001) [Regulations on Procedures for the Formulation of Rules 2001], promulgated by Decree No 322 of the State Council on 16 November 2001, effective on 1 January 2002; revised by 《国务院关于修改的决定》 (2017) [Decision on Revising the Regulations on Procedures for the Formulation of Rules 2017], Decree No 695 of the State Council, promulgated on 22 December 2017, effective on 1 May 2018.

Notice on China’s WTO Accession 2001

《关于我国加入世界贸易组织有关情况的通报》 (2001) [Notice on China’s WTO Accession 2001], Announcement No 26 of General Office of the Central Committee of the Communist Party of China, issued on 20 November 2001.

AD Regulation 2001

《中华人民共和国反倾销条例》 (2001) [Anti-Dumping Regulation of the People’s Republic of China 2001], Decree No 328 of the State Council, promulgated on 26 November 2001 and effective on 1 January 2002; as amended by Decree No 401 of the State Council, promulgated on 31 March 2004 and effective on 1 June 2004.

xxviii  List of Chinese Legislation and Regulatory Documents CV Regulation 2001

《中华人民共和国反补贴条例》 (2001) [Countervailing Regulation of the People’s Republic of China 2001], Decree No 329 of the State Council, promulgated on 26 November 2001 and effective on 1 January 2002; as amended by Decree No 402 of the State Council, promulgated on 31 March 2004 and effective on 1 June 2004.

SG Regulation 2001

《中华人民共和国保障措施条例》 (2001) [Regulation on Safeguards Measures of the People’s Republic of China 2001], Decree No 330 of the State Council, promulgated on 26 November 2001 and effective on 1 January 2002; as amended by Decree No 403 of the State Council, promulgated on 31 March 2004 and effective on 1 June 2004.

Regulation on the Administration of Import and Export of Technology 2001

《中华人民共和国技术进出口管理条例》 (2001) [The Regulation on the Administration of Import and Export of Technology 2001], Order No 331 of the State Council, promulgated on 10 December 2001, effective on 1 January 2002.

Imports and Exports Regulation 2001

《中华人民共和国货物进出口管理条例》 (2001) [Administrative Regulations on Import and Export of Goods 2001], Decree No 332 of the State Council, promulgated on 10 December 2001, effective on 1 January 2002.

Export Quota Administration Measures 2001

《出口商品配额管理办法》 (2001) [Measures for the Administration of Export Commodities Quotas 2001], Order No 12 of the Ministry of Foreign Trade and Economic Cooperation, issued on 20 December 2001, effective on 1 January 2002.

Regulations on Representative Offices of Foreign Law Firms in China 2001

《外国律师事务所驻华代表机构管理条例》 (2001) [Regulations on Representative Offices of Foreign Law Firms in China 2001], Decree No 338 of the State Council, promulgated on 22 December 2001, effective on 1 January 2002.

Audiovisual Products Regulation 2001

《音像制品管理条例》 (2001) [Regulations on the Administration of Audiovisual Products 2001], Decree No 341 of the State Council, promulgated on 25 December 2001, effective on 1 February 2002.

List of Chinese Legislation and Regulatory Documents  xxix Film Regulation 2001

《电影管理条例》 (2001) [Regulations on the Administration of Films 2001], Decree No 342 of the State Council, promulgated on 25 December 2001, effective on 1 February 2002.

Publications Regulation 2001

《出版管理条例》 (2001) [Regulations on the Administration of Publications 2001], Decree No 343 of the State Council, promulgated on 25 December 2001, effective on 1 February 2002.

Interim Rules on Initiation of Anti-dumping Investigations 2002

《反倾销调查立案暂行规则》 (2002) [Interim Rules on Initiation of Anti-dumping Investigations 2002], Order No 8 of the Ministry of Foreign Trade and Economic Cooperation, promulgated on 10 February 2002, effective on 13 March 2002.

Foreign Investment Regulation 2002

《指导外商投资方向规定》 (2002) [Regulations Guiding the Orientation of Foreign Investment 2002], Decree No 346 of the State Council, promulgated on 11 February 2002, effective on 1 April 2002.

Interim Rules on On-Site Verification in Anti-dumping Investigation 2002

《反倾销调查实地核查暂行规则》 (2002) [Interim Rules on On-Site Verification in Anti-dumping Investigation 2002], Order No 13 of the Ministry of Foreign Trade and Economic Cooperation, promulgated on 13 March 2002, effective on 15 April 2002.

Interim Rules on Sampling in Anti-dumping Investigations 2002

《反倾销调查抽样暂行规则》 (2002) [Interim Rules on Sampling in Anti-dumping Investigations 2002], Order No 15 of the Ministry of Foreign Trade and Economic Cooperation, promulgated on 13 March 2002, effective on 15 April 2002.

Interim Rules on Price Undertakings in Anti-dumping Investigations 2002

《反倾销价格承诺暂行规则》 (2002) [Interim Rules on Price Undertakings in Anti-dumping Investigations 2002], Order No 20 of the Ministry of Foreign Trade and Economic Cooperation, promulgated on 13 March 2002, effective on 15 April 2002.

Interim Rules on New Exporters Review in Anti-dumping Investigations 2002

《反倾销新出口商复审暂行规则》 (2002) [Interim Rules on New Exporters Review in Anti-dumping Investigations 2002], Order No 21 of the Ministry of Foreign Trade and Economic Cooperation, promulgated on 13 March 2002, effective on 15 April 2002.

xxx  List of Chinese Legislation and Regulatory Documents Audiovisual Products Importation Rule 2002

《音像制品进口管理办法》 (2002) [Rules on the Administration of the Importation of Audiovisual Products 2002], Order No 23 of the Ministry of Culture and the General Administration of Customs, promulgated on 17 April 2002, effective on 1 June 2002.

Publications (Sub-) Distribution Rule 2003

《外商投资图书、报纸、期刊分销企业管理办法》 (2003) [Rules on the Administration of ForeignInvested Distribution Enterprises of Books, Newspaper, and Periodicals 2003], Order No 18 of the General Administration of Press and Publication and the Ministry of Foreign Trade and Economic Cooperation, promulgated on 17 March 2003, effective on 1 May 2003.

Internet Culture Rule 2003

《互联网文化管理暂行规定》 (2003) [Interim Rules on the Administration of Internet Culture 2003], Order No 27 of the Ministry of Culture, promulgated on 10 May 2003, effective on 1 July 2003.

Circular on Further Improving Bank Card Interoperability Related Work 2003

《中国人民银行关于进一步做好银行卡联网通用 工作的通知》 (2003) [Circular on Further Improving Bank Card Interoperability Related Work 2003], Circular No 129 of the People’s Bank of China, issued and effective on 2 July 2003.

Circular on Internet Culture Rule 2003

《文化部关于实施有关问题的通知》 (2003) [Circular on Issues of Implementation of the ‘Interim Rules on the Administration of Internet Culture’ 2003], Circular No 27 of the Ministry of Culture, promulgated on 4 July 2003, effective on the same date.

Rules on Injury Investigations in Anti-dumping Investigations 2003

《反倾销产业损害调查规定》 (2003) [Rules on Injury Investigations in Anti-dumping Investigations 2003], Order No 5 of the Ministry of Commerce, promulgated on 17 October 2003, effective on 16 November 2003.

List of Chinese Legislation and Regulatory Documents  xxxi Announcement on Providing Clearing Arrangements for Banks Handling Personal RMB Deposit, Exchanges, Bank Cards and Remittance in Hong Kong 2003

《关于为在香港办理个人人民币存款、兑换、银行卡 和汇款业务的有关银行提供清算安排的公告》 (2003) [Announcement on Providing Clearing Arrangements for Banks Handling Personal RMB Deposit, Exchanges, Bank Cards and Remittance in Hong Kong 2003], Announcement No 16 of the People’s Bank of China, issued and effective on 19 November 2003.

Administrative Regulations on Import and Export Tariffs 2003

《中华人民共和国进出口关税条例》 (2003) [Administrative Regulations on Import and Export Tariffs 2003], Decree No 392 of the State Council, promulgated on 23 November 2003, effective on 1 January 2004; revised on 7 December 2013, and 1 March 2017.

GAC Regulation 2003

《中华人民共和国知识产权海关保护条例》 (2003) [Regulation of the People’s Republic of China on the Customs Protection of Intellectual Property Rights 2003], Order No 395 of the State Council, promulgated on 2 December 2003, effective on 1 March 2004, amended on 24 March 2010 and effective on 1 April 2010, amended on 19 March 2018 and effective on same date.

Audiovisual (Sub-) Distribution Rule 2003

《中外合作音像制品分销企业管理办法》 (2003) [Rules on the Administration of Sino-Foreign Contractual Joint Ventures for the Sub-Distribution of Audiovisual Products 2003], Order No 28 of the Ministry of Culture and the Ministry of Commerce, promulgated on 8 December 2003, effective on 1 January 2004.

Measures for the Implementation of the Regulation on the Customs Protection of Intellectual Property Rights 2004

《中华人民共和国海关关于〈中华人民共和国 知识产权海关保护条例〉的实施办法》 (2004) [Measures for the Implementation of the Regulation on the Customs Protection of Intellectual Property Rights 2004], Order No 114 of the General Administration of Customs, promulgated on 25 May 2004, effective on 1 July 2004.

Publications 《出版物市场管理规定》 (2004) [Rules on the Market Rule 2004 Administration of Publications Market 2004], Order No 23 of the General Administration of Press and Publication, promulgated on 18 June 2004, effective on 1 July 2004.

xxxii  List of Chinese Legislation and Regulatory Documents Measures for the Filing and Registration of Foreign Trade Operators 2004

《对外贸易经营者备案登记办法》 (2004) [Measures for the Filing and Registration of Foreign Trade Operators 2004], Order No 14 of the Ministry of Commerce, promulgated on 25 June 2004, effective on 1 July 2004.

Announcement on Providing Clearing Arrangements for Banks Handling Personal RMB Business in Macao 2004

《关于为澳门银行办理个人人民币业务提供清算 安排的公告》 (2004) [Announcement on Providing Clearing Arrangements for Banks Handling Personal RMB Business in Macao 2004], Announcement No 8 of the People’s Bank of China, issued and effective on 3 August 2004.

Notice on Terminating VAT Refund for Imports of Integrated Circuit Products Designed Domestically and Fabricated Abroad 2004

《关于停止执行国内设计国外流片加工 集成电路产品进口环节增值税退税政 策的通知》 (2004) [Notice on Terminating VAT Refund for Imports of Integrated Circuit Products Designed Domestically and Fabricated Abroad 2004], Notice No 40 of the Ministry of Finance and the State Administration of Taxation, issued on 31 August 2004, effective on 1 October 2004.

Circular on Relevant Issues on Accepting and Using RMB Bank Cards in Border Areas 2004

《中国人民银行关于边境地区受理和使用人民币银行 卡有关问题的通知》 (2004) [Circular on Relevant Issues on Accepting and Using RMB Bank Cards in Border Areas 2004], Circular No 219 of the People’s Bank of China, issued and effective on 21 September 2004.

Film Enterprise Rule 2004

《电影企业经营资格准入暂行规定》 (2004) [Provisional Rules on Entry Criteria for Operating Film Enterprises 2004], Order No 43 of the State Administration of Radio, Film and Television and the Ministry of Commerce, promulgated on 10 October 2004, effective on 10 November 2004.

Notice on Terminating VAT Refund for Integrated Circuits 2004

《关于停止集成电路增值税退税政策的通知》 (2004) [Notice on Terminating VAT Refund for Integrated Circuits 2004], Circular No 174 of the Ministry of Finance and the State Administration of Taxation, issued on 25 October 2004.

List of Chinese Legislation and Regulatory Documents  xxxiii Circular on Relevant Issues Concerning the Operation of Individual RMB Business by Mainland Banks and Hong Kong/ Macau Banks 2004

《中国人民银行关于内地银行与香港、澳门银行办理 个人人民币业务有关问题的通知》 (2004) [Circular on Relevant Issues Concerning the Operation of Individual RMB Business by Mainland Banks and Hong Kong/ Macau Banks 2004], Circular No 254 of the People’s Bank of China, issued and effective on 28 October 2004.

Domain Name Rules 2004

《中国互联网络域名管理办法》 (2004) [Rules for the Administration of Internet Domain Names of China 2004], Order No 30 of the Ministry of Industry and Information Technology, promulgated on 5 November 2004, effective on 20 December 2004.

Measures on the Administration of Import Licences for Goods 2004

《中华人民共和国货物进口许可证管理办法》 (2004) [Measures on the Administration of Import Licences for Goods 2004], Order No 27 of the Ministry of Commerce, promulgated on 9 December 2004, effective on 1 January 2005.

Imported Publications Subscription Rule 2004

《订户订购进口出版物管理办法》 (2004) [Rules on the Administration of the Subscription of Imported Publications 2004], Order No 27 of the General Administration of Press and Publication, promulgated on 31 December 2004, effective on 1 February 2005.

Several Opinions on Promoting the Development of Bank Card Industry 2005

《中国人民银行等九部委关于促进银行卡产业发 展的若干意见》 (2005) [Several Opinions on Promoting the Development of Bank Card Industry 2005], Circular No 103 of the People’s Bank of China and other eight ministries or departments of the State Council, issued and effective on 24 April 2005.

Geographical Indications Rules 2005

《地理标志产品保护规定》 (2005) [Rules on the Protection of Products with Geographical Indications 2005], Order No 78 of the General Administration of Quality Supervision, Inspection and Quarantine, promulgated on 7 June 2005, effective on 15 July 2005.

xxxiv  List of Chinese Legislation and Regulatory Documents Guiding Opinions on Regulating and Promoting the Development of Bank Card Acceptance Market 2005

《中国人民银行关于规范和促进银行卡受理市场发 展的指导意见》 (2005) [Guiding Opinions on Regulating and Promoting the Development of Bank Card Acceptance Market 2005], Order No 153 of the People’s Bank of China, issued and effective on 16 June 2005.

Several Opinions 2005

《关于文化领域引进外资的若干意见》 (2005) [Several Opinions on the Introduction of Foreign Capital into the Cultural Sector 2005], Order No 19 of the Ministry of Culture, the State Administration of Radio, Film and Television, the General Administration of Press and Publication, the National Development and Reform Commission, and the Ministry of Commerce, promulgated and effective on 6 July 2005.

Eleventh FiveYear Plan (2006–2010)

《中华人民共和国国民经济和社会发展第十一个五年 规划纲要》 (2006) [Eleventh Five-Year Plan for National Economic and Social Development of the People’s Republic of China (2006–2010)], Announcement No 12 of State Council on 14 March 2006.

Network Music Opinions 2006

《文化部关于网络音乐发展和管理的若干意见》 (2006) [Several Opinions on the Development and Administration of Network Music 2006], the Ministry of Culture, issued on 11 December 2006, effective on the same date.

Enterprise Income Tax Law 2007

《企业所得税法》 (2007) [Enterprise Income Tax Law of the People’s Republic of China 2007], promulgated by Order No 63 of the President of the PRC on 16 March 2007, effective on 1 January 2008, as amended by the Standing Committee of the National People’s Congress on 24 February 2017, effective on the same date.

GAC Circular 2007

《关于没收侵犯知识产权货物依法拍卖有关事宜》 (2007) [Issues relating to the Auction of Confiscated Goods that Infringe Intellectual Property Rights 2007], Circular No 16 of the General Administration of Customs, issued on 4 April 2007.

List of Chinese Legislation and Regulatory Documents  xxxv Circular on Issues Concerning Wholly Foreignfunded Banks and Chineseforeign Equity Joint Banks in Conducting Bank Card Business 2007

《中国银行业监督管理委员会关于外商独资银行、 中外合资银行开办银行卡业务有关问题的通知》 (2007) [Circular on Issues Concerning Wholly Foreignfunded Banks and Chinese-foreign Equity Joint Banks in Conducting Bank Card Business 2007], Order No 49 of the China Banking Regulatory Commission, issued and effective on 6 June 2007.

Circular on Issues Concerning Strengthening the Administration of Overseas Business Acceptance of Bank Cards 2007

《中国人民银行关于加强银行卡境外受理业务管理有 关问题的通知》 (2007) [Circular on Issues Concerning Strengthening the Administration of Overseas Business Acceptance of Bank Cards 2007], Order No 273 of the People’s Bank of China, issued and effective on 6 August 2007.

Electronic 《电子出版物出版管理规定》 (2008) [Rules on Publications Rule the Administration of Electronic Publishing 2008], 2008 Order No 34 of the General Administration of Press and Publication, promulgated on 21 February 2008, effective on 15 April 2008. National Intellectual Property Strategy 2008

《国务院关于印发国家知识产权战略纲要的通知》 (2008) [Outline of the National Intellectual Property Strategy 2008], Circular No 18 of the State Council, issued on 5 June 2008, effective on the same date.

Measures for the Administration of License for the Export of Goods 2008

《货物出口许可证管理办法》 (2008) [Measures for the Administration of License for the Export of Goods 2008], Order No 11 of the Ministry of Commerce, promulgated on 7 June 2008, effective on 1 July 2008.

Provisional Measure on Administration of Special Fund for the Industrialization of Wind Power Equipment 2008

《风力发电设备产业化专项资金管理暂行办法》 (2008) [Provisional Measure on Administration of Special Fund for the Industrialization of Wind Power Equipment 2008], Notice No 476 of the Ministry of Finance, issued and effective on 11 August 2008.

xxxvi  List of Chinese Legislation and Regulatory Documents 2009 Tariff Implementation Program

《2009关税实施方案》 (2008) [Tariff Implementation Program 2009], Notice No 40 of the Customs Tariff Policy Commission of the State Council, issued on 15 December 2008, effective on 1 January 2009.

Decision on Revising ‘the Decision of the State Council on Setting Administrative Licensing for Administrative Examination and Approval Items that Need to be Retained’ 2009

《国务院关于修改的决定》 (2009) [Decision on Revising ‘the Decision of the State Council on Setting Administrative Licensing for Administrative Examination and Approval Items that Need to be Retained’ 2009], issued by Decree No 548 of the State Council on 29 January 2009, effective on the same date.

Administrative Measures for the Registration of Technology Import and Export Contracts 2009

《技术进出口合同登记管理办法》 (2009) [Administrative Measures for the Registration of Technology Import and Export Contracts 2009], Order No 3 of the Ministry of Commerce, promulgated on 1 February 2009, effective on 1 March 2009.

Guiding Opinions on Promoting World Famous Brand 2009

《关于推进国际品牌培育工作的指导意见》 (2009) [Guiding Opinions on Promoting World Famous Brand 2009], issued by the Ministry of Commerce, the National Development and Reform Commission, the Ministry of Finance, the Ministry of Science and Technology, the General Administration of Customs, the State Administration of Taxation, the State Administration for Industry and Commerce, and the General Administration of Quality Supervision, Inspection and Quarantine, Order No 150, issued on 2 April 2009.

Circular on Strengthening the Security Management of Bank Cards and Preventing and Fighting Crimes in Bank Cards 2009

《关于加强银行卡安全管理预防和打击银行卡犯 罪的通知》 (2009) [Circular on Strengthening the Security Management of Bank Cards and Preventing and Fighting Crimes in Bank Cards 2009], Order No 142 of the People’s Bank of China, the China Banking Regulatory Commission, the Ministry of Public Security and the State Administration for Industry and Commerce, issued and effective on 27 April 2009.

List of Chinese Legislation and Regulatory Documents  xxxvii Regulation on the Provision of Financial Information Services by Foreign Institutions in China 2009

《外国机构在中国境内提供金融信息服务管理规定》 (2009) [Regulation on the Provision of Financial Information Services by Foreign Institutions in China 2009], issued by Decree No 7 of the Information Office of the State Council, the Ministry of Commerce and State Administration for Industry and Commerce on 30 April 2009, effective on 1 June 2009.

Announcement on Repealing Regulatory Documents 2009

《关于废止规范性文件的公告》 (2009) [Announcement on Repealing Regulatory Documents 2009], Announcement No 42 of the General Administration of Quality Supervision, Inspection and Quarantine, issued and effective on 5 May 2009.

Notice on the Adjustment of Export Tariffs on Certain Commodities 2009

《国务院关税税则委员会关于调整部分产品出口关 税的通知》 (2009) [Notice on the Adjustment of Export Tariffs on Certain Commodities 2009], Circular No 6 of the Tariff Policy Commission of the State Council, issued on 19 June 2009.

Opinions on the Implementation of the Circular on Strengthening the Security Management of Bank Cards and Preventing and Fighting Crimes in Bank Cards 2009

《中国人民银行关于贯彻落实的意见》 (2009) [Opinions on the Implementation of the Circular on Strengthening the Security Management of Bank Cards and Preventing and Fighting Crimes in Bank Cards 2009], Circular No 149 of the People’s Bank of China, issued and effective on 1 August 2009.

Policy on Development of Automotive Industry 2009

《汽车产业发展政策》 (2009) [Policy on Development of Automotive Industry 2009], Decree No 10 of the Ministry of Industry and Information Technology and the National Development and Reform Commission, issued on 15 August 2009, effective on 1 September 2009.

xxxviii  List of Chinese Legislation and Regulatory Documents Decision on Repealing the Administrative Rules on Importation of Automobile Parts Characterized as Complete Vehicles 2009

《关于废止构成整车特征的汽车零部件进口管 理办法》 (2009) [Decision on Repealing the Administrative Rules on Importation of Automobile Parts Characterized as Complete Vehicles 2009], Decree No 185 of the General Administration of Customs, the National Development and Reform Commission, the Ministry of Finance, and the Ministry of Commerce, promulgated on 28 August 2009, effective on 1 September 2009.

Announcement No 58 of the GAC 2009

《海关总署公告2009年第58号》 (2009) [Announcement No 58 of the General Administration of Customs 2009], issued on 31 August 2009, effective on 1 September 2009.

2010 Tariff Implementation Program

《2010关税实施方案》 (2009) [Tariff Implementation Program 2010], Notice No 28 of the Customs Tariff Policy Commission of the State Council, issued on 8 December 2009, effective on 1 January 2010.

Decision on Revising Rules on the Administration of Chinese Brand Name Products 2009

《国家质量监督检验检疫总局关于修改的决定》 (2009) [Decision on Revising Rules on the Administration of Chinese Brand Name Products 2009], Order No 124 of the General Administration of Quality Supervision, Inspection and Quarantine, issued and effective on 18 December 2009.

Copyright Law 2010

《全国人民代表大会常务委员会关于修改〈中华人 民共和国著作权法〉的决定》 (2010) [Decision of the Standing Committee of the National People’s Congress on Amending the Copyright Law 2010], adopted at the 13th Session of the Standing Committee of the 11th National People’s Congress of the People’s Republic of China on 26 February 2010, effective on 1 April 2010.

GAC Regulation 2010

《国务院关于修改〈中华人民共和国知识产权海关保 护条例〉的决定》(2010) [Decision of the State Council on Amending the Regulation on the Customs Protection of Intellectual Property Rights 2010], Order No 572 of the State Council, promulgated on 24 March 2010, effective on 1 April 2010.

List of Chinese Legislation and Regulatory Documents  xxxix Circular on Standardising the Administration of Foreign Currency Bank Cards 2010

《国家外汇管理局关于规范银行外币卡管理的通知》 (2010) [Circular on Standardising the Administration of Foreign Currency Bank Cards 2010], Circular No 53 of the State Administration of Foreign Exchange, issued on 11 October 2010, effective on 1 November 2010.

Internet Culture Rule 2011

《互联网文化管理暂行规定》 (2011) [Interim Rules on the Administration of Internet Culture 2011], Order No 51 of the Ministry of Culture, promulgated on 17 February 2011, effective on 1 April 2011.

Order No 62 of the MOF

《中华人民共和国财政部令第62号》 (2011) [Order No 62 of the Ministry of Finance 2011], issued on 21 February 2011.

The 12th Five-Year Plan (2011–2015)

《中华人民共和国国民经济和社会发展第十二个 五年规划纲要》 (2011) [The 12th Five-Year Plan for Economic and Social Development of the People’s Republic of China (2011–2015)], issued on 14 March 2011.

Publications Regulation 2011

《出版管理条例》 (2011) [Regulations on the Administration of Publications 2011], Decree No 594 of the State Council, promulgated and effective on 19 March 2011.

Audiovisual Products Regulation 2011

《音像制品管理条例》 (2011) [Regulations on the Administration of Audiovisual Products 2011], Decree No 595 of the State Council, promulgated and effective on 19 March 2011.

Circular on Internet Culture 2011

《文化部关于实施新修订的通知》 (2011) [Circular on the Implementation of the New ‘Interim Rules on the Administration of Internet Culture’ 2011], Circular No 14 of the Ministry of Culture, issued and effective on 21 March 2011.

Imported Publications Subscription Rule 2011

《订户订购进口出版物管理办法》 (2011) [Rules on the Administration on Subscription of Imported Publications 2011], Order No 51 of the General Administration of Press and Publication, promulgated on 25 March 2011, effective on the same date.

Publications 《出版物市场管理规定》 (2011) [Rules on the Market Rule 2011 Administration of the Publications Market 2011], Order No 52 of the General Administration of Press and Publication and the Ministry of Commerce, promulgated and effective on 25 March 2011.

xl  List of Chinese Legislation and Regulatory Documents Audiovisual Products Importation Rule 2011

《进口音像制品管理办法》 (2011) [Rules on the Administration of the Importation of Audiovisual Products 2011], Order No 53 of the General Administration of Press and Publication and the General Administration of Customs, promulgated and effective on 6 April 2011.

12th Five-Year Development Plan for the Steel Industry 2011

《关于印发的通知》 (2011) [Notice on Distributing the 12th Five-Year Development Plan for the Steel Industry 2011], Notice No 480 of the Ministry of Industry and Information Technology, issued on 24 October 2011.

2012 Export Quota Amounts

《公布2012年农产品和工业品出口配额总量》 (2011) [Notice on ‘2012 Export Quota Amounts for Agricultural and Industrial Products’], Notice No 71 of the Ministry of Commerce, issued on 31 October 2011, effective on 1 January 2012.

Application Qualifications and Procedures for Rare Earth Export Quotas 2012

《关于2012年稀土出口配额申报条件和申报程 序的公告》 (2011) [Application Qualifications and Procedures for Rare Earth Export Quotas 2012], Circular No 77 of the Ministry of Commerce, issued on 11 November 2011.

Application Qualifications and Procedures for Molybdenum Export Quotas 2012

《关于2012年铟、钼、锡出口配额申报条件及申报 程序的公告》 (2011) [Application Qualifications and Procedures for Export Quotas of Indium, Molybdenum and Tin 2012], Circular No 79 of the Ministry of Commerce, issued on 11 November 2011.

2012 Tariff Implementation Program

《2012年关税实施方案》 (2011) [Tariff Implementation Program 2012], Circular No 27 of the Customs Tariff Policy Commission of the State Council, issued on 9 December 2011, effective on 1 January 2012.

2012 Tariff Implementation Plan

《关于2012年关税实施方案》 (2011) [Tariff Implementation Plan 2012], Circular No 79 of the General Administration of Customs, issued on 22 December 2011, effective on 1 January 2012.

List of Chinese Legislation and Regulatory Documents  xli First Batch Export Quotas of Tungsten, Antimony and Other Non-Ferrous Metals 2012

《关于公布2012年钨、锑等有色金属出口（供货）企 业名单并下达第一批出口配额的通知》 (2011) [The First Batch Export Quotas of Tungsten, Antimony and Other Non-Ferrous Metals 2012], Circular No 1131 of the Ministry of Commerce, issued on 26 December 2011.

2012 Export Licensing Catalogue

《公布》 (2011) [Notice on ‘2012 Export Licensing Management Commodities Catalogue’], Notice No 98 of the Ministry of Commerce and the General Administration of Customs, issued on 30 December 2011, effective on 1 January 2012.

12th Five-Year 《纺织工业“十二五”发展规划》(2012) [The 12th Development Plan Five-Year Development Plan for the Textile Industry for the Textile 2012], issued on 20 January 2012. Industry 2012 First Batch Rare Earth Export Quotas (Supplement) 2012

《商务部关于补充下达2012年第一批稀土出口配 额的通知》 (2012) [The First Batch Rare Earth Export Quotas (Supplement) 2012], Circular No 618 of the Ministry of Commerce, issued on 16 May 2012.

2013 Tariff Implementation Program

《关于2013年关税实施方案》 (2012) [Tariff Implementation Program 2013], Order No 63 of the General Administration of Customs, promulgated on 28 December 2012, effective on 1 January 2013.

2013 Export Licensing Catalogue

《2013年出口许可证管理货物目录》 (2012) [Catalogue of Goods subject to Export Licensing Administration 2013], Order No 97 of the General Administration of Customs and the Ministry of Commerce, promulgated on 31 December 2012, effective on 1 January 2013.

Decision on Amending the Relevant Provisions of the 2011 Catalogue for Guiding Industry Restructuring 2013

《国家发展改革委关于修改〈产业结构调整指导目录 （2011年本）〉有关条款的决定》 (2013) [Decision on Amending the Relevant Provisions of the 2011 Catalogue for Guiding Industry Restructuring 2013], Order No 21 of the National Development and Reform Commission, promulgated on 16 February 2013, effective on 1 May 2013.

xlii  List of Chinese Legislation and Regulatory Documents Announcement No 7 of PBOC 2013

《中国人民银行公告第7号》 (2013) [Announcement No 7 of the People’s Bank of China 2013], issued by the People’s Bank of China on 28 June 2013, effective on the same date.

Circular on Streamlining the Process of Cross-border RMB Business and Improving Relevant Policies 2013

《中国人民银行关于简化跨境人民币业务流程和完 善有关政策的通知》 (2013) [Circular on Streamlining the Process of Cross-border RMB Business and Improving Relevant Policies 2013], Notice No 168 of the People’s Bank of China, issued on 5 July 2013, effective on the same date.

Interim Rules on the Implementation of the Rulings of the World Trade Organization on Trade Remedy Disputes 2013

《执行世界贸易组织贸易救济争端裁决暂行规则》 (2013) [Interim Rules on the Implementation of the Rulings of the World Trade Organization on Trade Remedy Disputes 2013], Order No 2 of the Ministry of Commerce, promulgated on 29 July 2013, effective on the same date.

Circular on the Implementation of the Rules on the Administration of Content SelfExamination by Internet Culture Entities 2013

《文化部关于实施的通知》 (2013) [Circular on the Implementation of the Rules on the Administration of Content Self-Examination by Internet Culture Entities 2013], Order No 39 of the Ministry of Culture, promulgated on 12 August 2013, effective on 1 December 2013.

Notice on Adjusting the Value-Added Tax Policies for Imported Planes 2013

《关于调整进口飞机有关增值税政策的通知》 (2013) [Notice on Adjusting the Value-Added Tax Policies for Imported Planes 2013], Circular No 53 of the Ministry of Finance and State Administration of Taxation, issued on 29 August 2013.

List of Chinese Legislation and Regulatory Documents  xliii Export of Tungsten, Antimony and Silver by State Trading Enterprises Exporting, and First Batch of Export Quotas of Rare Earths, Indium, Molybdenum and Tin 2014

《关于公布2014年钨、锑、白银出口国营贸易 企业, 稀土、铟、钼、锡出口企业名单并下达第一 批出口配额的通知》 (2013) [Notice on the Export of Tungsten, Antimony and Silver by State Trading Enterprises Exporting, and First Batch of Export Quotas of Rare Earths, Indium, Molybdenum and Tin 2014], Notice No 1012 of the Ministry of Commerce, issued on 13 December 2013.

Notice on Further Strengthening the Compliance of Trade Policies 2014

《关于进一步加强贸易政策合规工作的通知》 (2014) [Notice on Further Strengthening the Compliance of Trade Policies 2014], Announcement No 29 of the General Office of the State Council on 9 June 2014.

Decision on the Administration of Market Entry of Bankcard Clearing Institutions issued by the State Council 2015

《国务院关于实施银行卡清算机构准入管理的决定》 (2015) [Decision on the Administration of Market Entry of Bankcard Clearing Institutions 2015], Order No 22 of the State Council, issued on 9 April 2015, effective on 1 June 2015.

Notice on the Reform of Taxes on Rare Earths, Tungsten and Molybdenum Based on Their Prices 2015

《关于实施稀土、钨、钼资源税从价计征改革 的通知》 (2015) [Notice on the Reform of Taxes on Rare Earths, Tungsten and Molybdenum Based on Their Prices 2015], Notice No 52 of the Ministry of Finance and the State Administration of Taxation, issued on 30 April 2015, effective on 1 May 2015.

Made in China 2025

《国务院关于印发的通知》 (2015) [Notice on the Printing and Release of ‘Made in China 2025’ 2015], Decree No 28 of the State Council, issued on 8 May 2015.

xliv  List of Chinese Legislation and Regulatory Documents Circular on Further Strengthening and Improving the Administration of Network Music Content 2015

《文化部关于进一步加强和改进网络音乐内容管理 工作的通知》 (2015) [Circular on Further Strengthening and Improving the Administration of Network Music Content 2015], Circular No 21 of the Ministry of Culture, issued on 23 October 2015, effective on 1 January 2016.

13th Five-Year Plan (2016–2020)

《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》(2016) [13th Five-Year Plan for National Economic and Social Development of the People’s Republic of China (2016-2020)], promulgated on 17 March 2016.

Rules on the Administration of Bankcard Clearing Institutions 2016

《银行卡清算机构管理办法》 (2016) [Rules on the Administration of Bankcard Clearing Institutions 2016], Order No 2 of the People’s Bank of China and the China Banking Regulatory Commission, promulgated on 6 June 2016, effective on the same date.

Announcement on the ‘Standard Conditions for the Rare Earth Industry (2016 Version)’ and the ‘Measures for the Administration of the “Standard Conditions for the Rare Earth Industry”’ 2016

《和公告》 (2016) [Announcement on the ‘Standard Conditions for the Rare Earth Industry (2016 Version)’ and the ‘Measures for the Administration of the “Standard Conditions for the Rare Earth Industry”’ 2016], Circular No 31 of the Ministry of Industry and Information Technology, issued on 30 June 2016, effective on 1 July 2016.

Notice on Value-added Tax Policies for Large Passenger Aircraft and New Regional Aircrafts 2016

《关于大型客机和新支线飞机增值税政策的通知》 (2016) [Notice on Value-added Tax Policies for Large Passenger Aircraft and New Regional Aircrafts 2016], Circular No 141 of the Ministry of Finance and State Administration of Taxation, issued on 15 December 2016.

List of Chinese Legislation and Regulatory Documents  xlv Interim Measures for Record-filing Administration of the Establishment and Change of Foreign-invested Enterprises 2017

《关于修改〈外商投资企业设立及变更备案管理暂 行办法〉的决定》 (2017) [Decision of the Ministry of Commerce to Amend the Interim Measures for Recordfiling Administration of the Establishment and Change of Foreign-invested Enterprises 2017], Order No 2 of the Ministry of Commerce, promulgated on 30 July 2017, effective on the same date.

Domain Name Rules 2017

《互联网域名管理办法》 (2017) [Rules for the Administration of Internet Domain Names 2017], Order No 43 of the Ministry of Industry and Information Technology, promulgated on 24 August 2017, effective on 1 November 2017.

Plans for Furthering the Institutional Reform of the Party and the State 2018

《深化党和国家机构改革方案》 (2018) [Plans for Furthering the Institutional Reform of the Party and the State 2018], issued by the Government of China on 21 March 2018.

Rules on Public Hearings in Antidumping and Countervailing Investigations 2018

《反倾销和反补贴调查听证会规则》 (2018) [Rules on Public Hearings in Anti-dumping and Countervailing Investigations 2018], Order No 2 of the Ministry of Commerce, promulgated on 4 April 2018, effective on 4 May 2018.

Rules on Questionnaire in Anti-dumping Investigations 2018

《反倾销问卷调查规则》 (2018) [Rules on Questionnaire in Anti-dumping Investigations 2018], Order No 3 of the Ministry of Commerce, promulgated on 4 April 2018, effective on 4 May 2018.

Negative List 2018

《外商投资准入特别管理措施（负面清单）》 (2018) [Special Administrative Measures on Access to Foreign Investment (Negative List) 2018], issued by Order No 18 of the National Development and Reform Commission on 28 June 2018.

xlvi  List of Chinese Legislation and Regulatory Documents Rules on the Management of Investment in Automotive Industry (Consultation Draft) 2018

《关于就公 开征求意见的公告》 (2018) [Rules on the Management of Investment in Automotive Industry (Consultation Draft) 2018], released by the National Development and Reform Commission on 4 July 2018.

Foreign Investment Law (Consultation Draft) 2018

《中华人民共和国外商投资法（草案）》 (2018) [Foreign Investment law of the People’s Republic of China], consultation draft released by the National People’s Congress on 26 December 2018.

1 Introduction I. INTRODUCTION

T

he establishment and development of the rules-based system of the World Trade Organization (WTO) has taken considerable time, effort, and resources by all countries and stakeholders involved. However, the efficacy of WTO rules would be significantly weakened ‘if there is no effective system to clarify the meaning of those rules and to enforce them.’1 The dispute settlement mechanism (DSM) of the WTO, in serving this key function, is commonly regarded as ‘the jewel in the crown’ of the multilateral trading system.2 The success of the DSM is widely recognised. The fact that WTO Members have extensively used the DSM, as well as the impressive records of compliance with the rulings of the WTO’s dispute settlement tribunals, show that there is significant confidence in, and respect for, the system. Indeed, the DSM has managed over 500 trade disputes since commencing its operation in 1995;3 and the caseload continues to increase4 notwithstanding the unprecedented challenges that the system currently faces.5 The overall compliance rate is beyond 80 per cent although there have been cases where compliance took a long period of time and some ‘hard cases’ where compliance has yet to be achieved.6 1 William Davey, ‘The WTO and Rules-Based Dispute Settlement: Historical Evolution, ­Operational Success, and Future Challenges’ (2014) 17(3) Journal of International Economic Law 679, 679. 2 WTO, ‘WTO Disputes Reach 400 Mark’ (6 November 2009), available at www.wto.org/english/ news_e/pres09_e/pr578_e.htm. 3 WTO, ‘Dispute Settlement’, available at www.wto.org/english/tratop_e/dispu_e/dispu_e.htm. 4 WTO, Annual Report 2018 (Geneva, WTO, 2018) 128, available at www.wto.org/english/res_e/ booksp_e/anrep18_e.pdf. For a comprehensive data analysis of the caseload, see Joost Pauwelyn and Weiwei Zhang, ‘Busier than Ever? A Data-Driven Assessment and Forecast of WTO Caseload’ (30 April 2018) CTEI Working Papers 2018-02. 5 Tetyana Payosova, Gary Clyde Hufbauer and Jeffrey J Schott, ‘The Dispute Settlement Crisis in the World Trade Organization: Causes and Cures’ (Peterson Institute for International Economics, March 2018), available at https://piie.com/system/files/documents/pb18-5.pdf. The pressing challenge essentially concerns the appellate function of the DSM which will soon become paralysed if the US continues to block the appointment of Appellate Body members. For a recent discussion of the major concerns of the US and some possible solutions, see Jennifer Hillman, ‘Three Approaches to Fixing the World Trade Organization’s Appellate Body: the Good, the Bad and the Ugly?’, IIEL Issue Briefs, 10 December 2018, available at www.law.georgetown.edu/wp-content/uploads/2018/12/ Hillman-Good-Bad-Ugly-Fix-to-WTO-AB.pdf. 6 See Davey, above n 1, 689–90. See also generally Bruce Wilson, ‘Compliance by WTO Members with Adverse WTO Dispute Settlement Rulings: The Record to Date’ (2007) 10(2) Journal of International Economic Law 397.

2  Introduction However, whether the DSM is designed to induce compliance remains subject to debate, just as no agreement has ever been reached on whether certain Members have fully implemented adverse WTO rulings. In this regard, China has generated longstanding concerns. Amid the ongoing crisis surrounding the WTO, issues such as whether China is a trustworthy player in the global trading system have attracted even greater attention. An assessment of China’s compliance with the rulings of the WTO would undoubtedly contribute to the understanding of China’s behaviour in the system. Yet, existing scholarship has not explored this issue in a comprehensive, thorough and systemic manner. This book undertakes this task by investigating and analysing a host of issues, including: 1. the quality of China’s implementation of WTO rulings; 2. the strategies and approaches that China has undertaken in such implementations; 3. the factors behind China’s compliance or non-compliance; and 4. the major implications for China’s trading partners as well as the DSM. This chapter provides an overview of the basic elements and core function of the DSM (Section II), overall records of compliance under the DSM (Section III), and China’s participation in the DSM (Section IV). Section V sets out the scope, analytical framework and outline of this book. II.  THE DSM AND ITS FUNCTION

The DSM is governed by the Dispute Settlement Understanding7 (DSU), one of the cornerstones of the 1994 Marrakesh Agreement Establishing the WTO. The DSM provides a forum for WTO Members to resolve disputes relating to their rights and obligations under the covered WTO agreements.8 Disputants are required to engage in consultations prior to adjudications.9 The first stage of the adjudication process involves the establishment of an ad hoc WTO panel to rule on a dispute.10 The panel’s decisions, produced in an official report, may be appealed to a standing WTO Appellate Body which may uphold, modify, or overrule the decisions of the panel in its final report on the dispute.11

7 Understanding on Rules and Procedures Governing the Settlement of Disputes, 15 April 1994, Marrakesh Agreement Establishing the World Trade Organization, annex 2, 1869 UNTS 401. [hereinafter DSU]. 8 ibid, art 1.1. ‘Covered agreements’ include all of the multilateral trade agreements (ie annexes 1A– 1C and 2) and the four plurilateral trade agreements (ie annex 4) concluded during the Uruguay Round negotiations for the establishment of the WTO except the Trade Policy Review Mechanism (ie annex 3). 9 ibid, art 4. 10 ibid, arts 6, 8, 12. 11 ibid, arts 16–17.

The DSM and its Function  3 The panel’s and/or Appellate Body’s reports making findings and recommendations on the dispute need to be adopted by the Dispute Settlement Body (DSB) represented by all WTO Members based on a ‘negative consensus’ rule.12 This means that adoption is automatic in practice as non-adoption requires consensus by all Members including the winning party. Once the reports are adopted, the defaulting party is expected to comply with the rulings and recommendations promptly or within a reasonable period of time.13 If the prevailing Member believes that the defaulting Member has failed to implement the rulings within the relevant timeframe, it may bring this matter to a panel (usually the original panel), known as a compliance panel.14 The report of the compliance panel may be appealed to the Appellate Body, which makes final rulings on the legal issues raised on compliance. Where satisfactory implementation has not been achieved, the defaulting Member may offer or suffer temporary ­remedies in the form of voluntary compensation or suspension of concessions or other obligations (known as retaliation or sanction) by the prevailing Member.15 Throughout the dispute settlement process, the disputing parties are entitled to reach a mutually agreed solution (MAS) to their dispute.16 Shortly after the establishment of the WTO, the function of the DSM was vigorously debated. The central issue was whether the dispute settlement rules established by the DSU impose an obligation of compliance or merely require compensation by a losing party in disputes. In defending the ‘binding’ nature of the DSM, Jackson forcefully criticised the view that the implementation of WTO rulings is not compulsory as long as the defaulting Member provides compensation or accepts retaliation so that the overall balance of negotiated commitments is maintained.17 To Jackson, adopted panel and Appellate Body reports establish ‘an international law obligation upon the member in question to change its practice to make it consistent with the rules’ of the WTO; and therefore ‘the “compensation” (or retaliation) approach is only a fallback in the event of non-compliance.’18 Jackson referred to a list of provisions of the DSU to show that compliance is a preferred solution to disputes.19 This initial debate over the function of the DSM provoked broader and deeper discussions. Based on the public choice literature and the economic theory of contracts, Schwartz and Sykes proposed an ‘efficient breach’ theory

12 ibid, art 17.14. 13 ibid, arts 21.1 and 21.3. 14 ibid, art 21.5. 15 ibid, art 22. 16 ibid, art 3.6. 17 See Judith Hippler Bello, ‘The WTO Dispute Settlement Understanding: Less is More’ (1996) 90(3) American Journal of International Law 416; John H Jackson, ‘The WTO Dispute Settlement Understanding – Misunderstandings on the Nature of Legal Obligation’ (1997) 91(1) American Journal of International Law 60. 18 See Jackson, above n 17, 60–61. 19 ibid, 63–64.

4  Introduction arguing that compliance with WTO rulings is required only when it ‘will yield greater benefits to the promisee than costs to the promisor’ such that deviations from WTO rules or non-compliance is permitted ‘whenever the costs of compliance to the promisor exceed the benefits to the promisee.’20 This argument was quickly rejected by Jackson. In a more elaborated analysis, Jackson established that an interpretation of the WTO treaty, particularly the DSU based on the rules set out in the Vienna Convention on the Law of Treaties,21 provides no support for the ‘efficient breach’ theory but lends strong support to the view that ‘compliance with the panel/appellate report is obligatory’.22 In Jackson’s view, compensation or retaliation are merely temporary remedies to allow some additional time for the government of a losing Member to fend off some pressure of full compliance in its domestic political system.23 However, despite the availability of the temporary remedies, Jackson concluded that: the ultimate idea that full compliance is an international law obligation can still be crucial to the notion of a rule-oriented system that is objective and creditable and provides a basis of security and predictability for all members of the organization, as well as nongovernmental beneficiaries of the system.24

Many other leading commentators in the field echoed and further developed Jackson’s analysis. For example, Mavroidis argued that ‘the basic obligation imposed on WTO members is an obligation of result … (compliance with the WTO contract)’, although there may be different paths than the one suggested by WTO tribunals to fulfil that obligation.25 He shared Jackson’s view that the temporary remedies based on compensation or retaliation are merely ‘the means that induce eventual compliance with the WTO contract.’26 McRae reached the same conclusion based on an interpretation of the objectives of the WTO.27 Charnovitz explained how the function of retaliation has shifted from one of rebalancing under the General Agreement on Tariffs and Trade28 (GATT), the predecessor of the WTO, to one of enforcement under the WTO.29 20 Warren F Schwartz and Alan O Sykes, ‘The Economic Structure of Renegotiation and Dispute Resolution in the World Trade Organization’ (2002) 31(1) The Journal of Legal Studies 179, 181. 21 Vienna Convention on the Law of Treaties 1969, 23 May 1969, 1155 UNTS 331. 22 John H Jackson, ‘International Law Status of WTO Dispute Settlement Reports: Obligation to Comply or Option to “Buy Out”?’ (2004) 98(1) American Journal of International Law 109, 115–17. 23 ibid, 122. 24 ibid. 25 Petros C Mavroidis, ‘Remedies in the WTO Legal System: Between a Rock and a Hard Place’ (2000) 11(4) European Journal of International Law 763, 785. 26 ibid, 800. 27 Donald McRae, ‘Measuring the Effectiveness of the WTO Dispute Settlement System’ (2008) 3(1) Asian Journal of WTO & International Health Law and Policy 1, 8. 28 General Agreement on Tariffs and Trade, opened for signature 30 October 1947, 61 Stat A-11, TIAS 1700, 55 UNTS 194. The GATT Contracting Parties held eight rounds of negotiations to further trade liberalisation. The last GATT round – the Uruguay Round negotiation completed in 1994 – established the WTO. 29 Steve Charnovitz, ‘Rethinking WTO Trade Sanctions’ (2001) 95(4) American Journal of ­International Law 792, 800–8.

The DSM and its Function  5 Pauwelyn treated WTO rules as ‘international legal obligations to the benefit of all members and economic operators in domestic and global market places’ and hence the removal or correction of WTO-unlawful conduct as ‘the target of the DSU … in pursuit of public goods.’30 Pelc challenged the foundation of the ‘efficient breach’ theory and expounded that ‘efficient breach goes against the very purpose of international trade agreements’ by effectively ‘increasing the returns to domestic industries from lobbying for protection, and empowering the very groups with preferences against trade liberalisation.’31 This is why, in Pelc’s view, efficient breach is hardly a desirable approach to dispute settlement in practice.32 Through an assessment of WTO Members’ practice, Shaffer and Ganin observed that ‘complainants are driven primarily by the aim of compliance, not rebalancing.’33 Ehring found that the EU’s use of trade sanctions has been intended to induce compliance and deter future WTO breaches by the same defaulting Members.34 While Jackson’s position on the function of the DSM has been influential, there are different voices. For example, Mercurio pointed out that the aims and objectives of the DSU are not clearly set out, thereby leaving the function of the DSM a systemic issue to be settled.35 Looking through the lens of ‘law in action’, Trachtman argued that ‘States that violate WTO law are not subject to enforceable specific performance-type remedies’.36 Sykes reiterated the facts that the DSU does permit the other types of remedies as a practical matter and that compliance with adverse rulings has yet to be a universal practice, let alone prompt compliance.37 The above is not intended to provide a comprehensive review of the DSU or the existing literature on the function of the DSM. However, it demonstrates that that the function of the DSM should be to enforce implementation of WTO rulings has been a predominant view, although the system allows some flexibility for delayed compliance or even non-compliance in practice.

30 Joost Pauwelyn, ‘Enforcement and Countermeasures in the WTO: Rules are Rules – Toward A More Collective Approach’ (2000) 94(2) American Journal of International Law 335, 342. 31 Krzysztof J Pelc, ‘Eluding Efficiency: Why Do We Not See More Efficient Breach at the WTO’ (2010) 9(4) World Trade Review 629, 631, 639. 32 ibid, 631–33. 33 Gregory Shaffer and Daniel Ganin, ‘Extrapolating Purpose from Practice: Rebalancing or Inducing Compliance’ in Bown and Pauwelyn (eds), The Law, Economics and Politics of Retaliation in WTO Dispute Settlement (Cambridge, Cambridge University Press, 2010) 73, 85. 34 Lothar Ehring, ‘The European Community’s Experience and Practice in Suspending WTO ­Obligations’ in Bown and Pauwelyn (eds), The Law, Economics and Politics of Retaliation in WTO Dispute Settlement (Cambridge, Cambridge University Press, 2010) 244, 245. 35 Bryan Mercurio, ‘Why Compensation Cannot Replace Trade Retaliation in the WTO Dispute Settlement Understanding’ (2009) 8(2) World Trade Review 315, 324, 336. 36 Joel Trachtman, ‘The WTO Cathedral’ (2007) 43(1) Stanford Journal of International Law 127, 146. 37 Alan O Sykes, ‘The Dispute Settlement Mechanism: Ensuring Compliance?’ in Daunton, Narlikar and Stern (eds), The Oxford Handbook on the World Trade Organization (Oxford, Oxford University Press, 2012) 560, 563.

6  Introduction III.  COMPLIANCE UNDER THE DSM

WTO Members do not implement adverse rulings in every case. In a recent statistical analysis of the effectiveness of the DSM between 1995 and 2016, Reich observed that (1) of the 35 reports issued by compliance panels, full compliance was not achieved in 33 cases (or almost 92 per cent); (2) of the 33 cases, retaliation was authorised in 21 cases (or 64 per cent); and (3) the US and the EU, two of the most active users of the DSM, have also been the most frequent targets in compliance proceedings and retaliation requests.38 The timely updated data provided by www.worldtradelaw.net shows that by December 2018 there have been 64 compliance reports issued by panels and the Appellate Body39 and 46 requests for retaliation.40 A list of unresolved disputes due to the lack of full compliance remain on the agenda of the DSB,41 as required under Article 21.6 of the DSU. In addition, the latest statistical analysis of the WTO’s caseloads between 1995 and 2018, conducted by Pauwelyn and Zhang, revealed that around 22 per cent ‘of disputes filed were formally settled before the circulation of a panel report’ in the first 15 years of the WTO while such early settlement reduced significantly in more recent periods.42 In these cases, the issue of potential violations of WTO rules would arise, as will be elaborated in Section V. Thus, while the overall implementation records are remarkable, many agree that the enforcement mechanism has its shortcomings.43 Indeed, some studies have tried to show that retaliation has played a role in influencing government trade policy decisions.44 Other studies, however, have considered factors other than retaliation as the underlying reasons for a decision to comply. For example, Davey observed that the overall good record of compliance is attributable ‘mainly to the good faith desire of WTO members to see the dispute settlement system work effectively’, rather than the use of compensation or retaliation.45 Wilson opined that timely compliance is more likely to be achieved if the compliance

38 Arie Reich, ‘The Effectiveness of the WTO Dispute Settlement System: A Statistical Analysis’ (2017) EUI Working Papers Law 2017/11, 17–20. 39 WorldTradeLaw.net, ‘Panel and Appellate Body Reports in Article 21.5 Disputes’, available at www.worldtradelaw.net/databases/art215reports.php. 40 WorldTradeLaw.net, ‘List of All Suspension Requests under the DSU in WTO Disputes’, available at www.worldtradelaw.net/databases/retaliationrequests.php. 41 See, eg, WTO, DSB, Minutes of Meeting Held in the Centre William Rappard on 27 March 2018 (WT/DSB/M/410, 26 June 2018) 2–7. 42 Pauwelyn and Zhang, above n 4, 10–11. 43 See, eg, Pauwelyn, above n 30, 343–6; McRae, above n 27, 8–11; Trachtman, above n 36, 167; Charnovitz, above n 29, 808–12; Yuka Fukunana, ‘Securing Compliance through the WTO Dispute Settlement System: Implementation of DSB Recommendations’ (2006) 9(2) Journal of International Economic Law 383, 399–426. 44 See, eg, Chad P Bown, ‘On the Economic Success of GATT/WTO Dispute Settlement’ (2004) 86(3) The Review of Economics and Statistics 811, 812; Sherzod Shadikhodjaev, Retaliation in the WTO Dispute Settlement System (The Netherlands, Kluwer Law International, 2009) 183–184. 45 See William J Davey, ‘Compliance Problems in WTO Dispute Settlement’ (2009) 42(1) Cornell International Law Journal 119, 125.

Compliance under the DSM  7 involves merely administrative action as opposed to legislative action.46 Mitchell emphasised that the indirect costs associated with breach of international obligations or loss of reputation play an important role in enforcing WTO rules.47 This was confirmed by a recent empirical study showing that reputational costs have been a main reason for responding Members to agree to an early resolution of WTO disputes.48 More specifically, there have been studies of compliance by individual WTO Members. For example, Krikorian’s analysis of the impact of the DSM on the domestic policy-making in the US and Canada revealed that the US Government would only comply with WTO rulings if it would serve its best interests.49 The Canadian Government has adopted ‘a series of strategies and avoidance technique’ in implementing WTO rulings in order to mitigate the impact of the rulings, especially when highly contested social issues were involved.50 ­Looking into the domestic political system in the US, Chilton and Brewster observed that it is the domestic political actors involved in the policy process that determine how the US responds to adverse WTO rulings, and that non-compliance or delayed compliance is most likely to occur when congressional involvement is required in the compliance process.51 A recent study of the EU’s WTO compliance demonstrated that the EU’s decisions on whether to comply have been affected more by domestic competing industries than by exporting interests.52 In addition, Princen opined that ‘the role of trade officials … is crucial in determining’ the EU’s WTO compliance.53 In contrast with democracies such as the US, Zhang and Li argued that choice of compliance in authoritarian countries like China would face fewer domestic constraints from special interests and ‘is largely shaped by the perception of a small group of individuals of the material and reputational costs of noncompliance, which in turn is influenced by the relative power of the state and its degree of reliance on the good will [and cooperation] of the’ other WTO Members.54 46 Wilson, above n 6, 397. 47 See generally Shannon K Mitchell, ‘GATT, Dispute Settlement and Cooperation: A Note’ (1997) 9(1) Economics and Politics 87. 48 See generally Jiwon Lee and Teresa Wittgenstein, ‘Weak vs Strong Ties: Explaining Early ­Settlement in WTO Disputes’ (June 2017) University of Hamburg, Institute of Law and Economics, Working Paper 2017 No 7, available at www.econstor.eu/bitstream/10419/162700/1/ile-wp-2017-7. pdf. 49 Jacqueline D Krikorian, International Trade Law and Domestic Policy (Vancouver, UBC Press, 2012) 81. 50 ibid, 197. 51 Adam S Chilton and Rachel Brewster, ‘Supplying Compliance: Why and When the US Complies with WTO Rulings’ (2014) 39(2) Yale Journal of International Law 201, 203. 52 Aydin Yildirim and Dirk De Bievre, ‘Leader or Laggard? Political Determinants of The EU’s Compliance with WTO Dispute Settlement Rulings’ (January 2015) Leuven Centre for Global Governance Studies, Working Paper No 145, 14–15. 53 Sebastiaan Princen, ‘EC Compliance with WTO Law: The Interplay of Law and Politics’ (2004) 15(3) European Journal of International Law 555, 571, 573–74. 54 Xiaowen Zhang and Xiaoling Li, ‘The Politics of Compliance with Adverse WTO Dispute Settlement Rulings in China’ (2014) 23(85) Journal of Contemporary China 143, 149–50.

8  Introduction Again, the review of the literature above is not intended to be comprehensive. However, one may safely conclude that WTO Members are likely to consider multiple factors in determining how to react to adverse WTO rulings. These may include, amongst others, economic, social, political, legal, institutional and reputational considerations, the impact of which would vary in different cases. Given the mixed considerations, Members may fully or selectively comply with WTO rulings, or not comply on a temporary basis or for a longer period of time depending on their own values and interests. IV.  CHINA’S PARTICIPATION IN THE DSM

On 11 December 2001, China’s accession to the WTO marked the history of the multilateral trading system. In joining the WTO, China made unparalleled commitments some of which even exceeded the expectations of WTO Members.55 To implement these commitments, China has undertaken massive economic, regulatory and structural reforms,56 and has experienced tremendous impacts and adjustments.57 However, concerns about China’s observance of WTO obligations remain at large and have recently intensified. In particular, the United States Trade Representative (USTR) has been monitoring China’s compliance since 2002 with a Report to Congress on China’s WTO Compliance (China Compliance Report) published on a yearly basis.58 In general, these reports provide a review of China’s implementation of WTO commitments in various areas of trade as well as China’s compliance with adverse WTO rulings.59 The reports have claimed that China has failed to fully deliver its WTO commitments and in certain cases, to implement WTO rulings. With the release of the latest China Compliance Report in January 2018, the Trump administration accused China of not complying with WTO rules and undermining the entire

55 See Hearing before the H Subcomm on Trade of the Comm on Ways and Means, 106th Cong 43 (2000) (statement of Charlene Barshefsky). For an overview of China’s WTO commitments, see Nicholas Lardy, Integrating China into the Global Economy (Washington DC, Brookings Institution Press, 2002) 65–105; Ching Cheong and Hung-Yee Ching, Handbook on China’s WTO Accession and Its Impacts (Singapore, World Scientific Publishing, 2003) 31–161. 56 See, eg, Zhenyu Sun, ‘China’s Experience of 10 Years’ in Melendez-Ortiz, Bellmann and Cheng (eds), A Decade in the WTO: Implications for China and Global Trade Governance (Geneva, International Centre for Trade and Sustainable Development, 2011) 11–14; Ling-Ling He and Razeen Sappideen, ‘Reflections on China’s WTO Accession Commitments and Their Observance’ (2009) 43(4) Journal of World Trade 847. 57 See, eg, Julia Ya Qin, ‘Trade, Investment and Beyond: The Impact of WTO Accession on China’s Legal System’ (2007) 191 The China Quarterly 720; Ligang Song, ‘The State of the Chinese Economy – Structural Changes, Impacts and Implications’ in Cass, Williams and Barker (eds), China and the World Trading System: Entering the New Millennium (Cambridge, Cambridge University Press, 2003) 83. 58 See Office of the US Trade Representative, Report to Congress on China’s WTO Compliance, available at www.loc.gov/item/2011230506/. 59 These reports will be considered throughout this book.

China’s Participation in the DSM  9 trading system on many occasions.60 Various US reporters followed suit to criticise China’s failure in fulfilling WTO obligations and Members’ expectations.61 Unfortunately, existing scholarly works do not provide an adequate response to the question of whether China has complied with unfavourable WTO rulings. For example, while Ji and Huang provided an overview of China’s involvement in WTO disputes and records of compliance by 2010, they did not discuss the compliance measures adopted by China in detail.62 Webster examined the timeliness and quality of China’s WTO compliance merely in three disputes which do not include the most recent and many important ones.63 Lately and before the completion of this book, Bacchus, Lester and Zhu offered a summary of China’s compliance in all the disputes China lost by 2018.64 However, this summary provides no analysis of the details of China’s compliance measures and the quality of compliance. Despite the inadequate studies so far, these works show disagreement among scholars on China’s records of compliance, in sharp contrast with the one-way criticism of China by the US Government and media. Compared with the study of compliance, most of the scholarly works have been dedicated to discussing China’s engagement in the DSM in general.65 The shared view has been that China has taken an incremental approach starting as a ‘rule-taker’, and then gradually becoming a ‘rule-shaker’ and now a ‘rule-maker’.66 Some of these and other relevant studies have also offered some explanations for the Chinese approach to participating in the DSM.67 These works are relevant to the analysis of China’s approach to settling trade 60 See, eg, Lesley Wroughton, ‘Trump Administration Says U.S. Mistakenly Backed China WTO Accession in 2001’ (Reuters, 20 January 2018), available at www.reuters.com/article/us-usatrade-china/trump-administration-says-u-s-mistakenly-backed-china-wto-accession-in-2001idUSKBN1F82U1. 61 See, eg, Fareed Zakaria, ‘Trump is Right: China’s A Trade Cheat’ (The Washington Post, 5 April 2018), available at www.washingtonpost.com/opinions/global-opinions/trump-is-right-chinas-a-tradecheat/2018/04/05/6cd69054-390f-11e8-8fd2-49fe3c675a89_story.html?noredirect=on&utm_term=. f49fefe6f6c2. 62 See generally Wenhua Ji and Cui Huang, ‘China’s Experience in Dealing with WTO Dispute Settlement: A Chinese Perspective’ (2011) 45(1) Journal of World Trade 1. 63 See generally Timothy Webster, ‘Paper Compliance: How China Implements WTO Decisions’ (2014) 35(3) Michigan Journal of International Law 525. 64 See generally James Bacchus, Simon Lester and Huan Zhu, ‘Disciplining China’s Trade Practices at the WTO: How WTO Complaints Can Help Make China More Market-Oriented?’ (15 November 2018) CATO Institute Policy Analysis Number 856, available at https://object.cato. org/sites/cato.org/files/pubs/pdf/pa856.pdf. 65 See, eg, Marcia Don Harpaz, ‘Sense and Sensibilities of China and WTO Dispute Settlement’ (2010) 44(6) Journal of World Trade 1155; Bryan Mercurio and Mitali Tyagi, ‘China’s Evolving Role in WTO Dispute Settlement: Acceptance, Consolidation and Activation’ in Herrmann and Terhechte (eds), European Yearbook of International Economic Law, vol 3 (Berlin, Springer, 2012) 89–123; Lisa Toohey, ‘China and the World Trade Organization: The First Decade’ (2011) 60(3) International and Comparative Law Quarterly 788; Matthew Kennedy, ‘China’s Role in WTO Dispute Settlement’ (2012) 11(4) World Trade Review 555; Guohua Yang, ‘China in the WTO Dispute Settlement: A Memoir’ (2015) 49(1) Journal of World Trade 1. 66 See generally Henry S Gao, ‘China’s Ascent in Global Trade Governance: From Rule Taker to Rule Shaker, and Maybe Rule Maker?’ in Carolyn Deere-Birkbeck (ed), Making Global Trade Governance Work for Development (Cambridge, Cambridge University Press, 2011) 153. 67 See, eg, Yenkong Ngangjoh Hodu and Qi Zhang, The Political Economy of WTO Implementation and China’s Approach to Litigation in the WTO (Cheltenham, Edward Elgar Publishing, 2016).

10  Introduction disputes or implementing WTO rulings in this book and will be considered in subsequent chapters. By December 2018, China has been a complainant in 20 WTO disputes, a respondent in 43 disputes, and a third party in 163 disputes.68 These figures suggest that China has been playing an increasingly active role in the system as it continues to accrue experience and legal expertise, which enables it to better use the system to defend its own interests.69 To explore China’s compliance with WTO rulings, this book will focus on the 43 disputes in which China has been a respondent. These disputes involved a total of 30 matters and can be divided into four categories, including trade in goods, trade in services, trade-related intellectual property rights (IPRs), and trade remedies (ie disputes over the application of anti-dumping, countervailing, or safeguard measures). These disputes are set out below in chronological order under each of the categories: 1. ‘trade in goods’ disputes: (1) China – VAT on Integrated Circuits70 (DS309); (2) China – Auto Parts71 (DS339, 340, 342); (3) China – Taxes72 (DS358, 359); (4) China – Publications and Audiovisual Products73 (DS363); (5) China – Grants, Loans and Other Incentives74 (DS387, 388, 390); (6) China – Raw Materials75 (DS394, 395, 398); (7) China – Wind Power E ­ quipment76 (DS419); 68 The WTO member information page of China provides a list of WTO disputes involving China, available at www.wto.org/english/thewto_e/countries_e/china_e.htm. 69 For a discussion of China’s reluctance in participating in WTO disputes, see generally Henry S Gao, ‘Aggressive Legalism: The East Asian Experience and Lessons for China’ in Gao and Lewis (eds), China’s Participation in the WTO (London, Cameron May, 2005) 315, 348–51; and generally Henry S Gao, ‘Taming the Dragon: China’s Experience in the WTO Dispute Settlement System’ (2007) 34(4) Legal Issues of Economic Integration 369. For a comprehensive review of how China strived to build up capacity in WTO litigation, see Gregory Shaffer and Henry Gao, ‘China’s Rise: How It Took on the U.S. at the WTO’ 2018(1) University of Illinois Law Review 115. 70 For a summary of the dispute, see WTO, Dispute Settlement, China – Value-Added Tax on Integrated Circuits (DS309) (US), available at www.wto.org/english/tratop_e/dispu_e/cases_e/ds309_e.htm. 71 For a summary of the dispute, see WTO, Dispute Settlement, China – Measures Affecting Imports of Automobile Parts (DS339) (EC), (DS340) (US), (DS342) (Canada), available at www.wto. org/english/tratop_e/dispu_e/cases_e/ds339_e.htm; www.wto.org/english/tratop_e/dispu_e/cases_e/ ds340_e.htm; www.wto.org/english/tratop_e/dispu_e/cases_e/ds342_e.htm. 72 For a summary of the dispute, see WTO, Dispute Settlement, China – Certain Measures Granting Refunds, Reductions or Exemptions from Taxes and Other Payments (DS358) (US), (DS359) (Mexico), available at www.wto.org/english/tratop_e/dispu_e/cases_e/ds358_e.htm; www.wto.org/ english/tratop_e/dispu_e/cases_e/ds359_e.htm. 73 For a summary of the dispute, see WTO, Dispute Settlement, China – Measures Affecting Trading Rights and Distribution Services for Certain Publications and Audiovisual Entertainment Products (DS363) (US), available at www.wto.org/english/tratop_e/dispu_e/cases_e/ds363_e.htm. 74 For a summary of the dispute, see WTO, Dispute Settlement, China – Grants, Loans and Other Incentives (DS387) (US), (DS388) (Mexico), (DS390) (Guatemala), available at www.wto. org/english/tratop_e/dispu_e/cases_e/ds387_e.htm; www.wto.org/english/tratop_e/dispu_e/cases_e/ ds388_e.htm; www.wto.org/english/tratop_e/dispu_e/cases_e/ds390_e.htm. 75 For a summary of the dispute, see WTO, Dispute Settlement, China – Measures Related to the Exportation of Various Raw Materials (DS394) (US), (DS395) (EC), (DS398) (Mexico), available at www.wto.org/english/tratop_e/dispu_e/cases_e/ds394_e.htm; www.wto.org/english/tratop_e/ dispu_e/cases_e/ds395_e.htm; www.wto.org/english/tratop_e/dispu_e/cases_e/ds398_e.htm. 76 For a summary of the dispute, see WTO, Dispute Settlement, China – Measures concerning Wind Power Equipment (DS419) (US), available at www.wto.org/english/tratop_e/dispu_e/cases_e/ ds419_e.htm.

China’s Participation in the DSM  11 (8) China – Rare Earths77 (DS431, 432, 433); (9) China – Autos and Auto Parts78 (DS450); (10) China – Apparel and Textile Products79 (DS451); (11) China – Demonstration Bases80 (DS489); (12) China – Aircraft81 (DS501); (13) China – Raw Materials II82 (DS508, 509); (14) China – Agricultural Products83 (DS511); (15) China – TRQs84 (DS517); (16) China – Aluminium85 (DS519); (17) China – Additional Duties on Certain P ­ roducts86 87 (DS558); and (18) China – Imports of Sugar (DS568). 2. ‘trade in services’ disputes: (1) China – Publications and Audiovisual Products which also involved issues on services; (2) China – Financial Information Services88 (DS372, 373, 378); and (3) China – Electronic Payment Services89 (DS413). 77 For a summary of the dispute, see WTO, Dispute Settlement, China – Measures Related to the Exportation of Rare Earths, Tungsten and Molybdenum (DS431) (US), (DS432) (EU), (DS433) (Japan), available at www.wto.org/english/tratop_e/dispu_e/cases_e/ds431_e.htm; www.wto.org/english/ tratop_e/dispu_e/cases_e/ds432_e.htm; www.wto.org/english/tratop_e/dispu_e/cases_e/ds433_e.htm. 78 For a summary of the dispute, see WTO, Dispute Settlement, China – Certain Measures Affecting the Automobile and Automobile-Parts Industries (DS450) (US), available at www.wto.org/ english/tratop_e/dispu_e/cases_e/ds450_e.htm. 79 For a summary of the dispute, see WTO, Dispute Settlement, China – Measures Relating to the Production and Exportation of Apparel and Textile Products (DS451) (Mexico), available at www. wto.org/english/tratop_e/dispu_e/cases_e/ds451_e.htm. 80 For a summary of the dispute, see WTO, Dispute Settlement, China – Measures Related to Demonstration Bases and Common Service Platforms Programmes (DS489) (US), available at www. wto.org/english/tratop_e/dispu_e/cases_e/ds489_e.htm. 81 For a summary of the dispute, see WTO, Dispute Settlement, China – Tax Measures Concerning Certain Domestically Produced Aircraft (DS501) (US), available at www.wto.org/english/tratop_e/ dispu_e/cases_e/ds501_e.htm. 82 For a summary of the disputes, see WTO, Dispute Settlement, China – Export Duties on Certain Raw Materials (DS508) (US), available at www.wto.org/english/tratop_e/dispu_e/cases_e/ds508_e. htm; China – Duties and other Measures concerning the Exportation of Certain Raw Materials (DS509) (EU), available at www.wto.org/english/tratop_e/dispu_e/cases_e/ds509_e.htm. 83 For a summary of the dispute, see WTO, Dispute Settlement, China – Domestic Support for Agricultural Producers (DS511) (US), available at www.wto.org/english/tratop_e/dispu_e/cases_e/ ds511_e.htm. 84 For a summary of the dispute, see WTO, Dispute Settlement, China – Tariff Rate Quotas for Certain Agricultural Products (DS517) (US), available at www.wto.org/english/tratop_e/dispu_e/ cases_e/ds517_e.htm. 85 For a summary of the dispute, see WTO, Dispute Settlement, China – Subsidies to Producers of Primary Aluminium (DS519) (US), available at www.wto.org/english/tratop_e/dispu_e/cases_e/ ds519_e.htm. 86 For a summary of the dispute, see WTO, Dispute Settlement, China – Additional Duties on Certain Products from the United States (DS558) (US), available at www.wto.org/english/tratop_e/ dispu_e/cases_e/ds558_e.htm. 87 For a summary of the dispute, see WTO, Dispute Settlement, China – Certain Measures Concerning Imports of Sugar (DS568) (Brazil), available at www.wto.org/english/tratop_e/dispu_e/ cases_e/ds568_e.htm. 88 For a summary of the dispute, see WTO, Dispute Settlement, China – Measures Affecting Financial Information Services and Foreign Financial Information Suppliers (DS372) (EC), (DS373) (US), (DS378) (Canada), available at www.wto.org/english/tratop_e/dispu_e/cases_e/ds372_e.htm; www. wto.org/english/tratop_e/dispu_e/cases_e/ds373_e.htm; www.wto.org/english/tratop_e/dispu_e/ cases_e/ds378_e.htm. 89 For a summary of the dispute, see WTO, Dispute Settlement, China – Certain Measures Affecting Electronic Payment Services (DS413) (US), available at www.wto.org/english/tratop_e/dispu_e/ cases_e/ds413_e.htm.

12  Introduction 3. ‘trade-related IPRs’ disputes: (1) China – IPRs90 (DS362); (2) China – IPRs II91 (DS542); and (3) China – Transfer of Technology92 (DS549). 4. ‘trade remedies’ disputes: (1) China – Fasteners93 (DS407); (2) China – GOES94 (DS414); (3) China – X-Ray Equipment95 (DS425); (4) China – Broiler Products96 (DS427); (5) China – Autos (US)97 (DS440); (6) China – HP-SSST98 (DS454, 460); and (7) China – Cellulose Pulp99 (DS483). Not all of the cases have been adjudicated – some were resolved before a panel was established or a panel report was issued, while others are new disputes in which the adjudication process has not commenced or has not been completed. There was one dispute which was resolved partly via mutually acceptable compensation after China lost the dispute. Notably, China has never been subject to request for authorisation of retaliations so far, which indicates that China has managed to implement WTO rulings in a satisfactory manner. Accordingly, the 43 disputes involving 30 matters can be further broken up into five sub-­categories which are set out in Table 1 below.

90 For a summary of the dispute, see WTO, Dispute Settlement, China – Measures Affecting the Protection and Enforcement of Intellectual Property Rights (DS362) (US), available at www.wto.org/ english/tratop_e/dispu_e/cases_e/ds362_e.htm. 91 For a summary of the dispute, see WTO, Dispute Settlement, China – Certain Measures Concerning the Protection of Intellectual Property Rights (DS542) (US), available at www.wto.org/ english/tratop_e/dispu_e/cases_e/ds542_e.htm. 92 For a summary of the dispute, see WTO, Dispute Settlement, China – Certain Measures on the Transfer of Technology (DS549) (EU), available at www.wto.org/english/tratop_e/dispu_e/cases_e/ ds549_e.htm. 93 For a summary of the dispute, see WTO, Dispute Settlement, China – Provisional Anti-­Dumping Duties on Certain Iron and Steel Fasteners from the European Union (DS407) (EU), available at www.wto.org/english/tratop_e/dispu_e/cases_e/ds407_e.htm. 94 For a summary of the dispute, see WTO, Dispute Settlement, China – Countervailing and Anti-Dumping Duties on Grain Oriented Flat-rolled Electrical Steel from the United States (DS414) (US), available at www.wto.org/english/tratop_e/dispu_e/cases_e/ds414_e.htm. 95 For a summary of the dispute, see WTO, Dispute Settlement, China – Definitive Anti-Dumping Duties on X-Ray Security Inspection Equipment from the European Union (DS425) (EU), available at www.wto.org/english/tratop_e/dispu_e/cases_e/ds425_e.htm. 96 For a summary of the dispute, see WTO, Dispute Settlement, China – Anti-Dumping and Countervailing Duty Measures on Broiler Products from the United States (DS427) (US), available at www.wto.org/english/tratop_e/dispu_e/cases_e/ds427_e.htm. 97 For a summary of the dispute, see WTO, Dispute Settlement, China – Anti-Dumping and Countervailing Duties on Certain Automobiles from the United States (DS440) (US), available at www. wto.org/english/tratop_e/dispu_e/cases_e/ds440_e.htm. 98 For a summary of the dispute, see WTO, Dispute Settlement, China – Measures Imposing Anti-Dumping Duties on High-Performance Stainless Steel Seamless Tubes (‘HP-SSST’) from Japan and the EU (DS454) (Japan), (DS460) (EU), available at www.wto.org/english/tratop_e/dispu_e/ cases_e/ds454_e.htm; www.wto.org/english/tratop_e/dispu_e/cases_e/ds460_e.htm. 99 For a summary of the dispute, see WTO, Dispute Settlement, China – Anti-Dumping Measures on Imports of Cellulose Pulp from Canada (DS483) (Canada), available at www.wto.org/english/ tratop_e/dispu_e/cases_e/ds483_e.htm.

This Book  13 Table 1  Categories and sub-categories of WTO disputes in which China is a respondent

Areas of Trade

Adjudicated disputes

MAS or disputes Compensation resolved before after adjudication adjudication

Pending disputes

Trade in goods

DS339, 340, 342; DS363; DS394, 395, 398; DS431, 432, 433.

DS309; DS363100 DS358, 359; DS387, 388, 390; DS419; DS450; DS451; DS489; DS501.

DS508, 509; DS511; DS517; DS519; DS558; DS568.

Trade in services

DS363; DS413.

DS372, 373, 378

N/A

N/A

Trade-related IPRs

DS362

N/A

N/A

DS542; DS549.

DS407

N/A

N/A

Trade remedies DS414; DS425; DS427; DS440; DS454, 460; DS483.

Thus, in 12 cases, adverse WTO rulings were issued and China was required to implement these rulings. In ten other cases, the parties agreed to a MAS or other means to resolve the disputes without adjudication by WTO tribunals. These figures do not show a clear pattern of China’s participation in the DSM or why China chose to resolve a dispute in a particular way. These issues will be discussed in subsequent chapters of this book. However, Table 1 provides a basis for the structure of this book as will be elaborated below. V.  THIS BOOK

The proper functioning of the multilateral trading system hinges largely on WTO Members’ compliance with the rules of the system. Such compliance comprises two essential components, namely, observance of the rules established by the WTO membership (ie the first order compliance) and implementation of the findings and recommendations of WTO tribunals adopted by the DSB 100 While this dispute was largely resolved by China’s implementation of WTO rulings, one element of WTO-inconsistencies was resolved via a MAS. This will be discussed in ch 3.

14  Introduction (ie the second order compliance).101 In discussing China’s implementation of adverse WTO rulings, it is necessary to consider both China’s observance of WTO rules and compliance with WTO rulings. However, the focus of this book will be on the latter. A.  Analytical Framework Measuring compliance with WTO rulings is a formidable and complex task which has yet to be fulfilled adequately so far.102 However, the literature review conducted above has provided the materials for establishing an analytical framework for measuring China’s implementation of WTO rulings in an objective and structured manner. Firstly, an assessment of the extent to which compliance has been achieved must be strictly based on the violations found by WTO tribunals in specific disputes.103 Thus, a detailed analysis of WTO rulings and the implementation measures adopted by China is generally required to determine the quality of compliance.104 In cases where a complaining Member challenges the adequacy of China’s implementation, the challenge does not in itself prove non-­compliance. Rather, the relevant rulings of the compliance panel and/or the Appellate Body must be assessed. Secondly, the quality of compliance may be affected by the time that China takes to achieve full compliance, and especially if China fails to implement the relevant rulings within the required timeframe.105 WTO-illegal measures will continue to impact trade as well as the predictability and security that the DSM seeks to maintain until the measures are brought into conformity with WTO rules. Thirdly, when a MAS is reached, or when China voluntarily removes, replaces, or modifies the measures in question to the satisfaction of a complainant before the findings of WTO tribunals, there are, strictly speaking, no WTO rulings to implement because the measures involved cannot be deemed to be WTO-­ inconsistent.106 While the disputing parties are expected to notify a MAS to the DSB and the relevant WTO Councils and Committees,107 in practice such

101 See generally Gregory Shaffer, ‘How the World Trade Organization Shapes Regulatory Governance’ (2015) 9 Regulation & Governance 1. 102 Manfred Elsig, ‘WTO Dispute Settlement and the Study of Compliance’ (2015) 14(3) Journal of International Trade Law and Policy 112. 103 Manfred Elsig, Joost Pauwelyn and Thomas Bernauer, ‘Dispute Settlement Mechanism – ­Analysis and Problems’ in Daunton, Narlikar and Stern (eds), The Oxford Handbook on the World Trade Organization (Oxford, Oxford University Press, 2012) 485, 499. 104 John H Jackson, Robert E Hudec and Donald Davis, ‘The Role and Effectiveness of the WTO Dispute Settlement Mechanism [with Comments and Discussion]’ in Collins and Rodrik (eds), Brookings Trade Forum 2000 (Washington DC, Brookings Institution Press, 2000) 179, 221. 105 Davey, above n 45, 119–20. 106 DSU, above n 7, art 23.2. 107 ibid, art 3.6.

This Book  15 notifications are not always lodged or when lodged, may be limited to a statement that a MAS has been reached without disclosing the substance of the solution. In these cases, an analysis of compliance would be subject to not only the availability of the relevant information but also the caveat that the WTO-consistency of the contested Chinese measures remains unsettled.108 Fourthly, when a compensation deal is reached in a dispute after the contested Chinese measures have been found to be WTO-unlawful, compliance would not be achieved. The Chinese measures will remain in force, leading to uncertainties as to when they may be modified, replaced, or removed to achieve WTO-­consistency. By applying the analytical framework, I seek to provide a comprehensive, thorough and systemic analysis of the quality of China’s implementation of adverse WTO rulings. However, this book goes beyond a mere legal analysis of China’s WTO compliance in three important aspects. Firstly, I offer a detailed analysis of the possible explanations for China’s approaches to resolving trade disputes or implementing WTO rulings. Secondly, I discuss the potential postcompliance issues such as the practical application of revised measures by Chinese authorities, non-transparency in decision-making, and repetitive violation of similar WTO rules using similar measures. While these issues do not necessarily affect the adequacy of China’s compliance in individual disputes, they show that compliance in a specific dispute would not prevent China from prioritising domestic policy objectives over the observance of WTO rules. Thirdly, drawing on the discussions of the first two aspects, I offer some observations on the implications of China’s behaviour for WTO Members and the DSM. Indeed, an analysis of China’s approach to, and reasons for, compliance as well as its post-compliance activities would facilitate a better understanding of the relevant Chinese regulatory regime and assist WTO Members in strategically managing future trade disputes with China. In addition, it would also reveal the deficiencies of the DSM in inducing observance of, and compliance with, the rules of the multilateral trading system. B. Structure This book consists of eight chapters, which are organised according to the categories and sub-categories of the disputes set out in Table 1. I will primarily focus on the completed disputes and will only consider a pending dispute when it is closely related to a completed one.

108 The WTO-inconsistencies of a measure may be more obvious in some cases than others. Thus, it must be conceded that there are instances of non-compliance by China and other Members even when there is no ruling to that effect. However, it must also be noted that art 23.2(a) of the DSU requires all Members to not make a determination of whether a violation has occurred and instead to resort to the WTO dispute settlement mechanism for such determinations.

16  Introduction Chapter 2 begins with an examination of the ten cases in which China decided to settle via a MAS and without resorting to adjudication. This chapter will analyse China’s approaches to resolving the disputes and the reasons for such approaches. Chapters 3–7 will discuss the 12 cases in which China lost and was required to implement unfavourable WTO rulings. Each of the chapters will start by providing a brief overview of the relevant Chinese regulatory regime, China’s WTO commitments and observance of such commitments in the relevant areas of trade. They will then offer a detailed analysis of the disputes including the background, the Chinese measures, the WTO rulings, China’s implementation measures, the quality of implementation, the possible explanations for China’s approaches to compliance, and the implications for WTO Members and the DSM. Specifically, Chapters 3 and 4 will discuss the four ‘trade in goods’ disputes with Chapter 3 dealing with two disputes involving China’s regulation of imports (ie China – Auto Parts and China – Publications and Audiovisual Products) and Chapter 4 covering two disputes concerning China’s regulation of exports (ie China – Raw Materials and China – Rare Earths). Chapter 5 then moves on to analyse China’s implementation of WTO rulings against its regulatory regime affecting trade in services in two disputes, ie China – Publications and Audiovisual Products and China – Electronic Payment Services. Chapter 6 examines China’s regulatory regime for IPR protection and enforcement and China’s implementation of the WTO decision in China – IPRs. This chapter also offers some observations on the prospects of the two ­pending ‘trade-related IPRs’ disputes, ie China – IPRs II and China – Transfer of ­Technology. Chapter 7 explores the six ‘trade remedies’ disputes in which China’s antidumping and/or countervailing practices were found to be WTO-incompatible. This chapter discusses the drivers for China’s resort to anti-dumping and countervailing actions and expounds the distinctive features of China’s approach to compliance in comparison to its compliance in the other categories of disputes. Chapter 8 reflects upon the conclusions that have already been made in each of the previous chapters of this book. It underlines the overall record of compliance that China has achieved in all the disputes, the factors that have affected China’s approaches to compliance, and the likelihood that China will continue to prioritise the pursuit of domestic policy goals over the observance of WTO rules. This chapter highlights that China’s record of compliance compares favourably with those of the other major players in the system such as the US, and that the probability of breach of WTO rules for domestic policy reasons after compliance in one dispute remains as high in every WTO Member as it is in China. In the face of the ongoing crisis in the DSM, this chapter stresses that the DSM is indispensable for the multilateral trading system given its effectiveness in enforcing WTO rules and inducing compliance as amply demonstrated in the examination of the Chinese practices in this book.

2 Disputes Settled Without WTO Rulings I. INTRODUCTION

A

s shown in Chapter 1, among the 22 completed WTO disputes in which China was a defendant, ten were settled through a mutually agreed solution (MAS) or other means without adjudication by WTO tribunals. In two disputes, the settlement of the disputes was not publicly reported, although the complaining parties did not continue the WTO proceedings. This chapter discusses the ten disputes in chronological order. Section II provides an overview of the factual background and major issues of these disputes. It then analyses China’s approaches to resolving the disputes and provides explanations for such approaches. Drawing on the analysis in Section II, Section III offers some general observations on China’s participation in the WTO dispute settlement mechanism (DSM). Section IV concludes the chapter. II.  THE TEN DISPUTES

A.  China – VAT on Integrated Circuits (DS309) China – VAT on Integrated Circuits1 was the first case in which China was sued at the WTO. This case was also only the second time that China used the DSM after its entry into the WTO. The first time was when China joined a group of countries to successfully challenge the US’s safeguard measures on steel products in 2002.2

1 For a summary of the dispute, see WTO, Dispute Settlement, China – Value-Added Tax on Integrated Circuits (DS309) (US), available at www.wto.org/english/tratop_e/dispu_e/cases_e/ds309_ e.htm. 2 For a summary of the US – Steel Safeguards dispute, see WTO, Dispute Settlement, United States – Definitive Safeguard Measures on Imports of Certain Steel Products (DS252), available at www.wto.org/english/tratop_e/dispu_e/cases_e/ds252_e.htm. For an overview of China’s participation in the dispute, see Guohua Yang, ‘China in the WTO Dispute Settlement’ (2015) 49(1) Journal of World Trade 1, 1–7.

18  Disputes Settled Without WTO Rulings Initiated by the US on 18 March 2004, the dispute concerned China’s application of value-added tax (VAT) on integrated circuits (ICs) in a discriminatory manner by granting a partial refund to eligible domestic enterprises in the software industry and IC industry.3 Specifically, the US contended that the Chinese measures treated foreign ICs and foreign IC design service providers less favourably than domestic ones in violation of the national treatment (NT) principle under the General Agreement on Tariffs and Trade (GATT) and the General Agreement on Trade in Services4 (GATS). The preferential tax treatment was intended to promote the development of the domestic software and IC industries. However, the allegedly discriminatory tax affected the US semiconductor industry which exported around US$ 2 billion worth of IC products to China.5 Four months later, the parties settled the dispute at the consultation stage through a MAS for China to amend the relevant measures and eliminate the VAT refunds.6 China abolished the tax rebates through two measures issued jointly by the Ministry of Finance (MOF) and the State Administration of Taxation (SAT) on 31 August 20047 (in relation to the VAT refund for ICs designed in China and manufactured abroad) and 25 October 20048 (in relation to the VAT refund for ICs manufactured domestically). In October 2005, the parties notified the DSB that China’s implementation was satisfactory.9 China’s approach to the settlement of the dispute may be explained by several factors. Firstly, the WTO-inconsistencies of the measures seemed to be clear such that it was unnecessary to allocate resources to fight for a losing case. As a newcomer to the system, China had limited legal capacity and had to use resources wisely. Secondly, China may be concerned about the potential

3 China – Value-Added Tax on Integrated Circuits, Request for Consultations by the United States (WT/DS309/1, 23 March 2004). For a detailed discussion of the case, see Liyong Jiang, ‘The WTO Dispute Settlement Mechanism and China’s Participation’ in Gao and Lewis (eds) China’s Participation in the WTO (London, Cameron May, 2005) 303, 307–10; Henry S Gao, ‘Aggressive Legalism: The East Asian Experience and Lessons for China’ in Gao and Lewis (eds) China’s Participation in the WTO (London, Cameron May, 2005) 315, 329–34. 4 General Agreement on Trade in Services, 15 April 1994, Marrakesh Agreement Establishing the World Trade Organization, annex 1B, 1869 UNTS 183, 33 ILM 1167 (1994). 5 Jiang, ‘The WTO Dispute Settlement Mechanism and China’s Participation’ in Gao and Lewis (eds), above n 3, 308. 6 China – Value-Added Tax on Integrated Circuits, Joint Communication from China and the United States (WT/DS309/7, 16 July 2004). 7 《 关 于 停 止 执 行 国 内 设 计 国 外 流 片 加 工 集 成 电 路 产 品 进 口 环 节 增 值 税 退 税 政 策 的 通知》(2004) [Notice on Terminating VAT Refund for Imports of Integrated Circuit Products Designed Domestically and Fabricated Abroad 2004], Notice No 40 of the Ministry of Finance (MOF) and the State Administration of Taxation (SAT), issued on 31 August 2004, effective on 1 October 2004. 8 《关于停止集成电路增值税退税政策的通知》(2004) [Notice on Terminating VAT Refund for Integrated Circuits 2004], Circular No 174 of the MOF and the SAT, issued on 25 October 2004. 9 China – Value-Added Tax on Integrated Circuits, Notification of Mutually Agreed Solution (WT/DS309/8, 6 October 2005).

The Ten Disputes  19 loss of reputation if it was found by WTO tribunals to violate international obligations.10 Thirdly, China strategically used the dispute as an opportunity to promote the reform of the VAT regime to better serve its industrial policies.11 As other commentators have observed, the rebate system was designed inadvertently in a way that benefited foreign companies with significant investments in China as opposed to domestic enterprises.12 Thus, the change in the VAT policy did not have a significant impact on the financial performance and growth of the domestic industry, as confirmed by major Chinese producers of ICs.13 Overall, it was in China’s own interest to settle the dispute in a timely fashion. B.  China – Taxes (DS358, 359) The China – Taxes14 dispute concerned China’s provision of subsidies in the form of tax refunds, reductions or exemptions and other payments to certain domestic entities. The US’s request for consultations, dated 2 February 2007, challenged a list of Chinese measures under the Subsidy and Countervailing Measures (SCM) Agreement,15 the Trade-Related Investment Measures (TRIMs) Agreement,16 the GATT, and the Protocol on the Accession of China17 (Accession Protocol).18 The European Communities (EC), Australia, Japan, and Mexico joined the consultations in the same month. On 12 July 2007, the US and Mexico requested the establishment of a panel which was subsequently established on 31 August 2007. Three months later, China reached a Memorandum of Understanding (MOU) separately with the US and Mexico to amend the measures and 10 Yang, above n 2, 8; Jiang, ‘The WTO Dispute Settlement Mechanism and China’s Participation’ in Gao and Lewis (eds), above n 3, 309. 11 Wenhua Ji and Cui Huang, ‘China’s Experience in Dealing with WTO Dispute Settlement: A Chinese Perspective’ (2011) 45(1) Journal of World Trade 1, 15. 12 Henry Gao, ‘Taming the Dragon: China’s Experience in the WTO Dispute Settlement System’ (2007) 34(4) Legal Issues of Economic Integration 369, 377–78; Bryan Mercurio and Mitali Tyagi, ‘China’s Evolving Role in WTO Dispute Settlement: Acceptance, Consolidation and Activation’ in C Herrmann & J P Terhechte (eds) European Yearbook of International Economic Law, vol 3 (Berlin, Springer, 2012) 89, 95. 13 Yenkong Ngangjoh Hodu and Qi Zhang, The Political Economy of WTO Implementation and China’s Approach to Litigation in the WTO (Cheltenham, Edward Elgar Publishing, 2016) 116–17. 14 For a summary of the dispute, see WTO, Dispute Settlement, China – Certain Measures Granting Refunds, Reductions or Exemptions from Taxes and Other Payments (DS358) (US), (DS359) (Mexico), available at www.wto.org/english/tratop_e/dispu_e/cases_e/ds358_e.htm; www.wto.org/ english/tratop_e/dispu_e/cases_e/ds359_e.htm. 15 Agreement on Subsidies and Countervailing Measures, 15 April 1994, Marrakesh Agreement Establishing the World Trade Organization, annex 1A, 1869 UNTS 14. 16 Agreement on Trade-Related Investment Measures, 15 April 1994, Marrakesh Agreement Establishing the World Trade Organization, annex 1A, 1868 UNTS 186. 17 Protocol on the Accession of the People’s Republic of China (WT/L/432, 23 November 2001) [hereinafter Accession Protocol]. 18 China – Certain Measures Granting Refunds, Reductions or Exemptions from Taxes and Other Payments, Request for Consultations by the United States (WT/DS358/1, 7 February 2007).

20  Disputes Settled Without WTO Rulings a­ bolish the tax and other preferences in dispute effective from 1 January 2008.19 In the dispute, the primary beneficiaries of the tax and non-tax preferences were foreign-invested enterprises (FIEs). These preferences were instituted to attract foreign direct investment (FDI) in China.20 As widely documented, FDI made tremendous contributions to the economic development of China by expanding the export of manufacturing goods, imparting new and advanced technology and management skills, enhancing industrial productivity and the competitiveness of Chinese goods and services, etc.21 However, at the time of the dispute, the Chinese Government had been facing growing domestic opposition to the preferential treatment of FIEs, and was in the process of reforming the relevant regulatory regime to reduce the tax incentives and unify the tax rates and policies for FIEs and domestic enterprises.22 Significantly, the reform resulted in the promulgation of the Enterprise Income Tax Law – the principal legislation in the regulatory regime – in 2007 to level the playing field for domestic firms and FIEs with few exceptions.23 Thus, the WTO dispute served as an additional driving force for the acceleration of the reform. A quick settlement of the dispute was, therefore, in line with China’s policy objectives and reform agenda.24 C.  China – Financial Information Services (DS372, 373, 378) The China – Financial Information Services25 dispute pertained to China’s regulation of financial information services. On 3 March 2008, the EC and the US separately requested for consultations with China challenging a range of Chinese measures restricting market access for, and applying discriminatory requirements to, foreign financial information service suppliers under the GATS 19 China – Certain Measures Granting Refunds, Reductions or Exemptions from Taxes and Other Payments, Communication from China and the United States (WT/DS358/14, 4 January 2008); China – Certain Measures Granting Refunds, Reductions or Exemptions from Taxes and Other Payments, Communication from China and Mexico (WT/DS359/14, 13 February 2008). 20 For a detailed discussion of the development of the tax preferences regime in China, see Qun Li, ‘Tax Incentive Policies for Foreign-Invested Enterprises in China and their Influence on Foreign Investment’ (2008) 18(1) Revenue Law Journal 1. 21 See Ross Buckley and Weihuan Zhou, ‘Navigating Adroitly: China’s Interaction with the Global Trade, Investment, and Financial Regimes’ (2013) 9(1) University of Pennsylvania East Asia Law Review 1, 20. 22 See Li, above n 20, 24–36. 23 Buckley and Zhou, above n 21, 22–3; Hodu and Zhang, above n 13, 127. For the legislation, see《企业所得税法》 (2007) [Enterprise Income Tax Law of the People’s Republic of China 2007], promulgated by Order No 63 of the President of the PRC on 16 March 2007, effective on 1 January 2008, as amended by the Standing Committee of the NPC on 24 February 2017, effective on the same date. 24 Ji and Huang, above n 11, 17. 25 For a summary of the dispute, see WTO, Dispute Settlement, China – Measures Affecting Financial Information Services and Foreign Financial Information Suppliers (DS372) (EC), (DS373) (US), (DS378) (Canada), available at www.wto.org/english/tratop_e/dispu_e/cases_e/ds372_e.htm; www. wto.org/english/tratop_e/dispu_e/cases_e/ds373_e.htm; www.wto.org/english/tratop_e/dispu_e/cases_ e/ds378_e.htm.

The Ten Disputes  21 and the Report of the Working Party on the Accession of China26 (­Working Party Report).27 Canada requested for consultations on the same issues three months later.28 At the centre of the dispute was the Xinhua News Agency (Xinhua), China’s state news agency and regulatory authority for news services. While Xinhua was mandated to approve the operation of foreign financial information providers, it was also involved in the provision of the services concerned via its own platform ‘Xinhua 08’ in competition with other service suppliers. This created a significant conflict of interests. Furthermore, the Chinese measures restricted the form of foreign investment in financial information services to representative offices only, and prohibited foreign providers from directly soliciting subscriptions for their services but required such subscriptions to be done through an entity designated by Xinhua. The China Economic Information Service (CEIS), a branch of Xinhua, was the only designated entity. In addition, foreign suppliers must satisfy certain operational requirements to obtain or renew their service licences. Neither the restrictions nor the operational requirements were applicable to Xinhua 08 or other Chinese financial information providers. These measures adversely affected the interests of the major global providers of financial information services, ie Bloomberg (US), Reuters (UK) and Thomson (Canada). China decided to settle the dispute and reached a MOU with each of the complainants on the same terms on 4 December 2008.29 In the MOUs, China undertook to amend the relevant measures in a way that (1) creates a new regulator of financial information services independent from any suppliers of the services, (2) introduces a new licensing system to remove the restriction on direct subscriptions, and (3) accords equal treatment to foreign suppliers vis-à-vis domestic ones. To implement these undertakings, China promulgated two main measures in 2009. The first measure, issued by the State Council on 29 January 2009, shifted the approval authority from Xinhua to the Information Office of the State Council.30 The second was the Regulation on the Provision 26 Report of the Working Party on the Accession of China (WT/ACC/CHN/49, 1 October 2001). 27 China – Measures Affecting Financial Information Services and Foreign Financial Information Suppliers, Request for Consultations by the European Communities (WT/DS372/1, 5 March 2008); China – Measures Affecting Financial Information Services and Foreign Financial Information Suppliers, Request for Consultations by the United States (WT/DS373/1, 5 March 2008). 28 China – Measures Affecting Financial Information Services and Foreign Financial Information Suppliers, Request for Consultations by the Canada (WT/DS378/1, 23 June 2008). 29 China – Measures Affecting Financial Information Services and Foreign Financial Information Suppliers, Joint Communication from China and the European Communities (WT/DS372/4, 9 December 2008); China – Measures Affecting Financial Information Services and Foreign Financial Information Suppliers, Joint Communication from China and the United States (WT/DS373/4, 9 December 2008); China – Measures Affecting Financial Information Services and Foreign Financial Information Suppliers, Joint Communication from China and Canada (WT/DS378/3, 9 December 2008). 30 《国务院关于修改的决定》 (2009) [Decision on Revising ‘the Decision of the State Council on Setting Administrative Licensing for Administrative Examination and Approval Items that Need to be Retained’ 2009], issued by Decree No 548 of the State Council on 29 January 2009, effective on the same date.

22  Disputes Settled Without WTO Rulings of Financial Information Services by Foreign Institutions in China31 (Regulation 2009) which allowed foreign financial information service suppliers to establish a commercial presence (ie other than representative offices) in China and provided detailed approval requirements and procedures for that purpose. The Regulation also removed the restriction on direct subscriptions to the services by customers in China and invalidated all prior measures in the event of inconsistencies. However, Webster32 has criticised that China failed to fix certain issues in the 1995 Notice Authorising Xinhua News Agency to Implement Centralised Administration over the Release of Economic Information in China by Foreign News Agencies and their Subsidiary Information Institutions.33 In his view, the measure, which remains in effect, continues to impose more onerous requirements on foreign financial information service providers than domestic ones. Specifically, he pointed out that Article 5 of the measure prohibits Chinese Government departments at all levels and their affiliated entities from directly subscribing to financial information from foreign providers. He argued that this prohibition does not directly contradict the Regulation 2009 and hence remains valid. This argument is untenable. Article 8 of the Regulation 2009 explicitly allows foreign financial information service providers to enter into a subscription agreement directly with customers in China. No provisions in the Regulation impose any limitations on the scope of ‘customers’ which therefore should include both governmental and non-governmental entities. In this sense, Article 5 of the 1995 Notice is inconsistent with the Regulation 2009 and hence is no longer valid. As acknowledged in the United States Trade Representative’s (USTR) China Compliance Report 2009, China’s actions fully complied with the terms of the MOU.34 It was observed that China’s decision to settle the dispute mainly came out of political considerations and was affected more by internal power allocation than the external pressure from the complainants or the WTO litigation.35 However, it must also be noted that China’s approach to resolving the disputes did not require significant changes to, or reduce the rigor of, the regulatory scrutiny of foreign financial information service suppliers.36 The revised measures improved 31 《外国机构在中国境内提供金融信息服务管理规定》 (2009) [Regulation on the Provision of Financial Information Services by Foreign Institutions in China 2009], issued by Decree No 7 of the Information Office of the State Council, the Ministry of Commerce (MOFCOM) and State Administration for Industry and Commerce (SAIC) on 30 April 2009, effective on 1 June 2009. 32 See Timothy Webster, ‘Paper Compliance: How China Implements WTO Decisions’ (2014) 35(3) Michigan Journal of International Law 525, 572. 33 《国务院办公厅关于授权新华社通讯社对外国通讯社及其所属信息机构在中国境内发布 经济信息实行归口管理的通知》(1995) [Notice Authorising Xinhua News Agency to Implement Centralised Administration over the Release of Economic Information in China by Foreign News Agencies and their Subsidiary Information Institutions 1995], issued by the General Office of the State Council Decree No 1 on 31 December 1995, effective on the same date. 34 USTR, 2009 Report to Congress on China’s WTO Compliance (December 2009) 9, 96, available at https://ustr.gov/sites/default/files/2009%20China%20Report%20to%20Congress.pdf. 35 Ji and Huang, above n 11, 22. 36 Hodu and Zhang, above n 13, 136–37.

The Ten Disputes  23 the transparency of the regulatory framework and the market access for foreign suppliers, which contributed to China’s objectives to develop a healthy and more competitive financial sector. In the meantime, the licensing/approval system continued to ensure that the market liberalisation would not undermine the industrial development goals and financial stability in China. D.  China – Grants, Loans and Other Incentives (DS387, 388, 390) In China – Grants, Loans and Other Incentives,37 the US, Mexico and ­Guatemala challenged over 100 Chinese measures at both the state and regional levels as providing WTO-illegal export subsidies in the form of grants, loans and other incentives to domestic enterprises in violation of the SCM Agreement, the Agreement on Agriculture,38 the GATT, and China’s Accession Protocol.39 The subsidies, categorised as the ‘China World Top Brand Program’ and the ‘Chinese Famous Export Brand Program’, were primarily aimed at promoting the development of Chinese brands and the export of all kinds of Chinese merchandise recognised as ‘famous brands’. These were criticised as unfair practice detrimental to the interests of the US manufacturing and export sectors.40 However, the actions of Mexico and Guatemala were viewed as unexpected by the Chinese Government.41 On 18 December 2009, one year after the commencement of the consultations, China reached a MAS with each of the complaining parties, agreeing to eliminate all the contested export-contingent subsidies.42 This MAS, which was announced by the USTR, was not notified to the WTO. In fact, China’s actions predated the conclusion of the MAS. For example, on 2 April 2009, eight ministries and departments of the State Council jointly issued Guiding Opinions on Promoting World Famous Brand,43 which repealed the measure in dispute 37 For a summary of the dispute, see WTO, Dispute Settlement, China – Grants, Loans and Other Incentives (DS387) (US), (DS388) (Mexico), (DS390) (Guatemala), available at www.wto. org/english/tratop_e/dispu_e/cases_e/ds387_e.htm; www.wto.org/english/tratop_e/dispu_e/cases_e/ ds388_e.htm; www.wto.org/english/tratop_e/dispu_e/cases_e/ds390_e.htm. 38 Agreement on Agriculture, 15 April 1994, Marrakesh Agreement Establishing the World Trade Organization, annex 1A, 1867 UNTS 410. 39 China – Grants, Loans and Other Incentives, Request for Consultations by the United States (WT/DS387/1, 7 January 2009); China – Grants, Loans and Other Incentives, Request for Consultations by Mexico (WT/DS388/1, 8 January 2009); China – Grants, Loans and Other Incentives, Request for Consultations by Guatemala (WT/DS390/1, 22 January 2009). 40 USTR, United States Wins End to China’s ‘Famous Brand’ Subsidies after Challenge at WTO; Agreement Levels Playing Field for American Workers in Every Manufacturing Sector, Press Release (Press Release, 18 December 2009), available at https://ustr.gov/about-us/policyoffices/press-office/press-releases/2009/december/united-states-wins-end-china%E2%80% 99s-%E2%80%9Cfamous-brand%E2%80%9D-sub. 41 Ji and Huang, above n 11, 22. 42 USTR, above n 40; Ji and Huang, above n 11, 23. 43 《关于推进国际品牌培育工作的指导意见》(2009) [Guiding Opinions on Promoting World Famous Brand 2009], issued by the MOFCOM, the National Development and Reform Commission

24  Disputes Settled Without WTO Rulings published in 2005. The new measure eliminated the subsidies for the development of export brands and stipulated that any promotion of ‘world famous brands’ must not infringe China’s international obligations. On 5 May 2009, the General Administration of Quality Supervision, Inspection and Quarantine (AQSIQ) issued a notice to repeal the 2005 Circular on the evaluation and recognition of world top brands.44 On 18 December 2009, the AQSIQ amended the 2005 Rules on the Administration of Chinese Brand Name Products by removing export performance from the list of the criteria for the application of Chinese Brand Name Products.45 Thus, at least at the state level, China corrected the WTO-inconsistencies by removing the legal basis for the export-contingent subsidies under each of the challenged programs. In contrast, given the number of local measures involved, it is difficult to evaluate China’s performance at the provincial and local levels. However, China is obliged to ‘apply and administer in a uniform, impartial and reasonable manner all its laws, regulations and other measures’ across its entire customs territory, especially at the sub-national level.46 In this specific case, it was observed that ‘provincial governments quickly reviewed, revised and repealed the relevant documents’ with the assistance of local WTO advisory centres and strong coordination between different authorities in order to ‘maintain the overall status of national interests’.47 China – Grants, Loans and Other Incentives was the first dispute which involved myriads of Chinese measures at sub-national levels. Amid its entry into the WTO, China already made great efforts to educate and train government officials on WTO rules at both central and local levels.48 For example, on 20 November 2001, the State Council and the Central Committee of the Communist Party of China (CPC) issued a joint Notice on China’s WTO Accession49 to all ministries and provincial governments and urged the Party organs and government organisations at all levels to strengthen the study of WTO rules and the training of WTO experts. Soon after, the Central Government organised a high-level week-long training course for senior officials at the provincial and ministerial levels.50 Various local governments also established WTO Centres, (NDRC), the MOF, the Ministry of Science and Technology (MST), the General Administration of Customs (GAC), the SAT, the SAIC, and the General Administration of Quality Supervision, Inspection and Quarantine (AQSIQ), Order No 150, issued on 2 April 2009. 44 《关于废止规范性文件的公告》 (2009) [Announcement on Repealing Regulatory Documents 2009], Announcement No 42 of the AQSIQ, issued and effective on 5 May 2009. 45 《国家质量监督检验检疫总局关于修改的决定》 (2009) [Decision on Revising Rules on the Administration of Chinese Brand Name Products 2009], Order No 124 of the AQSIQ, issued and effective on 18 December 2009. 46 Accession Protocol, above n 17, s 2(A). 47 Hodu and Zhang, above n 13, 132. 48 For a comprehensive review of how China strived to build up capacity in WTO litigation, see generally Gregory Shaffer and Henry Gao, ‘China’s Rise: How It Took on the US at the WTO’ 2018 (1) University of Illinois Law Review 115. 49 《关于我国加入世界贸易组织有关情况的通报》 (2001) [Notice on China’s WTO Accession 2001], Announcement No 26 of the General Office of the Central Committee of the Communist Party of China (CPC), issued on 20 November 2001. 50 See Shaffer and Gao, above n 48, 140.

The Ten Disputes  25 which not only conduct WTO-related trainings, research, and outreach activities for the governments, but also provide advice to the governments on the consistency of various trade-related measures. In 2014, the State Council issued the Notice on Further Strengthening the Compliance of Trade Policies51 setting out a list of policy instruments that may affect trade and mandating governments at all levels to consult the MOFCOM on the WTO-compatibility of such instruments when they are formulated. This shows China’s continuous efforts to ensure WTO compliance and uniform administration of laws, regulations and other measures. Given the number of measures involved in the dispute, it was a sensible and pragmatic decision for the parties to settle without resorting to WTO proceedings. This saved significant time and resources and avoided difficulties in litigating the case.52 In addition, as indicated above, the removal of the prohibited subsidies served to protect the reputation of China and hence China’s interests in the WTO. E.  China – Fasteners (DS407) China – Fasteners53 was the first WTO dispute over China’s trade remedy regime. It arose out of China’s imposition of provisional anti-dumping (AD) measures on certain iron and steel fasteners from the EU in 2009.54 On 7 May 2010, the EU requested for consultations with China at the WTO challenging China’s AD practices under the Agreement on Anti-Dumping55 (AD Agreement).56 The dispute was just one in the chain of retaliatory AD and WTO actions concerning fasteners between the EU and China. China is one of the world’s largest producers and exporters of fasteners (ie screws, nuts, bolts and ­ ­washers).57 The EU is one of the top destinations of China’s fastener exports, and in the meantime China is also one of the largest export markets for ­fasteners

51 《关于进一步加强贸易政策合规工作的通知》 (2014) [Notice on Further Strengthening the Compliance of Trade Policies 2014], Announcement No 29 of the General Office of the State Council on 9 June 2014. 52 See Ji and Huang, above n 11, 23. 53 For a summary of the dispute, see WTO, Dispute Settlement, China – Provisional Anti-­Dumping Duties on Certain Iron and Steel Fasteners from the European Union (DS407) (EU), available at www.wto.org/english/tratop_e/dispu_e/cases_e/ds407_e.htm. 54 《对欧盟碳钢紧固件反倾销的初裁公告》(2009) [Preliminary Determinations on the Antidumping Investigation into Certain Iron and Steel Fasteners Exported from the EU], MOFCOM Announcement No 115 on 23 December 2009, available at www.mofcom.gov.cn/article/b/c/200912/ 20091206690755.shtml. 55 Agreement on the Implementation of Art VI of GATT 1994, 15 April 1994, Marrakesh Agreement Establishing the World Trade Organization, annex 1A, 1868 UNTS 201. 56 China – Provisional Anti-Dumping Duties on Certain Iron and Steel Fasteners from the ­European Union, Request for Consultations by the European Union (WT/DS407/1, 12 May 2010). 57 Zhong Nan, ‘China Wins Fastener Tiff with EU’ (China Daily Europe, 22 January 2016), available at www.chinadaily.com.cn/a/201601/22/WS5a2b836da310eefe3e9a0c14.html.

26  Disputes Settled Without WTO Rulings originating in the EU.58 While China’s fastener industry comprises thousands of enterprises,59 the EU has some of the world’s largest fastener producers.60 In 2007, the EU received an AD petition from the European Industrial Fasteners Institute and initiated an investigation against fastener exports from China. The investigation resulted in the imposition of an AD duty between 26.5 per cent and 85 per cent on certain Chinese steel and iron fasteners in 2009.61 China took two actions in response. First, China initiated an AD investigation into fastener exports from the EU in 2008, which led to the provisional AD measures challenged by the EU in China – Fasteners. This WTO dispute, therefore, is clearly a retaliatory action taken by the EU aiming to ‘get China to make changes in the final decision or terminate the investigation’.62 However, the EU’s WTO action did not stop China from imposing AD duties. On 28 June 2010, the MOFCOM made final determinations to impose a 6.1 per cent AD duty on KAMAX-Werke Rudolf Kellermann GMBH & Co. KG (Kamax) the only cooperating exporter and 26 per cent on all other EU exporters.63 Overall, it was estimated that the duties affected 140 million Euros ($240 million) of the EU’s fastener exports to China.64 However, it seemed that the WTO dispute led to a reduction of the provisional AD duty from 16.8 per cent to 6.1 per cent for Kamax. This duty reduction explained the EU’s decision to discontinue the WTO proceedings. Second, China commenced WTO proceedings against the EU’s AD actions in 2009 in the EC – Fasteners (China) dispute.65 The EU lost the case and implemented the WTO rulings by initiating a review of the original AD duties which were subsequently reduced to a range from 22.9 per cent to 74.1 per cent.66 In 2014, the EU initiated a sunset review of the AD duties with 58 See, eg, Financial Times, ‘EU Files WTO Complaint against China Over Steel Fasteners’ (EUbusiness, 13 May 2010), available at www.eubusiness.com/news-eu/wto-trade-dispute.4m0; China Fastener Info, ‘China’s Fastener Imports and Exports for Jan.–Nov. 2015’, available at www. chinafastener.info/en/news/4417.htm. 59 Nan, above n 57. 60 ChinaFastener.com, ‘Global Fastener Market Situation and Future Trend Analysis’ (14 September 2010), available at www.chinafastener.com/news/fastener-news-840.htm. 61 This investigation was widely reported, see, eg, Ji and Huang, above n 11, 24; Qingjiang Kong, China-EU Trade Disputes and Their Management (Singapore, World Scientific Publishing, 2012) 43–44. 62 See Ji and Huang, above n 11, 24. 63 《公布关于原产于欧盟的进口碳钢紧固件产品反倾销调查的最终裁定》 (2010) [Final Deter­ minations on the Anti-dumping Investigation into Certain Iron and Steel Fasteners Exported from the EU], MOFCOM Announcement No 40 on 28 June 2010, available at www.mofcom.gov.cn/ article/b/g/201009/20100907137383.shtml. 64 ChinaFastener.com, ‘China Slaps Anti-dumping Tax on EU Steel Fasteners’ (29 June 2010), available at www.chinafastener.info/en/news/3199.htm. 65 For a summary of this dispute, see WTO, Dispute Settlement, European Communities – ­Definitive Anti-Dumping Measures on Certain Iron or Steel Fasteners from China, WT/DS397, available at www.wto.org/english/tratop_e/dispu_e/cases_e/ds397_e.htm. 66 European Communities – Definitive Anti-Dumping Measures on Certain Iron or Steel F ­ asteners from China, Status Report Regarding Implementation of the DSB Recommendation and Ruling (WT/DS397/15, 13 July 2012); Jonathan Stearns, ‘China Faces Renewal of EU Fastener Duties It Challenged’ (Bloomberg, 28 March 2015), available at www.bloomberg.com/news/articles/2015-03-27/ china-faces-renewal-of-eu-fastener-duties-it-challenged.

The Ten Disputes  27 a final decision made in 2015 to maintain the duties.67 The duties had effectively excluded Chinese fasteners from the EU market cutting their market share from 26 per cent to 0.6 per cent.68 In 2013, China continued the WTO proceedings by challenging the EU’s compliance with the WTO rulings in EC – Fasteners (China). On 18 January 2016, the Appellate Body ruled in favour of China holding that the EU had failed to comply with the rulings.69 This decision brought an end to the seven-year long AD duties against China’s fastener exports.70 In the meantime, however, China initiated a sunset review of its AD duties on EU’s fastener exports in June 2015 and made a final decision to extend the duties for another five years in June 2016.71 Thus, China took a strikingly different approach in China – Fasteners. Unlike its approach in the previous cases discussed above, China did not settle the dispute by negotiations or concede to the request of the EU. Rather, China maintained its AD measures and used the DSM to safeguard its export interests. In this regard, while China’s retaliatory AD action was ineffective in lifting the EU’s AD duties, the WTO litigation eventually forced the EU to act. China’s different reaction may have to do with strategic considerations. As Ji and Huang rightly observed: if China withdraws the measures in question as a result of this litigation threat against it, this might lead to a chain of events creating systemic dangers to China’s ability to carry out future AD investigations. It would also surely provide fresh evidence in support of domestic allegations and critiques that China is hesitant to enter into WTO litigation to defend its legitimate interests but would rather negotiate accommodations with its trading partners.72

As a frequent victim of AD actions worldwide, China has strong incentives to use the same measures for various objectives. Its reaction in China – Fasteners is a perfect demonstration of China’s growing sophistication in using AD ­measures and WTO litigation to protect export interests and retaliate against AD measures overseas.73 However, China’s AD action was unlikely undertaken for protectionist purposes; the Chinese fastener industry remained

67 Commission Implementing Regulation (EU) 2015/519 of 26 March 2015, available at http://trade.ec.europa.eu/doclib/docs/2015/march/tradoc_153327.def.en.L82-2015.pdf. 68 Stearns, above n 66. 69 Appellate Body Report, European Communities – Definitive Anti-Dumping Measures on Certain Iron or Steel Fasteners from China, Recourse to art 21.5 of the DSU by China (WT/DS397/ AB/RW, adopted 12 February 2016). 70 Commission Implementation Regulation (EU) 2016/278 of 26 February 2016, available at http:// trade.ec.europa.eu/doclib/docs/2016/february/tradoc_154326.repeal.en.L52-2016.pdf. 71 《关于对原产于欧盟的进口碳钢紧固件所适用的反倾销措施期终复审裁定的公告》(2016) [Determinations on the Sunset Review of the Imposition of Anti-dumping Measures on Certain Iron and Steel Fasteners Exported from the EU], MOFCOM Announcement No 24 on 28 June 2016, available at www.mofcom.gov.cn/article/b/c/201606/20160601348530.shtml. 72 See Ji and Huang, above n 11, 24–25. 73 For an excellent discussion of China’s approach to public-private partnership in dealing with foreign trade barriers particularly through anti-dumping actions, see generally Henry Gao, ‘Public-Private Partnership: The Chinese Dilemma’ (2014) 48(5) Journal of World Trade 983.

28  Disputes Settled Without WTO Rulings strong and continued to grow despite losing almost the entire EU market.74 The ­motivations of China’s use of AD will be further discussed in Chapter 7. Finally, China’s WTO action also served to challenge the EU’s discriminatory treatment of China as a non-market economy (NME) in AD investigations. This NME-treatment is significant to China as it often leads to the imposition of hefty AD duties against Chinese exports.75 After decades of economic reforms to promote the transformation from a planned economy to a market economy, it is also in China’s interest to be recognised as a market economy in the global community. However, since the WTO litigation was limited to certain aspects of the EU’s AD practices in an individual investigation,76 it did not have a systematic impact on the relevant laws and practices of WTO Members. Moreover, despite China’s success in challenging the EU’s practices at the WTO, it does not reduce the likelihood of the EU initiating a new investigation to protect its domestic industry and export interests, especially given the continuation of the Chinese AD duties on EU fasteners. F.  China – Wind Power Equipment (DS419) The Wind Power Equipment77 case came out of China’s provision of subsidies in the form of grants, funds or awards to manufacturers of wind power equipment contingent upon the purchase of domestic over imported wind power components. The measure identified in the US’s request for consultations was the Provisional Measure on Administration of Special Fund for the Industrialization of Wind Power Equipment issued by the MOF in 2008.78 The US claimed that the subsidies are prohibited under the SCM Agreement and that China failed to notify and make available a translation of the measure. According to the USTR,

74 See Jinyao Feng, ‘Hand in Hand for A New Page of China-Europe Fastener Industry’ (Fastener World Europe Special Edition No 4, 2015), available at www.fastener-world.com.tw/0_magazine/ ebook/pdf_download/FW_151_E_100.pdf. 75 The issues relating to China’s market economy status and the treatment of China as an NME under the WTO have provoked intense debates among scholars, practitioners, and policy-makers worldwide. For some recent discussions, see generally James Nedumpara and Weihuan Zhou (eds), Non-Market Economies in the Global Trading System: The Special Case of China (Singapore, Springer, 2018); Weihuan Zhou and Delei Peng, ‘EU – Price Comparison Methodologies (DS516): Challenging the Non-Market Economy Methodology in Light of the Negotiating History of Article 15 of China’s WTO Accession Protocol’ (2018) 52(3) Journal of World Trade 505. 76 For an analysis of the legal issues, see Michelle Zang, ‘EC – Fasteners: Opening the Pandora’s Box of Non-Market Economy Treatment’ (2012) 14(4) Journal of International Economic Law 869. 77 For a summary of the dispute, see WTO, Dispute Settlement, China – Measures concerning Wind Power Equipment (DS419) (US), available at www.wto.org/english/tratop_e/dispu_e/cases_e/ ds419_e.htm. 78 China – Measures concerning Wind Power Equipment, Request for Consultations by the United States (WT/DS419/1, 6 January 2011). The measure is 《风力发电设备产业化专项资金管理暂 行办法》(2008) [Provisional Measure on Administration of Special Fund for the Industrialization of Wind Power Equipment 2008], Notice No 476 of the MOF, issued and effective on 11 August 2008.

The Ten Disputes  29 the subsidies ‘totalled several hundred million dollars’, with individual grants ranging ‘between $6.7 million and $22.5 million’.79 These had accorded Chinese manufacturers and exporters of wind power equipment unfair advantages over US manufacturers. The US and China settled the dispute by consultations and China repealed the measure at issue on 21 February 2011.80 The root cause of the dispute was China’s industrial policies. As stated in the contested measure, the subsidies were designed to foster the domestic manufacturing of wind power equipment and technological advancement. The development of the wind power industry also plays an important role in the growth of the entire renewable energy industry. The subsidies were merely one element of China’s policy programs which promoted a rapid growth of the wind energy industry.81 In 2010, China became the world’s largest installer of wind power capacity.82 As the International Centre for Trade and Sustainable Development (ICTSD) commented, the support programs and rapid growth ‘allowed the major manufacturers to accumulate technology and investment while overcoming challenges in the production of megawatt-level and offshore wind turbines.’83 As Chinese exports of wind power equipment became increasingly competitive, they undermined the interests of foreign manufacturers and exporters. Besides the WTO dispute, the US also initiated a ‘Section 301’ investigation into the Chinese subsidies in response to the request of domestic industries.84 Therefore, it is reasonable to observe that China terminated the subsidies under the pressure of the US. However, it must also be noted that the termination of the subsidies had insignificant impacts on Chinese domestic manufacturers of wind power equipment. It was reported that by the time of the termination, most of the domestic manufacturers had already s­ uccessfully

79 USTR, ‘China Ends Wind Power Equipment Subsidies Challenged by the United States in WTO Dispute’ (Press Release, June 2011), available at https://ustr.gov/about-us/policy-offices/press-office/ press-releases/2011/june/china-ends-wind-power-equipment-subsidies-challenged. 80 USTR, 2012 Report to Congress on China’s WTO Compliance (December 2012) 51, available at https://ustr.gov/sites/default/files/uploads/2012%20Report%20to%20Congress%20-%20Dec% 2021%20Final.pdf. The legal instrument which repealed the Chinese measure was Order No 62 of the MOF, issued on 21 February 2011, available at www.gov.cn/gongbao/content/2011/content_ 1939189.htm. 81 For a discussion of China’s wind energy policy and development, see Hanjie Wang et al, Wind Power in China: A Cautionary Table (Manitoba, International Institute for Sustainable Development, 2016); Zhongying Wang, Haiyan Qin and Joanna Lewis, ‘China’s Wind Power Industry: Policy Support, Technological Achievements, and Emerging Challenges’ (2012) 51 Energy Policy 80. For an analysis of China’s financial support for the industry and their efficiencies, see Lin Wu and Han Li, ‘Analysis of the Development of the Wind Power Industry in China – from the Perspective of the Financial Support’ (2017) 7(37) Energy, Sustainability and Society, available at https://link. springer.com/article/10.1186/s13705-017-0140-1#citeas. 82 See Wang, Qin and Lewis, above n 81, 1. 83 See International Centre for Trade and Sustainable Development (ICTSD), ‘China to End Challenged Subsidies in Wind Power Case’ (ICTSD, 13 June 2011), available at www.ictsd.org/ bridges-news/biores/news/china-to-end-challenged-subsidies-in-wind-power-case. 84 USTR, above n 79.

30  Disputes Settled Without WTO Rulings claimed the subsidies,85 and further development of the domestic industry was no longer dependent upon the subsidies.86 The termination of the subsidies was also economically desirable as they began to cause over-capacity and over-production.87 In addition, the termination did not affect China’s p ­ olicies in the wind power and renewable energy industries, which have continued to support the industrial development. In 2015, Xinjiang Goldwind Science & Technology Co. Ltd, a major Chinese manufacturer, surpassed General Electric Co. to become the world’s largest wind turbine maker based on generation capacity.88 In short, it was wise for China to resolve the dispute, which eased the tension with the US without jeopardising the continuous growth of domestic manufacturers and the development and implementation of industrial policies. Finally, from a legal perspective, the settlement of the dispute allowed China to avoid a WTO ruling against its lack of transparency in the notification of subsidies and the translation of trade-related measures. Thus, the controversies over China’s observance of its commitments on transparency remained open for adjudication in another dispute. G.  China – Autos and Auto Parts (DS450) & China – Demonstration Bases (DS489) China – Autos and Auto Parts89 was another dispute over subsidies c­ontingent upon export performance. On 17 September 2012, the US challenged 73 Chinese national and sub-national measures which allegedly provided export subsidies through a program establishing ‘export bases’ for auto and auto parts industries in various municipal cities.90 The US’s claim also continued to involve China’s WTO obligations on transparency, reflecting its lasting concern about China’s inadequate notifications of subsidy programs.91 According to the USTR, at least $1 billion worth of subsidies were granted between 2009 and 2011,

85 See Chunlai Yu, ‘Ministry of Finance Officials Confirmed the Termination of the Wind Power Subsidies: No Significant Impact on Manufacturers’ (Sina, 9 June 2011), available at http://finance. sina.com.cn/roll/20110609/02169962064.shtml. 86 ICTSD, above n 83. 87 ibid. 88 See Daniel Cusick, ‘Chinese Wind Turbine Maker Is Now World’s Largest’ (E&E News, 23 February 2016), available at www.scientificamerican.com/article/chinese-wind-turbine-makeris-now-world-s-largest/. 89 For a summary of the dispute, see WTO, Dispute Settlement, China – Certain Measures ­Affecting the Automobile and Automobile-Parts Industries (DS450) (US), available at www.wto.org/ english/tratop_e/dispu_e/cases_e/ds450_e.htm. 90 China – Certain Measures Affecting the Automobile and Automobile-Parts Industries, Request for Consultations by the United States (WT/DS450/1, 20 September 2012). 91 USTR, above n 80, 8.

The Ten Disputes  31 which contributed significantly to the rapid growth of the Chinese industries to the detriment of the US auto and auto parts manufacturing sector.92 More comprehensive studies have shown that the auto parts industry alone received at least $27.5 billion from 2001 to 2011.93 Given the economic and political importance of the US auto and auto parts sector, the dispute was reasonably foreseeable. Before the outbreak of the dispute, 188 Members of the US Congress signed a letter to express grave concerns about China’s trade practices in the auto parts industry and urged the administration to ‘address Chinese predatory policies in [the industry] as one of its initial priorities.’94 In 2013 and 2014, the two sides attempted to resolve the dispute via negotiations without achieving any substantive outcomes.95 Notably, this dispute was only one of many US-China disputes for their own auto and auto parts industries. The other WTO disputes, which involved different Chinese measures eventually found to be WTO-illegal by WTO tribunals, will be discussed in Chapters 3 and 7. Instead of pursuing the Autos and Auto Parts case, the US launched a more broad and vigorous dispute over China’s export subsidy programs in February 2015 – ie China – Demonstration Bases96 – based on information developed during the previous case.97 The US’s 25-page-long request for consultations condemned 182 Chinese measures at both central and local levels which allegedly provided a vast array of export subsidies through a program establishing ‘Foreign Trade Transformation and Upgrading Demonstration Bases’ (Demonstration Bases) and Common Service Platforms.98 The US contended that the subsidies, mainly in the form of discounted or free services or cash grants, were provided ‘to manufacturers and producers across seven economic sectors

92 USTR, ‘Fact Sheet: WTO Case Challenging Chinese Subsidies’ (September 2012), available at https://ustr.gov/about-us/policy-offices/press-office/fact-sheets/2012/september/wto-case-challengingchinese-subsidies. 93 Usha Haley, ‘Putting the Pedal to the Metal: Subsidies to China’s Auto-Parts Industry from 2001 to 2011’ (31 January 2012) EPI Briefing Paper No 316, 20. For a detailed analysis of the WTOconsistency and trade-effects of China’s subsidies in the auto industry, see Ann Christoff, ‘The Chinese Automobile Industry and the World Trade Organisation: China’s Non-Compliance with WTO Regulations Through Subsidizing of Automobile Manufacturers’ (2009) 19(1) Indiana International & Comparative Law Review 137. 94 Bill Canis and Wayne Morrison, ‘US-Chinese Motor Vehicle Trade: Overview and Issues’ (16 August 2013) US Congressional Research Service, 19. 95 USTR, 2014 Report to Congress on China’s WTO Compliance (Dec 2014) 36, available at https://ustr.gov/sites/default/files/2014-Report-to-Congress-Final.pdf. 96 For a summary of the dispute, see WTO, Dispute Settlement, China – Measures Related to Demonstration Bases and Common Service Platforms Programmes (DS489) (US), available at www. wto.org/english/tratop_e/dispu_e/cases_e/ds489_e.htm. 97 USTR, ‘United States Launches Challenge to Extensive Chinese Export Subsidy Program’ (Press Release, February 2015), available at https://ustr.gov/about-us/policy-offices/press-office/ press-releases/2015/february/united-states-launches-challenge. 98 China – Measures Related to Demonstration Bases and Common Service Platforms Programmes, Request for Consultations by the United States (WT/DS489/1, 19 February 2015).

32  Disputes Settled Without WTO Rulings and dozens of sub-sectors located in more than one hundred and fifty industrial ­clusters throughout China’.99 The Chinese industries included textiles, ­agriculture, medical products, light industry, special chemical engineering, new materials, and hardware and building materials. In April 2015, a WTO panel was established after the US’s request for the establishment of a panel. One year later, however, the US and China entered into a MOU in which China confirmed that it had terminated all the subsidies in question and had introduced new measures to upgrade the Demonstration Base Program so that it was no longer related to export performance.100 The US confirmed that the Chinese measures in dispute were either no longer in effect, or terminated or amended to its satisfaction, and hence claimed victory for its workers and businesses in the sectors affected.101 The Autos and Auto Parts case and the Demonstration Base case are highly similar to the Famous Brand dispute discussed in sub-section D above, in terms of the involvement of export subsidies and numerous measures at both national and sub-national levels. The reasons for China’s decision to settle the Famous Brand dispute may also apply to the Demonstration Base case. However, these disputes only dealt with some of China’s subsidy programs while many others remain in effect. Thus, the USTR’s China Compliance Report 2017 continued to question China’s provision of WTO-prohibited subsidies in a variety of sectors and lack of notification of subsidy programs.102 As far as the auto and auto parts sector is concerned, the focus of China’s industrial policy has shifted to the development of new energy vehicles (NEVs) which have been receiving significant subsidies from both central and provincial/municipal governments.103 Accordingly, the US’s surveillance of China’s WTO compliance has been increasingly focused on the Chinese measures in the NEVs sector, foreshadowing an imminent WTO dispute.104 China’s industrial policy and major measures in the NEVs sector will be further discussed in Chapter 3.

99 ibid. Also see USTR, above n 97. 100 China – Measures Related to Demonstration Bases and Common Service Platforms Programmes, Communication from China and the United States (WT/DS489/7, 19 April 2016). 101 USTR, ‘Status of Instruments Challenged in the Demonstration Bases-Common Service Platform Program’ (12 April 2016), available at https://ustr.gov/sites/default/files/DB-MOULgl-Instruments-Status-version-20160412.pdf; USTR, ‘Chinese Export Subsidies Under the ‘Demonstration Bases-Common Service Platform’ Program Terminated Thanks to U.S.-China Agreement’ (Press Release, April 2016), available at https://ustr.gov/about-us/policy-offices/ press-office/press-releases/2016/april/chinese-export-subsidies-under. 102 USTR, 2017 Report to Congress on China’s WTO Compliance (Dec 2017) 12, 52–4, available at https://ustr.gov/sites/default/files/files/Press/Reports/China%202017%20WTO%20Report.pdf. 103 Jack Perkowski, ‘What China’s Shifting Subsidies Could Mean For Its Electric Vehicle Industry’ (Forbes, 13 July 2018), available at www.forbes.com/sites/jackperkowski/2018/07/13/chinashifts-subsidies-for-electric-vehicles/#386a04ff5703; Export.Gov, ‘China – Automotive Industry’ (14 July 2017), available at www.export.gov/article?id=China-Automotive-Components-Market. 104 USTR, above n 102, 88–90.

The Ten Disputes  33 H.  China – Apparel and Textile Products (DS451) The China – Apparel and Textile Products105 dispute occurred only one month after the commencement of the China – Autos and Auto Parts dispute. On 15 October 2012, Mexico requested for consultations with China on a range of subsidies in the form of loans, tax preferences or exemptions, cash payments, etc in the Chinese apparel and textile industry and the upstream cotton and chemical fibres industries.106 The apparel and textile industry has been a major contributor to Mexico’s economy and has developed rapidly as a result of the growth and expansion of exports to its trading partners.107 In particular, thanks to the North American Free Trade Agreement (NAFTA), Mexico has been able to rely predominantly on the US market for its textile exports for many years. However, its market share in the US has been gradually taken away by Chinese textile exports to the US which increased steadily and significantly between 2008 and 2017 and accounted for nearly a half on the US textile and apparel market in the end of that period.108 The dispute, therefore, was primarily triggered by the Mexican-Chinese competition in the US market.109 From Mexico’s perspective, the Chinese subsidies had accorded unfair competitive advantages to its textile exports. According to the WTO official summary of the case, the parties remain in consultations. There has been no notification of MAS or official announcement from either party on the settlement of the dispute. Therefore, it is reasonable to observe that the parties have not found a way to resolve the dispute. However, Mexico did not proceed with the WTO litigation either. There are several possible explanations for the outcome of the dispute. Firstly, the fact that the consultations failed to resolve the dispute suggested that China was not prepared to remove the alleged subsidies and therefore was likely to defend vigorously if the dispute continued. Given the economic importance of the textile and apparel industry in China, it is politically powerful in influencing industrial development policies and decision-making.110 Moreover, by the time

105 For a summary of the dispute, see WTO, Dispute Settlement, China – Measures Relating to the Production and Exportation of Apparel and Textile Products (DS451) (Mexico), available at www. wto.org/english/tratop_e/dispu_e/cases_e/ds451_e.htm. 106 China – Measures Relating to the Production and Exportation of Apparel and Textile Products, Request for Consultations by Mexico (WT/DS451/1, 18 October 2012). 107 Fibre2Fashion.com, ‘Mexico Textile Industry: A Report’, available at www.fibre2fashion.com/ industry-article/5050/mexican-textile-industry-a-report. 108 Polyestertime, ‘Will China-US Trade War Impact Textile and Apparel Industry?’ (3 May 2018), available at www.polyestertime.com/china-usa-trade-war-textile-apparel-industry/. 109 ICTSD, ‘Mexico Challenges China over Subsidies for Clothing, Textiles’ (ICTSD, 17 October 2012), available at www.ictsd.org/bridges-news/bridges/news/mexico-challenges-china-over-subsidiesfor-clothing-textiles. 110 For an overview of the Chinese textile and apparel sector and recent policy developments, see Beatriz Irun, The Textile and Apparel Market in China (EU SME Centre, July 2017), available at http://ccilc.pt/wp-content/uploads/2017/07/eu_sme_centre_report_tamarket_in_china_2017.pdf.

34  Disputes Settled Without WTO Rulings of the dispute, China had already litigated a number of complex cases and had become an experienced player in the DSM.111 Secondly, while Mexico’s request for consultations provided a long list of evidence to demonstrate the existence of the claimed subsidies, it did not set out the specific measures that provided the subsidies in most parts. This indicated the difficulties that Mexico faced in identifying the Chinese measures. Thus, the continuation of the litigation may require the contribution of significant time and resources that Mexico was unwilling to make. Thirdly, it may be that Mexico was waiting to see how the China – Autos and Auto Parts case would eventuate before taking any actions. Subsequently, it continued to observe the progress of the Demonstration Base dispute which eventually pushed China to remove all of the challenged export subsidies in the textile industry amongst the other sectors. This result provided sufficient satisfaction to Mexico. Finally, in the meantime, Mexico strengthened its domestic regulatory framework for textile and apparel imports, affording protection to its domestic industry by reducing import competition.112 This may have placated the Mexican textile industry in pushing for the WTO litigation. I.  China – Aircraft (DS501) China – Aircraft113 was the last case that was resolved by negotiations at the time of writing. On 8 December 2015, the US challenged four Chinese measures as affording VAT exemptions for the sale of certain domestically-made aircraft (generally under 25 tonnes by weight) while ‘like’ imported aircraft was not entitled to the same exemptions.114 In addition, the US questioned China’s lack of transparency in the publication of these exemptions. As the USTR reported, the discriminatory treatment affected the US aviation manufacturing industry which supports 102,600 jobs in the US and contributes $14 billion to the US ­economy each year.115 On 18 October 2016, the USTR announced that the dispute

111 Some of these disputes will be discussed in detail in the subsequent chapters. 112 Sheng Lu, ‘Mexican New Import Rules on Textiles and Apparel Raise Concerns’ (7 March 2015), available at https://shenglufashion.com/2015/03/07/mexican-new-import-rules-on-textiles-and-apparelraise-concerns/. 113 For a summary of the dispute, see WTO, Dispute Settlement, China – Tax Measures Concerning Certain Domestically Produced Aircraft (DS501) (US), available at www.wto.org/english/tratop_e/ dispu_e/cases_e/ds501_e.htm. 114 China – Tax Measures Concerning Certain Domestically Produced Aircraft, Request for Consultations by the United States (WT/DS501/1, 10 December 2015). 115 USTR, ‘United States Launches Trade Enforcement Challenge to China’s Hidden and Discriminatory Tax Exemptions for Certain Chinese-Produced Aircraft’ (Press Release, December 2015), available at https://ustr.gov/about-us/policy-offices/press-office/press-releases/2015/december/uslaunches-trade-enforcement.

The Ten Disputes  35 was settled with the discriminatory tax exemptions abolished by China.116 Interestingly enough, however, all the measures challenged by the US were repealed by China or already expired before the dispute.117 Specifically, the MOF and the SAT issued measures in 2013 to terminate the tax exemptions for domestically produced regional aircraft and the N-5 aircraft. The VAT exemption for the new AVIC I regional aircraft expired on 31 December 2009. Thus, it is unclear why the US initiated this dispute in the first place. Like many other developed or developing countries, China has adopted a robust industrial policy to foster the growth of manufacturing capacity and technological advancement in the commercial aircraft industry. However, among a host of policy instruments, the VAT exemptions are no longer a major one.118 By the time of the termination of the exemptions, the Chinese industry concerned had already benefited from the exemptions for over a decade; therefore, such benefits had become increasingly less significant to the growth of the industry. Weighing the benefits of the tax exemptions against the reputational cost of being a violator of fundamental WTO rules, the former became dispensable. In fact, China not only terminated the VAT exemptions for the aircraft concerned but on 15 December 2016, the MOF and the SAT also issued a notice to apply a VAT rate of 5 per cent on domestically-made large passenger aircraft and new regional aircraft above 25 tonnes by weight.119 This is the same rate that applies to ‘like’ imported large aircraft under another measure issued by the same authorities in 2013.120 These measures served to avoid potential WTO dispute over similar discriminatory tax policies. However, it remains to be seen whether the other policy instruments may raise WTO-inconsistent issues. A summary of the ten disputes is provided in Table 1 below.

116 USTR, ‘China Ends Hidden, Discriminatory Tax Exemptions for Certain Chinese-Produced Aircraft’ (Press Release, 18 October 2016), available at https://ustr.gov/about-us/policy-offices/ press-office/press-releases/2016/october/china-ends-hidden-discriminatory. 117 ibid, the press release includes an attachment setting out the Chinese measures, see https://ustr. gov/sites/default/files/2016_ATTACH_relevant_measures.pdf. 118 For a detailed analysis of China’s commercial aircraft industry and the major industrial development policies, see generally Keith Crane et al, The Effectiveness of China’s Industrial Policies in Commercial Aviation Manufacturing (Santa Monica CA, RAND Corporation, 2014). For a discussion of China’s policy instruments in the large civil aircraft sector, see generally Juan He, ‘WTO-Plus Commitments and Emerging Implications for China’s Large Civil Aircraft Manufacturing’, (2014) 13(3) World Trade Review 517. 119 《关于大型客机和新支线飞机增值税政策的通知》(2016) [Notice on Value-added Tax Policies for Large Passenger Aircraft and New Regional Aircraft 2016], Circular No 141 of the MOF and SAT, issued on 15 December 2016. 120 《关于调整进口飞机有关增值税政策的通知》(2013) [Notice on Adjusting the Value-Added Tax Policies for Imported Planes 2013], Circular No 53 of the MOF and SAT, issued on 29 August 2013.

36  Disputes Settled Without WTO Rulings Table 1  China’s Settlement of WTO Disputes without Adjudication or WTO Rulings Request for Consultations

WTO Dispute

Measures

VAT on Integrated Circuits [DS309 (US)]

Discriminatory internal tax by way of VAT refund

18 Mar 2004

MAS (14 Jul 2004)

Settlement

China issued two measures in 2004 to abolish the VAT rebates.

Outcome

China – Taxes [DS358 (US), 359 (Mexico)]

Domestic subsidies (ie tax or other preferences) to certain enterprises

2 Feb 2007

MAS (19 Dec 2007 (US); 7 Feb 2008 (Mexico))

China ­abolished the tax or other preferences effective from 1 Jan 2008.

Financial Information Services [DS372 (EC), 373 (US), 378 (Canada)]

Discriminatory treatment and market access restriction on foreign financial information service suppliers

3 Mar 2008 (EC and US) 20 Jun 2008 (Canada)

MAS (4 Dec 2008)

China issued two measures in January and Jun 2009 to implement its commitments in the MOU.

Grants, Loans and Other Incentives [DS387 (US), 388 (Mexico), 390 (Guatemala)]

Export ­subsidies to ‘famous brands’ products

19 Dec 2008 (US and Mexico) 19 Jan 2009 (Guatemala)

MAS was announced by the USTR on 18 Dec 2009.

China issued a number of measures in 2009 to abolish the subsidies or remove export ­performance from the contested measures.

Fasteners [DS407 (EU)]

Anti-dumping duties on fasteners from the EU

7 May 2010

N/A

China imposed AD duties in Jun 2010, and extended the duties for another five years in Jun 2016. (continued)

The Ten Disputes  37 Table 1  (Continued) WTO Dispute

Measures

Wind Power Equipment [DS419 (US)]

Domestic content ­subsidies to Chinese manufacturers of wind power equipment

Autos and Auto Parts [DS450 (US)]

Request for Consultations 22 Dec 2010

Settlement

Outcome

No formal MAS was announced or notified

China repealed the measure at issue on 21 Feb 2011.

Export 17 Sep 2012 ­subsidies to the auto and auto parts industries

N/A, the two sides remain in consultations.

There was no publicly available information to show that China has removed the subsides.

Apparel and Textile Products [DS451 (Mexico)]

Domestic subsidies to apparel and textile industry and the cotton and chemical fibres industries

N/A, the two sides remain in consultations.

There was no publicly available information to show that China has removed the subsides.

Demonstration Bases [DS489 (US)]

Export 11 Feb 2015 ­subsidies to seven industries

MAS (14 Apr 2016)

China issued a number of measures in 2015 and 2016 to abolish the subsidies or remove export performance from the contested measures.

Aircraft [DS501 (US)]

Discriminatory internal tax by way of VAT exemptions

MAS was announced by the USTR on 18 Oct 2016.

The VAT exemptions were either terminated or expired.

15 Oct 2012

8 Dec 2015

38  Disputes Settled Without WTO Rulings III.  AN ASSESSMENT OF CHINA’S APPROACH TO SETTLING DISPUTES BY AGREEMENT AND IMPLICATIONS

Many scholars have discussed the pattern of China’s engagement with the DSM at different phases. For example, Gao observed three stages in which China became increasingly active or even aggressive in the DSM from a ‘rule taker’ (2001–2005) to a ‘rule shaker’ (2006–2009) and then a ‘rule maker’ since 2010.121 Similar observations came from Toohey who described the phases as ‘early engagement’, ‘escalating involvement’, and ‘asserting influence’,122 as well as Mercurio and Tyagi characterising the stages as ‘acceptance’, ‘consolidation’, and ‘activation’.123 Many factors were identified in these and other relevant studies to explain China’s behaviour in individual disputes and the changing pattern.124 A key factor, however, concerns China’s legal expertise and capacity as well as experience in using the DSM. The discussion of the ten disputes in this chapter does not clearly show the pattern discerned in the previous studies. To see the pattern, one needs to also consider the cases resolved without the initiation of the WTO dispute settlement process and the cases China litigated vigorously at the WTO.125 However, while the pattern provides an important perspective of China’s participation in the DSM, it is equally important to emphasise the selective approach that China has adopted. This selective approach may be explained by the following facts. Firstly, China settled disputes by negotiations not only in the early stages but also in more recent stages despite its growing WTO expertise and experience. The Demonstration Bases case is a perfect illustration of this point. This suggests that China has been selective in determining how to pursue a WTO dispute. Secondly, China’s legal capacity remains constrained due to the ­increasing number of cases that China had to defend and many other cases that China was keen to pursue. As flagged in Chapter 1, apart from the 163 disputes 121 See Henry S. Gao, ‘China’s Ascent in Global Trade Governance: From Rule Taker to Rule Shaker, and Maybe Rule Maker?’ in Carolyn Deere-Birkbeck (ed), Making Global Trade Governance Work for Development (Cambridge, Cambridge University Press, 2011) 153, 167–72. 122 See generally Lisa Toohey, ‘China and the World Trade Organization: The First Decade’ (2011) 60(3) International and Comparative Law Quarterly 788. 123 See generally Mercurio and Tyagi, ‘China’s Evolving Role in WTO Dispute Settlement: Acceptance, Consolidation and Activation’ in C Herrmann & J P Terhechte (eds), above n 12. 124 See, eg, Marcia Don Harpaz, ‘Sense and Sensibilities of China and WTO Dispute Settlement’ (2010) 44(6) Journal of World Trade 1155; Liyu Han and Henry Gao, ‘China’s Experience in Utilizing the WTO Dispute Settlement Mechanism’ in Gregory Shaffer and Ricardo Melendez-Ortiz (eds), Dispute Settlement at the WTO: The Developing Country Experience (Cambridge, Cambridge University Press, 2011) 137–173; Wenhua Ji and Cui Huang, ‘China’s Path to the Center Stage of WTO Dispute Settlement: Challenges and Responses’ (2010) 5(9) Global Trade and Customs Journal 365. 125 See, eg, Gao, ‘China’s Ascent in Global Trade Governance: From Rule Taker to Rule Shaker, and Maybe Rule Maker?’ in Carolyn Deere-Birkbeck (ed), above n 121; Mercurio and Tyagi, ‘China’s Evolving Role in WTO Dispute Settlement: Acceptance, Consolidation and Activation’ in C Herrmann & J P Terhechte (eds), above n 12.

China’s Approach to Settling WTO Disputes  39 in which China participated as a third party, it has been involved in 63 disputes including 43 as a respondent and 20 as a complainant. The sheer number of cases meant that China had to be selective to optimise the allocation of resources. Besides legal capacity, there are other important considerations behind China’s selective approach as demonstrated in Section II. These include the complexity of disputes, the difficulties for China to amend challenged measures, the reputational cost associated with the likelihood of WTO-breach and loss of disputes, the impact on China’s industrial policies and the relevant economic sectors and stakeholders, and the political implications. Given the selective approach, China should also have weighed the importance of other disputes to which it needed to respond or pursue during the same periods. In these other disputes, China participated fully in the adjudication process either as a respondent or a complainant. This suggests strongly that China considered various factors before deciding to litigate some cases while settling the others by negotiations. Thus, comparing with the general pattern of China’s participation in the DSM, the growing sophistication of China tends to be a more significant matter for WTO Members to comprehend. Despite China’s increasing ‘aggressive legalism’ at the WTO, it has maintained a selective approach in response to WTO disputes. This approach reveals China’s deep understanding of how to maintain its reputation and the integrity of the DSM while in the meantime, managing the domestic stakeholders and adroitly utilising the system for its own benefits. The variables in China’s decision-making are therefore of vital importance as they have determined and will continue to determine China’s approach to WTO disputes. As will be shown in subsequent chapters, these factors also apply to China’s implementation of adverse WTO rulings. Finally, it must be stressed that the ten disputes discussed above were not adjudicated by WTO tribunals. Thus, strictly speaking, there were no WTO rulings for China to implement, or to put in another way, China was not obliged to make any changes to the challenged measures. The fact that China amended or removed almost all the measures does not preclude the possibility that a MAS may involve a rebalancing deal whereby a defending party offers compensation or concessions to the satisfaction of a complaining party in exchange for the maintenance of the measures in dispute. Accordingly, the resolution of disputes via a MAS may create at least two uncertainties: (1) the WTO-legality of the contested measures remains unsettled; and (2) when disputes are settled via a rebalancing deal, the challenged measures will continue to affect trade until they are modified, replaced or repealed.126

126 For a discussion of other potential issues that might arise from the settlement of disputes via MAS and some proposed reforms of the DSM, see generally Wolfgang Alschner, ‘Amicable Settlements of WTO Disputes: Bilateral Solutions in a Multilateral System’ (2014) 13(1) World Trade Review 65.

40  Disputes Settled Without WTO Rulings IV. CONCLUSION

China has settled WTO disputes by negotiations or MAS at different stages of its development of legal expertise and experience in the DSM. It is likely that China has undertaken a selective approach in determining whether to pursue or settle a dispute. This selective approach seems to be based on weighing and balancing multiple factors including the complexity of disputes, the difficulties in amending contested measures, reputational cost, and impacts on industrial policies and economic and political stakeholders. This approach also shows the growing sophistication of China in resolving WTO disputes in terms of China’s demonstrated capability in maintaining its reputation and the integrity of the DSM while also managing the domestic stakeholders and utilising the system for its own benefits. These factors have also affected China’s implementation of adverse WTO rulings (as will be discussed in subsequent chapters of this book) and will continue to influence China’s participation in the DSM.

3 China’s Regulation of Imports and Implementation of WTO Rulings I. INTRODUCTION

T

his chapter and Chapter 4 focus on the disputes involving Chinese measures affecting trade in goods, in which China was required to implement the decisions of WTO tribunals. As shown in Chapter 1, there were four such disputes: China – Auto Parts, China – Publications and Audiovisual Products, China – Raw Materials, and China – Rare Earths. The first two disputes, which concerned China’s regulation of importation of goods, are discussed in this chapter. Chapter 4 will discuss the remaining two disputes concerning China’s regulation of exportation of goods. Section II provides a brief overview of China’s liberalisation of the regulatory regime for the importation of goods pursuant to its WTO obligations. Sections III and IV discuss the two WTO disputes starting with the background of the disputes. They then review the decisions of WTO panels and the Appellate Body, identifying the WTO-inconsistencies of the Chinese measures and the flexibilities left for China’s regulatory activities in the sectors or industries concerned. This will be followed by a detailed analysis of China’s implementation, including the measures that China adopted to comply with the WTO rulings to assess whether full compliance has been achieved, the factors that may have affected China’s approaches to implementation, and the implications for other WTO Members and the DSM. Section V concludes the chapter. II.  CHINA’S REGULATION OF IMPORTS

Before China became a Member of the WTO in December 2001, it had carried out economic reform and market liberalisation for over two decades since the launch of the ‘opening-up and reform’ policy in 1978. However, China’s import regulatory regime remained complex and prohibitive, comprising an array of trade and regulatory barriers.1 These included, inter alia, tariffs, quotas, tariff-rate quotas (TRQs), import licensing requirements, and restriction on 1 Nicholas R Lardy, Integrating China into the Global Economy (Washington DC, The Brookings Institution, 2002) 32.

42  China’s Regulation of Imports and Implementation of WTO Rulings trading rights, although China had gradually liberalised these barriers in anticipation of the accession to the WTO.2 However, systematic and comprehensive reforms did not occur until China took efforts to implement its WTO obligations. In addition to the general WTO rules on non-discrimination,3 tariffs and other duties and charges,4 quotas,5 import licensing,6 state trading,7 ­transparency,8 etc, China agreed to a wide range of WTO-plus obligations as codified in its accession instruments including the Protocol on Accession of China9 (Accession Protocol) and the Report of the Working Party on the Accession of China10 (Work Party Report).11 Many of the obligations apply across different areas of trade (ie imports, exports, services, and/or traderelated intellectual property rights). These include, for example, uniform administration of trade regime at all levels of governments,12 transparency,13 non-discrimination against foreign individuals and enterprises in certain areas of government procurement,14 commitment to ensure commercial-based decisions of state-owned enterprises (SOEs) on purchases and sales without government intervention,15 and elimination of price controls in all but a few exempted sectors.16 With respect to imports, China undertook to, amongst others, liberalise trading rights,17 reduce tariffs and remove other duties and charges according to its Schedule of Concessions (Goods Schedule),18 phase out a long list of non-tariff measures (eg quotas, import licence) by 2005 according to Annex 3 of the Accession Protocol,19 administer TRQs in a transparent, predictable, uniform, fair and non-discriminatory manner,20 and publish and notify licensing requirements.21 2 ibid, 33–46. 3 See, eg, arts I (most-favoured-nation) and III (national treatment) of the GATT. 4 See, eg, art II of the GATT. 5 See, eg, art XI of the GATT. 6 See, eg, Agreement on Import Licensing Procedures, 15 April 1994, Marrakesh Agreement Establishing the World Trade Organization, annex 1A, 1869 UNTS 436. 7 See, eg, art XXIV of the GATT. 8 See, eg, art X of the GATT. 9 Protocol on the Accession of the People’s Republic of China (WT/L/432, 23 November 2001) [hereinafter Accession Protocol]. 10 Report of the Working Party on the Accession of China (WT/ACC/CHN/49, 1 October 2001) [hereinafter Working Party Report]. 11 For an overview and analysis of China-specific commitments, see Julia Ya Qin, ‘‘‘WTO-Plus” Obligations and Their Implications for the World Trade Organization Legal System’ (2003) 37(3) Journal of World Trade 483. 12 See Accession Protocol, above n 9, s 2(A); Working Party Report, above n 10, para 75. 13 See Accession Protocol, above n 9, s 2(C); Working Party Report, above n 10, paras 331–36. 14 See Accession Protocol, above n 9, s 3. 15 ibid, s 6.1; see also Working Party Report, above n 10, para 46. 16 See Accession Protocol, above n 9, s 9.1; Working Party Report, above n 10, para 62. 17 See Accession Protocol, above n 9, s 5.1; Working Party Report, above n 10, paras 83–84. 18 See Accession Protocol, above n 9, s 11.1; Working Party Report, above n 10, para 96. 19 See Accession Protocol, above n 9, s 7.1; Working Party Report, above n 10, para 126. 20 See, eg, Working Party Report, above n 10, para 116. 21 ibid, para 130; see also Accession Protocol, above n 9, s 8.1.

China’s Regulation of Imports  43 To implement its obligations, China undertook an overhaul of its foreign trade regime through the amendments of numerous laws and implementing ­regulations.22 The principal foreign trade legislations applicable to both imports and exports are the Foreign Trade Law 1994 (as amended),23 Administrative Regulations on Import and Export of Goods 200224 (Imports and Exports Regulation 2002), Customs Law 1987 (as amended),25 and Administrative Regulations on Import and Export Tariffs 200326 (Imports and Exports Tariff Regulation 2003). Some of these legislations were further revised after the amendments to comply with China’s WTO accession commitments. These legislations provide the basis for the application of import or export tariffs, quotas, TRQs, licensing, and trade remedies, the delegation of administrative authorities, trade promotion, and the grant of trading rights, amongst other areas of trade. The competent ministries or departments of the State Council, delegated to administer the relevant import or export matters, may publish more detailed rules, for example, on the administration of import quotas and licensing requirements.27 Tariff schedules including items, classifications and rates are determined by the State Council or its Customs Tariff Commission.28 At a practical level, China ‘cut tariffs on over 5,000 products’ and reduced the overall tariff level to 9.8 per cent.29 By 1 January 2005, all of the listed non-tariff measures including import quota, licence and tendering were eliminated.30 As will be further discussed in Section IV, China liberalised trading rights which 22 See Xiaozhun Yi, ‘A Decade in the WTO, A Decade of Shared Development’ in Ricardo ­Melendez-Ortiz, Christophe Bellmann and Shuaihua Cheng (eds), A Decade in the WTO: I­ mplications for China and Global Trade Governance (Geneva, ICTSD, 2011) 2; Xin Zhang, Implementation of the WTO Agreements in China (London, Wildy, Simmonds & Hill Publishing, 2005) 123–49. 23 《中华人民共和国对外贸易法》(1994) [Foreign Trade Law of the People’s Republic of China 1994], adopted by the seventh Session of the Standing Committee of the eighth National People’s Congress on 12 May 1994, effective on 1 July 1994; revised on 6 April 2004, and on 7 November 2016, effective on the same date [hereinafter ‘Foreign Trade Law’]. 24 《中华人民共和国货物进出口管理条例》(2001) [Administrative Regulations on Import and Export of Goods 2001], promulgated by Decree No 332 of the State Council on 10 December 2001, effective on 1 January 2002 [hereinafter ‘Imports and Exports Regulation’]. 25 《中华人民共和国海关法》(1987) [Customs Law of the People’s Republic of China 1987], adopted by the nineteenth Session of the Standing Committee of the sixth National People’s Congress on 22  January 1987, effective on 1 July 1987; revised on 8 July 2000, 29 June 2013, 28 December 2013, 7 November 2016, and 4 November 2017 [hereinafter ‘Customs Law’]. 26 《中华人民共和国进出口关税条例》(2003) [Administrative Regulations on Import and Export Tariffs 2003], Decree No 392 of the State Council, promulgated on 23 November 2003, effective on 1 January 2004; revised on 7 December 2013, and 1 March 2017 [hereinafter ‘Imports and Exports Tariff Regulation’]. 27 See, eg,《中华人民共和国货物进口许可证管理办法》(2004) [Measures on the Administration of Import Licences for Goods 2004], Order No 27 of the Ministry of Commerce, promulgated on 9 December 2004, effective on 1 January 2005. 28 See Imports and Exports Tariff Regulation, above n 26, arts 3, 4. 29 See Zhenyu Sun, ‘China’s Experience of 10 Years in the WTO’ in Ricardo Melendez-Ortiz, Christophe Bellmann and Shuaihua Cheng (eds), A Decade in the WTO: Implications for China and Global Trade Governance (Geneva, ICTSD, 2011) 11. 30 See WTO, Trade Policy Review Body, Trade Policy Review, Report by the People’s Republic of China (WT/TPR/G161, 17 March 2006) 13.

44  China’s Regulation of Imports and Implementation of WTO Rulings had long been controlled by SOEs. More generally, China took steps to enhance transparency of its trade regime, such as the creation of an official journal for trade law and regulations and WTO enquiry centres as well as the translation of trade-related laws and regulations; however, the outcomes have been uneven and in certain areas, unsatisfactory.31 Despite these efforts, China’s imports regime has remained a subject of WTO disputes. For example, after the scheduled phase-out of the non-tariff measures, the USTR’s China Compliance Report 2006 identified issues with China’s import licensing procedure, import quota system, administration of TRQs on industrial goods, amongst other import regulations.32 The two disputes to be discussed below involve some of these issues. China lost both disputes after a vigorous defence and consequently was required to implement the WTO rulings. III.  CHINA – AUTO PARTS

A. Background The auto industry has been treated as one of the essential drivers of China’s economic growth. In order to bolster the development of the industry, the Chinese Government introduced various measures at different stages of development including protectionist instruments such as high import tariffs and quotas.33 Despite these efforts, the industry remained underdeveloped and vulnerable to foreign competition prior to China’s WTO accession, resulting in strong resistance to the liberalisation of the sector.34 Upon the entry into the WTO, China committed to progressively remove the import quotas by 2005 and cut auto tariffs from as high as 100 per cent to 25 per cent and tariffs on auto parts ‘from an average of 23.4% to an average of 10%’ by  2006.35 However, due to its low level of development, China’s auto industry was unlikely to be ready for intense foreign competition once the quotas phased out and the tariffs 31 For a discussion of China’s transparency commitments and implementation, see Henry Gao, ‘The WTO Transparency Obligations and China’ (2018) 12(2) Journal of Comparative Law 329. For a discussion of the difficulties for China to implement its transparency obligations, see Sijie Chen, ‘China’s Compliance with WTO Transparency Requirement: Institution-Related Impediments’ (2012) 4(4) Amsterdam Law Forum 25. 32 USTR, 2006 Report to Congress on China’s WTO Compliance (11 December 2006) 25–35, available at https://ustr.gov/archive/assets/Document_Library/Reports_Publications/2006/asset_upload_ file688_10223.pdf. 33 See generally Eric Harwit, ‘The Impact of WTO Membership on the Automobile Industry in China’ (2001) 167 The China Quarterly 655. For a discussion of the other policy instruments that China adopted to promote its auto industry, see Wan-Wen Chu, ‘How the Chinese Government Promoted a Global Automobile Industry’ (2011) 20(5) Industrial and Corporate Change 1235. 34 Harwit, above n 33, 660–70. 35 See Ching Cheong and Ching Hung Yee, Handbook on China’s WTO Accession and Its Impacts (Singapore, World Scientific Publishing, 2003) 227–28.

China – Auto Parts  45 significantly lowered; hence, some other forms of protection were required.36 The China – Auto Parts dispute arose exactly in such a context as China had resorted to other forms of protection in attempt to mitigate the impacts that the WTO-driven market opening imposed on the domestic auto industry. From the complainants’ point of view, the dispute was economically and politically necessary as it represented an effort of the US, the EU, and Canada to address their respective bilateral trade deficit with China in general and the impacts of the measures on their auto exports to China in particular.37 B.  The Measures The dispute involved three measures that China introduced just before the phase-out of the auto quotas and the reduction of the auto and auto parts tariffs to the lowest committed levels. The measures included:38 1. Policy on Development of Automotive Industry (issued by the National Development and Reform Commission (NDRC) in 2004) (‘NDRC Policy 2004’); 2. Administrative Rules on Importation of Automobile Parts Characterized as Complete Vehicles (issued by the General Administration of Customs (GAC), the NDRC, the Ministry of Finance (MOF) and the Ministry of Commerce (MOFCOM) in 2005) (‘Administrative Rule 2005’); and 3. Rules on Verification of Imported Automobile Parts Characterized as Complete Vehicles (issued by the GAC in 2005) (‘GAC Rule 2005’). The NDRC Policy 2004, which replaced the previous auto industry policy published in 1994, set forth general guidelines for the promotion of China’s auto industry in the new economic environment particularly post China’s WTO accession. The Administrative Rule 2005 and the GAC Rule 2005 contained detailed rules and procedure that implemented the NDRC policy. The key aspects of the measures in dispute are set out below: • the measures required that imported auto parts be subject to a 25 per cent charge (ie an amount equivalent to the import tariff applicable to

36 See Raj Bhala and Won-Mog Choi, ‘China’s First Loss’ (2011) 45(2) Journal of World Trade 321, 325. 37 ibid, 321–22; John Shijian Mo, ‘A Critical Examination of Chinese Position in the Auto Part Dispute’ (2006) 13 James Cook University Law Review 167, 170; Rachel Tang, The Rise of China’s Auto Industry and Its Impact on the US Motor Vehicle Industry (Congressional Report Service, 16 November 2009) 25. 38 The description of the measures was mainly based on the WTO panel report and the Appellate Body Report on the dispute, see WTO Panel Report, China – Measures Affecting Imports of ­Automobile Parts (WT/DS339/R, WT/DS340/R, WT/DS342/R and Add 1 and Add 2, adopted 12 January 2009); Appellate Body Report (WT/DS339/AB/R, WT/DS340/AB/R, WT/DS342/AB/R, adopted 12 January 2009) [hereinafter China – Auto Parts].

46  China’s Regulation of Imports and Implementation of WTO Rulings complete  vehicles) if the parts were used in the production/assembly of complete v­ ehicles for domestic sales and were characterised as complete vehicles; • the key thresholds for determining whether imported auto parts should be characterised as complete vehicles included (1) a volume threshold which concerned the importation of major auto parts for the making of a vehicle with the parts constituting 60 per cent or more of the content of the vehicle, and (2) a value threshold which referred to the value of the imported parts in a complete vehicle accounting for ‘60% or more of the total price of that vehicle’; and • the assessment procedure involved a preliminary self-evaluation by auto manufacturers who produce complete vehicles using imported auto parts, and subsequently a review by the GAC if the self-evaluation concluded that the auto parts should not be characterised as complete vehicles. If the conclusion of self-evaluation was the opposite (ie that imported auto parts should be characterised as complete vehicles), the relevant vehicle models must be registered with the GAC before the importation of the auto parts. The charge was payable by auto manufacturers after complete vehicles were produced using imported auto parts. However, the charge did not apply to auto parts manufacturers or suppliers who were not also auto manufacturers. The measures provided an exemption for the so-called Complete Knock Down (CKD) and Semi Knock Down (SKD) kits39 if auto manufacturers who import the kits declared them as complete vehicles and paid the applicable customs duties (ie 25 per cent) at the time of importation. However, if the manufacturers did not do so, then the kits, like the other auto parts, would be subject to the 25 per cent charge and the administrative procedures described above. C.  WTO Rulings A threshold issue for the WTO tribunal was whether the charge in question is an ‘internal charge’ subject to Article III:2 of the GATT or an ‘ordinary customs duty’ subject to Article II:1 of the GATT. Both the panel and the Appellate Body ruled that the charge should be characterised as an ‘internal charge’ such that Article III:2 should apply.40 Having resolved the preliminary 39 The Chinese measures did not define CKD / SKD kits. However, the parties generally agreed that while CKD kits refer to ‘all, or nearly all, of the auto parts and components necessary to assemble a complete vehicle’, SKD kits ‘refer to partially assembled combinations of parts that can be used to manufacture a whole vehicle’. WTO Panel Report, China – Auto Parts, above n 38, paras 7.640–644. 40 The tribunal’s lengthy analysis of this issue addressed all of the controversial points raised by the disputants. The key indicator of how the charge should be characterised, as observed by the panel and upheld by the Appellate Body, seems to be whether the application of the charge is triggered by an internal factor separate from importation. See WTO Panel Report, China – Auto Parts, above n 38, paras 7.128–207; Appellate Body Report, China – Auto Parts, above n 38, paras 141–76.

China – Auto Parts  47 issue, it was not difficult for the panel to find a violation of the GATT national treatment (NT) rule codified in Article III:2, first sentence.41 The measures were discriminatory because they distinguished between domestic and imported auto parts on the basis of their origin and subjected the latter, but not the former, to the 25 per cent charge.42 In addition, the tribunal found that the administrative requirements mandated by the measures including the volume and value thresholds contravened GATT Article III:443 on the grounds that the requirements, which were applicable to imported auto parts only, created ‘a disincentive for auto manufacturers to use imported auto parts’ as opposed to domestic ones, and hence treated the former less favourably.44 Before the panel, China invoked GATT Article XX(d) as a defence, contending that the measures were necessary to secure compliance with a valid interpretation of its domestic tariff schedule for motor vehicles which allows the treatment of imported auto parts having the essential character of a motor vehicle as a complete vehicle.45 However, China failed to substantiate that the measures were designed to prevent circumvention of the higher customs duty applicable to complete vehicles (ie 25 per cent) as opposed to the lower one on auto parts (ie 10 per cent).46 The panel’s findings under Article XX(d) were not appealed. In relation to the CKD and SKD kits, China made a specific commitment under paragraph 93 of the Work Party Report which states that if China creates tariff lines for CKD and SKD kits, the applicable tariff rates must not exceed 10  per cent. The panel found that in its 2005 tariff schedule, China created separate tariff headings for CKD and SKD kits and therefore that the imposition of the 25 per cent charge was a breach of that commitment.47 This finding was rejected by the Appellate Body because it was premised on an assumption that the charge was an ‘ordinary customs duty’ while both the panel and the Appellate Body had found it to be an ‘internal charge’.48 Thus, the imposition For a discussion of the tribunal’s rulings on this issue, see Jasper Wauters and Hylke Vandenbussche, ‘China – Measures Affecting Imports of Automobile Parts’ (2010) 9(1) World Trade Review 201, 213–20; Bhala and Choi, above n 36, 334–40. 41 Article III:2, first sentence of the GATT provides: ‘The products of the territory of any contracting party imported into the territory of any other contracting party shall not be subject, directly or indirectly, to internal taxes or other internal charges of any kind in excess of those applied, directly or indirectly, to like domestic products.’ 42 See WTO Panel Report, China – Auto Parts, above n 38, paras 7.214–223; Appellate Body Report, China – Auto Parts, above n 38, paras 183–86. 43 Article III:4 of the GATT relevantly provides: ‘The products of the territory of any contracting party imported into the territory of any other contracting party shall be accorded treatment no less favourable than that accorded to like products of national origin in respect of all laws, regulations and requirements affecting their internal sale, offering for sale, purchase, transportation, distribution or use.’ 44 See WTO Panel Report, China – Auto Parts, above n 38, paras 7.234–272; Appellate Body Report, China – Auto Parts, above n 38, paras 187–95. 45 See WTO Panel Report, China – Auto Parts, above n 38, para 7.285. 46 ibid, paras 7.301–365. 47 ibid, paras 7.742–758. 48 See Appellate Body Report, China – Auto Parts, above n 38, para 245.

48  China’s Regulation of Imports and Implementation of WTO Rulings of the 25 per cent charge (being an internal charge) cannot violate China’s commitment on the tariff treatment of CKD and SKD kits. D.  China’s Implementation and an Assessment Having lost the dispute on all but one front, China agreed with the complaining parties to implement the WTO rulings in a reasonable period of time by 1 September 2009.49 In the DSB meeting on 31 August 2009, China notified that it had fully implemented the WTO rulings by promulgating new measures to ‘stop the implementation of the relevant provisions of’ the NDRC Policy 2004 and to repeal the Administrative Rule 2005.50 China, however, did not provide further details of these new measures in its notification to the DSB. China’s implementation measures included the following. 1. Policy on Development of Automotive Industry 200951 (‘NDRC Policy 2009’). The new policy revised the NDRC Policy 2004 by repealing six ­articles (including Articles 52, 53, 55–57, and part of Article 60) under Section 11 titled ‘Administration of Importation’. In essence, Articles 55–57 provided general guidelines for the determination of whether imported auto parts should be characterised as a complete vehicle. Articles 53 and 60, respectively, mandated auto manufacturers using imported auto parts for production of complete vehicles to report to the responsible authorities and pay the applicable customs duties, and the authorities to formulate detailed rules to implement the policy. By ceasing the operation of these provisions, the revised policy removed the regulatory basis for the introduction of the 25 per cent charge on imported auto parts and the accompanying administrative requirements. 2. Decision on Repealing the Administrative Rules on Importation of Automobile Parts Characterized as Complete Vehicles,52 which repealed the Administrative Rule 2005 in its entirety. 3. Announcement No 58 of the GAC in 2009,53 which repealed the GAC Rule 2005. 49 China – Measures Affecting Imports of Automobile Parts, Agreement under art 21.3(b) of the DSU (WT/DS342/15, 3 March 2009). 50 WTO, DSB Minutes of Meeting (WT/DSB/M/273, 6 November 2009) 21. 51 《汽车产业发展政策》(2009) [Policy on Development of Automotive Industry 2009], Decree No 10 of the Ministry of Industry and Information Technology (MIIT) and the National Development and Reform Commission (NDRC), issued on 15 August 2009, effective on 1 September 2009. 52 《关于废止构成整车特征的汽车零部件进口管理办法》 (2009) [Decision on Repealing the Administrative Rules on Importation of Automobile Parts Characterized as Complete Vehicles 2009], Decree No 185 of the General Administration of Customs (GAC), the NDRC, the Ministry of Finance (MOF), and the Ministry of Commerce (MOFCOM), promulgated on 28 August 2009, effective on 1 September 2009. 53 《海关总署公告2009年第58号》 (2009) [Announcement No 58 of the GAC 2009], issued on 31 August 2009, effective on 1 September 2009.

China – Auto Parts  49 Accordingly, China complied with the WTO rulings on time by abolishing all of the measures that were found to be in violation of WTO rules. The China Compliance Report 2009 published by the USTR also acknowledged China’s full implementation of the WTO rulings in the dispute.54 E.  Reasons for China’s Compliance There are many reasons to explain China’s timely and full compliance in the dispute. Firstly, as a recently acceded and the largest developing country member of the WTO, China’s reputation was at stake. China – Auto Parts was the first WTO dispute in which China went through the panel and the appellate stages as a respondent and was required to implement WTO rulings. The full implementation of the rulings was desirable for China to dispel ‘previous suspicions and doubts as to whether China would behave well when confronted with negative international adjudicatory outcomes.’55 Furthermore, given that the measures in question were in clear violation of one of the fundamental principles of the WTO (ie the NT rule), the risk of losing reputation and confidence of other WTO Members in China’s behaviour in the multilateral trading system would be very high if China resisted WTO compliance. Secondly, from an economic perspective, China’s auto industry had developed quickly during the period when the measures were in place such that the measures became no longer necessary by the time that China had to remove them. Specifically, the dual tariff structure on autos versus auto parts was aimed at incentivising the importation of car parts in support of the development of China’s manufacturing capacity in the upstream activity of car assembly.56 However, from the introduction of the measures in May 2004 to the removal of them in September 2009, China’s auto industry had over five years to restructure and grow under the protection of the discriminatory measures. By 2008, China’s auto industry became the second largest worldwide in terms of production volume and continued to expand in 2009 despite the global economic downturn.57 Given these achievements, the measures became dispensable especially when they were known to be in conflict with China’s international obligations. Thirdly, from a policy perspective, the measures had also become inappropriate for the further development and growth of China’s auto industry. At the time of the required WTO compliance, the overarching industrial policy

54 USTR, 2009 Report to Congress on China’s WTO Compliance (December 2009) 20, available at https://ustr.gov/sites/default/files/2009%20China%20Report%20to%20Congress.pdf. 55 Wenhua Ji and Cui Huang, ‘China’s Experience in Dealing with WTO Dispute Settlement: A Chinese Perspective’ (2011) 45(1) Journal of World Trade 1, 16. 56 See Wauters and Vandenbussche, above n 40, 226–27. 57 See Rachel Tang, above n 37, 2–3.

50  China’s Regulation of Imports and Implementation of WTO Rulings in China was shifting to the development of high-end manufacturing with advanced technology and know-how, modern industrial structure, enhanced efficiency and global competitiveness, amongst other goals.58 As far as the auto industry is concerned, the NDRC Policy 2009 reiterated the development goals as being to facilitate the restructuring of the industry to promote efficiency, enhance its international competitiveness, and satisfy the increasing demands of consumers for motor vehicles. These goals could not be achieved through the discriminatory and protectionist measures as protection would be detrimental to the efficiency and competitiveness of the industry as well as to the interests of consumers.59 In addition, while the measures served the interest of Chinese car makers, they were detrimental to China’s upstream car parts sector. The WTO rulings against these measures became a timely external force for the Chinese Government to counteract domestic resistance to further economic reforms of the auto industry.60 Lastly, from a legislative perspective, the measures concerned were not statutory laws the amendments or abolishment of which often takes considerable time due to the involvement of the National People’s Congress (NPC) or its Standing Committee and detailed substantive and procedural requirements.61 Rather, they were departmental rules which may be amended or repealed by decisions of the relevant departments or ministries of the State Council subject to the review of the State Council.62 This allowed China to implement the WTO rulings in a timely manner. F.  Challenges and Implications It should be noted that the WTO rulings in China – Auto Parts were limited in several aspects. The rulings did not prevent China from imposing different

58 《中华人民共和国国民经济和社会发展第十二个五年规划纲要》(2011) [The Twelfth FiveYear Plan for Economic and Social Development of the People’s Republic of China (2011–2015)], issued on 14 March 2011, available at www.gov.cn/2011lh/content_1825838.htm. 59 See Wauters and Vandenbussche, above n 40, 233 (observing that the measures in dispute mainly affected Chinese consumers). 60 Bhala and Choi, above n 36, 345–46. 61 《中华人民共和国立法法》(2000) [Legislation Act of the People’s Republic of China 2000], adopted at the Third Session of the Ninth National People’s Congress on March 15, 2000 and promulgated by Order No 31 of the President of the People’s Republic of China on 15 March, 2000; revised by the Decision of the National People’s Congress on Revising the Legislation Law of the People’s Republic of China, adopted at the Third Session of the Twelfth National People’s Congress on 15 March 2015 [hereinafter Legislation Act], ch 2. 62 ibid, arts 84–85. The relevant implementation regulation is《规章制定程序条例》(2001) [Regulations on Procedures for the Formulation of Rules 2001], promulgated by Decree No 322 of the State Council on 16 November 2001, effective on 1 January 2002; revised by《国务院关于修改的决定》(2017) [Decision on Revising the Regulations on Procedures for the Formulation of Rules 2017], Decree No 695 of the State Council, promulgated on 22 December 2017, effective on 1 May 2018.

China – Auto Parts  51 tariff  rates on autos and auto parts or from maintaining the rule of interpreting its tariff schedule in a way that characterises imported auto parts as a complete vehicle so as to avoid circumvention of the higher customs duty applicable to complete vehicles. Nor were the rulings intended to restrain China’s capacity to pursue the policy objective of combating tariff circumvention through other means or to promote the development of the auto industry in general. It was merely China’s use of the discriminatory charge and administrative requirements in pursuit of the chosen objective that was unacceptable to the WTO tribunal. Accordingly, the rulings merely touched upon a very specific element of China’s auto industrial policy and regulations. The effect of the WTO rulings has proven to be limited in discouraging China from employing other measures to protect its auto industry. For example, in December 2011, China imposed anti-dumping and countervailing duties on certain automobiles imported from the US. The US subsequently challenged these duties in the China – Autos (US) dispute which will be discussed in Chapter 7.63 In 2012, the US brought the China – Autos and Auto Parts dispute, which was discussed in Chapter 2, challenging China’s provision of various forms of export subsidies to its auto industry.64 More significantly, in line with its upgraded industrial policy, China has introduced other measures to advance the auto industry. One of the notable examples, as identified in USTR’s China Compliance Reports since 2014, has been the measures designed to help the industry build the production capacity for new energy vehicles (NEVs) or electric cars.65 In May 2015, China released the so-called ‘Made in China 2025’, an ambitious ten-year action plan to develop technological capability and indigenous innovation in ten strategic industries including NEVs.66 Since 2015, China has introduced a series of measures to support the development of expertise in manufacturing NEVs.67 These measures have generated serious concerns about their tradedistorting effects and WTO-legality as they are seen to inherently mandate technology transfer to Chinese manufacturers and provide various ­privileges

63 See China – Autos (US), DS440. 64 See China – Auto and Auto-Parts (US), DS450. 65 See USTR, 2014 Report to Congress on China’s WTO Compliance (December 2014) 93–95, available at https://ustr.gov/sites/default/files/2014-Report-to-Congress-Final.pdf; USTR, 2015 Report to Congress on China’s WTO Compliance (December 2015) 101, available at https://ustr. gov/sites/default/files/2015-Report-to-Congress-China-WTO-Compliance.pdf; USTR, 2016 Report to Congress on China’s WTO Compliance (December 2016) 106–08, available at https://ustr.gov/ sites/default/files/2016-China-Report-to-Congress.pdf; USTR, 2017 Report to Congress on China’s WTO Compliance (December 2017) 88–90, available at https://ustr.gov/sites/default/files/files/Press/ Reports/China%202017%20WTO%20Report.pdf. 66 《国务院关于印发的通知》(2015) [Notice on the Printing and Release of ‘Made in China 2025’ 2015], Decree No 28 of the State Council, issued on 8 May 2015, available at www.gov.cn/zhengce/content/2015-05/19/content_9784.htm. 67 ‘Classification: Laws & Regulations’ (China Automotive Review), available at www. chinaautoreview.com\\pub\\CARList.aspx?ID=6.

52  China’s Regulation of Imports and Implementation of WTO Rulings to the NEVs sector.68 In July 2018, China, for the first time, relaxed the 50 per cent foreign ownership restriction in Sino-foreign joint ventures in the NEVs sector.69 While this is a positive step towards further liberalisation of the Chinese market to foreign investment, it will undoubtedly confront a variety of existing and new regulatory barriers. In the same month, the NDRC released the Rules on the Management of Investment in Automotive Industry (Consultation Draft),70 imposing a host of entry requirements (eg  financial capability and technological capacity) in the NEVs sector as well as approval or verification requirements and procedures. Thus, the removal of the foreign ownership limitation, in itself, may not enhance the market access for foreign auto companies to the Chinese NEVs sector. Rather, coupled with the NDRC Rules, it seems to be calculated to bring more foreign partners with strong financial and technological capacity into the Chinese market to allow the Chinese counterparts to acquire advanced technology and manufacturing expertise and the entire NEVs industry to become globally competitive. Overall, China’s regulatory activities in the auto industry suggest that the Chinese Government would not be hesitant to introduce new measures in support of industrial policies and regulatory goals and that the WTO-­ consistency of these measures may not be a decisive factor on whether they should be introduced. In this sense, the impact of the DSM on domestic policymaking would be quite limited when WTO rulings merely address some very specific components or narrow aspects of a broad, complex, and rapidly developing regulatory regime. In such disputes, like China – Auto Parts, China’s implementation in an individual case would become increasingly less significant over time than the need for WTO Members to closely monitor China’s regulatory development. IV.  CHINA – PUBLICATIONS AND AUDIOVISUAL PRODUCTS

A. Background Prior to the commencement of the economic reforms and opening up, China had a long history of restricting trading rights – i.e. the right to import and export goods – to a handful of state-owned enterprises (SOEs).71 While the 68 ibid. 69 《外商投资准入特别管理措施（负面清单）（2018年版）》(2018) [Special Administrative Measures on Access to Foreign Investment (Negative List) 2018], Order No 18 of the NDRC, issued on 28 June 2018 [hereinafter Negative List 2018], available at www.ndrc.gov.cn/zcfb/zcfbl/201806/ t20180628_890730.html. 70 《关于就公开征求意见的公告》(2018) [Rules on the Management of Investment in Automotive Industry (Consultation Draft) 2018], released by the NDRC on 4 July 2018, available at www.ndrc.gov.cn/gzdt/201807/t20180704_891859.html. 71 Lardy, above n 1, 40.

China – Publications and Audiovisual Products  53 reforms led to significant liberalisation of trading rights,72 China maintained an ‘examination and approval’ system under which only entities which satisfied certain licensing criteria may become a foreign trade operator (FTO) and engage in import and export activities.73 This licensing system had the effect of restricting the number and type of FTOs and consequently the volume of imports. To join the WTO, China made commitments to liberalising trading rights. These commitments are set out mainly in Articles 5.1 and 5.2 of the Accession Protocol, and Paragraphs 83(d) and 84(a) & (b) of the Working Party Report. According to Article 5.1 of the Accession Protocol, China has a general obligation to progressively liberalise trading rights within three years after accession, that is, to ensure that after 11 December 2014, all enterprises in China are entitled to import and export all goods except for a short exemption list contemplated in Annex 2A.74 This general obligation is reconfirmed in Paragraphs  83(d) and  84(a) of the Working Party Report. Moreover, under Paragraphs 84(a) and 84(b) of the Working Party Report, China is obliged to eliminate ‘its system of examination and approval of trading rights’ and confine all requirements for obtaining trading rights to ‘customs and fiscal purposes only’ without constituting a barrier to trade. Paragraph 84(a) further clarifies that entities entitled to trading rights include ‘all enterprises in China and foreign enterprises and individuals, including sole proprietorships of other WTO Members’. In addition, China is required to grant trading rights ‘in a non-discriminatory and non-discretionary way’ under Paragraph 84(b) of the Working Party Report. Article  5.2 of the Accession Protocol sets out a general requirement of NT, preventing China from treating foreign enterprises and ­individuals ‘including those not invested or registered in China” less favourably than “enterprises in China with respect to the right to trade’. Shortly before the implementation deadline by 11 December 2004, China undertook a fundamental overhaul of its trading rights mechanism by replacing the licensing system with a registration system. Under the registration system, trading rights are granted automatically to any enterprise, institution or individual as long as these entities are registered with the MOFCOM or its local 72 ibid, 41–42 (noting that prior to China’s WTO accession, the Chinese Government had authorised 35,000 firms of all types to engage in foreign trade). 73 Xin Zhang, International Trade Regulation in China: Law and Policy (Oxford, Hart Publishing, 2006) 26–32. These licensing criteria mainly included threshold requirements for registered capital, export performance and prior experience, and limitations on the scope of imports and exports. 74 Goods listed in annex 2A of the Accession Protocol will continue to be subject to state trading. Specifically, only those SOEs set out in the Schedule of that Annex can engage in the importation of grain, vegetable oil, sugar, tobacco, crude oil, processed oil, chemical fertilizer, and cotton (annex  2A1), and the exportation of tea, rice, corn, soy bean, tungsten ore and certain tungsten products, coal, crude oil, processed oil, silk, cotton, cotton yarn, certain woven cotton products, antimony, and silver (annex 2A2).

54  China’s Regulation of Imports and Implementation of WTO Rulings branches or designated bodies.75 Applications for registration are no longer subject to the strict criteria applied under the licensing system but only need to provide basic information, such as copies of business licence and organisation code.76 Proof of asset and funding is also required in case of foreign-invested enterprises (FIEs) and sole proprietors. As a general principle, applications will be processed within five working days.77 The establishment of a registration system for the grant of trading rights marked China’s liberalisation of trading rights in accordance with its WTO commitments.78 Shi Guangsheng, China’s Minister of Commerce during the WTO accession negotiations, regarded the transformation (ie from a long-standing ‘examination and approval’ system to a registration system) as one of the most significant changes in China’s regulation of trading rights.79 The practical achievements of the change were also remarkable. Shi observed: From 1st July 2004 to 31st January 2005, 38,000 foreign trade dealers put up their file for registration all over the country. Currently, 170,000 domestically-funded enterprises have trading rights which, coupled with 230,000 foreign-invested enterprises, adds up 400,000 businesses enjoying trading rights.80

Thus, China seems to have implemented its commitments on trading rights timely and satisfactorily. This was acknowledged in USTR’s China Compliance Report 2007 with one notable exception which concerned the remaining restrictions on the right to import certain cultural products.81 These restrictions triggered the China – Publications and Audio-visual Products82 dispute. B.  The Measures The dispute concerned a number of Chinese administrative regulations and departmental rules which continued to restrict the right to import reading materials, audiovisual products, sound recordings, and films for theatrical release to certain SOEs, prohibiting other entities such as FIEs from engaging in the 75 Foreign Trade Law, see above n 23, arts 8–9; 《对外贸易经营者备案登记办法》(2004) [Measu­ res for the Filing and Registration of Foreign Trade Operators 2004], Order No 14 of the MOFCOM, promulgated on 25 June 2004, effective on 1 July 2004, arts 2–4. 76 Measures for the Filing and Registration of Foreign Trade Operators 2004, above n 75, art 5. 77 ibid, art 6. 78 Zhang, above n 73, 31. 79 Guangsheng Shi, ‘Introduction: Working Together for a Brighter Future Based on Mutual ­Benefit’ in Henry Gao and Donald Lewis (ed), China’s Participation in the WTO (London: Cameron, May 2005) 16. 80 ibid. 81 USTR, 2007 Report to Congress on China’s WTO Compliance (11 December 2007) 16–17, ­available at https://ustr.gov/sites/default/files/asset_upload_file625_13692.pdf. 82 WTO Panel Report, China – Measures Affecting Trading Rights and Distribution Services for Certain Publications and Audiovisual Entertainment Products (WT/DS363/R, adopted 19 January 2010); Appellate Body Report (WT/DS363/AB/R, adopted 19 January 2010) [hereinafter China – Publications and Audiovisual Products].

China – Publications and Audiovisual Products  55 importing activities. These restrictions had significant impacts on the growing US content industry which was keen to ‘engage the huge potential market in China’.83 The main Chinese measures included:84 1. Regulations Guiding the Orientation of Foreign Investment 200285 (issued by the State Council) (Foreign Investment Regulation 2002); 2. Catalogue of Industries for Guiding Foreign Investment 200786 (issued by the NDRC and the MOFCOM) (Catalogue 2007); 3. Several Opinions on the Introduction of Foreign Capital into the Cultural Sector 200587 (issued jointly by the Ministry of Culture (MOC), the State Administration of Radio, Film and Television (SARFT), the General Administration of Press and Publication (GAPP), the NDRC, and the MOFCOM) (Several Opinions 2005); 4. Regulations on the Administration of Publications 200188 (issued by the State Council) (Publications Regulation 2001); 5. Regulations on the Administration of Audiovisual Products 200189 (issued by the State Council) (Audiovisual Products Regulation 2001); 6. Rules on the Administration of the Importation of Audiovisual Products 200290 (issued jointly by the MOC and the GAC) (Audiovisual Products Importation Rule 2002); 7. Rules on the Administration of Sino-Foreign Contractual Joint Ventures for the Sub-Distribution of Audiovisual Products 200391 (issued jointly by the MOC and the MOFCOM) (Audiovisual (Sub-)Distribution Rule 2003); 8. Regulations on the Administration of Films 200192 (issued by the State Council) (Film Regulation 2001); and

83 Elanor A Mangin, ‘Market Access in China – Publications and Audiovisual Materials: A Moral Victory with a Silver Lining’ (2010) 25(1) Berkeley Technology Law Journal 279, 281–82. 84 The listed measures are only those affecting trading rights and hence trade in goods. As mentioned in Ch 1, this dispute also involved Chinese measures affecting trade in services. These measures will be discussed in Ch 5. 85 《指导外商投资方向规定》 (2002) [Regulations Guiding the Orientation of Foreign Investment 2002], Decree No 346, promulgated on 11 February 2002, effective on 1 April 2002. 86 《外商投资产业指导目录》 (2007) [Catalogue of Industries for Guiding Foreign Investment 2007], Order No 57, promulgated on 31 October 2007, effective on 1 December 2007. 87 《关于文化领域引进外资的若干意见》 (2005) [Several Opinions on the Introduction of Foreign Capital into the Cultural Sector 2005], Order No 19, promulgated and effective on 6 July 2005. 88 《出版管理条例》 (2001) [Regulations on the Administration of Publications 2001], Decree No 343, promulgated on 25 December 2001, effective on 1 February 2002. 89 《音像制品管理条例》 (2001) [Regulations on the Administration of Audiovisual Products 2001], Decree No 341, promulgated on 25 December 2001, effective on 1 February 2002. 90 《音像制品进口管理办法》 (2002) [Rules on the Administration of the Importation of Audiovisual Products 2002], Order No 23, promulgated on 17 April 2002, effective on 1 June 2002. 91 《中外合作音像制品分销企业管理办法》 (2003) [Rules on the Administration of SinoForeign Contractual Joint Ventures for the Sub-Distribution of Audiovisual Products 2003], Order No 28, promulgated on 8 December 2003, effective on 1 January 2004. 92 《电影管理条例》 (2001) [Regulations on the Administration of Films 2001], Decree No 342, promulgated on 25 December 2001, effective on 1 February 2002.

56  China’s Regulation of Imports and Implementation of WTO Rulings 9. Provisional Rules on Entry Criteria for Operating Film Enterprises 200493 (issued jointly by the SARFT and the MOFCOM) (Film Enterprise Rule 2004). The WTO-unlawful provisions of these measures and their revisions are discussed in sub-sections C and D below. C.  WTO Rulings All of these measures were found to be inconsistent with China’s trading rights commitments summarised above. The violations fall within the following ­categories. • Measures which had the effect of prohibiting FIEs from engaging in the importation of the goods in question into China, and hence were in violation of China’s commitments to liberalising trading rights by allowing all entities to import these goods. These measures included Articles X.2 and X.3 of the Catalogue 2007 (working together with the Foreign Investment Regulation 2002),94 Article 4 of the Several Opinions 2005,95 Articles 41 and 42 of the Publications Regulation 2001,96 Article 21 of the Audiovisual (Sub-)Distribution Rule 2004,97 Article 30 of the Film Regulation 2001 and Article 16 of the Film Enterprise Rule 2004.98 • Measures which imposed conditions for the approval of import entities while the conditions were not maintained for fiscal or customs purposes and may effectively deprive entities of trading rights. These measures included Articles 41 and 42 of the Publications Regulation 2001.99 • Measures which maintained a designation system for the approval of import entities while the designation was not subject to any objective criteria but instead was at the discretion of the relevant administrative organs. These measures, which caused China to fail to grant trading rights to FIEs in a non-discretionary way, included Article 41 of the Publications Regulation 2001,100 Articles 5 and 27 of the Audiovisual Products Regulation 2001,101 Articles 7 and 8 of the Audiovisual Products Importation Rule 2002,102 and 93 《电影企业经营资格准入暂行规定》 (2004) [Provisional Rules on Entry Criteria for Operating Film Enterprises 2004], Order No 43, promulgated on 10 October 2004, effective on 10 November 2004. 94 WTO Panel Report, China – Publications and Audiovisual Products, above n 82, paras 7.348–352. 95 ibid, paras 7.372–374. 96 ibid, paras 7.397–401. 97 ibid, paras 7.703–704. 98 ibid, paras 7.575–576, 7.597–599. 99 ibid, paras 7.410–411. 100 ibid, paras 7.436–438. 101 ibid, paras 7.631–633, 7.655–657. 102 ibid, paras 7.679–690.

China – Publications and Audiovisual Products  57 Article 30 of the Film Regulation 2001 and Article 16 of the Film Enterprise Rule 2004.103 Instead of contesting the panel’s findings of the violations above, China defended its measures under Article XX(a) of the GATT as serving the objective of maintaining an effective and efficient content review mechanism, which ensures that imports do not contain content that could have negative impacts on public morals.104 The defence did not prevail as China failed to establish that the measures were ‘necessary’ for the pursuit of the objective. According to the panel and the Appellate Body, some of the measures did not materially contribute to the protection of public morals; and further, there was a less-trade-restrictive alternative means that China could employ to attain the objective.105 In particular, the tribunal found that the objective could well be achieved if the Chinese Government takes the responsibility of conducting content reviews of goods imported by non-state entities including FIEs.106 D.  China’s Implementation and an Assessment China agreed to implement the WTO rulings by 19 March 2011.107 Upon the expiry of the implementation deadline, China did not manage to complete 103 ibid, paras 7.569–571, 7.594. 104 ibid, para 7.713. There was a threshold issue of whether Article XX(a) is applicable to violations of China’s Accession Protocol. While the panel assumed its applicability (para 7.754), the Appellate Body found that the contested measures had ‘a clearly discernable, objective link to China’s regulation of trade in the relevant products’, and therefore, that ‘China may rely upon the introductory clause of paragraph 5.1 of its Accession Protocol and seek to justify these provisions’ under ­Article XX(a). Appellate Body Report, China – Publications and Audiovisual Products, above n 82, para 233. For further discussions of the issue, see Paola Conconi and Joost Pauwelyn, ‘­Trading Cultures: Appellate Body Report on China-Audiovisuals’ (2011) 10(1) World Trade Review 95; Frieder Roessler, ‘Comment: Appellate Body Ruling in China-Publications and Audiovisual Products’ (2011) 10(1) World Trade Review 119. 105 WTO Panel Report, China – Publications and Audiovisual Products, above n 82, paras 7.824–911; Appellate Body Report, above n 82, paras 269–337. 106 WTO Panel Report, China – Publications and Audiovisual Products, above n 82, paras 7.889–900; Appellate Body Report, above n 82, paras 322, 327–331. The panel found that the alternative means could make an equivalent contribution to the accomplishment of the objective and tended to be less-trade-restrictive than the measures at issue. It also found the means to be ‘reasonably available’ on the grounds that the Chinese Government had been responsible to finance the content review activities, and in any event, could ‘lessen any burden by charging appropriate fees’ from any import entities requesting content reviews. On appeal, the Appellate Body rejected China’s argument that the application of this alternative means would result in undue administrative, financial and technical burdens including ‘tremendous restructuring’ and the creation of ‘a new, multilevel structure for content review within the Government’, training and assignment of a large number of qualified content reviewers to numerous locations, as well as ‘a completely upgraded electronic communications system to perform efficiently such an electronic review’. It observed that China failed to substantiate that the changes that it may be required to make in applying the alternative means would result in undue burdens. 107 China – Measures Affecting Trading Rights and Distribution Services for certain Publications and Audiovisual Entertainment Products, Agreement under Art 21.3(b) of the DSU (WT/DS363/16 (13 July 2010).

58  China’s Regulation of Imports and Implementation of WTO Rulings the implementation process due to the complexity and sensitivity involved but ­reiterated its intention to achieve full WTO-compliance.108 On 12 March 2012, China reported that it ‘has ensured full implementation of the DSB’s recom­ mendations and rulings, except those concerning film for theatrical release.’109 With respect to films, China and the US reached a Memorandum of Understanding (MOU) to temporarily resolve the disputes at issue.110 China’s implementation measures included the following: 1. Catalogue of Industries for Guiding Foreign Investment 2011111 (Catalogue 2011); 2. Regulations on the Administration of Publications 2011112 (Publications Regulation 2011); 3. Regulations on the Administration of Audiovisual Products 2011113 (Audio­ visual Products Regulation 2011); 4. Rules on the Administration of the Importation of Audiovisual Products 2011114 (Audiovisual Products Importation Rule 2011); and 5. Rules on the Administration of the Publications Market 2011115 (Publications Market Rule 2011). i.  Catalogue 2011 The Catalogue 2011 made the following amendments to the Catalogue 2007: Catalogue of Prohibited Foreign Investment Industries: Article X.2: “publication, master distribution and importation of books, newspapers and periodicals”; Article X.3: “publication, manufacturing and importation of audiovisual products and electronic publications”.

108 China – Measures Affecting Trading Rights and Distribution Services for certain Publications and Audiovisual Entertainment Products, Status Report by China – Addendum (WT/DS363/17/ Add.2, 15 March 2011). 109 China – Measures Affecting Trading Rights and Distribution Services for certain Publications and Audiovisual Entertainment Products, Status Report by China – Addendum (WT/DS363/17/ Add.14, 13 March 2012). 110 China – Measures Affecting Trading Rights and Distribution Services for certain Publications and Audiovisual Entertainment Products, Joint Communication from China and the United States (WT/DS363/19, 11 May 2012). 111 《外商投资产业指导目录》 (2011) [Catalogue of Industries for Guiding Foreign Investment 2011], Order No 12 of the NDRC and the MOFCOM, promulgated on 24 December 2011, effective on 30 January 2012. 112 《出版管理条例》 (2011) [Regulations on the Administration of Publications 2011], Decree No 594 of the State Council, promulgated and effective on 19 March 2011. 113 《音像制品管理条例》 (2011) [Regulations on the Administration of Audiovisual Products 2011], Decree No 595 of the State Council, promulgated and effective on 19 March 2011. 114 《进口音像制品管理办法》 (2011) [Rules on the Administration of the Importation of Audiovisual Products 2011], Order No 53 of the GAPP and the GAC, promulgated and effective on 6 April 2011. 115 《出版物市场管理规定》 (2011) [Rules on the Administration of the Publications Market 2011], Order No 52 of the GAPP and the MOFCOM, promulgated and effective on 25 March 2011.

China – Publications and Audiovisual Products  59 To understand whether WTO-consistency has been achieved, it is necessary to briefly review the legal status and effect of the Catalogue. The Foreign Investment Regulation 2002 mandates competent departments of the State Council to formulate a detailed catalogue to guide foreign investment, which is to be used as one of the core mechanisms for examining and approving foreign-invested projects and the establishment of FIEs. The regulation classifies foreign-invested projects into four categories – ‘encouraged’, ‘restricted’, ‘prohibited’ and ‘permitted’, and requires the catalogue to provide a list of projects falling within the first three categories, with those not listed deemed to be ‘permitted’. Pursuant to the regulation, a catalogue was issued in 2002 and subsequently revised periodically. Under the Catalogue 2007, the importation of publication and audiovisual products fell under the ‘prohibited’ category, meaning that FIEs were not allowed to engage in the importation of these goods. As shown above, this prohibition was found to breach China’s commitments on trading rights. The Catalogue 2011 removed the business of importing the subject goods from the ‘prohibited’ category, and hence no longer deprives FIEs of the relevant trading rights. With these changes made to the catalogue, it is unnecessary for China to make any amendments to the Foreign Investment Regulation 2002. While the Catalogue was further revised subsequently in 2015,116 2017,117 and 2018,118 no prohibition or restriction of the right to import by FIEs was reinstituted. ii. Publications The Publications Regulation 2011 made four amendments to Articles 41 and 42 of the Publications Regulation 2001. These included: (1) replacing the designation system with an approval system (ie Article 41), (2) deleting the condition that trading rights can be granted to wholly SOEs only (ie Article  42(2)), (3) ­amending the condition relating to suitable organisation and qualified per­­ sonnel (ie Article 42(4)), and (4) removing the state plan requirement (ie ­Article 42, last paragraph). These changes are set out below: Article 41 The business of importing publications shall be conducted by Publication Importing Entities approved in accordance with the Regulation. Entities wishing to engage in the importation of newspapers and periodicals shall be designated by the publication administration department of the State Council. [Without having

116 《外商投资产业指导目录》 (2015) [Catalogue of Industries for Guiding Foreign Investment 2015], Order No 12 of the NDRC and the MOFCOM, promulgated on 10 March 2015, effective on 10 April 2015. 117 《外商投资产业指导目录》 (2017) [Catalogue of Industries for Guiding Foreign Investment 2017], Order No 4 of the NDRC and the MOFCOM, promulgated on 28 June 2017, effective on 28 July 2017. 118 See above n 69, Negative List 2018.

60  China’s Regulation of Imports and Implementation of WTO Rulings been so approved, no entities or individuals shall engage in the business of importing publications.] Article 42 Applicants for approval of the establishment of Publication Importing Entities shall: (1) have a name and articles of association; (2) be a wholly state-owned enterprise and possess a sponsoring unit and its competent agency at the higher level which are recognized by the publication administration department of the State Council; (3) have a well-defined scope of business; (4) have an organizational structure which meets the needs of its scope of publications importation business and professionals who have the necessary job qualifications stipulated by the State; [be competent to perform the preliminary content review of import publications]; (5) have the fund which meets the needs of its scope of publications importation business; (6) have a fixed business site; (7) satisfy other conditions prescribed by laws and administrative regulations and by the State. In addition to the aforesaid criteria, the approval of the establishment of a Publication Importing Entity shall also conform to the State plan for the total number, structure and distribution of Publication Importing Entities.

The revised regulation has formally remedied the violations found by the panel. Essentially, the designation system allowed the GAPP (as the publication administration department) to grant trading rights by discretion. In practice, the GAPP granted such rights to wholly SOEs only. The revised measure confined that discretion by requiring the GAPP to apply the criteria contemplated for approval. The criterion restricting trading rights to wholly SOEs was also removed. Furthermore, as the criterion under Article 42(4) and the state plan were not considered to be ‘maintained for fiscal or customs purposes’, the former was amended to ensure the quality of preliminary content review while the latter was removed. Overall, it appears that all entities and individuals may now apply for the establishment of a publication import entity in accordance with the amended conditions. The GAPP will need to review applications based on these conditions. iii.  Audiovisual Products With respect to audiovisual products, the implementation measures made the following amendments: Audiovisual Products Regulation 2011 Article 5 The State shall apply a licensing system for the publication, production, duplication, import, wholesale, retail and rental of audiovisual products; no entities and

China – Publications and Audiovisual Products  61 i­ndividuals, without the necessary license, shall engage in the publication, production, duplication, import, wholesale, retail and rental of audiovisual products. Article 27 The importation of finished audiovisual products shall only be conducted by a Finished Audiovisual Products Importing Entity designated[approved] by the culture [publication] administration department of the State Council. Without having been so designated[approved], no entity or individual shall engage in the business of importing finished audiovisual products. Audiovisual Products Importation Rule 2011 Article 7 The State shall apply a licensing system for the importation of audiovisual products.[the establishment of Finished Audiovisual Products Importing Entity]. Article 8 Only Finished Audiovisual Products Importing Entities designated[approved] by the MOC[GAPP] shall engage in the importation of finished audiovisual products; without having been so designated[approved], no entity or individual shall engage in the business of importing finished audiovisual products. [Article 9 Applicants for approval of the establishment of a Finished Audiovisual Products Importing Entity shall: 1) 2) 3) 4) 5) 6) 7)

have a name and articles of association; possess a sponsoring unit and its competent agency at the higher level which are recognized by the GAPP; have a well-defined scope of business; be competent to perform the preliminary content review of import audiovisual products; have the fund which meets the needs of its scope of audiovisual products importation business; have a fixed business site; satisfy other conditions prescribed by laws and administrative regulations and by the State.]

[Article 10 The application for the establishment of a Finished Audiovisual Products Importing Entity shall be lodged to the GAPP. An ‘Audiovisual Products Publication Permit’ shall be issued to the applicant, who shall then obtain a business licence from the Industry and Commerce Bureau, and fulfill other formalities set forth in laws and regulations governing foreign trade.]

Like the implementation measures for publications, the revised measures replaced the designation requirement with an approval requirement and set out specific criteria and procedure for the granting of the right to import finished audiovisual products. The GAPP must follow these criteria and procedure in approving the establishment of a finished audiovisual products import entity. To ensure consistency, these criteria are identical to those which the GAPP needs to consider in granting the right to import publications.

62  China’s Regulation of Imports and Implementation of WTO Rulings However, it appears that the inconsistency relating to the import right of audiovisual products used for publication, ie Article 5 of the Audiovisual ­Products Regulation 2001, has not been corrected. Before the panel, China claimed that Article 5 applies to the importation of audiovisual products intended for publication (eg tangible master copies) as opposed to finished audiovisual products.119 On that basis, the panel found a violation (similar to those under Article 27) due to the lack of automatic licensing, process for applying and obtaining licence, and criteria guiding the granting of licence.120 Under the amended Article 5, the right to import audiovisual products used for publications remains subject to licensing. However, the criteria and procedure added for the approval of the right to import finished audiovisual goods appear to be inapplicable to determinations of whether a licence should be granted for the importation of audiovisual products used for publications. Therefore, the authorities may continue to exercise discretion in deciding who shall be granted the right to import such goods. In addition, Article 45 of the Publications Market Rule 2011 repealed the Audiovisual (Sub-)Distribution Rule 2004 which prohibited Sino-foreign contractual enterprises from conducting the business of importing audiovisual products into China (ie Article 21) and hence was found to be inconsistent with China’s commitments on trading rights.121 With the removal of this prohibition, Sino-foreign contractual joint ventures are not a priori excluded from the right to import audiovisual products. iv.  Several Opinions 2005 China did not make any amendments to Article 4 of the Several ­Opinions 2005 which stipulates that ‘foreign investors’ setting up and operating … films import  … companies’ and ‘foreign investors’ investing in the business of importing books, newspapers and periodicals, and … audiovisual products and electronic publications’ shall be prohibited. The panel held that this measure had the effect of directing ‘relevant agencies to ensure, through promulgation of appropriate rules, that no FIEs in China can lawfully import the 119 China argued that its trading rights commitments do not apply to Art 5 which regulates services not goods, ie, ‘the service of licensing – the licensing of copyrights for the publication of copies of audiovisual content’. This argument was rejected by the panel. Sided with the US, the panel found that ‘audiovisual products intended for publication that are the subject of the US claim – tangible master copies – are goods for the purposes of China's trading rights commitments.’ On appeal, the Appellate Body upheld the panel’s finding that China’s trading rights commitments were applicable to Art 5 of the Audiovisual Products Regulation 2001. WTO Panel Report, China – Publications and Audiovisual Products, above n 82, paras 7.646–652; Appellate Body Report, above n 82, paras 203–4. 120 WTO Panel Report, China – Publications and Audiovisual Products, above n 82, paras 7.655–657. 121 ibid, paras 7.703–704.

China – Publications and Audiovisual Products  63 covered goods.’122 China’s inaction was probably because it believed that given the amendments made to the other measures, it was unnecessary to amend this measure. According to China, Several Opinions 2005 is not a ‘­measure’ but ‘merely an internal guideline for the formulation and improvement of implementation procedures by the authorities competent in the cultural sectors concerned’.123 Under Chinese law, it should, however, be considered as a departmental rule jointly promulgated by several responsible departments of the State Council and hence, as the panel correctly found, having a general application.124 As such, it is subordinate to administrative regulations issued by the State Council and to more recent departmental rules which should prevail to the extent of any inconsistencies.125 Therefore, China may have taken the position that as the revised measures (being administrative regulations or later departmental rules) have removed restrictions on who may apply for the right to import the subject goods except for films, Article 4 of the Several Opinions 2005 is no longer applicable both as a matter of law and practice. On this score, Webster has argued that China has failed to implement the WTO rulings as in practice local governments and agencies continue to follow the measure.126 This argument has missed the fact that it is the GAPP, not the local governments or agencies, that is responsible for the approval of applications for the establishment of import entities for the importation of the goods. This is clearly specified in Article 43 of the Publications Regulation 2011127 (in relation to publications), Article 27 of the Audiovisual Products Regulation 2011 and Article 10 of the Audiovisual Products Importation Rule 2011 (in relation to audiovisual goods). Following the promulgation of the revised measures, the GAPP has updated its official website applying the approval criteria and procedure contemplated in these measures.128 The website also makes available the prescribed application form, provides clarifications on some of the required documentation and confirms that there is no restriction on the number of applicants. This suggests that in practice all entities should be entitled to apply to the GAPP for approval

122 ibid, paras 7.372–374. 123 ibid, paras 7.181–182, 7.189, 7.198. China made this argument at the panel stage. However, the panel rejected the argument, ruling that the Several Opinions 2005 did constitute a ‘measure’ within the meaning of Art 3.3 of the DSU because it ‘is an act taken by the organs of the state … [and therefore] is attributable to China’, and it ‘sets forth rules or norms intended to have general and prospective application’. 124 Legislation Act, above n 61, arts 80–81. 125 ibid, arts 88, 92. 126 See Timothy Webster, ‘Paper Compliance: How China Implements WTO Decisions’ (2014) 35(3) Michigan Journal of International Law 525, 567. 127 Article 43 provides that anyone who wishes to establish a publications importation unit shall apply to the publication administration department of the State Council (ie, GAPP) and obtain a licence. 128 This website is in Chinese, available at www.gapp.gov.cn/govservice/1978/195983.shtml (an English version of the website does not seem to be available).

64  China’s Regulation of Imports and Implementation of WTO Rulings in accordance with the revised criteria and procedure, and hence that Article 4 of the Several Opinions 2005 has effectively ceased operation to the extent that it prohibits FIEs from trading rights. The reason why the Several Opinions 2005 is still being applied at the local level is that it provides general guidance for the introduction of foreign capital into the cultural sector and hence contains many other important rules which local governments and agencies are required to follow. Certainly, even if China were to make any changes to the Several ­Opinions 2005, it did not need to repeal it in its entirety but merely needed to delete the wording ‘business of importation’ in Article 4, thereby leaving the other provisions in effect. In short, the fact that local governments have continued to apply the Several Opinions 2005 does not mean that the single provision on trading rights has been applied in practice. This is especially so if one considers the fact that local governments are fully aware of the conflict between the provision and the other revised measures as well as the explicit guidance that the GAPP sets out on its official website. v. Films The two WTO-unlawful measures applicable to films, ie Film Regulation 2001 and Film Enterprise Rule 2004, were left untouched. Article 5 of the Regulation and Article 3 of the Rule prohibit entities without a licence to import films. Under Article 30 of the Regulation and Article 16 of the Rule, only film import entities designated by the SARFT may engage in the business of importing films. The panel found that the designation process allowed the SARFT to grant the right to import films by discretion, in violation of China’s commitments to grant trading rights in a non-discretionary fashion.129 Moreover, the panel found that the designation requirement had the effect of depriving FIEs, foreign enterprises not registered in China and foreign individuals of trading rights; and in practice, only one Chinese SOE was designated.130 As noted above, instead of amending these measures, China concluded an MOU with the US in exchange for a temporary settlement of the disputes over films, that is, the US was not to challenge China’s implementation of the WTO rulings regarding films until 2017. In the deal, China agreed to relax film quotas for ‘enhanced format films’ (such as 3D and IMAX films) and to provide an increased share of revenue for US film producers and more liberalised distribution rights for local enterprises.131 The deal guaranteed enhanced market access and revenue-sharing for US film-makers in the world’s second largest film market.132 However, the restrictions on trading rights remain in place. 129 WTO Panel Report, China – Publications and Audiovisual Products, above n 82, paras 7.569–7.571, 7.594. 130 ibid, paras 7.575–7.576, 7.597–7.599. 131 See above n 110, Joint Communication from China and the United States. 132 See Genevieve Koski, ‘What U.S. films did China import this year, and way?’ (DISSOLVE, 22 October 2014), available at https://thedissolve.com/news/3701-hollywood-in-china/.

China – Publications and Audiovisual Products  65 Since 2017, the two countries have been negotiating a new MOU granting more market access to US films.133 Interrupted by the escalated US-China trade war in 2018, no deal has been notified to the WTO or otherwise reported at the time of writing.134 However, the ongoing negotiations suggest that a further extension of non-compliance is likely. Compared with implementation, a bilateral deal would be desirable for both countries: while China does not have to grant the trading rights to non-state entities, the US could acquire better and exclusive market access which the liberalisation of trading rights may not provide. Accordingly, the US may not genuinely push for China’s implementation but rather use it as a bargaining chip to further open the Chinese market for its filmmakers. A consequence of China’s non-compliance would be that the trading rights on films will continue to be confined to very few SOEs designated at the discretion of the SARFT and no other entities will be entitled to engage in film importation within the territory of China. E.  Reasons for China’s (Partial) Compliance The China – Publications and Audio-visual Products dispute challenged one of the most sensitive sectors of China – the culture industry. It is sensitive not only because the sector has been treated as an essential segment of China’s economic reforms and development,135 but more importantly it contains and conveys fundamental social values and political interests.136 While fully supported and successfully pushed China’s bid for the WTO membership, the then President of China Jiang, Zemin also stressed in a speech to the Chinese Communist Party before China’s accession to the WTO that: a few countries that have tried to force their own values, economic regime and social system on other countries by taking advantage of economic globalization … we must take it as a crucial task in our cultural development to carry forward and cultivate the national spirit and incorporate it into our national education and the entire process of building spiritual civilization …137

133 See USTR, 2017 Report to Congress on China’s WTO Compliance, above n 65, at 34. 134 See Matthew Dresden, ‘China Film: Quota? What Quota?’ (China Law Blog, 19 June 2018), available at www.chinalaw.com/2018/06/china-film-quota-what-quota.html. 135 See generally Xiaolu Chen, China’s Cultural Industries in the Face of Trade Liberalization: An Analytical Framework of China’s Cultural Policy (Master thesis, The Ohio State University, 2009), available at https://etd.ohiolink.edu/!etd.send_file?accession=osu1253553429&disposition=inline. 136 See, eg, Jingxia Shi and Weidong Chen, ‘The “Specificity” of Cultural Products versus the “Generality” of Trade Obligations: Reflecting on “China – Publications and Audiovisual Products”’ (2011) 45(1) Journal of World Trade 159, 161 (observing that cultural goods ‘serve as essential instruments in disseminating government policy and shaping public opinion’); Mangin, above n 83, 302–3 (observing that China’s restrictions on trading rights served to ‘combat perceived cultural colonialism’ and ‘regulate the cultural content its population consumes’). 137 See Chen, above n 135, 58–9 (citing Jiang Zemin’s speech at Grand Gathering Marking the Eightieth Anniversary of the Chinese Communist Party, People’s Daily, 2 July 2001.).

66  China’s Regulation of Imports and Implementation of WTO Rulings Accordingly, the Chinese Government treated the restriction on the right to import cultural goods as an important way to (1) ‘combat perceived cultural colonialism’ by western countries, and (2) ‘regulate the cultural content its population consumes’.138 Therefore, despite the likely breach of WTO obligations, China deliberately chose not to liberalise the right to import these special goods.139 The above provides an important context for understanding China’s implementation of the WTO rulings in the dispute. Specifically, the sensitivity of the cultural sector and the importance of ensuring appropriate content review of imported cultural goods constitutes the most important reason for China’s delayed implementation. This was further complicated by the need to amend administrative regulations of the State Council and the involvement of multiple departments or ministries of the State Council in revising jointly-published departmental rules. It took time for the decision-makers to coordinate and devise a way of implementation that would mitigate the impact on China’s political censorship and ideological control. In addition, the delayed implementation may also have to do with the government providing extra time for the Chinese culture industry to adjust to increasing foreign competition. However, to strengthen the confidence of WTO Members in China as a credible player in the system, China took efforts to comply by amending or abolishing most of the contested measures. As shown above, the amended measures implemented the WTO rulings at least on a textual basis. Why, then, did China refuse to implement the rulings on the right to import films? This primarily had to do with the special interests involved. Unlike the publication industry which underwent significant market-based reforms, the film industry remained under the control of two economically and politically influential SOEs.140 The liberalisation of the trading rights would considerably undermine not only their monopoly position and the associated economic interests but also their policy function in developing and promoting the national film industry.141 Apparently, their resistance to the WTO-mandated liberalisation was successfully channelled into China’s decision-making process. Through the MOU with the US, China adroitly utilised the flexibility of the DSM to manage the level of import competition for the monopolistic SOEs and more importantly, to buy an extended period of time to resolve the political difficulties in its internal system so that further reform is possible.

138 Mangin, above n 83, 302–3. 139 See Ross Buckley and Weihuan Zhou, ‘Navigating Adroitly: China’s Interaction with the Global Trade, Investment, and Financial Regimes’ (2013) 9(1) University of Pennsylvania East Asia Law Review 1, 14. 140 Xiaowen Zhang and Xiaoling Li, ‘The Politics of Compliance with Adverse WTO Dispute Settlement Rulings in China’ (2014) 23(85) Journal of Contemporary China 143, 159. 141 ibid, 156.

China – Publications and Audiovisual Products  67 F.  Challenges and Implications China’s compliance in China – Publications and Audio-visual Products is a testament to the effectiveness of the DSM in inducing implementation, especially given the sensitivity of and the systemic reform required in the Chinese industry. However, the WTO rulings have left flexibilities for China to maintain an ‘approval’ system in relation to the right to import the cultural goods. The tribunal did so apparently to pay deference to China’s right to undertake content reviews. It is certain that China will continue to strictly enforce the censorship of cultural imports. This creates several issues in assessing the practical impact of China’s implementation. Firstly, under the ‘approval’ system, the grant of trading rights is unlikely to be automatic but may continue to be subject to discretion. Since the Chinese authorities have long granted the trading rights to wholly SOEs only, they may well be inclined to continuing that practice by utilising the flexibilities embedded in the approval criteria. For instance, the condition that an applicant shall have an articles of association may not fit in the situation of individuals and sole proprietorships. The conditions that an applicant shall have the capacity to undertake a preliminary content review and sufficient funds to conduct the ­business of importation (including the content review of imports) may be applied to exclude private entities and FIEs from becoming an importing entity. Politically speaking, the risk of granting a FIE or private entity or individual the right to import the cultural goods may be too high for the approval authorities and their responsible officers if content reviews are not conducted properly such that goods which should have not been imported enter into the Chinese market. To the extent that the ‘approval’ system remains non-automatic, it may remain in breach of China’s commitments on trading rights, at least in practical ­applications. Secondly, the ‘approval’ system may give rise to issues of transparency.142 For example, while the GAPP published the approval criteria and procedure in accordance with the revised measures on its official website, there is no publicly available information about the approved entities and the reasons why an application is approved or rejected. This makes it virtually impossible to monitor whether all entities have been allowed to file applications and whether applications have been assessed objectively based on the statutory criteria rather than by discretion. Accordingly, the lack of transparency in the approval process is perhaps the most glaring issue post China’s implementation. Short of such information, it is hard to conclude whether China has implemented the WTO rulings in practice.

142 See Julia Ya Qin, ‘Pushing the Limits of Global Governance: Trading Rights, Censorship and WTO Jurisprudence – A Commentary on the China – Publications Case’ (2011) 10(1) Chinese J­ournal of International Law 271, 284–86.

68  China’s Regulation of Imports and Implementation of WTO Rulings Thirdly, as China continues to enforce political censorship, it is uncertain whether the liberalisation of trading rights would bring enhanced market access for foreign cultural goods. While the WTO rulings may lead to an increase in the number of entities importing cultural goods, the goods to be imported must have the same quality so as to satisfy content reviews of the Chinese Government.143 Accordingly, the rigour of China’s censorship in the cultural sector may continue to effectively limit the volume of cultural imports.144 In light of the above, China’s implementation of the WTO rulings in the dispute may not lead to full liberalisation of the right to import cultural goods. Indeed, the revised measures have formally lifted the restrictions on trading rights and installed specific criteria and procedure for the approval of the right to import the subject goods (except for films). This is a significant step toward the dismantling of the monopolisation of trading rights by SOEs in the long run. However, the likelihood of discretion, arbitrariness and lack of transparency in decision-making remains high, which not only constitutes a barrier to the importation of the goods but has also increased the difficulties in assessing China’s implementation of the revised measures in practice. Thus, like in the China – Auto Parts dispute, WTO Members would need to continue to monitor China’s implementation of the revised measures. However, to do so, WTO Members will need to push China to fully observe its obligations on transparency and due process pursuant to general WTO rules and China’s accession commitments. In the meantime, they would also need to consult the trading entities and other stakeholders involved in the application process to obtain relevant information. V. CONCLUSION

In China – Auto Parts and China – Publications and Audio-visual Products, the two disputes where China was required to make changes to its import regulatory regime in conformity with WTO rulings, China’s implementation was largely satisfactory. Reputational costs of non-compliance seem to be a core factor in China’s choice of compliance, which may be further supported or compromised by a mix of other factors including industrial policies, economic impacts, noneconomic values, political constituents, and legislative procedures. In other words, these other factors may either facilitate compliance or result in delayed implementation or non-compliance. Notably, like in democracies, difficult or bad cases may arise when compliance is confronted by strong resistance of influential interest groups. This provides an explanation for China’s failure to remove the restrictions on the right to import films.



143 Shi

and Chen, above 136, 171. and Pauwelyn, above n 104, 108.

144 Conconi

Conclusion  69 When compliance is desirable, China’s approach has focused on textual compliance which strictly addresses the WTO findings of inconsistencies. In this regard, China has become increasingly sophisticated and experienced in utilising the flexibilities that the WTO rulings left for its regulatory activities. Furthermore, despite China’s compliance in the specific disputes, the lack of transparency in the implementation of revised measures and rapid regulatory development in pursuit of industrial policies or regulatory goals may continue to create WTO-consistency issues. Therefore, it is necessary to monitor China’s application of implementation measures and its introduction of new measures, and to push China to make available public information relating to decisionmaking by responsible administrative authorities. Overall, the two disputes show that the DSM is effective in inducing compliance regardless of whether the required correction relates to a narrow aspect of a complex regulatory regime or the regime as a whole in a systematic manner. However, compliance in an individual case would not preclude Members from continuing to behave in a WTO-unlawful manner in applying implementation measures in practice or adopting new protectionist measures.

4 China’s Regulation of Exports and Implementation of WTO Rulings I. INTRODUCTION

T

his chapter focuses on two disputes, China – Raw Materials and China – Rare Earths, in which China’s regulation of exports was found in breach of WTO rules and China took steps to implement the WTO rulings. Section II provides a brief overview of China’s WTO commitments to liberalising its exports regulatory regime and the major issues which led to the two disputes. Section III discusses the two disputes with a focus on the WTO findings of inconsistencies, China’s implementation measures, reasons for China’s compliance, and implications for WTO Members and the DSM. Section IV concludes the chapter. II.  CHINA’S REGULATION OF EXPORTS

Prior to the commencement of China’s 1978 economic reforms, exports (such as trading rights, quantity, and price) were predominantly subject to central ­planning.1 In its transition into a market-oriented system, China gradually liberalised its export regulatory mechanism by relaxing the restrictions on trading rights, quantity of exports, export licensing and pricing, amongst others. Furthermore, various forms of incentives – such as value-added tax rebates and duty drawbacks – were introduced to promote export trade.2 The reforms led to explosive export growth and diversification3 and shaped the export-based growth model of China. Despite the reforms, export controls were not completely abandoned before China’s entry into the WTO. In the negotiations of China’s accession, WTO Members had serious concerns about China’s use of restrictions on exports4 1 Nicholas R Lardy, Integrating China into the Global Economy (Washington DC, The Brookings Institution, 2002) 30, 46–55. 2 Xin Zhang, International Trade Regulation in China: Law and Policy (Oxford, Hart Publishing, 2006) 253–69. 3 Lardy, above n 1, 55–7; Thomas Rumbaugh and Nicolas Blancher, ‘China: International Trade and WTO Accession’ (1 March 2004) IMF Working Paper No 04/36, 3–7. 4 Report of the Working Party on the Accession of China (WT/ACC/CHN/49, 1 October 2001) [hereinafter Working Party Report], s IV (C).

China’s Regulation of Exports  71 and successfully pushed China to undertake to eliminate such restrictions with limited exceptions. Upon accession, China committed to abide by the general WTO rules on export restrictions and a range of ‘WTO-plus’ obligations. Some of the rules and obligations on imports regulation, as discussed in Section II of Chapter 3, also apply to exports, while there are exports-specific commitments. Notably, China agreed to: • Trading Rights Commitments: eliminate restrictions on the right to export goods particularly any export performance, prior experience and minimum capital requirements,5 and grant trading rights in a non-discretionary and non-discriminatory manner;6 • Export Quota Commitments: not impose any ‘restrictions other than duties, taxes or other charges, whether made effective through quotas, import or export licences or other measures … on the exportation or sale for export of any product’;7 • Export Duties Commitments: ‘eliminate all taxes and charges applied to exports unless specifically provided in Annex 6 of the Accession Protocol’,8 although the GATT does not impose such an obligation on WTO Members in general. Annex 6 includes 84 tariff items covering commodities, such as certain raw materials for the making of steel, to which a bound export duty rate from 20 per cent to 50 per cent applies; and • Export Subsidies: eliminate all export subsidies upon accession, although there is no such requirement on WTO Members in relation to agricultural goods.9 As shown in Chapter 3, China took considerable efforts to bring its legislations in conformity with its WTO obligations. However, China maintained a web of laws, regulations and departmental rules on foreign trade. With respect to exports, restrictions such as export taxes, quotas, non-automatic licence may still be applied, and in such circumstances, the allocation of export quotas and administration of the licensing system can be quite complex.10 Unlike China’s timely implementation of most of its accession commitments, the progress on the removal of export restraints on certain commodities has been slow. As the USTR’s China Compliance Report 2009 noted, ‘China has continued to

5 Protocol on the Accession of the People’s Republic of China (WT/L/432, 23 November 2001) [hereinafter Accession Protocol], s 5.1; Working Party Report, above n 4, paras 83(a), 83(b), 83(d) & 84(a). 6 Accession Protocol, above n 5, s 5.2; Working Party Report, above n 4, para 84(b). 7 Article XI:1 of the GATT. 8 Accession Protocol, above n 5, s 11.3. 9 Accession Protocol, above n 5, ss 10.3 & 12.1. Agreement on Subsidies and Countervailing Measures, 15 April 1994, Marrakesh Agreement Establishing the World Trade Organization, annex 1A, 1869 UNTS 14, art 3.1; Agreement on Agriculture, 15 April 1994, Marrakesh Agreement Establishing the World Trade Organization, annex 1A, 1867 UNTS 410, art 9. 10 Zhang, above n 2, 91–93, 100–2, 110.

72  China’s Regulation of Exports and Implementation of WTO Rulings impose restraints on exports of raw materials, including export quotas, related export licensing and bidding requirements, minimum export prices and export duties’.11 For most of these commodities, China had become a major or a dominant source of world supply.12 After years of unsuccessful attempts to solve this issue via diplomatic channels, the US initiated two consecutive WTO proceedings against China, namely, China – Raw Materials in 2009 (where the US was joined by the EU and Mexico) and subsequently China – Rare Earths in 2012 (where the US was joined by the EU and Japan). III.  CHINA – RAW MATERIALS & CHINA – RARE EARTHS

A.  China – Raw Materials The China – Raw Materials13 dispute concerned China’s imposition of four types of export restraints – including export duties, export quotas, export licences, and minimum export prices – on a wide range of raw materials including bauxite, coke, fluorspar, magnesium, manganese, silicon carbide, silicon metal, yellow phosphorus and zinc. At the panel stage, a total of 40 measures were identified by the complaining parties, which imposed the aforesaid export restraints or regulated the allocation and administration of export quotas.14 i.  Measures and WTO Findings a.  Export Duties China’s export duty system consists of three main measures: the Customs Law 1987,15 the Imports and Exports Regulation 2001,16 and a tariff implementation 11 USTR, 2009 Report to Congress on China’s WTO Compliance (December 2009) 38–39, available at https://ustr.gov/sites/default/files/2009%20China%20Report%20to%20Congress.pdf. 12 For export statistics of some of the selected commodities between 2002 and 2008 before the China – Raw Materials dispute, see Baris Karapinar, ‘China’s Export Restriction Policies: ­Complying with “WTO Plus” or Undermining Multilateralism’ (2011) 10(3) World Trade Review 389, 395–97. For a comprehensive discussion of China’s rare earth industry and export regime, see Wayne M Morrison and Rachel Tang, China’s Rare Earth Industry and Export Regime: Economic and Trade Implications for the United States (Congressional Research Service, 30 April 2012). 13 WTO Panel Report, China – Measures Related to the Exportation of Various Raw Materials (WT/DS394/R, WT/DS395/R, WT/DS398/R, adopted 22 February 2012, as modified by Appellate Body Report); Appellate Body Report (WT/DS394/AB/R, WT/DS395/AB/R, WT/DS398/AB/R, adopted 22 February 2012) [hereinafter China – Raw Materials]. 14 WTO Panel Report, China – Raw Materials, above n 13, para 2.4. 15 《中华人民共和国海关法》 (1987) [Customs Law of the People’s Republic of China 1987], adopted by the Nineteenth Session of the Standing Committee of the 6th National People’s Congress on 22 January 1987, effective on 1 July 1987; revised on 8 July 2000, 29 June 2013, 28 December 2013, 7 November 2016, and 4 November 2017. 16 《中华人民共和国货物进出口管理条例》 (2001) [Administrative Regulations on Import and Export of Goods 2001], Decree No 332 of the State Council, promulgated on 10 December 2001, effective on 1 January 2002.

China – Raw Materials and China – Rare Earths  73 program published annually setting out export duties on certain goods applicable in the corresponding calendar year. The tariff implementation program was at the core of the dispute. The 2009 Tariff Implementation Program17 was in effect when the panel was established but shortly after, China published the 2010 Tariff Implementation Program.18 The panel decided to consider the 2009 Program, although China claimed that the 2010 Program should be the basis of the panel’s decisions and recommendations.19 Table 1 below sets out the export duties imposed on the relevant raw materials under the 2009 Program in comparison with the duties applied under the 2010 Program, as well as the bound rates which China is permitted to apply under Annex 6 of the Accession Protocol. Table 1  China’s export duties on raw materials 2009 & 2010 1. Yellow phosphorous

2009 Program 20% (+ 50% special duty which was removed by the Adjustment of Export Tariffs Circular since 1 July 2009)20 15%; 15%; 10%

2010 Program Annex 6 of the AP 20% 20%

2. Bauxite including: Refractory clay; Aluminium ores and concentrates; Aluminium ash residues 3. Coke 40%

No export duty

Not listed (eg no export duty)

40%

4. Fluorspar including: 15% met-spar; acid-spar 5. Magnesium including: 10% magnesium metal; unwrought magnesium; magnesium waste and scrap

15%

Not listed (eg no export duty) Not listed (eg no export duty) Not listed (eg no export duty)

10%

(continued)

17 《2009关税实施方案》(2008) [Tariff Implementation Program 2009], Notice No 40 of the Tariff Policy Commission of the State Council, issued on 15 December 2008, effective on 1 January 2009. 18 《2010关税实施方案》(2009) [Tariff Implementation Program 2010], Notice No 28 of the Tariff Policy Commission of the State Council, issued on 8 December 2009, effective on 1 January 2010. 19 Panel Report, China – Raw Materials, above n 13, para 7.53. 20 ibid, paras 7.69–71. The 50% special duty was removed by 《国务院关税税则委员会关于 调整部分产品出口关税的通知》(2009) [Notice on the Adjustment of Export Tariffs on Certain Commodities 2009], Circular No 6 of the Tariff Policy Commission of the State Council, issued on 19 June 2009.

74  China’s Regulation of Exports and Implementation of WTO Rulings Table 1  (Continued) 2009 Program 15%; 20%

2010 Program Annex 6 of the AP 15%; 20% Not listed (eg no export duty)

15%

15%

8. Zinc including: zinc waste 10% and scrap; hard zinc spelter; other zinc ash and residues

10%

6. Manganese including: manganese ores and concentrates; unwrought manganese waste and scrap and powder 7. Silicon metal

Not listed (eg no export duty) Not listed (eg no export duty)

Based on the 2009 Program, the panel concluded that China had imposed export duties on each of these products in violation of its obligations under Section 11.3 of the Accession Protocol.21 The panel’s findings were not appealed. It is clear from the table above that the violations remained under the 2010 Program which continued to impose the export duties on the goods (other than yellow phosphorous and bauxite) while China committed not to do so. China’s main defence was based on GATT Articles XX(g) and XX(b).22 This triggered the threshold question of whether Article XX is applicable to violations of the Accession Protocol, ie Section 11.3 in this present case. After a careful analysis of this issue, the panel ruled that Article XX is not applicable in this case due to the lack of textual and contextual basis for such an application; the ruling was subsequently upheld by the Appellate Body.23 b.  Export Quotas Compared with export duties, China’s export quotas system is much more complex. The regulatory framework includes the following basic measures. • Foreign Trade Law, which confers the Ministry of Commerce (MOFCOM) the authority to impose export quotas to limit or prohibit the exportation of 21 ibid, para 7.105. 22 ibid, para 7.108. 23 ibid, paras 7.124–159; Appellate Body Report, above n 13, paras 279–307. For a discussion of this issue, see Julia Ya Qin, ‘The Predicament of China’s “WTO-Plus” Obligation to Eliminate Export Duties: A Commentary on the China – Raw Materials Case’ (2012) 11(2) Chinese ­Journal of International Law 237, 239–44 (criticizing the WTO tribunal’s strict textual interpretative approach to this issue); Ilaria Espa, ‘The Appellate Body Approach to the Applicability of Article XX GATT in Light of China – Raw Materials: A Missed Opportunity’ (2012) 46(6) Journal of World Trade 1399 (arguing that the Appellate Body’s interpretative approach to this issue is too rigid to accommodate the interests of members to protect ‘the fundamental values of conservation and public health’); Bin Gu, ‘Applicability of GATT Article XX in China – Raw Materials: A Clash within the WTO Agreement’ (2012) 15(4) Journal of International Economic Law 1007 (identifying other contextual basis in support of an interpretation that art XX should apply).

China – Raw Materials and China – Rare Earths  75 goods for specific purposes such as protecting national security, public interest, human health or the environment, etc.24 • Imports and Exports Regulation 2001 and Export Quota Administration Measures 200125 which set out detailed rules on, for example, the allocation and administration of quotas. • A catalogue of export quotas formulated and published by the MOFCOM in collaboration with the General Administration of Customs (GAC) on an annual basis. Under the 2009 Export Licensing Catalogue, bauxite, coke, fluorspar, silicon carbide, and zinc were subject to export quotas – while the quotas on coke and zinc were allocated directly by the MOFCOM based on certain ­performancerelated criteria, quotas on the other goods were allocated via a bidding system.26 The MOFCOM also publishes various measures specifying the quota application procedures (ie for coke export) and the quota bidding procedures.27 After export quotas have been allocated, the receiving exporters need to apply for an export quota licence for customs clearance at the time of exportation.28 As summarised by the panel, the export quotas allocated to the subject goods in 2009 were 930,000 tonnes on bauxite, 550,000 metric tonnes on fluorspar, 216,000 tonnes on silicon carbide, 13,092,000 metric tonnes on coke, and nil on zinc.29 China’s imposition of export quotas on these goods was easily found by the panel to be inconsistent with Article XI:1 of the GATT which ‘explicitly forbid[s] Members from maintaining a restriction made effective through a prohibition or quota on the exportation of any product.’30 China did not contest the panel’s findings of violation but sought to justify the export quotas on refractory-grade bauxite under Article XI:2(a) which allows temporary applications of export restrictions ‘to prevent or relieve critical shortages of foodstuffs or other products essential to the exporting Member.’31 While the panel observed that refractory-grade bauxite (as an intermediate product for the production of iron and steel) was currently ‘essential’ to China, it was not persuaded that the application of the quotas was merely temporary to 24 《中华人民共和国对外贸易法》(1994) [Foreign Trade Law of the People’s Republic of China 1994], adopted by the 7th Session of the Standing Committee of the 8th National People’s Congress on 12 May 1994, effective on 1 July 1994; as amended on 6 April 2004, effective on 1 July 2004, and subsequently amended on 7 November 2016, effective on the same date [hereinafter ‘Foreign Trade Law’], arts 14 & 16. 25 《出口商品配额管理办法》 (2001) [Measures for the Administration of Export Commodities Quotas 2001], Order No 12 of the Ministry of Foreign Trade and Economic Cooperation (MOFTEC), issued on 20 December 2001, effective on 1 January 2002. 26 Panel Report, above n 13, paras 7.176–178. 27 ibid, paras 7.180–201. 28 ibid, para 7.174. 29 ibid, paras 7.216–217. 30 ibid, para 7.207. 31 ibid, para 7.227.

76  China’s Regulation of Exports and Implementation of WTO Rulings address a critical shortage as the quotas had been in place for over a decade.32 Accordingly, the panel found that the export quotas were not justifiable under Article XI:2(a), a finding subsequently upheld by the Appellate Body.33 As an alternative defence, China argued that the export quotas on ­refractory-grade bauxite were justifiable under GATT Article XX(g) which allows the imposition of export restrictions for the purpose of conserving exhaustible natural resources. China’s argument failed as the panel found that no equivalent or even-handed restrictions were applied to domestic production or consumption and hence the export quotas did not serve the claimed conservation goal.34 On appeal, the Appellate Body modified the panel’s application of the ‘even-handedness’ test but did not review the panel’s ultimate findings which were not challenged by China.35 In addition, China invoked GATT Article XX(b) contending that the use of export quotas on coke and silicon carbide served the protection of human health and the environment.36 Again, the panel dismissed China’s defence. In relation to the declared environmental objective, the panel found that the evidence before it seems to suggest that the measures served ‘the economic goal of moving the products in question up the value chain’ rather than the protection of the ­environment.37 As far as the protection of human health is concerned, the panel held that China failed to establish that the measures made a material contribution to the objective or that the other existing measures that China had adopted for the objective ‘cannot be used in lieu of applying export restrictions.’38 These findings were not appealed. c.  Trading Rights, Allocation and Administration of Quotas and Minimum Export Price In addition to the export duties and quotas, the contested measures were also found to have imposed various other forms of export restrictions in breach of China’s WTO obligations. These included: • violations of China’s commitments to liberalising trading rights,39 as China imposed certain prior export performance and minimum registered capital requirements on the allocation of quotas to coke, bauxite, fluorspar and ­silicon carbide;40

32 ibid, paras 7.307–351. 33 ibid, para 7.353; Appellate Body Report, above n 13, paras 318–44. 34 Panel Report, above n 13, paras 7.411–468. 35 Appellate Body Report, above n 13, paras 359–61. 36 Panel Report, above n 13, para 7.470. The panel also considered, arguendo, whether the export duties applied to certain scrap products, coke, magnesium metal, manganese metal and silicon carbide were justifiable under art XX(b) and found against China. 37 ibid, paras 7.512–514. 38 ibid, paras 7.525–591. 39 ibid, paras 7.665–670. 40 ibid, paras 7.658–659.

China – Raw Materials and China – Rare Earths  77 • violations of Article X:3(a) of the GATT, as China allowed authorities to reject the grant of export quotas to entities without ‘operation capacity’ but did not provide any definition or guidelines for the application of this criterion, hence posing a real risk of ‘unreasonable and non-uniform administration of this criterion’;41 • a violation of Article X:1 of the GATT, due to the failure of the Chinese Government to publish the annual allocation of export quota for zinc;42 and • violations of Article XI:1 of the GATT, as China, through a series of measures, enforced a minimum export price requirement by imposing penalties on exporters and licensing entities, which constituted a restriction on the exportation of the subject goods.43 Instead of challenging the panel’s findings of violations above, China skilfully appealed the panel’s inclusion of all of the remaining 37 measures into its terms of reference. The Appellate Body sided with China, finding that the panel should not have made the findings above in relation to these measures as the complainants had ‘failed to present the legal basis for their complaints with sufficient clarity to comply with Article 6.2 of the DSU.’44 The practical consequences of the Appellate Body’s ruling are two-fold: first, the WTO-legality of these measures remains to be subject to the review of the Appellate Body, and second, China did not need to implement the panel’s rulings against these measures. ii.  China’s Implementation and an Assessment China reached an agreement with each of the complainants that it was to bring the contested measures into compliance with the relevant WTO rules by 31 December 2012.45 On 18 January 2013, China notified that it had fully implemented the WTO rulings through the following measures:46 • 2013 Tariff Implementation Program,47 issued by the GAC on 28 December 2012; and • 2013 Catalogue of Goods subject to Export Licensing Administration,48 jointly issued by the MOFCOM and the GAC on 31 December 2012.

41 ibid, paras 7.679–756. 42 ibid, paras 7.798–807. 43 ibid, paras 7.1066–1082. 44 Appellate Body Report, above n 13, paras 221–35. 45 China – Measures Related to the Exportation of Various Raw Materials, Agreement under art 21.3(b) of the DSU (WT/DS394/18, WT/DS395/17, WT/DS398/16, 30 May 2012). 46 China – Measures Related to the Exportation of Various Raw Materials, Status Report by China (WT/DS394/19/Add 1, WT/DS395/18/Add 1, WT/DS398/17/Add 1, 18 January 2013). 47 《2013年关税实施方案》 (2012) [Tariff Implementation Program 2013], Order No 63 of the GAC, promulgated on 28 December 2012, effective on 1 January 2013. 48 《2013年出口许可证管理货物目录》 (2012) [The Catalogue of Goods subject to Export Licensing Administration 2013], Order No 97 of the GAC and the MOFCOM, promulgated on 31 December 2012, effective on 1 January 2013.

78  China’s Regulation of Exports and Implementation of WTO Rulings The two implementation measures, which took effect on 1 January 2013, removed the WTO-illegal export duties and quotas on the covered raw materials. While the complaining Members were generally satisfied with China’s implementation, they remained concerned about China’s regulation of exports and particularly the possibility that China may reintroduce these export ­restrictions.49 Compared with the huge efforts that the WTO tribunal had to make in adjudicating the consistencies of the Chinese measures in dispute, China’s implementation was a considerably easier task. As the Appellate Body dismissed the panel’s findings on most of the challenged measures relating to the regulation of trading rights, allocation and administration of export quotas and export prices, China only needed to revise 2 out of 40 measures. Moreover, both of the measures that China was required to amend were temporary instruments which are updated annually. Therefore, the legislative work and process involved in the implementation of the WTO rulings in this case was much simpler than that involved in the other ‘trade in goods’ disputes discussed in Chapter 3. However, given the significance and sensitivity of the goods and the policy goals at stake, the WTO rulings and China’s implementation of the rulings could have farreaching implications, which are discussed in sub-sections C and D below. B.  China – Rare Earths The China – Rare Earths50 dispute, initiated only three months after China’s implementation of the WTO rulings in China – Raw Materials, arose out of almost identical facts and issues as those in the previous case except that the goods in question were rare earths,51 tungsten and molybdenum. i.  Measures and WTO Findings The complainants identified around 40 Chinese measures challenging:52 • the imposition of export duties on the subject goods in breach of Section 11.3 of the Accession Protocol; 49 WTO Dispute Settlement Body, Minutes of Meeting (WT/DSB/M/328, 22 March 2013) 9–12. 50 WTO Panel Report, China – Measures Related to the Exportation of Rare Earths, Tungsten and Molybdenum (WT/DS431/R, WT/DS432/R, WT/DS433/R, adopted 29 August 2014, as modified by Appellate Body Report); Appellate Body Report (WT/DS431/AB/R, WT/DS432/AB/R, WT/DS433/AB/R, adopted 29 August 2014) [hereinafter China – Rare Earths]. 51 The panel summarised ‘“Rare earths” is the common name for a group of 15 chemical elements in the periodic table with atomic numbers 57 to 71. These elements are part of the so-called “lanthanide group”, composed of: lanthanum, cerium, praseodymium, neodymium, promethium, samarium, europium, gadolinium, terbium, dysprosium, holmium, erbium, thulium, ytterbium and lutetium. Two other rare earth elements are included in the scope of this dispute, namely, scandium (atomic No 21) and yttrium (atomic No 39).’ See Panel Report, above n 50, para 2.3. 52 Panel Report, above n 50, paras 2.8–14.

China – Raw Materials and China – Rare Earths  79 • the imposition of export quotas in violation of GATT Article XI:1 and China’s commitments in relation to non-automatic export licensing and export restrictions under paragraphs 162 and 165 of the Working Party Report; and • the allocation and administration of export quotas inconsistently with China’s commitments on trading rights. Like in the previous case, China’s defence was predominantly based on ­Articles XX(b) and XX(g) of the GATT. a.  Export Duties In relation to the export duties, the key measures at issue were the 2012 Tariff Implementation Program53 and the 2012 Tariff Implementation Plan54 which imposed export duties ranging from 5 per cent to 25 per cent on 58 rare earths products, 15 tungsten products, and 9 molybdenum products.55 As none of these products are listed in Annex 6 of China’s Accession Protocol, the panel found that the imposition of the export duties on them was in breach of Section 11.3 of the Accession Protocol.56 China’s use of Article XX to justify the violations was again rejected by the panel and the Appellate Body which maintained their position in China – Raw Materials that Article XX is not applicable to the obligations contemplated in Section 11.3 of the Accession Protocol.57 b.  Export Quotas With respect to export quotas, the regulatory framework at issue was similar to that in China – Raw Materials except that the measures allocating the quotas became the 2012 Export Licensing Catalogue58 and the 2012 Export 53 《2012年关税实施方案》(2011) [Tariff Implementation Program 2012], Circular No 27 of the Customs Tariff Policy Commission of the State Council, issued on 9 December 2011, effective on 1 January 2012. 54 《关于2012年关税实施方案》(2011) [Tariff Implementation Plan 2012], Circular No 79 of the GAC, issued on 22 December 2011, effective on 1 January 2012. 55 Panel Report, above n 50, para 7.46. 56 ibid, paras 7.47–48. 57 ibid, paras 7.62–115; Appellate Body Report, above n 50, para 5.73. On appeal, China only challenged one of the findings of the panel on the applicability of Article XX; the Appellate Body upheld the panel’s findings. For further criticism of the tribunal’s rulings, see Julia Ya Qin, ‘Judicial Authority in WTO Law: A Commentary on the Appellate Body’s Decision in China – Rare Earths’ (2014) 13 Chinese Journal of International Law 639; Elisa Baroncini, ‘The China – Rare Earths WTO Dispute: A Precious Chance to Revise the China – Raw Materials Conclusions on the Applicability of GATT Article XX to China’s WTO Accession Protocol’ (2012) 4(2) Cuadernos de Derecho Transnacional 49. 58 《公布》(2011) [Notice on ‘2012 Export Licensing Management Commodities Catalogue’], Notice No 98 of the MOFCOM and the GAC, issued on 30 December 2011, effective on 1 January 2012.

80  China’s Regulation of Exports and Implementation of WTO Rulings Quota Amounts.59 Under these measures, the goods concerned were all subject to export quota licensing administration with quota shares directly allocated by the MOFCOM.60 Once the allocation of quotas was determined, the MOFCOM published documents detailing the receiving entities and their quota shares typically twice a year. In 2012, the total quotas assigned on the subject goods were 30,996 tonnes for rare earths, 18,967 tonnes for tungsten and tungsten products, and 40,862 tonnes for molybdenum and molybdenum products.61 China did not dispute the panel’s finding that the imposition of the export quotas was in breach of GATT Article XI:1 and paragraphs 162 and 165 of the Working Party Report.62 In defence, China argued that the export quotas were imposed for the con­servation of rare earths, tungsten and molybdenum in accordance with GATT Article XX(g). The panel dismissed China’s defence essentially based on China’s failure to substantiate that the export quotas were related to the conservation of the natural resources, that the discrimination caused by the operation of the quotas to the detriment of foreign users of the subject goods was justifiable in light of the declared objective, and that the less-trade-­restrictive alternative measures proposed by the complainants were not reasonably available for the pursuit of the objective.63 On appeal, while the Appellate Body again questioned the panel’s interpretation of the ‘even-­handedness’ test,64 it upheld the panel’s ultimate findings. c.  Trading Rights, Allocation and Administration of Quotas Finally, the disputes over China’s breach of its trading rights commitments centred on the various eligibility criteria applied to the administration and allocation of the export quotas, including: • export performance, utilisation rate of export quotas, operation capacity of applicants, production scale, and resource status etc as contemplated in Article 19 of the Export Quota Administration Measures 2001; and • export performance and prior export experience and/or minimum registered capital requirements as specified in the 2012 Application Qualifications and Procedures for Rare Earth Export Quotas,65 the 2012 First Batch Rare 59 《公布》 (2011) [Notice on ‘2012 Export Quota Amounts for Agricultural and Industrial Products’], Notice No 71 of the MOFCOM, issued on 31 October 2011, effective on 1 January 2012. 60 Panel Report, above n 50, para 7.209. 61 ibid, paras 7.213–215, 7.222–223, 7.228–229. 62 ibid, para 7.200. See Working Party Report, above n 4, paras 162 and 165 of the Working Party Report essentially prohibit China from export restrictions and licensing after the date of accession unless these can be justified under the GATT or the Accession Protocol. 63 Panel Report, above n 50, paras 7.363–970. 64 Appellate Body Report, above n 50, paras 5.123–141. 65 《关于2012年稀土出口配额申报条件和申报程序的公告》 (2011) [Application Qualifications and Procedures for Rare Earth Export Quotas 2012], Circular No 77 of the MOFCOM, issued on 11 November 2011.

China – Raw Materials and China – Rare Earths  81 Earth Export Quotas (Supplement),66 the 2012 Application Qualifications and Procedures for Molybdenum Export Quotas,67 and the 2012 First Batch Export Quotas of Tungsten, Antimony and Other Non-Ferrous Metals.68 As the export performance, prior export experience, and minimum registered capital criteria are exactly the ones that China had committed to removing under its accession documents, the panel had no difficulty in finding them in breach of paragraphs 83(a), 83(d), 84(a), and 84(b) of the Working Party Report.69 In addition, since rare earths and molybdenum are not listed under Annex 2A2 of the Accession Protocol as an exception to China’s obligation to liberalise the right to export under Section 5.1 of the Accession Protocol, the eligibility criteria applicable to them were also found to be inconsistent with Section 5.1 as they had the effect of confining the grant of trading rights to some enterprises.70 China did not dispute the panel’s findings of inconsistencies but requested the panel to consider the justifiability of the breaches of paragraphs 83 and 84 of the Working Party Report under GATT Article XX(g). While the panel agreed with China as a threshold matter that Article XX applies to the two paragraphs, it found that China failed to provide sufficient evidence to prove that the criteria satisfy the legal requirements of Article XX(g).71 China did not appeal the panel’s findings. ii.  China’s Implementation and an Assessment China agreed to implement the WTO rulings by 2 May 2015.72 In the DSB meeting on 20 May 2015, China notified that it had fully implemented the WTO rulings through the following measures:73 • the 2015 Catalogue of Goods Subject to Export Licensing Administration, jointly published by the MOFCOM and the GAC (Announcement No 94) on 31 December 2014 and effective on 1 January 2015 (2015 Catalogue); and

66 《商务部关于补充下达2012年第一批稀土出口配额的通知》 (2012) [The First Batch Rare Earth Export Quotas (Supplement) 2012], Circular No 618 of the MOFCOM, issued on 16 May 2012. 67 《关于2012年铟、钼、锡出口配额申报条件及申报程序的公告》 (2011) [Application Quali­ fications and Procedures for Export Quotas of Indium, Molybdenum and Tin 2012], Circular No 79 of the MOFCOM, issued on 11 November 2011. 68 《关于公布2012年钨、锑等有色金属出口（供货）企业名单并下达第一批出口配额的 通知》 (2011) [The First Batch Export Quotas of Tungsten, Antimony and Other Non-Ferrous Metals 2012], Circular No 1131 of the MOFCOM, issued on 26 December 2011. 69 Panel Report, above n 50, paras 7.1001–1005. 70 ibid, paras 7.1009–1012. 71 ibid, paras 7.1025–1045. 72 China – Measures Related to the Exportation of Rare Earths, Tungsten and ­Molybdenum, Agreement under art 21.3(b) of the DSU (WT/DS431/16, WT/DS432/14, WT/DS433/14, 10 December 2014). 73 WTO Dispute Settlement Body, Minutes of Meeting (WT/DSB/M/361,13 July 2015) 18.

82  China’s Regulation of Exports and Implementation of WTO Rulings • the Notice on Adjusting Export Tariffs of Some Products, published by the State Council Customs Tariff Commission (Circular No 3) on 14 April 2015 and effective on 1 May 2015 (2015 Notice). The 2015 Notice abolished export duties on 84 tariff items including all the goods in dispute. As the notice did not set out an expiry date, it will remain effective until it is repealed by a later measure which may or may not reintroduce the export duties. Therefore, while China has achieved WTO-compliance by removing the export duties for 2015, this situation may change in subsequent years. This makes it essential to monitor China’s tariff implementation programs published on an annual basis. The 2015 Catalogue removed rare earths, tungsten, and molybdenum from the list of products subject to export quota licensing administration, and placed them under the general export licensing system. This means that the goods at issue are no longer subject to export quotas and hence that entities do not need to apply for the allocation of export quotas. Under the general export licensing system, an applicant will need to be a foreign trade operator (FTO) (which is generally approved based on registration74) and submit the relevant MOFCOM approval documents and export contracts in order to obtain an export licence.75 The 2015 Catalogue further removed the requirement of MOFCOM approval documents, leaving export contracts the only documentation that an applicant needs to provide. Upon receipt of an application, the authorities must issue the licence within three days.76 In the DSB meeting where China notified its compliance with the WTO rulings, the US was concerned that the general licensing system ‘could potentially act as an export restriction’.77 This concern is misplaced. The general licensing system is essentially registration-based whereby export licences are granted automatically. As such, it does not appear to have any restrictive effects on the volume of export of the subject goods. The issues relating to China’s implementation are elsewhere. Firstly, for at least a decade, export quotas on the subject goods had been allocated to limited numbers of enterprises. For example, in 2014, the number of entities that obtained quotas to export the subject goods was 28 for rare earths, 13  for tungsten and tungsten products, and 25 for molybdenum and molybdenum products.78 Moreover, as a specified exception to China’s trading rights commitments, tungsten will continue to be subject 74 See Section IV(A) of Ch 3. 75 《货物出口许可证管理办法》(2008) [Measures for the Administration of Licence for the Export of Goods 2008], Order No 11 of the MOFCOM, promulgated on 7 June 2008, effective on 1 July 2008, arts 10 & 11.7. 76 ibid, art 19. 77 See WTO Dispute Settlement Body, above n 73, 18. 78 《关于公布2014年钨、锑、白银出口国营贸易企业, 稀土、铟、钼、锡出口企业名单并下 达第一批出口配额的通知》(2014) [Notice on the Export of Tungsten, Antimony and Silver by State Trading Enterprises Exporting, and First Batch of Export Quotas of Rare Earths, Indium, Molybdenum and Tin 2014], Notice No 1012 of the MOFCOM, issued on 13 December 2013.

China – Raw Materials and China – Rare Earths  83 to state trading. Thus, it is likely that only these enterprises will continue to be the applicants for the licence to export the subject goods, thereby limiting the volume of exports in practice. Secondly, under the Foreign Trade Law 2004 and the Export Quota Administration Measures 2001, the authority to re-impose the export quotas remains in the hands of the MOFCOM. It is, therefore, possible that the MOFCOM may, at its own discretion, reintroduce some or all of the export quotas for the policy objectives specified in these laws.79 It follows that China’s compliance with the WTO rulings may turn out to be temporary and that close monitoring of MOFCOM’s annual allocation of the export quotas is necessary. China did not notify any compliance measures in relation to the violations of its trading rights commitments. This seemed to be unnecessary. Since the goods concerned are no longer subject to quotas, the criteria contemplated in Article 19 of the Export Quota Administration Measures 2001 (eg export performance requirement) no longer apply to the grant of licence to the export of these goods. For the other WTO-illegal measures applied to the allocation of export quotas for the subject goods, they had expired before the tribunal’s rulings were adopted by the DSB. Compared with the quota allocation system, the general licensing system does not seem to mandate the authorities to apply similar criteria (eg export performance and prior export experience and minimum registered capital requirements) in determining whether to grant an export licence. Therefore, with the abolition of the export quotas and the expiry of the other relevant contested measures, no further actions were required for China to implement the WTO rulings on trading rights. However, since the applicability of the criteria is dependent on whether the goods are subject to export quotas, the criteria are most likely to be re-imposed once export quotas on the goods are re-introduced. C.  Reasons for China’s Compliance China fully implemented the WTO rulings in China – Raw Materials and China – Rare Earths by removing the export restrictions in question. China’s implementation may be attributable to its concerns about reputational costs of non-compliance in such high-profile cases. These two disputes were the first group of cases where WTO tribunals comprehensively adjudicated and substantially clarified the legal issues relating to export restraints, particularly China’s general obligations on export quotas and ‘unique’ obligations on export duties and their justifiability under the GATT exceptions. They involved goods among the most commercially, strategically and politically important not only to China but to other countries. China’s failure to comply would attract



79 Foreign

Trade Law, above n 24, arts 14 & 16.

84  China’s Regulation of Exports and Implementation of WTO Rulings widespread criticism which may undermine the good reputation China had gradually built in previous cases. Moreover, as indicated above, China’s timely implementation may also have benefited from the simple process involved in amending or replacing the WTO-unlawful measures. More significantly, however, implementing the WTO rulings is consistent with China’s economic development and environmental policies. For decades, China maintained various forms of export restraints over raw materials and rare earths. While the restrictions were initially imposed to drive up world prices and hence China’s earnings from the sale of these goods,80 they have evolved into one of the policy prescriptions for China to pursue more advanced strategic goals such as safeguarding the security of exhaustible natural resources and sustainable development. As the world’s largest producer and exporter of rare earths supplying over 95 per cent of global demand, China has had an imminent and serious risk of running out of rare earths reserves and hence an urgent task of preservation.81 Furthermore, years of mining and over-exploitation of these minerals at the sacrifice of the environment has also made environmental protection and sustainable development one of the policy priorities of the nation. These priorities were endorsed in China’s most fundamental policy documents such as the Twelfth Five-Year Plan (2011–2015).82 As far as the rare earths industry is concerned, the Chinese government formulated an array of policy and regulatory documents to pursue various environmental policies and initiatives and address the long-lasting issues relating to ineffective law enforcement.83 For example, at the outset of the China – Rare Earths dispute, the Chinese government published a White Paper on the rare earths industry voicing grave concerns about over-exploitation and serious environmental pollution, setting out basic principles and primary goals in ensuring sustainable development of the industry, and calling for the establishment of a comprehensive regulatory framework to control illegal mining and production, promote structural reform and technological advancement, and foster environmental protection.84 In the

80 Lardy, above n 1, 47. 81 See, eg, Liu Ying, ‘The Applicability of Environmental Protection Exceptions to WTO-Plus Obligations: In View of the China – Raw Materials and China – Rare Earths Cases’ (2014) 27(1) Leiden Journal of International Law 113, 128–29; Han-Wei Liu and John Maughan, ‘China’s Rare Earths Export Quotas: Out of the China – Raw Materials Gate, But Past the WTO’s Finish Line?’ (2012) 15(4) Journal of International Economic Law 971, 972; Ruth Jebe, Don Mayer and Yong-Shik Lee, ‘China’s Export Restrictions on Raw Materials and Rare Earths: A New Balance Between Free Trade and Environmental Protection?’ (2012) 44 The George Washington International Law Review 579, 586–91. 82 See, eg, 《中华人民共和国国民经济和社会发展第十二个五年规划纲要》(2011) [The Twelfth Five-Year Plan for Economic and Social Development of the People’s Republic of China (2011– 2015)], promulgated on 14 March 2011, available at www.gov.cn/2011lh/content_1825838.htm. 83 See Liu and Maughan, above n 81, 995–98; Karapinar, above n 12, 401–3. 84 Information Office of the State Council, 《中国的稀土状况与政策》[Situations and P ­ olicies of China’s Rare Earth Industry] (20 June 2012), available at www.gov.cn/zhengce/2012-06/20/ content_2618561.htm.

China – Raw Materials and China – Rare Earths  85 aftermath of the dispute, China not only eliminated the export restrictions as required but also carried on its regulatory efforts in the industry by rolling out measures to strengthen domestic production quotas and industry entry criteria, combat illegal extraction and distribution, and increase resource taxes.85 The central government has endeavoured to push local governments to undertake necessary actions to incorporate and implement these policy and regulatory instruments.86 Thus, in implementing the WTO rulings, China seized a great opportunity to push for reforms of the rare earths industry in line with its upgraded growth model and industrial policies. WTO compliance served as a strong political lever to overcome domestic resistance to the pursuit of various environmental policies and initiatives and their enforcement especially at the local level. Indeed, as many commentators correctly discerned, China’s export restrictions on raw materials and rare earths also served to ‘subsidise’ the development of major domestic downstream industries (ie steel, semiconductors, solar products) by maintaining low prices of these inputs at home to confer a substantial cost advantage to these industries.87 However, the elimination of the export restrictions may not necessarily increase the financial burdens of the downstream industries which may be subsidised or supported through other means. As a general position, the Chinese Government wants to see an increase in the price of rare earths by ensuring the price internalises both private and social costs of the production of rare earths.88 In addition, the government also holds the view that the removal of the export restraints would help curb the rampant smuggling of rare earths.89 Overall, China’s compliance with the WTO rulings was in its own best interest. D.  Challenges and Implications The significance of the WTO rulings in China – Raw Materials and China – Rare Earths goes beyond inducing China’s compliance. The rulings dealt with some of the most fundamental and sensitive issues relating to states’ economic 85 See, eg, 《关于实施稀土、钨、钼资源税从价计征改革的通知》(2015) [Notice on the Reform of Taxes on Rare Earths, Tungsten and Molybdenum Based on Their Prices 2015], Notice No 52 of the MOF and the SAT, issued on 30 April 2015, effective on 1 May 2015; 《和公告》(2016) [Announcement on  the ‘Standard Conditions for the Rare Earth Industry (2016 Version)’ and the ‘Measures for the Adminis­tration of the “Standard Conditions for the Rare Earth Industry”’ 2016], Circular No 31 of the Ministry of Industry and Information Technology (MIIT), issued on 30 June 2016, effective on 1 July 2016. For policy recommendations, see Brigid Gavin, ‘Sustainable Development of China’s Rare Earth Industry within and without the WTO’ (2015) 49(3) Journal of World Trade 495. 86 See Chenxi Wang, ‘WTO Rare Earths Case’s Influence on China’s Domestic Regulatory Changes’, (2018) 52(2) Journal of World Trade 307, 321–27. 87 See Marco Bronckers and Keith Maskus, ‘China – Raw Materials: A Controversial Step Towards Evenhanded Exploitation of Natural Resources’, (2014) 13(2) World Trade Review 393, 402–4. 88 See above n 84. 89 See Wang, above n 86, 318–19.

86  China’s Regulation of Exports and Implementation of WTO Rulings sovereignty over natural resources and prerogative rights to prevent the depletion of these resources and protect the environment. It is, therefore, important to understand the implications of the rulings for China’s regulatory activities in the raw materials and rare earths industries in order to comprehend China’s regulatory development and the challenges for WTO Members and the DSM. While the rulings correctly condemned China’s export restrictions, they left flexibilities for China to pursue the chosen conservation and environmental goals. The rulings do not constitute a de facto ban on the use of export restrictions for these objectives. As both the panel and the Appellate Body observed, ‘Article XX(g) … does not exclude, a priori, export quotas or any other type of measure from being justified by a WTO Member pursuing the conservation of an exhaustible natural resource’.90 This observation should also apply to Article XX(b). Thus, the WTO findings merely suggest that given the state of China’s regulations and law enforcement in pursuing the declared objectives at the time of the disputes, export restrictions especially export quotas were not a justified instrument in that pursuit. Policy objectives and policy instruments used for the pursuit of the objectives are distinct but closely interrelated. While a declared level of protection warrants the use of certain policy instruments, the chosen instruments reflect and justify the genuineness of the protection level. Consistent with existing WTO jurisprudence, the WTO rulings in the two disputes did not accept the level of protection claimed by China at its face value but examined China’s regulatory framework as a whole in terms of its effectiveness of combating pollution and natural resources depletion. It was found that the framework was ineffective to achieve the claimed level of protection given the problems relating to low resource tax, poor enforcement of production quotas, smuggling, etc.91 Evidence also demonstrated that despite China’s regulatory efforts and the imposition of export restraints, the production and consumption of rare earths had been on the rise in these past years due to illegal extraction and production and lax enforcement.92 These facts suggest that the actual level of protection that China achieved was lower than the claimed level and hence, it did not warrant the use of export quotas being the most trade-restrictive instrument. However, the tribunals did not rule out the possibility that export quotas may become a necessary instrument to pursue the objectives once China’s regulatory framework has been strengthened and duly enforced to attain a higher level of protection. In other words, the higher the genuine level of protection and the more rigid and effective of domestic regulations in coping with environmental and conservation problems, the more likely export quotas are to become necessary as fewer alternative means may be equally effective to achieve the same level of protection. In this connection, it must be noted that it is unnecessary for China to

90 Appellate

Body Report, above n 50, para 5.162. Karapinar, above n 12, 401–3. 92 See Liu and Maughan, above n 81, 994. 91 See

China – Raw Materials and China – Rare Earths  87 have exhausted all possible policy instruments before it can resort to export quotas. Nor does China need to provide concrete figures on how much contributions export quotas actually make to the objectives. In Brazil – Retreaded Tyres, Brazil’s import ban successfully passed the scrutiny of Article XX(b) because the ban had become one of the key elements of the entire Brazilian scheme to reduce waste tyres.93 In endorsing the justifiability of the ban, the Appellate Body treated qualitative reasoning as sufficient evidence and did not consult any quantitative evidence relating to the actual contribution of the ban to the chosen objective.94 Moreover, despite the availability of other alternative measures, the Appellate Body treated these measures as being complementary to rather than substitutable for the import ban as they were unable to attain the level of protection the ban sought to achieve.95 The same reasoning applies here. Thus, for China to re-introduce the export quotas, it would be sufficient if China can establish qualitatively that the quotas have become an essential or even indispensable element of a comprehensive regulatory scheme which is designed and effective to significantly reduce the extraction of rare earths and pollution. The above is not intended to suggest that China should resort to export quotas when they become WTO-justifiable. As a general economic principle, the most efficient instrument to address a domestic externality or domestic policy objective would be a domestic measure targeting the externality or the objective at its source.96 Trade measures – export quotas or export duties in our case – tend to be sub-optimal as they create inefficiencies in global resource allocation as well as production and economic benefits for domestic interest groups.97 Given China’s reliance on export-oriented growth, China also has a strong interest in avoiding the use of export restraints which could ‘create additional volatility in global markets and damage global welfare.’98 It follows that China should try not to use export restraints in the pursuit of the objectives if it has other domestic alternative means equally effective at its disposal. Even when export restraints become necessary for China’s regulatory pursuits, export duties are an economically preferable instrument than export quotas as they are more transparent and less trade-restrictive. In this connection, the WTO tribunals made a fundamental mistake in the two disputes in denying 93 Appellate Body Report, Brazil – Measures Affecting Imports of Retreaded Tyres (WT/DS332/ AB/R, adopted 17 December 2007), paras 153–54. [hereinafter Brazil – Retreaded Tyres]. 94 For a critique of the Appellate Body’s rulings in this regard, see Chad Bown and Joel Trachtman, ‘Brazil – Measures Affecting Imports of Retreaded Tyres: A Balancing Act’, (2009) 8(1) World Trade Review 85, 125–26. 95 See Appellate Body Report, above n 93, paras 172–74. 96 See Jagdish N Bhagwati, ‘The Generalized Theory of Distortions and Welfare’ in Jagdish N Bhagwati et al (eds), Trade balance of payments and growth: papers in International E ­ conomics in Honor of Charles P Kindleberger (Amsterdam, North-Holland Publishing Co, 1971) 69–90; Max W Corden, Trade Policy and Economic Welfare, 2nd ed (Oxford, Clarendon Press,1997). 97 See Liu and Maughan, above n 81, 975. 98 See Karapinar, above n 12, 405.

88  China’s Regulation of Exports and Implementation of WTO Rulings China’s right to invoke Article XX to justify the use of export duties to pursue the chosen objectives. This denial has created irrational and unjustifiable asymmetry in terms of policy spaces available to China as opposed to other WTO Members and in terms of policy justifications available for export duties as opposed to other WTO-regulated policy instruments.99 Export duties have been one of the policy instruments prevalently employed by WTO Members for various regulatory objectives ranging from revenue-raising and food security to environmental protection and conservation of natural resources.100 The WTO tribunals’ rejection of China’s right to use export duties for the same policy objectives has constituted an unjustified encroachment on China’s domestic autonomy. From an institutional perspective, “[d]enying a member the mere right to invoke generally accepted public policies reflects badly on an organisation like the WTO, and tarnished its legitimacy.”101 More significantly, the rulings have made it impossible for China to use export duties for any legitimate regulatory purposes, thereby incentivising China to resort to the least efficient and most trade-restrictive-and-distortive means, namely, export quotas for these purposes. Therefore, it is submitted that the WTO tribunals have misplaced the focus of their legal analysis in China – Raw Materials and China – Rare Earths. They should have adopted a more flexible and deferential interpretation of whether Article XX should be made available to a particular policy instrument employed by a particular Member, then focusing on examining whether the contested measures can pass the legal requirements of Article XX. The analysis above suggests that China is likely to continue to test the limits of WTO rules and the DSM in terms of its regulatory freedom in pursuing conservation and environmental goals in the raw materials and rare earths industries. As discussed above, it would be easy for China to re-introduce the export restraints which are instituted through temporary measures that are updated and issued on an annual basis. In 2016, merely one year after China’s implementation of the WTO rulings, the US and the EU, in two separate disputes, brought the same Chinese measures to the DSM claiming that China has continued to impose WTO-illegal export restrictions on various forms of antimony, chromium, cobalt, copper, graphite, indium, lead, magnesia, talc, tantalum, and tin.102 These raw materials were not covered in the past two disputes. However, given the past disputes, it is reasonable to predict that the key issue in the new disputes will not be findings of violations but will be whether the export quotas are justifiable under the GATT exceptions given 99 See Bronckers and Maskus, above n 87, 399–402; Baroncini, above n 57, 58–59. 100 See Jeonghoi Kim, ‘Recent Trends in Export Restrictions on Raw Materials’ in OECD, The Economic Impact of Export Restrictions on Raw Materials (Paris, OECD Publishing, 2010) 15–20. 101 See Bronckers and Maskus, above n 87, 402. 102 China – Export Duties on Certain Raw Materials, Request for Consultations by the United States (WT/DS508/1, 14 July 2016); China – Duties and Other Measures Concerning the Exportation of Certain Raw Materials, Request for Consultations by the European Union (WT/DS509/1, 25 July 2016).

Conclusion  89 China’s continuous regulatory activities in the raw materials and rare earths industries. The new disputes demonstrate China’s growing sophistication in leveraging the flexibility of the DSM. While China did repeat the same WTOillegal action, this may not necessarily be seen as ‘bad faith’ as the action may represent China’s genuine belief that export quotas have become an essential element of a more developed regulatory framework for the accomplishment of the environmental goals.103 For the Chinese Government, the new disputes would not only allow an additional amount of time for it to overcome domestic political resistance to further reforms in the industries concerned, but may also facilitate the implementation of reforms. For the WTO judges, the key challenge would be to determine how to balance the trade and non-trade values at stake in a way that pays due deference to China’s domestic autonomy and avoids over-reaching of WTO rules and judicial activism. This challenge has become more acute as the WTO tribunals are dealing with a more comprehensive and complex regulatory framework. In this connection, export duties, as a possible means to pursue the conservation and environmental objectives, are automatically unavailable to China. This takes one instrument from the list of less-trade-restrictive alternative means. In a more general sense, reform of the DSM seems to be necessary to address disputes with identical or almost identical facts, measures, and claims so as to simplify the judicial procedure and reduce the time that a defaulting Member may have to maintain WTO-unlawful measures. Alternatively, the defective design of the DSM, which does not allow for retrospective remedies and hence leaves a gap for temporary breach, will need to be corrected.104 However, it is important to realise that the DSM’s ‘free pass’ for temporary breach may be exploited by all WTO Members and have already been utilised by the other major users of the system.105 IV. CONCLUSION

Like China’s compliance in the WTO disputes over its regulation of imports as discussed in Chapter 3, China’s implementation of the WTO rulings in China – Raw Materials and China – Rare Earths was timely and satisfactory. While reputational costs of non-compliance and the simple implementation process played a positive role in China’s observance of WTO rulings, China’s major incentive was to leverage its WTO obligations to promote domestic reforms of 103 For arguments for the necessity of the export restrictions for China’s environmental objectives even before the more recent regulatory development, see Ying, above n 81, 128–31. 104 See generally Mark Wu, ‘China’s Export Restrictions and the Limits of WTO Law’ (2017) 16(4) World Trade Review 673. 105 One of the well-known examples concerns the US practice of ‘zeroing’ in anti-dumping actions and repetitive breach of the WTO anti-dumping rules. See generally Thomas J. Prusa and Luca Rubini, ‘United States – Use of Zeroing in Anti-Dumping Measures Involving Products from Korea: It’s déjà vu All Over Again’ (2013) 12(2) World Trade Review 409.

90  China’s Regulation of Exports and Implementation of WTO Rulings the raw materials and rare earths industries in pursuit of upgraded industrial policies, environmental goals, and sustainable development. China’s comprehension of the limits of the WTO rulings and continuous efforts to change its regulatory framework in response to the rulings is a perfect demonstration of its growing sophistication in the DSM. While the two disputes and the WTO rulings are important in many aspects, they merely touched upon Chinese measures of a temporary nature. Not long after China’s implementation, new measures of the same kind have been re-imposed on a group of different raw materials resulting in new WTO disputes. Such repetitive breach reveals one of the major weaknesses of the DSM as to the lack of retrospective remedies which provides room for temporary breach until WTO-illegal measures are brought into conformity with WTO rules. This weakness has been exploited by many major players in the system before China learned the ‘trick’ in more recent disputes. It calls for reform of the DSM by either introducing retrospective remedies or simplifying the WTO adjudicative procedures in cases involving the same facts, breaches and claims.

5 China’s Regulation of Trade in Services and Implementation of WTO Rulings I. INTRODUCTION

T

his chapter discusses two WTO disputes in which China’s regulation of trade in services was found to be incompatible with the General Agreement on Trade in Services1 (GATS) and consequently China was required to implement the WTO rulings. As flagged in Chapter 1, the disputes are China – Publications and Audiovisual Products (which also involved issues on China’s regulation of trade in goods as discussed in Chapter 3) and China – Electronic Payment Services. Trade in services differs from trade in goods in many aspects. As far as trade barriers are concerned, the most significant difference is perhaps that services trade is not subject to tariffs but mainly to non-tariff barriers especially domestic regulations.2 Such regulations may be imposed on services trade in general (such as non-discrimination) and on matters (such as market access) relating to individual service sectors. Moreover, unlike trade in goods which usually does not require the movement of goods suppliers, trade in services is more likely to involve the movement of service providers across the border. Thus, domestic regulations on foreign investment (ie when a foreign company seeks to establish a commercial presence and provide services in a host country) and the movement of natural persons (ie when a foreign individual seeks to enter and provide services in a host country) may also constitute barriers to trade in services. In addition, compared to the goods industry, the services industry often involves more politically sensitive sectors that are generally treated as providing public services or ‘classical domains of government ownership and control given their

1 General Agreement on Trade in Services, 15 April 1994, Marrakesh Agreement Establishing the World Trade Organization, annex 1B, 1869 UNTS 183, 33 ILM 1167 (1994) [hereinafter GATS]. 2 Aik Hoe Lim and Bart De Meester, ‘An Introduction to Domestic Regulation and GATS’ in Lim and Meester (eds), WTO Domestic Regulation and Services Trade: Putting Principles into Practice (Cambridge, Cambridge University Press, 2014) 1.

92  China’s Regulation of Trade in Services & WTO Rulings infrastructural importance and the perceived existence, in some cases, of natural monopoly situations.’3 Accordingly, the WTO framework for disciplining barriers to trade in services, as codified in the GATS, provides for general obligations (such as the most-favoured nation (MFN) rule4 and transparency5) and sector-specific rules (such as those on domestic regulation6 and monopolies7). Moreover, the GATS requires Members to undertake specific commitments relating to market access and national treatment (NT) under service sectors listed in their individual ‘Schedule of Specific Commitments’ (GATS Schedule). A GATS Schedule typically provides a list of sectors and subsectors, and a Member’s commitments and limitations on market access and NT under each sector or subsector. The commitments and limitations contain horizontal ones (which apply to all listed sectors) and sectoral ones, all scheduled with regard to each of the four modes of service supply. These modes are: (1) Cross-Border Supply (ie  services provided remotely by suppliers in one Member via electronic means, the post, distance learning, etc to clients in another Member); (2) Consumption Abroad (ie  ­customers from one Member enter the territory of another Member to obtain services); (3) Commercial Presence (ie services suppliers of one Member establish a presence in the territory of another Member to provide services); and (4) Presence of Natural Persons (ie persons of one Member enter the territory of another Member to supply services). In addition, internal regulations that do not fall within the market access and NT commitments may also affect trade. The multilateral disciplines on domestic regulation do not require regulatory harmonisation and are confined to addressing the adverse impact of such regulation on trade.8 However, rules in major regulatory areas (eg licensing requirements and procedures, qualification requirements and procedures, and technical ­standards) are still being developed,9 although positive outcomes have been achieved in certain sectors.10 Overall, GATS disciplines on domestic ­regulation remain

3 WTO, Trade in Services Division, ‘The General Agreement on Trade in Services: An Introduction’ (31 January 2013) 2, available at www.wto.org/english/tratop_e/serv_e/gsintr_e.pdf. Also see Panagiotis Delimatsis, International Trade in Services and Domestic Regulation: Necessity, ­Transparency, and Regulatory Diversity (Oxford, Oxford University Press, 2007) 66. 4 GATS, above n 1, art II. 5 ibid, art III. 6 ibid, art VI:5. 7 ibid, art VIII. 8 ibid, art VI; see also Lim and Meester, ‘An Introduction to Domestic Regulation and GATS’ in Lim and Meester (eds), above n 2, 8–9. 9 GATS, above n 1, art VI:4. For the progress of the negotiations, see WTO, Working Party on Domestic Regulation, Disciplines on Domestic Regulation pursuant to GATS Art VI:4 – Chairman’s Progress Report (S/WPDR/W/45, 14 April 2011). 10 WTO, Working Party on Professional Services, Disciplines on Domestic Regulation in the Accountancy Sector (S/WPPS/W/21, 30 November 1998). These disciplines were adopted by the Council for Trade in Services on 14 December 1998, see WTO, Trade in Services, Decision on Disciplines Relating to the Accountancy Sector (S/L/63, 15 December 1998). See also Lim and Meester, ‘An Introduction to Domestic Regulation and GATS’ in Lim and Meester (eds), above n 2, 10–12.

China’s Regulation of Trade in Services  93 limited, thereby leaving considerable room for Members to adopt measures for protectionist or non-protectionist objectives.11 In this connection, the GATS recognises that domestic regulation is necessary for a variety of legitimate policy objectives12 and allows exceptions to the rules accordingly.13 Against this backdrop, this chapter proceeds as follows. Section II offers a brief overview of China’s regulatory regime in the service industry, its WTO commitments on trade in services, and its observance of the commitments. Sections III and IV discuss the two disputes respectively including the WTO rulings, China’s approach to achieving WTO-compliance and the reasons behind it, and implications for WTO Members and the DSM. Section V concludes. II.  CHINA’S REGULATION OF TRADE IN SERVICES

The WTO’s approach to liberalising services trade provides a useful context for discussing China’s regulatory framework for trade in services. However, a comprehensive discussion is unpragmatic in this book given the complex web of laws and regulations in a vast range of service sectors. Generally speaking, China has continuously liberalised its service industry in implementing its WTO commitments, in line with its market-oriented reform and opening-up policy, and more recently in pursuit of a new model of growth in furtherance of the development of a strong service and innovation-based economy.14 The degree of liberalisation in a WTO Member’s service industry is largely determined by the specific commitments inscribed in the Member’s GATS Schedule. Overall, China’s specific commitments achieve a higher level of openness than those of many other WTO Members including the developed ones.15

11 See Working Party on Domestic Regulation, Regulatory Issues in Sectors and Modes of Supply (S/WPDR/W/48, 13 June 2012) 7–65. Also see generally Martin Roy, ‘Charting the Evolving Landscape of Services Trade Policies: Recent Patterns of Protection and Liberalisation’ in Sauve and Roy (eds), Research Handbook on Trade in Services (Cheltenham, Edward Elgar Publishing, 2016) 25–41. 12 GATS, above n 1, Preamble. Also see WTO, Working Party on Domestic Regulation, above n 11, 3–5. 13 See, eg, GATS, above n 1, art XIV. 14 See, eg,《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》 (2016) [Thirteenth Five-Year Plan for National Economic and Social Development of the People’s Republic of China (2016–2020)] promulgated on 17 March 2016, available at www.xinhuanet.com/politics/2016lh/201603/17/c_1118366322.htm. For discussions of the growth of China’s services sector and its contributions to China’s economic development, see generally Margit Molnar and Wei Wang, ‘A  Snapshot of China’s Service Sector’ (2015) OECD Economics Department Working Papers No 1217, 5–34, available at www.oecd-ilibrary.org/a-snapshot-of-china-s-service-sector_5js1j19lhbkl.pdf?itemId=%2F content%2Fpaper%2F5js1j19lhbkl-en&mimeType=pdf; Wei Wang et al, ‘Beyond Manufacturing: Developing the Service Sector to Drive Growth in the PRC’ (2016) Analysis from the East-West Center No 124, 1–8, available at www.eastwestcenter.org/system/tdf/private/api124.pdf?file=1&type= node&id=35640. 15 For China’s GATS Schedule, see WTO, Report of the Working Party on the Accession of China, Addendum – Schedule CLII – The People’s Republic of China, Part II – Schedule of

94  China’s Regulation of Trade in Services & WTO Rulings This has led some to observe that ‘one of the most closed services markets has promised to become one of the most open.’16 More specifically, China’s commitments compare favourably with those of other country groups in terms of the number of covered sectors, the coverage of market access commitments, and the breadth and depth of NT commitments.17 These commitments have contributed to the progressive dismantling of various barriers to services trade such as discrimination, restrictions on entry and foreign ownership, arbitrary decisionmaking, non-transparency, etc.18 In addition, China granted market access to foreign services providers in some of the most protected and sensitive sectors such as telecommunications, financial services (eg banking and insurance), and distribution services.19 Consistent with its overall level of openness, China’s commitments in these sectors are also among the most far-reaching under the WTO.20 Like in the goods regime, China put enormous efforts in bringing its regulatory regime for services into conformity with WTO obligations. In general, the Foreign Trade Law 1994 (as amended) provides the basis for China to grant market access and NT to foreign services suppliers pursuant to China’s commitments under international treaties, and authorises the State Council and its responsible ministries or departments (eg the Ministry of Commerce (MOFCOM)) to formulate and implement relevant regulations and rules.21 With regard to cross-border supply (ie Mode 1), China committed to not impose any restrictions under most of the listed sectors. In a few sectors such as financial and environmental services, China’s commitments are limited except for certain areas of services, meaning that China maintains restrictions on crossborder supply in these sectors but for the scheduled exceptions. In the rest of the covered sectors, China’s commitments remain ‘unbound’ (ie no commitments)

Specific Commitments on Services & List of art II MFN Exemptions (WT/ACC/CHN/49/Add.2, 1 October 2001) [hereinafter China’s GATS Schedule]. 16 Aaditya Mattoo, ‘China’s Accession to the WTO: The Services Dimension’ (2003) 6(2) Journal of International Economic Law 299, 299. 17 ibid, 301–5. 18 ibid, 320–26. 19 Nicholas R Lardy, Integrating China into the Global Economy (Washington DC, The B ­ rookings Institution, 2002) 66–73; Zhenyu Sun, ‘China’s Experience of 10 Years in the WTO’ in Ricardo Melendez-Ortiz et al (eds), A Decade in the WTO: Implications for China and Global Trade Governance (Geneva, ICTSD, 2011) 12; Dene Yeaman, ‘The Impact of China’s WTO Accession Upon Regulation of the Distribution and Logistics Industries in China’ in Cass, Williams and Barker (eds) China and the World Trading System: Entering the New Millennium (Cambridge, Cambridge University Press, 2003) 238–39. 20 See Lardy, above n 19, 66–73; John Whalley, ‘Liberalisation in China’s Key Service Sectors Following WTO Accession: Some Scenarios and Issues of Measurement’ NBER Working Paper Series 10143, 9–17; Yeaman, ‘The Impact of China’s WTO Accession Upon Regulation of the Distribution and Logistics Industries in China’ in Cass, Williams and Barker (eds), above n 19, 239–40. 21 《中华人民共和国对外贸易法》(1994) [Foreign Trade Law of the People’s Republic of China 1994], adopted by the seventh Session of the Standing Committee of the eighth National People’s Congress on 12 May 1994, effective on 1 July 1994; as amended on 6 April 2004, effective on 1 July 2004, and subsequently amended on 7 November 2016, effective on the same date, arts 24–26.

China’s Regulation of Trade in Services  95 or ‘unbound due to lack of technical feasibility’ (ie because the service supply under this mode is regarded as being technically infeasible). This suggests that China either imposes restrictions or retains the right to do so in these sectors. Distribution services offer a good example in this regard. That China did not make any commitments under Mode 1 likely reflects its need for flexibility to regulate the fast-growing e-commerce industry including online distribution in wholesaling and retailing.22 Another example is education services. The lack of commitment under Mode 1 reflects China’s reluctance to recognise cross-border distance and online education23 due to concerns about quality and the need to develop a comprehensive regulatory framework for transnational distance education.24 Under Mode 2, China’s commitments are ‘none’ (ie no restrictions) in almost all sectors and sub-sectors. This is in line with the common practice that home or service importing countries do not usually impose regulatory restrictions under Consumption Abroad which concerns consumers not service suppliers.25 Under Mode 3, China committed to lift an array of limitations on the entry and operation of foreign investment. The principal legislations on foreign investment require foreign investors to take certain forms (eg Sino-foreign joint ventures (JVs)) and impose conditions on, for example, foreign equity, performance, MOFCOM approval, etc.26 To adhere to its WTO commitments, China removed or relaxed some of these restrictions through the amendments of the  laws.27 22 See, eg, Bruno Grangier, ‘Online Distribution – Part 1: Are You Complying With the New Regulations in China?’ (Leaf-Legal, 11 June 2016), available at www.leaf-legal.com/ online-distribution-part-complying-new-regulations-china/. 23 See Chinese Service Center for Scholarly Exchange (CSCSE) Notice on the Verification of Overseas Academic Degrees and Diploma, available at . The CSCSE is the national professional accrediting authority under the Ministry of Education, providing a wide range of services for Chinese students studying overseas and foreign students studying in China. Under the CSCSE, the Overseas Academic Credential Evaluation Office is responsible for verifying foreign academic higher education qualifications for official recognition in China. 24 For a discussion of China’s liberalisation of education services under the WTO and FTAs, see Junfang Xi, Weihuan Zhou and Heng Wang, ‘The Impact of the China-Australia Free Trade Agreement on Australia's Education Exports to China: A Legal and Economic Assessment’ (2018) 41(12) The World Economy 3503. 25 See WTO, Council for Trade in Services, Structure of Commitments for Modes 1, 2 and 3 (S/C/W/99, 3 March 1999) 2. Take education services as an example, see APEC Secretariat, ‘Measures Affecting Cross Border Exchange and Investment in Higher Education in the APEC Region’ (May 2009) Asia-Pacific Economic Cooperation, 23. 26 See《中华人民共和国中外合资经营企业法》 (1979) [Law of the PRC on Sino-Foreign Equity Joint Ventures 1979], adopted by the second session of the fifth NPC on 1 July 1979, effective on 8 July 1979; amended on 4 April 1990, 15 March 2001, and 3 September 2016, effective on 1 O ­ ctober 2016;《中华人民共和国中外合作经营企业法》 (1988) [Law of the PRC on Sino-Foreign Contractual Cooperative Enterprises 1988], adopted by the fifth session of the seventh NPC on 13  April 1988, effective on the same date; amended on 31 October 2000, and 7 November 2016, effective on the same date;《中华人民共和国外商独资企业法》 (1986) [Law of the PRC on Foreign Wholly Owned Enterprises 1986], adopted by the fourth session of the sixth NPC on 12 April 1986; amended on 31 October 2000, and on 3 September 2016, effective on 1 October 2016. 27 See Julia Ya Qin, ‘Trade, Investment and Beyond: The Impact of WTO Accession on China’s Legal System’ (2007) 191 The China Quarterly 720, 728–32.

96  China’s Regulation of Trade in Services & WTO Rulings More recently, China has been undertaking a fundamental reform of its foreign investment regime unilaterally.28 Amongst other changes, the reform has made progress in the intended transformation from an approval-based system to a notification-based system for foreign investment.29 Moreover, while limitations or prohibitions on foreign investment used to apply to a long list of sectors, both the restrictions and the number of sectors have been gradually reduced over time.30 Lately, as a result of the unilateral reform, China has adopted a n ­ egative list approach to regulating foreign investment which significantly simplifies and further relaxes the barriers to the admission of foreign investment.31 In addition, the reform is also aimed at eliminating the restrictions on the legal form of investment and establishing a uniform regime for foreign investment. Unlike the other modes, China’s commitments under Mode 4 are confined to horizontal ones (as opposed to sector by sector) with entry permissions granted to certain personnel of foreign companies only (such as senior management, executives, or specialists) and subject to various conditions. China’s schedule and commitments under this mode represent the standard practice of WTO Members, which reflects the general concerns over and the political sensitivity of the temporary movement of foreign natural persons.32 Given the limited commitments, China, like other Members, is free to impose restrictions or requirements on visa, work-related permits, eligibility and qualifications, d ­ urations of stay, labour market test, residency, application procedures and fees, etc, which are also common in practice.33

28 《中华人民共和国外商投资法（草案）》 [Foreign Investment law of the PRC], consultation draft released by the National People’s Congress on 26 December 2018, available at www.npc.gov.cn/ COBRS_LFYJNEW/user/Law.jsp. 29 《关于修改〈外商投资企业设立及变更备案管理暂行办法〉的决定》 (2017) [Decision of the Ministry of Commerce to Amend the Interim Measures for Record-filing Administration of the Establishment and Change of Foreign-invested Enterprises], Order No 2 of the Ministry of Commerce (MOFCOM), promulgated on 30 July 2017, effective on the same date. 30 《外商投资产业指导目录》[Catalogue of Industries for Guiding Foreign Investment], promulgated by the State Planning Commission (SPC), State Economic and Trade Commission (SETC) and the Ministry of Foreign Trade and Economic Cooperation (MOFTEC), effective on 20 June 1995; amended in 1997 (by Order No 9 of the SPC, the SETC and the MOFTEC), in 2002 (by Order No 21 of the SPC, the SETC and the MOFTEC), in 2004 (by Order No 24 of the National Development and Reform Commission (NDRC) and the MOFCOM), in 2007 (by Order No 57 of the NDRC and the MOFCOM), in 2011 (by Order No 12 of the NDRC and the MOFCOM), in 2015 (by Order No 12 of the NDRC and the MOFCOM, effective on 10 April 2015), and in 2017 (by Order No 4 of the NDRC and the MOFCOM, effective on 28 July 2017). 31 《外商投资准入特别管理措施（负面清单）》(2018) [Special Administrative Measures on Access to Foreign Investment (Negative List) 2018], issued by Order No 18 of the NDRC on 28 June 2018, available at www.ndrc.gov.cn/zcfb/zcfbl/201806/t20180628_890730.html. 32 See Roy, ‘Charting the Evolving Landscape of Services Trade Policies: Recent Patterns of Protection and Liberalisation’ in Sauve and Roy (eds), above n 11, 30. See also WTO Council for Trade in Services, Presence of Natural Persons (Mode 4), Background Note by the Secretariat (S/C/W/301, 15 September 2009) 20–24. 33 See WTO Council for Trade in Services, above n 32, 18–20.

China’s Regulation of Trade in Services  97 Despite China’s efforts to observe WTO obligations and progressively liberalise its service industry, Members have continued to question China’s r­ egulatory activities. In 2007, at the end of the transitional period for China to phase out all scheduled limitations on market access and NT, USTR’s China Compliance Report claimed that China had failed to lift many barriers in a broad range of sectors such as distribution services, financial services, telecommunications, legal services, etc.34 Most of these concerns remain today according to the USTR’s China Compliance Report 2017.35 However, these concerns are legitimate only when China’s regulations are explicitly in conflict with its GATS commitments. Yet, in most (if not all) cases, the WTO-consistency of Chinese measures is highly debatable and requires interpretation and adjudication by WTO tribunals in order to determine whether, in fact, China has failed to honour GATS commitments.36 While China’s GATS commitments go beyond those of many other WTO Members, they do not cover all market access restrictions and discriminatory conducts. For example, to provide legal services in China, foreign law firms must establish a representative office and must not engage in Chinese legal practice.37 Limitations on forms of investment, ownership, business scope, etc continue to apply to foreign banks.38 Furthermore, given the limits of the existing GATS disciplines on domestic regulation, regulatory barriers continue to develop in different services sectors. Thus, the current WTO disciplines on trade in services are inadequate in pushing a comprehensive reform of China’s service industry. Pending further development of the GATS disciplines, WTO Members including China enjoy considerable latitude in ­regulating their service industry. In reality, domestic regulations are widespread in all WTO Members (as noted earlier) and constitute a major source of trade disputes. To date, WTO

34 USTR, 2007 Report to Congress on China’s WTO Compliance (11 December 2007) 85–104, available at https://ustr.gov/sites/default/files/asset_upload_file625_13692.pdf. 35 USTR, 2017 Report to Congress on China’s WTO Compliance (January 2018) 118–37, available at https://ustr.gov/sites/default/files/files/Press/Reports/China%202017%20WTO%20Report.pdf. 36 For an analysis of China’s commitments on banking services and the WTO-consistency of China’s regulations in the sector, see Daniel C Crosby, ‘Banking on China’s WTO Commitments: “Same Bed, Different Dreams” in China’s Financial Services Sector’ (2007) 11(1) Journal of International Economic Law 75. For a more comprehensive discussion of China’s implementation of GATS commitments and outstanding issues, see Xin Zhang, Implementation of the WTO Agreements in China (London, Simmonds & Hill Publishing, 2005) 181–276. 37 《外国律师事务所驻华代表机构管理条例》(2001) [Regulations on Representative Offices of Foreign Law Firms in China 2001], Decree No 338 of the State Council, promulgated on 22 ­December 2001, effective on 1 January 2002. For a more detailed discussion on the restrictions on foreign legal practices, see Weihuan Zhou and Junfang Xi, ‘China’s Liberalisation of Legal Services under the ChAFTA: Market Access or Lack of Market Access for Australian Legal Practices’ (2017) 51(2) Journal of World Trade 233, 251–55. 38 See, eg, Christina Tao, ‘China’s Financial Regulations: Are Other WTO Members’ Concerns Realistic or Overcritical?’ (2017) 22(1) Deakin Law Review 139, 141–61; Marcia Don Harpaz, ‘China’s WTO Compliance in Banking Services: Looking at the Big Picture’ in Zeng and Liang (eds) China and Global Trade Governance: China’s First Decade in the World Trade Organization (London, Routledge, 2013) 69–102.

98  China’s Regulation of Trade in Services & WTO Rulings cases have concentrated on the interpretation of Members’ specific commitments.39 III.  CHINA – PUBLICATIONS AND AUDIOVISUAL PRODUCTS

A. Background As explored at length in Chapter 3, one of the major issues in the China – ­Publications and Audiovisual Products case concerned China’s restrictions on trading rights particularly the right to import the covered cultural goods including reading materials, audiovisual products (including sound recordings), and films for theatrical release. The other major issue, as will be discussed below, involved China’s regulation of distribution services particularly the wholesaling and retailing of these cultural goods except for films. Distribution services used to be one of the most protected and centrallycontrolled sectors in China, and hence among the hardest to enter by foreign service suppliers. Restrictions were imposed on the form of foreign investment (ie JVs), the number and location of JVs, scope of business, products sold, etc.40 Prior to China’s WTO membership, these restrictions remained in place despite China’s gradual liberalisation of the sector in the process of economic reform and opening-up.41 To enter the WTO, China made unprecedented commitments. As far as Wholesale Trade Services (excluding salt and tobacco) and Retailing Services (excluding tobacco) are concerned, China committed to removing almost all limitations on market access by 2006 and to granting full NT to foreign-invested enterprises (FIEs) from the date of accession under Mode 3. This meant that China undertook to eliminate all the aforementioned restrictions on the admission and operation of foreign investment with very few exceptions.42 Under Annex 2 of China’s GATS Schedule, Wholesale Trade Services or wholesaling are defined as ‘the sale of goods/ merchandise to retailers to industrial, commercial, institutional, or other professional business users, or to other wholesalers and related subordinated services.’

39 See generally Eric H Leroux, ‘Twenty Years of GATS Case Law: Does It Taste Like a Good Wine?’ in Sauve and Roy (eds) Research Handbook on Trade in Services (Cheltenham, Edward Elgar Publishing, 2016) 191–215. 40 See Yeaman, ‘The Impact of China’s WTO Accession Upon Regulation of the Distribution and Logistics Industries in China’ in Cass, Williams and Barker (eds), above n 19, 240–46; Lardy, above n 19, 72–73. 41 For a summary of the regulatory development prior to China’s accession to the WTO, see Ying Fan, ‘China’s Liberalisation of Trade in Distribution Services’ (Regulatory Reforms and Liberalisation in Services: Examining Impacts on Inclusive and Sustainable Development conference, October 2010) 8–12. 42 For a discussion of China’s commitments on distribution services, see Yeaman, ‘The Impact of China’s WTO Accession Upon Regulation of the Distribution and Logistics Industries in China’ in Cass, Williams and Barker (eds), above n 19, 246–50; Lardy, above n 19, 73.

China – Publications and Audiovisual Products  99 Retailing  Services ‘consist of the sale of goods/merchandise for personal or household consumption either from a fixed location (eg, store, kiosk, etc.) or away from a fixed location and related subordinated services.’ The related subordinated services are strikingly broad covering: the whole logistical chain of related services, including inventory management; assembly, sorting and grading of bulk lots; breaking bulk lots and redistributing into smaller lots; delivery services; refrigeration, storage, warehousing and garage services; sales promotion, marketing and advertising, installation and after sales services including maintenance and repair and training services.43

This is confirmed by China’s additional commitments under wholesaling and retailing services which give permission to FIEs to distribute products manufactured in China and foreign service suppliers to provide the full range of related subordinate services. Towards this end, the major remaining limitations on market access and NT for foreign wholesale and retail services suppliers are those contemplated in China’s horizontal commitments. These include, inter alia, (1) limitations on the legal forms of foreign investors and minimum shareholding requirements in a Sino-foreign JV; (2) restriction on profit-making activities by foreign representative offices; (3) a maximum of 40 years for the commercial use of land; and (4) the permission of the existing subsidies granted to domestic services suppliers in the sectors of audiovisual, aviation and medical services. In addition, China’s commitments on Audiovisual Services (including the distribution of videos and sound recordings) are confined to permitting foreign services suppliers to establish Sino-foreign contractual JVs to engage in the distribution of audiovisual products excluding films. To implement these commitments, China revised the relevant laws to remove the covered restrictions according to the phase-in periods, leading to an exponential growth of the number of approved FIEs in the distribution services sector which as a result became one of the most liberalised and competitive services sectors in China.44 Thus, before the outbreak of the China – Publications and Audiovisual Products dispute in 2007, USTR’s China Compliance Report 2006 acknowledged the substantial progress made by China in implementing its commitments in the sector.45 However, the ‘continuing restrictions on the rights of foreign enterprises to engage in wholesale (and retail) distribution of books, newspapers, periodicals, electronic publications and audio and video products’ constituted a notable exception to China’s satisfactory compliance record and triggered the dispute.46 For the US content industries, the liberalisation of the right to import the cultural goods would not be adequate to secure market access 43 Mattoo, above n 16, 317. 44 See Fan, above n 41, 3–5, 16–7. 45 USTR, 2006 Report to Congress on China’s WTO Compliance (11 December 2006) 16, available at https://ustr.gov/archive/assets/Document_Library/Reports_Publications/2006/asset_ upload_file688_10223.pdf. 46 ibid, 19.

100  China’s Regulation of Trade in Services & WTO Rulings to the Chinese market if the restrictions on the distribution of these goods are not dismantled. B.  The Measures The dispute concerned Chinese measures relating to the distribution of reading materials and audiovisual products including sound recordings. The US ­challenged the measures as being inconsistent with China’s GATS obligations on market access and NT.47 Some of these measures were also subject to the US’s claims on trading rights (as discussed in Chapter 3), including: 1. 2. 3. 4. 5.

Foreign Investment Regulation 2002; Catalogue 2007; Several Opinions 2005; Publications Regulation 2001; and Audiovisual (Sub-)Distribution Rule 2004.

The rest were specifically relevant to China’s distribution services commitments, including: 1. Rules on the Administration of the Subscription of Imported Publications 200448 (issued by the General Administration of Press and Publication (GAPP)) (Imported Publications Subscription Rule 2004); 2. Rules on the Administration of Foreign-Invested Distribution Enterprises of Books, Newspaper, and Periodicals 200349 (jointly issued by the GAPP and the Ministry of Foreign Trade and Economic Cooperation (MOFTEC)) (Publications (Sub-)Distribution Rule 2003); 3. Rules on the Administration of Publications Market 200450 (issued by the GAPP) (Publications Market Rule 2004); 4. Rules on the Administration of Electronic Publications 199751 (issued by the GAPP) (Electronic Publications Rule 1997);

47 WTO Panel Report, China – Measures Affecting Trading Rights and Distribution Services for Certain Publications and Audiovisual Entertainment Products (WT/DS363/R, adopted 19 January 2010) [hereinafter China – Publications and Audiovisual Products], para 7.918. 48 《订户订购进口出版物管理办法》 (2004) [Rules on the Administration of the Subscription of Imported Publications 2004], Order No 27, promulgated on 31 December 2004, effective on 1 ­February 2005. 49 《外商投资图书、报纸、期刊分销企业管理办法》 (2003) [Rules on the Administration of Foreign-Invested Distribution Enterprises of Books, Newspaper, and Periodicals 2003], Order No 18, promulgated on 17 March 2003, effective on 1 May 2003. 50 《出版物市场管理规定》 (2004) [Rules on the Administration of Publications Market 2004], Order No 23, promulgated on 18 June 2004, effective on 1 July 2004. 51 《电子出版物管理规定》 (1997) [Rules on the Administration of Electronic Publications 1997], Order No 11, promulgated on 30 December 1997, effective on 1 January 1998.

China – Publications and Audiovisual Products  101 5. Interim Rules on the Administration of Internet Culture 200352 (issued by the Ministry of Culture (MOC)) (Internet Culture Rule 2003); 6. Circular on Issues of Implementation of the ‘Interim Rules on the Administration of Internet Culture’ 200353 (issued by the MOC) (Circular on Internet Culture 2003); and 7. Several Opinions on the Development and Administration of Network Music 200654 (issued by the MOC) (Network Music Opinions 2006). The WTO-illegal provisions of these measures and their revisions are discussed in sub-sections C and D below. C.  WTO Rulings All the above measures were found to contain provisions incompatible with China’s commitments under the GATS. The WTO findings of violations are set out below with a summary also provided in Table 1. i.  Distribution of Reading Materials Article 3 of the Imported Publications Subscription Rule 2004 required that imported newspapers and periodicals, and imported books and electronic publications captured by the ‘limited distribution category’ must be distributed by subscription only. Article 4 of the same measure stipulated that ‘subscription’ can only be handled by a Publication Importing Entity. As shown in Chapter 3, Article 42(2) of the Publications Regulation 2001 required Publication Importing Entities to be wholly state-owned enterprises (SOEs). Taken together, the panel found that the measures prohibited FIEs from wholesaling the imported reading materials through ‘subscription’ to commercial, industrial or institutional users, or other professional business users (ie not for personal or household consumption) while domestic wholesalers were not so restricted. This constituted a breach of China’s NT commitments under Article XVII of the GATS.55 Regarding imported books and electronic publications in the ‘non-limited distribution category’, they may be distributed by ‘sales through the market’ pursuant to Article 3 of the Imported Publications Subscription Rule 2004. 52 《互联网文化管理暂行规定》 (2003) [Interim Rules on the Administration of Internet Culture 2003], Order No 27, promulgated on 10 May 2003, effective on 1 July 2003. 53 《文化部关于实施有关问题的通知》 (2003) [Circular on Issues of Implementation of the ‘Interim Rules on the Administration of Internet Culture’ 2003], Circular No 27, promulgated on 4 July 2003, effective on the same date. 54 《文化部关于网络音乐发展和管理的若干意见》 (2006) [Several Opinions on the Development and Administration of Network Music 2006], issued on 11 December 2006, effective on the same date. 55 WTO Panel Report, above n 47, paras 7.943–981.

102  China’s Regulation of Trade in Services & WTO Rulings Such sales must be undertaken by a Publication Distribution Entity approved by the GAPP according to Articles 3 and 4 of the Publications Market Rule 2004. According to Article 16 of the measure, separate rules were applicable to FIEs and were provided by the Publications (Sub-)Distribution Rule 2003. While this measure set out the substantive and procedural requirements for the establishment of foreign-invested Publication Distribution Entities, it confined the goods eligible for distribution to books, newspapers, and periodicals published by a publishing entity authorised by the GAPP (Article 2). In the panel’s view, ­Article 16 of the Publications Market Rule 2004 and Article 2 of the Publications (Sub-)Distribution Rule 2003, operating together, prohibited foreign services providers from distributing imported reading materials. In contrast, wholly Chinese-owned entities may wholesale both domestic and imported reading materials under Publications Market Rule 2004. This amounted to a violation of the NT rule with respect to imported reading materials subject to ‘sales through the market’.56 Subsequently, the panel also found that while Article 2 of the Publications (Sub-)Distribution Rule 2003 refers to books, newspapers, and periodicals only, it had been applied to electronic publications as a general practice; hence, the same measures also prevented FIEs from engaging in the wholesale of imported electronic publications while allowing Chinese-owned entities to do so.57 Furthermore, the US challenged the Chinese measures relating to ‘master distribution’ of books, newspapers, and periodicals. Under Article 2 of the Publications Market Rule 2004, ‘master distribution’ was defined as the exclusive sale of publications by an authorised Publication Distribution Entity, and the disputants agreed to this definition.58 With respect to the services activities involved, Article 2 of the Interim Rules on the Administration of Master Distribution of Books 199159 suggested that a ‘master distribution’ entity is exclusively authorised to undertake the ‘first-level wholesale’ or resale of books purchased from a publisher to other downstream wholesalers or retailers, or directly to industrial, commercial, institutional, or other professional business users. Accordingly, the panel held that ‘master distribution’, when operated by entities other than publishers, falls within China’s GATS commitments on ‘Wholesale Trade Services.’60 Recall that Articles 3 and 4 of the Foreign Investment Regulation 2002 incorporated the Catalogue 2007 which classified foreign investment into encouraged, restricted and prohibited categories. The master distribution of the reading materials concerned fell within the ‘prohibited’ category under Article X.2 of the Catalogue 2007. Collectively, the two measures operated 56 ibid, paras 7.982–999. 57 ibid, paras 7.1078–1094. 58 ibid, para 7.1011. 59 《图书总发行管理的暂行规定》(1991) [Interim Rules on the Administration of Master Distribution of Books 1991], Order No 7 of the GAPP and the State Administration for Industry and Commerce (SAIC), promulgated on 11 May 1991, effective on the same date. 60 WTO Panel Report, above n 47, paras 7.1024–1027.

China – Publications and Audiovisual Products  103 to ban foreign investment in the master distribution of the reading materials. This was confirmed in Article 4 of the Several Opinions 2005 which set out the same restriction. Since this prohibition applied to FIEs only, it constituted a NT ­violation.61 In addition, the panel found that in cases where ‘master distribution’ involved retail of the reading materials (that is, the resale by a master distribution entity directly to end-consumers), the measures above were also in breach of China’s NT commitments on ‘Retailing Services.’62 Finally, notwithstanding the fact that the Electronic Publications Rule 1997 was repealed by the Rules on the Administration of Electronic Publishing 200863 (Electronic Publications Rule 2008) during the dispute, the panel decided to consider the WTO-consistency of the repealed measure.64 In this regard, ­Article 62 of that measure prohibited FIEs from engaging in the ‘master wholesale’ and the wholesale of electronic publications while allowing Chinese-owned enterprises to do so (as long as the prescribed conditions are satisfied). The panel accepted China’s explanation that ‘master wholesale’ had the same meaning as ‘master distribution’ but was exclusively used for electronic publications, and hence ruled that ‘master wholesale’ was covered by China’s commitments on wholesaling.65 Accordingly, the panel found a NT-violation as above.66 ii.  Conditions on FIEs in Distributing Reading Materials Where distribution activities of FIEs were permitted, Chinese measures imposed more onerous requirements on the establishment of FIEs in engaging in the distribution of reading materials. The panel found that the following requirements applicable to foreign-invested distribution entities compared less favourably than those applicable to Chinese-owned distribution entities and hence violated China’s NT commitments on wholesaling: • Article 7.4 of the Publications (Sub-)Distribution Rule 2003, which imposed a registered capital requirement of no less than 30 million RMB on foreigninvested wholesalers, whereas the minimum registered capital requirement on Chinese-owned ones was merely 2 million (Article 8.4 of the Publications Market Rule 2004);67 and • Article 7.5 of the Publications (Sub-)Distribution Rule 2003, which limited the term of operation for foreign-invested wholesalers to 30 years, while no such limitations applied to Chinese-owned wholesalers.68 61 ibid, paras 7.1033–1048. 62 ibid, paras 7.1051–1058. 63 《电子出版物出版管理规定》(2008) [Rules on the Administration of Electronic Publishing 2008], Order No 34 of the GAPP, promulgated on 21 February 2008, effective on 15 April 2008. 64 WTO Panel Report, above n 47, para 7.1065. 65 ibid, para 7.1068. 66 ibid, paras 7.1070–1074. 67 ibid, paras 7.1106–1120. 68 ibid, paras 7.1127–1141.

104  China’s Regulation of Trade in Services & WTO Rulings iii.  Distribution of Audiovisual Products Apart from the distribution of reading materials, Chinese measures on the distribution of audiovisual products were also contested. As far as sound recordings were concerned, the US’s claims focused on electronic distribution particularly through the Internet.69 As an important threshold issue, the panel conducted a thorough interpretation of China’s GATS commitments on ‘Audiovisual Services’ and found that they include the distribution of both physical and non-physical audiovisual products such as music and other sound content embedded in a physical product (eg CD or DVD) or conveyed to consumers without a physical carrier through electronic means.70 As mentioned earlier, the only limitation inscribed in China’s commitments on ‘Audiovisual Services’ is the requirement that foreign services suppliers must provide sound recording distribution services through Sino-foreign contractual JVs.71 Turning to the Chinese measures, the Internet Culture Rule 2003, which provided for an overarching regime for the production, circulation, and transmission of cultural goods (including audiovisual products), required the distribution (eg wholesaling and retailing) of these goods to be undertaken by an Internet Culture Entity approved by the MOC and the telecommunications administration (Articles  1–4). This measure did not explicitly prohibit FIEs from becoming an Internet Culture Entity to engage in internet culture activities. However, the Circular on Internet Culture 2003, as the implementing measure, mandated that applications by foreign-invested internet information service providers shall not be accepted (Article 2). This was confirmed in Article 8 of the Network Music Opinions 2006 which prohibited the establishment of foreign-invested Internet Culture Entities. The same prohibition was also found under Article 4 of the Several Opinions 2005 and Article X:7 of the ‘prohibited’ category under the Catalogue 2007. Thus, except for the Internet Culture Rule 2003, the other measures were found to be in breach of China’s NT commitments on sound recording distribution services.72 The US’s claims also covered the wholesale, retail or rental of physical audiovisual home entertainment (AVHE) products including videocassettes, VCDs and DVDs.73 Like in the case of sound recordings, the panel conducted a detailed interpretation of China’s GATS Schedule and commitments on ‘Videos, including entertainment software and (CPC83202), distribution services’ and concluded that they apply to the distribution services of the AVHE products in dispute.74 Specifically, the US firstly challenged several Chinese measures as imposing foreign equity limitations inconsistently with Article XVI:2(f) of the GATS. Unless explicitly recorded in GATS Schedules, Article XVI:2(f) prevents

69 ibid,

paras 7.1143–1153. paras 7.1170–1265. para 7.1278. 72 ibid, paras 7.1288–1312. 73 ibid, para 7.1317. 74 ibid, paras 7.1320–1349. 70 ibid, 71 ibid,

China – Publications and Audiovisual Products  105 Members from imposing ‘limitations on the participation of foreign capital in terms of maximum percentage limit on foreign shareholding or the total value of individual or aggregate foreign investment.’ The panel noted that apart from the requirement on the legal form of investment (ie contractual JVs), China’s GATS Schedule does not inscribe any limitation on foreign equity in such JVs.75 However, Article 8.4 of the Audiovisual (Sub-)Distribution Rule 2004 provided that the ‘rights and interests’ of a Chinese partner in a contractual JV must be no less than 51 per cent. China argued that ‘rights and interests’ refer to profits not shareholding.76 By consulting the other relevant Chinese laws, the panel ruled that the scope of ‘rights and interests’ was broad enough to cover equity and shareholding; hence the measure concerned violated China’s GATS commitments.77 In addition, the US alleged that Article VI:3 of the ‘restricted’ category of the Catalogue 2007, coupled with Article 8 of the Foreign Investment Regulation 2002, constituted the same breach. The panel sided with the US finding that the two measures, operating together, required a Chinese partner to hold a ‘majority share’ (ie a minimum of 51 per cent) and hence imposed the same restriction on foreign equity in breach of China’s commitments on market access.78 Turning to China’s NT commitments, the panel considered Article  1 of the Several Opinions 2005 which required a Chinese party in a contractual JV to maintain a ‘dominant position’. As the panel observed, ‘dominant position’ referred to a ‘controlling’ position in an entity, which may well be maintained without holding a majority shareholding.79 Since China’s GATS Schedule does not include any NT limitations, the panel ruled that this measure violated China’s commitments insofar as it prohibited contractual JVs in which a foreign partner holds a dominant position from engaging in the distribution of AVHE products while Chinese-owned enterprises are permitted to do so.80 Finally, like in the case of the distribution of reading materials, Article 8.5 of the A ­ udiovisual (Sub-)Distribution Rule 2004 also imposed a limitation on the operating term of Sino-foreign contractual JVs (ie up to 15 years). Applying its previous rulings, the panel found that this measure similarly constituted a NT-violation.81 On appeal, China disputed only one ruling of the panel, that is, that its GATS Schedule entry on ‘Sound Recording Distribution Services’ applies to the distribution of sound recordings in non-physical forms. The Appellate Body upheld the panel’s ruling in this regard.82 Thus, China did not challenge the

75 ibid, paras 7.1357–1358. 76 ibid, para 7.1371. 77 ibid, paras 7.1366–1376. 78 ibid, paras 7.1383–1388. 79 ibid, para 7.1392. 80 ibid, paras 7.1404–1422. 81 ibid, para 7.1425. 82 Appellate Body Report, China – Measures Affecting Trading Rights and Distribution Services for Certain Publications and Audiovisual Entertainment Products (WT/DS363/AB/R, adopted 19 January 2010), paras 338–413.

106  China’s Regulation of Trade in Services & WTO Rulings panel’s findings of all the violations; nor did China defend its measures under the general exceptions of the GATS (ie Article XIV), while it did so under the GATT in relation to trading rights as discussed in Chapter 3. Table 1  China – Publications and Audiovisual Products: Summary of China’s Violations Measures

Types of Services

Arts 3&4 of Wholesaling by Imported Publications subscription Subscription Rule 2004;

Goods Involved

Violations

Imported newspapers and periodicals, and imported books and electronic publications in the ‘limited distribution category’

Prohibiting FIEs from engaging in the services while allowing wholly Chinese-owned entities to do so

Imported books, newspapers, periodicals, and electronic publications subject to ‘sales through the market’

As above

Master distribution by wholesale or retail

Books, newspapers, and periodicals

As above

Art 62 of Electronic Publications Rule 1997

Master wholesale and wholesale

Electronic publications

As above

Art 7.4 of Publications (Sub-)Distribution Rule 2003

Wholesale

Books, newspapers, and periodicals

More onerous registered capital requirement on FIEs

Art 7.5 of Publications (Sub-)Distribution Rule 2003

As above

As above

More onerous operating term requirement on FIEs

Art 42(2) of Publications Regulation 2001. Art 16 of Publications Wholesaling by Market Rule 2004; market sales Art 2 of Publications (Sub-)Distribution Rule 2003.

Art X.2 of Catalogue 2007 with Arts 3&4 of Foreign Investment Regulation 2002; Art 4 of Several Opinions 2005.

(continued)

China – Publications and Audiovisual Products  107 Table 1  (Continued) Measures

Types of Services

Art 2 Circular on Wholesale and Internet Culture 2003; retail through the Internet Art 8 of Network

Goods Involved

Violations

Sound recordings

Prohibiting FIEs from establishing an Internet Culture Entity to engage in internet culture activities

Audiovisual home entertainment (AVHE) (ie videocassettes, video compact discs (VCDs) and digital video discs (DVDs))

Imposing an equity restriction on foreign investors or partners in a Sino-foreign contractual JV

As above

As above

Prohibiting contractual JVs where a foreign partner holds a dominant position from engaging in the distribution services

Art 8.5 of Audiovisual As above (Sub-)Distribution Rule 2004

As above

More onerous operating term requirement on FIEs

Music Opinions 2006; Art 4 of Several Opinions 2005; Art X.7 of Catalogue 2007 with Arts 3&4 of Foreign Investment Regulation 2002. Art 8.4 of Audiovisual Wholesale, (Sub-)Distribution retail, and Rule 2004; rental Art VI.3 of Catalogue 2007 with Art 8 of Foreign Investment Regulation 2002 Art 1 of Several Opinions 2005

D.  China’s Implementation and an Assessment To implement the WTO rulings, China amended or repealed a number of measures. The implementation measures included: 1. Catalogue of Industries for Guiding Foreign Investment 201183 (Catalogue 2011); 83 《外商投资产业指导目录》 (2011) [Catalogue of Industries for Guiding Foreign Investment 2011], Order of the NDRC and the MOFCOM (No 12), promulgated on 24 December 2011, effective on 30 January 2012.

108  China’s Regulation of Trade in Services & WTO Rulings 2. Regulations on the Administration of Publications 201184 (Publications Regulation 2011); 3. Rules on the Administration of the Publications Market 201185 (Publications Market Rule 2011); 4. Electronic Publications Rule 2008; and 5. Circular on the Implementation of the New ‘Interim Rules on the Administration of Internet Culture’ 201186 (published by the MOC) (Circular on Internet Culture 2011). i.  Publications Regulation 2011 With respect to the distribution of reading materials through ‘subscription’, China’s major implementation action was to remove the requirement that a Publication Importing Entity must be a wholly SOE under Article 42 of the Publications Regulation 2011, which was discussed in Chapter 3. This removed the discriminatory treatment in dispute as FIEs may now apply for the establishment of a Publication Importing Entity to engage in wholesaling the reading materials through ‘subscription’. Consequently, for this specific violation, it was unnecessary for China to make any changes to Articles 3 and 4 of the Imported Publications Subscription Rule 2004. However, China did modify the categories of reading materials for distribution purposes under the Imported Publications Subscription Rule 2011.87 The categories included: (1) imported newspapers, periodicals, books, and ­electronic publications in the ‘limited distribution category’ must be distributed by ‘subscription’; (2) imported newspapers and periodicals in the ‘unlimited distribution category’ shall be distributed through ‘subscription’ and ‘market sales’; and (3) imported books and electronic publications in the ‘unlimited distribution category’ shall be distributed through ‘market sales’ (Article 3). Compared to the previous measure which required all imported newspapers and periodicals to be distributed by ‘subscription’, the core change was allowing some imported newspapers and periodicals to be distributed by ‘market sales’ (in  addition to ‘subscription’). However, it remained the case that not all imported reading materials were allowed to be distributed through ‘market sales’. In this

84 《出版管理条例》 (2011) [Regulations on the Administration of Publications 2011], Decree of the State Council (No 594), promulgated and effective on 19 March 2011. 85 《出版物市场管理规定》 (2011) [Rules on the Administration of the Publications Market 2011], Order of the GAPP and the MOFCOM (No 52), promulgated and effective on 25 March 2011. 86 《文化部关于实施新修订的通知》 (2011) [Circular on the Implementation of the New ‘Interim Rules on the Administration of Internet Culture’ 2011], Circular No 14, published and effective on 21 March 2011. 87 《订户订购进口出版物管理办法》 (2011) [Rules on the Administration on Subscription of Imported Publications 2011], Order No 51 of the GAPP, promulgated on 25 March 2011, effective on the same date.

China – Publications and Audiovisual Products  109 connection, only Publication Importing Entities designated by the GAPP may handle ‘subscription’ for imported reading materials in the ‘limited distribution ­category’ (Article 4). The fact that Imported Publications Subscription Rule 2011 did not provide for any objective criteria for decision-making left considerable discretion to the GAPP in determining who should be designated. This may lead to an ‘as applied’ violation of NT if in practice the GAPP designates only wholly Chinese-owned entities to engage in the business of ‘subscription’ or imposes higher requirements on FIEs for the purpose of designation. In this connection, one must note that China’s revisions of the Publications Regulation 2011 merely eliminated the designation system for the importation of publications (Article 41) and altered the criteria for the approval of the establishment of Publication Importing Entities (Article 42). These changes do not necessarily prevent the GAPP from exercising discretion in designating certain approved Publication Importing Entities to undertake ‘subscription’ of imported reading materials. ii.  Publications Market Rule 2011 & Electronic Publications Rule 2008 Article 45 of the Publications Market Rule 2011 repealed the Publications (Sub-)Distribution Rule 2003 and the Audiovisual (Sub-)Distribution Rule 2004 (the latter was also discussed in Chapter 3). Furthermore, Article 2 of the new measure modified the scope of Publications to cover audiovisual products in addition to reading materials. Finally, Article 16 of the measure was amended to explicitly permit FIEs to engage in the distribution of reading materials and Sino-foreign contractual JVs to engage in the distribution of audiovisual products. The same substantive requirements, as set out in Articles 6–15 of the measure, apply to both wholly Chinese-owned and foreign-invested distributors. These changes have removed a number of violations, including: (1) Article 16 of Publications Market Rule 2004 and Article 2 of Publications (Sub-)Distribution Rule 2003 in relation to the prohibition of FIEs from engaging in the wholesale of imported reading materials through ‘market sales’, (2) Articles 7.4 and 7.5 of Publications (Sub-)Distribution Rule 2003 in terms of the more onerous requirements on registered capital and operating term on FIEs, and (3) Articles 8.4 and 8.5 of Audiovisual (Sub-)Distribution Rule 2004 in relation to the restriction on foreign equity in, and more onerous requirement on the operating term of, ­Sino-foreign contractual JVs. It is worth noting that China did not need to repeal the Publications (Sub-)Distribution Rule 2003 and the Audiovisual (Sub-)Distribution Rule 2004 in their entirety for implementing the WTO rulings but was merely required to modify the foreign equity restriction and the discriminatory requirements. The repeal of the measures as a whole, however, was a positive step towards the elimination of a ‘dual regulatory framework’ and hence the application of equal and consistent rules between wholly-Chinese owned and foreign-invested entities in authorising them to undertake the distribution of reading materials and audiovisual products through ‘market sales’.

110  China’s Regulation of Trade in Services & WTO Rulings In addition, Article 63 of the Electronic Publications Rule 2008, which took effect during the dispute, already abolished the Electronic Publications Rule 1997 and hence removed the prohibition of FIEs from engaging in the ‘master wholesale’ and the wholesale of electronic publications. Notably, this new measure is no longer applicable to the distribution of electronic publications but regulates the production, publication, and importation of electronic publications only (Article 2). Like the other reading materials, the distribution of electronic publications is governed by the Publications Market Rule 2011 which as shown above, permits FIEs to engage in the distribution of reading materials. iii.  Catalogue 2011 & Circular on Internet Culture 2011 In relation to the distribution services captured by the ‘prohibited’ or ‘restricted’ categories under the Catalogue 2007, the Catalogue 2011 remedied the relevant inconsistencies. Firstly, Article X.2 removed ‘master distribution’ of books, newspapers and periodicals from the ‘prohibited’ category. Secondly, in line with the repeal of Audiovisual (Sub-)Distribution Rule 2004 (particularly Article 8.4), Article V.4 of the Catalogue 2011 no longer restricted foreign equity in a Sino-foreign contractual JV by removing the requirement that the Chinese party must hold a majority interest. Given this change, it is unnecessary for China to amend Article 8 of the Foreign Investment Regulation 2002 which merely defines what constitute a majority interest. Thirdly, in relation to the internet distribution of sound recordings, ­Article  X.7 excluded ‘music’ from the ‘prohibited’ category while maintaining the general prohibition of FIEs from engaging in internet culture activities. Corresponding changes were also made to the Circular on Internet Culture 2003. The Circular on Internet Culture 2011 was published to implement the new Internet Culture Rule 2011.88 Recall that the Internet Culture Rule 2003 did not explicitly prevent FIEs from becoming an Internet Culture Entity to conduct internet culture activities and hence was not in breach of China’s GATS commitments. This position remained under the Internet Culture Rule 2011. As the implementing measure, the Circular on Internet Culture 2011 treated network music business as an exception to the general prohibition of FIEs from undertaking internet culture activities. This was consistent with the change made under the Catalogue 2011. Article 14 of the measure further provided that this measure shall prevail over the Network Music Opinions 2006 in terms of any inconsistencies. This effectively rendered Article 8 of the Network Music Opinions 2006 invalid to the extent that it prohibited FIEs from establishing Internet Culture Entities to operate network music businesses. However, Article 12 of the

88 《互联网文化管理暂行规定》 (2011) [Interim Rules on the Administration of Internet Culture 2011], Order No 51 of the MOC, promulgated on 17 February 2011, effective on 1 April 2011.

China – Publications and Audiovisual Products  111 ­ easure provided that the MOC will formulate separate rules on the establishm ment of Sino-foreign contractual JVs to provide internet music services. This suggests that the general rules on the establishment of Internet Culture Entities, as set out in the Internet Culture Rule 2011, do not apply to the creation of such network music contractual JVs. Nor does the rule applicable to JVs between Hong Kong or Macao entities and Mainland entities, as contemplated under Article 6 of the Circular on Internet Culture 2011, apply. At the time of writing, the MOC has not published any rules for the establishment of Sino-foreign contractual JVs for network music activities. In the absence of such rules, it is unclear whether FIEs have been able to apply for the creation of such JVs and if they do, what rules and procedures have been applied. The issue of transparency also arises as there is no publicly available information on the assessment or approval of applications by FIEs. As a result, while the Catalogue 2011 and the Circular on Internet Culture 2011 no longer prevent foreign investment in network music services, the relevant rules for application and approval seem to be lacking, thereby creating uncertainties and practical difficulties for foreign service suppliers. Thus, China’s implementation in this regard is at best a partial compliance, that is, compliance in law but not in practice. iv.  Several Opinions 2005 China did not make any changes to the Several Opinions 2005. The two WTO-illegal provisions were Articles 1 and 4. Arguably, modification of these provisions was unnecessary given the other amendments made by China. Article 4 prevented FIEs from engaging in the ‘master distribution’ of books, newspapers, periodicals, audiovisual products, and electronic publications, and in establishing an Internet Culture Entity to engage in internet culture activities. As discussed in Chapter 3, the reasons for the absence of changes to this measure may be two-fold: (1) China believed that Several Opinions 2005 was not a ‘measure’ but merely an internal guideline (despite the panel’s rulings to the contrary); and (2) the WTO-inconsistencies had been removed by the other measures. Regarding the reading materials, the Publications Market Rule 2011, as a more recent departmental rule, should prevail to the extent that it permitted FIEs to undertake the distribution of these goods (as discussed above). This was confirmed in Article 45 of the same measure which provided that any previous rules or provisions inconsistent with the provisions of this measure shall cease to operate. Obviously, Article 4 of the Several Opinions 2005 was one of such inconsistent provisions and shall no longer apply. As far as internet culture activities are concerned, the WTO-unlawful aspect of Article 4 was limited to the prohibition of FIEs from undertaking internet distribution of sound recordings or music. As discussed above, China had modified the other relevant laws to exclude network music business from the ban. These more recent laws should prevail over the Several Opinions 2005 to the extent of any inconsistencies. Thus, China did not have to modify Article 4, although China’s overall i­mplementation

112  China’s Regulation of Trade in Services & WTO Rulings in this regard was inadequate due to the lack of rules for the application and approval for the establishment of network music Sino-foreign contractual JVs. Article 1 of the Several Opinions 2005 required a Chinese party in a Sinoforeign contractual JV undertaking distribution of AVHE products to maintain a dominant position. This provision may also be considered to have been replaced by subsequent measures. As discussed above, under Article V.4 of the Catalogue 2011, the only requirement on foreign investment in the distribution of audiovisual products was that it must take the form of a Sino-foreign contractual JV. There was no restriction on foreign equity or requirement on Chinese parties to hold a dominant position. This was confirmed under Article 16 of the Publications Market Rule 2011 which permitted foreign-invested contractual JVs to undertake the distribution of audiovisual products without imposing any restrictions or requirements on the interest or position of foreign or Chinese parties. Given China’s view on the legal status of the Several Opinions 2005 and the fact that the implementation measures were designed to remedy the WTOinconsistencies, it would be reasonable to observe that the ‘dominant position’ requirement was no longer applicable. In light of the above and the analysis of China’s implementation of the WTO rulings on trading rights in Chapter 3, we may safely conclude that China has brought all major measures into compliance except for films. This conclusion questions the accuracy of those views to the contrary. For example, Webster has observed that the China – Publications and Audiovisual Products dispute represents the ‘most striking case of non-compliance’ as China has maintained several WTO-inconsistent regulations particularly the Several Opinions 2005 and the Network Music Opinions 2006.89 This observation fails to consider the overall Chinese regulatory framework and the relationship among all relevant measures. It also shows a lack of understanding of China’s legislative system. The revised Chinese measures are sufficient to ensure compliance with China’s WTO commitments on the distribution of reading materials and audiovisual products, although foreign service providers may continue to face difficulties or restrictions in establishing network music businesses in practice due to the lack of rules and procedures for that purpose. Such rules and procedures remain absent today according to the USTR’s China Compliance Report 2018.90 A  summary of China’s WTO compliance in the dispute is set out in Table 2 below.

89 See Timothy Webster, ‘Paper Compliance: How China Implements WTO Decisions’ (2014) 35(3) Michigan Journal of International Law 525, 571–73. 90 See USTR, 2018 Report to Congress on China’s WTO Compliance (February 2019) 144, available at https://ustr.gov/sites/default/files/2018-USTR-Report-to-Congress-on-China%27s-WTOCompliance.pdf.

China – Publications and Audiovisual Products  113 Table 2  China – Publications and Audiovisual Products: Summary of China’s Implementation WTO-Illegal Measures

New Measures

Art 42(2) of Publications Regulation 2001;

Publications Removing the Regulation 2011 requirement of wholly SOEs

Implementation

Implemented

Comments

Publications Market Rule 2011

Repealing the old measures and permitting FIEs to engage in the distribution of reading materials by ‘market sales’

Implemented

Art X.2 of Catalogue 2007 with Arts 3&4 of Foreign Investment Regulation 2002

Catalogue 2011

Removing ‘master distribution’ of books, newspapers and periodicals from the ‘prohibited’ category

Implemented

Art 4 of Several Opinions 2005

No change

Unnecessary to change given the changes to Publications Market Rule 2011

Art 62 of Electronic Publications Rule 1997

Electronic Publications Rule 2008

Abolishing the old measure

Publications Market Rule 2011

Permitting FIEs to engage in the distribution of electronic publications

Art 7.4 of Publications (Sub-)Distribution Rule 2003

Publications Market Rule 2011

Repealing the old measure as a whole and applying same requirements on wholly Chinese-owned entities and FIEs

Implemented

Art 7.5 of Publications (Sub-)Distribution Rule 2003

As above

As above

Implemented

Arts 3&4 of Imported Publications Subscription Rule 2004 Art 16 of Publications Market Rule 2004; Art 2 of Publications (Sub-)Distribution Rule 2003

Implemented

(continued)

114  China’s Regulation of Trade in Services & WTO Rulings Table 2  (Continued) Art 2 Circular on Internet Culture 2003; Art 8 of Network Music Opinions 2006 Art X.7 of Catalogue 2007 with Arts 3&4 of Foreign Investment Regulation 2002

Circular on Removing the Internet Culture prohibition of FIEs 2011 from engaging in the distribution of network music Catalogue 2011 but requiring the formulation of separate rules on Sinoforeign contractual JVs

Partial implementation as no rules have been established for FIEs to apply for the establishment of a network music contractual JV

Art 4 of Several Opinions 2005

No change

Unnecessary to change given the changes above

Art 8.4 of Audiovisual (Sub-)Distribution Rule 2004

Publications Market Rule 2011

Repealing the old measure as a whole

Art VI.3 of Catalogue 2007 with Art 8 of Foreign Investment Regulation 2002

Catalogue 2011

Removing the foreign equity restriction

Art 1 of Several Opinions 2005

No change

Unnecessary to change given the changes to Catalogue 2011 and Publications Market Rule 2011

Implemented

Art 8.5 of Audiovisual (Sub-)Distribution Rule 2004

Publications Market Rule 2011

Repealing the old measure as a whole and applying same requirements on wholly Chinese-owned entities and FIEs

Implemented

Implemented

E.  China’s Compliance Approach and Implications The reasons behind China’s approach to implementation and its broader implications have been discussed in Chapter 3. Here, it would be useful and suffice to summarise my main observations on these issues. The China – ­Publications and Audiovisual Products dispute is perhaps the most difficult for China to implement due to the importance and sensitivity of the culture sector, the number of WTO-inconsistent measures, the involvement of multiple regulatory bodies in the rule-making process, and the economic impact on Chinese import monopolies and distribution businesses. The fact that China took tremendous efforts to comply with the WTO rulings in almost all aspects has shown its full

China – Publications and Audiovisual Products  115 respect and commitments to the multilateral trading system. In the implementation process, China’s utmost concern was to ensure that the censorship regime must not be undermined by the liberalisation of trading rights and distribution rights. Since the WTO rulings did not second guess China’s right to undertake content reviews, the censorship regime remained largely intact and will continue to be implemented with great caution or even strengthened when needed. The rigour of the censorship in the cultural sector may constitute a barrier to the importation and distribution of cultural goods in the territory of China. In this regard, the major issues would involve the discretion of competent authorities in assessing applications of FIEs, the lack of transparency in decision-making, other administrative hurdles FIEs may face in practice, and further development of domestic regulation. Like the liberalisation of trading rights, China has made remarkable achievements in progressively liberalising distribution services. By the time that China was required to implement the WTO rulings, foreign service providers had grown their market share in the wholesale and retail sectors.91 However, despite China’s implementation, regulatory barriers remain in the distribution of certain goods and in certain distribution activities.92 While some of these barriers are explicitly excluded from China’s WTO commitments (such as online distribution), others may invite issues of WTO-consistency. As far as the cultural sector is concerned, the Chinese Government continues to provide various financial support and policy preferences in pursuit of their development goals in the sector.93 One increasingly sensitive area has been the distribution of cultural goods through the Internet. The major concerns of the government may be two-fold. First, online distribution services are generally a new and ­fast-growing market that has a great potential to generate massive economic benefits. For example, by 2017 the market value of online paid videos, games, music, and news has exceeded RMB 300 billion with network music users alone reaching 548 million.94 The liberalisation of the market for foreign competition would significantly affect the economic interest of domestic service suppliers. Second and more importantly, the review of online content or Internet censorship is more difficult to carry out than the content review of hard copies of

91 See WTO, Trade Policy Review Body, Trade Policy Review: Report by the Secretariat – China (WT/TRP/S/264, 8 May 2012) 168–69. 92 ibid, 169–70. 93 See WTO, Trade Policy Review Body, Trade Policy Review: Report by the Secretariat – China (WT/TRP/S/342, 15 June 2016) 141–43. 94 See National Bureau of Statistics, ‘The Rapid Growth of the Service Industry in China’s Economic Reforms and Opening-up: Report No 10 on the Economic and Social Achievements of the Forty-Year Reform’ (National Bureau of Statistics, 10 September 2018) available at www.stats.gov. cn/ztjc/ztfx/ggkf40n/201809/t20180910_1621829.html; China Internet Network Information Center, Report on the Statistics of the Development of Internet Network in China (January 2018) 42, available at www.cac.gov.cn\\files\pdf\cnnic\CNNIC41.pdf.

116  China’s Regulation of Trade in Services & WTO Rulings cultural products. In this connection, China has introduced a self-examination system whereby Internet Culture Entities are responsible for the content review of Internet culture products before distribution, which is subsequently subject to the surveillance of the MOC.95 This self-review system also applies to the distribution of network music.96 The application of self-review shows not only the practical difficulties for the Chinese Government to undertake content reviews but also the confidence of the government that wholly Chinese-owned entities will undertake the reviews carefully to its satisfaction. However, FIEs are less likely to conduct content reviews in a satisfactory manner. These concerns offer an explanation for China’s failure to fully comply with the WTO rulings on network music services. To date, foreign investment in internet culture activities remains under the ‘prohibited’ category, despite China’s continuous reduction of the restriction list.97 While network music services are exempted from this prohibition, foreign service providers continue to face a ‘regulatory vacuum’ in which there are no rules available for them to follow in applying for the provision of the services in China. In short, at the same time as China endeavouring to comply with the WTO rulings in China – Publications and Audiovisual Products, it also sought to minimise the negative impact of compliance on its regulatory goals, industrial policies, social values, and political interests. These factors seem to outweigh the economic impact of compliance and are likely to result in the revival of repealed regulatory barriers in the same or varied forms or the development of new ones. Thus, while the WTO decision has pushed China to reform its regulatory regime for the importation and distribution of cultural goods, it remains necessary for WTO Members to monitor China’s implementation of the revised measures and regulatory development in the sector, as well as to push China to enhance transparency and due process in general. Given the sensitivity of the sector and the economic and political interests involved, a WTO dispute over the outstanding or newly-invented barriers remains possible. Such a dispute would not only challenge one of the weaknesses of the DSM as to whether the dispute settlement procedure may be facilitated to reduce the period of temporary breaches, but also continue to test the capacity and legitimacy of the system in balancing trade and non-trade values.

95 《文化部关于实施的通知》 (2013) [Circular on the Implementation of the Rules on the Administration of Content Self-Examination by Internet Culture Entities 2013], Order No 39 of the MOC, promulgated on 12 August 2013, effective on 1 December 2013. 96 《文化部关于进一步加强和改进网络音乐内容管理工作的通知》 (2015) [Circular on Further Strengthening and Improving the Administration of Network Music Content 2015], Circular No 21 of the MOC, issued on 23 October 2015, effective on 1 January 2016. 97 See Special Administrative Measures on Access to Foreign Investment (Negative List) 2018, above n 31.

China – Electronic Payment Services  117 IV.  CHINA – ELECTRONIC PAYMENT SERVICES

A. Background The China – Electronic Payment Services dispute came out of China’s regulation of electronic payment services (EPS) for payment card transactions.98 The services at issue concerned EPS for transactions involving the use of all types of payment cards including post-paid credit cards, real-time payment debit cards, and pre-paid cards.99 A typical payment card transaction involves a number of parties, including a cardholder (ie a customer), an issuing financial institution (ie a bank issuing payment cards), a payment card company (eg visa), an acquiring financial institution (ie a bank acquiring transactions from merchants), and a merchant.100 Payment card companies play a central role in such transactions by providing (and operating) ‘the processing infrastructure and network necessary for the execution of payments via payment cards’, the relevant rules, standards and procedures, and a licence for issuers and acquirers to use their payment card brands, etc. Both issuing and acquiring banks are required to adhere to the rules, standards and procedures as they participate in the transactions using the payment card network. The processing of a transaction consists of ‘front-end processing’ and ‘back-end processing’. The former, which occurs at the time of the transaction, essentially serves to authenticate and authorise transactions and involves the transmission of a request for the authorisation of payment from a merchant by an acquirer to an issuer via the payment card company, followed by the issuer verifying and checking the relevant information of the cardholder’s account to decide whether to authorise the transaction.101 When the transaction is authorised, the approved transaction information is then sent to the acquirer via the payment card company. The merchant completes the transaction once it receives the information from the acquirer. The ‘back-end’ processing, which may occur at the time of a transaction or at a later point in time, is essentially a ‘clearing and settlement’ process involving the processing of payment by the issuer to the acquirer based on a report issued by the payment card company on their net and debit positions. This process may also involve transfer of money from the cardholder to the issuer and from the acquirer to the merchant. Accordingly, the US described EPS as follows: ‘EPS suppliers receive, check and transmit the information that the parties need to conduct the transactions, and manage, facilitate, and enable the transmission of funds

98 The description of the dispute and the contested measures is mainly based on the WTO panel report on the dispute, see Panel Report, China – Certain Measures Affecting Electronic Payment Services (WT/DS413/R, adopted 31 August 2012) [hereinafter China – Electronic Payment Services]. 99 ibid, paras 7.13, 7.37. 100 ibid, paras 7.14–17. 101 ibid, paras 7.21–22.

118  China’s Regulation of Trade in Services & WTO Rulings between ­participating ­entities.’102 China’s description of EPS did not differ ­fundamentally.103 In addition, EPS suppliers may involve third parties providing outsourced technology services to issuers and/or acquirers.104 The establishment of China UnionPay Co Ltd (CUP) was one of the most remarkable achievements in China’s financial sector reform.105 For the Chinese Government, the modern development of bankcard businesses and related financial services in China requires the creation of a unified bankcard network which connects all banks and facilitates interbank payment card transactions.106 As the only official association for China’s banking card industry, CUP receives an array of policy and regulatory preferences and as a result maintains a de facto monopoly position in the Chinese market for RMB-denominated EPS ‘to the detriment of global providers such as Visa, MasterCard, and ­American Express as well as other potential domestic entrants’.107 When the WTO panel report on the China  – Electronic Payment Services dispute was adopted in 2012, CUP had become ‘the 2nd largest global bankcard processing network in terms of number of cards issued and transaction processed.’108 EPS transactions processed in China exceeded $1 trillion with over one billion customers.109 Access to the lucrative and fast-growing Chinese market is therefore of great importance to foreign EPS providers, particularly the giant US companies such as Visa, MasterCard, and American Express. More specifically, the trigger of the dispute had much to do with the global expansion of CUP since 2005. Prior to the expansion, CUP partnered with foreign EPS providers (eg Visa) by issuing co-branded ‘dual-currency’ cards which ‘allowed holders to pay for goods or services through CUP for transactions in China, and via the foreign p ­ artner’s network for transactions outside China.’110 However, as CUP continued to expand internationally, it enticed clients into using UnionPay system for transactions outside China by offering low or zero transaction fees.111 Through a series of actions, Visa attempted to dissuade CUP from over-reaching into 102 ibid, para 7.26. 103 ibid, para 7.29. 104 ibid, paras 7.46–54. 105 For a comprehensive review of the regulatory development of China’s EPS sector, see Wen Li, ‘The Regulation of New Electronic Payment Services in China’ (PhD thesis, Queen Mary University of London, 2014). For discussions of China’s banking sector reform, see, eg, Violaine Cousin, Banking in China, 2nd edn (London, Palgrave Macmillan, 2011); Yasheng Huang, Tony Saich and Edward Steinfeld, Financial Sector Reform in China (Cambridge, Harvard University Asia Center, 2005). 106 The People’s Bank of China, ‘Remarks by Mr. Dai Xianglong, Governor of the PBC at the Opening Ceremony of China Unionpay’ (The People’s Bank of China, 26 March 2002), available at www.pbc.gov.cn/english/130721/2830453/index.html. 107 Bernard Hoekman and Niall Meagher, ‘China – Electronic Payment Services: Discrimination, Economic Development and the GATS’ (2014) 13(2) World Trade Review 409, 410–11. 108 ibid, 411–12. 109 Panagiotis Delimatsis, ‘The WTO Outlaws the Privileges of the Chinese Payment Services Giant’ (2012) 16(31) ASIL Insights, available at www.asil.org/insights/volume/16/issue/31/ wto-outlaws-privileges-chinese-payment-services-giant. 110 Hoekman and Meagher, above n 107, 412. 111 ibid.

China – Electronic Payment Services  119 its businesses but failed.112 Eventually, Visa persuaded the US Government to bring an action against China. China’s GATS Schedule contains commitments under ‘Banking and Other Financial Services’. Amongst others, ‘banking services’ include subsector (d): ‘all payment and money transmission services, including credit, charge and debit cards, travellers cheques and bankers drafts (including import and export settlement)’. An important threshold issue in the dispute was, therefore, whether subsector (d) encompasses EPS. With respect to China’s specific commitments under ‘Banking Services’, Modes 1 and 3 were the most relevant to the dispute which concerned the provision of EPS by foreign service suppliers in China. China made no commitments on market access under Mode 1 with certain exceptions. Thus, restrictions that China is allowed to impose on market access under Mode 1 may also constitute a qualification to its NT commitment.113 Under Mode 3, China committed to eliminate restrictions on the location and clients of foreign-invested financial institutions in providing RMB business, and all non-prudential measures restricting the ownership, operation, and juridical form of foreign-invested banks by 2006. Certain conditions apply to the establishment of a subsidiary or a branch of a foreign bank in China and for foreign-invested banks to engage in RMB business. The substantive issue in the dispute was, therefore, whether China had acted inconsistently with these commitments. B.  The Measures The US challenged a series of Chinese measures as having established various legal requirements in violation of China’s GATS commitments on market access and NT, including (1) sole supplier requirements, (2) issuer requirements, (3)  terminal equipment requirements, (4) acquirer requirements, (5) crossregion/inter-bank prohibitions, and (6) Hong Kong/Macao requirements.114 These requirements will be discussed later. The US identified a total of 19 legal instruments giving effect to the above requirements. The panel decided not to consider three repealed instruments.115 The remaining measures, as set out below a­ ccording to their effective date, included: 1. Measures for the Administration of Bank Card Business116 (issued by the People’s Bank of China (PBOC)) (Document No 17); 112 ibid. 113 Article XX.2 of the GATS provides: ‘Measures inconsistent with both Arts XVI and XVII shall be inscribed in the column relating to Art XVI. In this case the inscription will be considered to provide a condition or qualification to Article XVII as well.’ 114 Panel Report, above n 98, paras 2.1–5. 115 ibid, paras 7.221–229. 116 《银行卡业务管理办法》 (1999) [Measures for the Administration of Bank Card Business 1999], Order No 17, issued on 5 January 1999, effective on 1 March 1999.

120  China’s Regulation of Trade in Services & WTO Rulings 2. Opinions on the Implementation of the Work in Bank Card Interoperability 2001117 (issued by the PBOC) (Document No 37); 3. Circular on Universal Use of ‘UnionPay’ Logo and its Holographic Label for Anti-counterfeiting118 (issued by the PBOC) (Document No 57); 4. Notice on the Issuance of Business Practices for the Interoperable Service of Bank Cards119 (issued by the PBOC) (Document No 76); 5. Circular on Further Improving Bank Card Interoperability Related Work120 (issued by the PBOC) (Document No 129); 6. Announcement on Providing Clearing Arrangements for Banks Handling Personal RMB Deposit, Exchanges, Bank Cards and Remittance in Hong Kong121 (issued by the PBOC) (Document No 16); 7. Announcement on Providing Clearing Arrangements for Banks Handling Personal RMB Business in Macao122 (issued by the PBOC) (Document No 8); 8. Circular on Relevant Issues on Accepting and Using RMB Bank Cards in Border Areas123 (issued by the PBOC) (Document No 219); 9. Circular on Relevant Issues Concerning the Operation of Individual RMB Business by Mainland Banks and Hong Kong/Macau Banks124 (issued by the PBOC) (Document No 254); 10. Several Opinions on Promoting the Development of Bank Card Industry125 (issued by the PBOC and other eight ministries or departments of the State Council) (Document No 103); 117 《2001年银行卡联网联合工作实施意见》 (2001) [Opinions on the Implementation of the Work in Bank Card Interoperability 2001], Circular No 37, issued and effective on 19 February 2001. 118 《中国人民银行关于统一启用‘银联’标识及其全息防伪标志的通知》(2001) [Circular on Universal Use of ‘UnionPay’ Logo and its Holographic Label for Anti-counterfeiting 2001], Circular No 57, issued and effective on 13 March 2001. 119 《中国人民银行关于印发的通知》 (2001) [Notice on the Issuance of Business Practices for the Interoperable Service of Bank Cards 2001], Circular No 76, issued on 29 March 2001, effective on 15 April 2001. 120 《中国人民银行关于进一步做好银行卡联网通用工作的通知》 (2003) [Circular on Further Improving Bank Card Interoperability Related Work 2003], Circular No 129, issued and effective on 2 July 2003. 121 《关于为在香港办理个人人民币存款、兑换、银行卡和汇款业务的有关银行提供清算 安排的公告》 (2003) [Announcement on Providing Clearing Arrangements for Banks Handling Personal RMB Deposit, Exchanges, Bank Cards and Remittance in Hong Kong 2003], Announcement No 16, issued and effective on 19 November 2003. 122 《关于为澳门银行办理个人人民币业务提供清算安排的公告》 (2004) [Announcement on Providing Clearing Arrangements for Banks Handling Personal RMB Business in Macao 2004], Announcement No 8, issued and effective on 3 August 2004. 123 《中国人民银行关于边境地区受理和使用人民币银行卡有关问题的通知》 (2004) [Circular on Relevant Issues on Accepting and Using RMB Bank Cards in Border Areas 2004], Circular No 219, issued and effective on 21 September 2004. 124 《中国人民银行关于内地银行与香港、澳门银行办理个人人民币业务有关问题的通知》 (2004) [Circular on Relevant Issues Concerning the Operation of Individual RMB Business by Mainland Banks and Hong Kong/Macau Banks 2004], Circular No 254, issued and effective on 28 October 2004. 125 《中国人民银行等九部委关于促进银行卡产业发展的若干意见》 (2005) [Several Opinions on Promoting the Development of Bank Card Industry 2005], Circular No 103, issued and effective on 24 April 2005.

China – Electronic Payment Services  121 11. Guiding Opinions on Regulating and Promoting the Development of Bank Card Acceptance Market126 (issued by the PBOC) (Document No 153); 12. Circular on Issues Concerning Wholly Foreign-funded Banks and Chineseforeign Equity Joint Banks in Conducting Bank Card Business127 (issued by the China Banking Regulatory Commission (CBRC)) (Document No 49); 13. Circular on Issues Concerning Strengthening the Administration of Overseas Business Acceptance of Bank Cards128 (issued by the PBOC) (Document No 273); 14. Circular on Strengthening the Security Management of Bank Cards and Preventing and Fighting Crimes in Bank Cards129 (issued by the PBOC, the CBRC, the Ministry of Public Security, the State Administration for Industry and Commerce (SAIC)) (Document No 142); 15. Opinions on the Implementation of the Circular on Strengthening the Security Management of Bank Cards and Preventing and Fighting Crimes in Bank Cards130 (issued by the General Office of the PBOC) (Document No 149); and 16. Circular on Standardising the Administration of Foreign Currency Bank Cards131 (issued by the State Administration of Foreign Exchange (SAFE)) (Document No 53). C.  WTO Rulings The panel conducted a detailed analysis of China’s GATS Schedule and found in favour of the US that subsector (d) under ‘Banking Services’ ‘encompasses services that are essential to the processing and completion of transactions

126 《中国人民银行关于规范和促进银行卡受理市场发展的指导意见》 (2005) [Guiding Opinions on Regulating and Promoting the Development of Bank Card Acceptance Market 2005], Order No 153, issued and effective on 16 June 2005. 127 《中国银行业监督管理委员会关于外商独资银行、中外合资银行开办银行卡业务有关问 题的通知》 (2007) [Circular on Issues Concerning Wholly Foreign-funded Banks and Chineseforeign Equity Joint Banks in Conducting Bank Card Business 2007], Order No 49, issued and effective on 6 June 2007. 128 《中国人民银行关于加强银行卡境外受理业务管理有关问题的通知》(2007)[CircularonIssues Concerning Strengthening the Administration of Overseas Business Acceptance of Bank Cards 2007], Order No 273, issued and effective on 6 August 2007. 129 《关于加强银行卡安全管理预防和打击银行卡犯罪的通知》 (2009) [Circular on Strengthening the Security Management of Bank Cards and Preventing and Fighting Crimes in Bank Cards 2009], Order No 142, issued and effective on 27 April 2009. 130 《中国人民银行关于贯彻落实 的意见》 (2009) [Opinions on the Implementation of the Circular on Strengthening the Security Management of Bank Cards and Preventing and Fighting Crimes in Bank Cards 2009], Circular No 149, issued and effective on 1 August 2009. 131 《国家外汇管理局关于规范银行外币卡管理的通知》 (2010) [Circular on Standardising the Administration of Foreign Currency Bank Cards 2010], Circular No 53, issued on 11 October 2010, effective on 1 November 2010.

122  China’s Regulation of Trade in Services & WTO Rulings using payment cards’.132 In the meantime, the panel rejected China’s argument that EPS should be captured by subsector (xiv) of paragraph 5(a) of the GATS Annex on Financial Services which covers ‘settlement and clearing services for financial assets, including securities, derivative products, and other negotiable instruments’.133 Turning to the specific legal instruments and requirements, the panel found the following. • Issuer requirements: certain provisions of Document Nos 37, 57, and 129 required that all RMB or dual currency bank cards issued by commercial banks (ie issuers) in China for use in domestic or cross-region interbank RMB transactions must bear the ‘Yin Lian/UnionPay’ logo on the front of the card. These instruments and Document Nos 17 and 76 also required issuers to become members of the CUP network and to ensure that their bank cards comply with certain uniform business specifications and technical standards (ie the interoperability requirement).134 • Terminal equipment requirements: certain provisions of Document Nos 37 and 153 required that ‘terminals (ATMs, merchant processing devices and POS terminals) in China that are part of the national bank card inter-bank processing network be capable of accepting all bank cards bearing the Yin Lian/UnionPay logo.’135 • Acquirer requirements: certain provisions of Document Nos 37, 76, and 153 required that all qualified acquirers must post the Yin Lian/UnionPay logo, comply with uniform business standards and technical specifications of inter-bank interoperability, and be capable of accepting all bank cards bearing the logo.136 • Hong Kong/Macao requirements: certain provisions of Document Nos 8, 16, and 254 prevented EPS suppliers other than CUP from handling ‘the clearing of certain RMB bank card transactions that involve either an RMB bank card issued in China and used in Hong Kong or Macao, or a bank card issued in Hong Kong or Macao that is used in China in an RMB transaction.’137 However, the panel was not persuaded by the US that the above requirements or legal instruments or the other identified measures, individually or collectively, 132 Panel Report, above n 98, paras 7.73–204. For discussions of the panel’s interpretation of various legal issues in the dispute, see, eg, Michelle Q Zang, ‘The Uncompleted Mission of China – Electronic Payment Services: Policy Equilibrium between Market Access and National Treatment under the GATS’ (2015) 12(1) Manchester Journal of International Economic Law 16; Rachel Block, ‘Market Access and National Treatment in China – Electronic Payment Services: An Illustration of the Structural and Interpretive Problems in GATS’ (2014) 14(2) Chicago Journal of International Law 652. 133 Panel Report, above n 98, paras 7.139–170. 134 ibid, paras 7.252–296. 135 ibid, paras 7.304–333. 136 ibid, paras 7.335–356. 137 ibid, paras 7.364–384.

China – Electronic Payment Services  123 de jure or de facto, established CUP as the sole EPS supplier for all domestic transactions denominated and paid in RMB or precluded the use of ‘non-CUP’ cards for those transactions including cross-region or inter-bank transactions.138 The panel further observed that while the contested legal instruments did enable the CUP to maintain a unique position in the Chinese EPS market, it was uncertain whether ‘CUP currently operates in the market as the sole supplier for RMB bank card transactions’.139 Based on the above, the panel moved on to consider the claimed violations of market access and NT. Firstly, the panel considered the US’s claims under Article XVI:2(a) of the GATS as to whether the measures at issue limited ‘the number of service suppliers … in the form of numerical quotas, monopolies, exclusive service suppliers …’. The panel examined China’s commitments on ‘Banking and Other Financial Services’ under Modes 1 and 3. It found that China made no commitments under Mode 1 with respect to subsector (d).140 Regarding Mode 3, the panel held that China’s market access commitments apply to foreign-invested financial institutions supplying services covered by subsector (d) and include not to impose any limitations on the number of service ­suppliers.141 However, the panel ruled that the issuer, terminal equipment and acquirer requirements did not violate Article XVI:2(a) essentially on the grounds that none of the relevant measures imposed an express limitation on the number of EPS suppliers that was numerical or quantitative in nature, and that it had found that the measures and requirements did not establish CUP as a monopoly or exclusive EPS supplier.142 In contrast, the panel found that the Hong Kong/Macao requirements limited the number of EPS suppliers to one, that is, that only CUP was permitted to supply EPS for RMB bank card transactions that ‘involve either an RMB bank card issued in China and used in Hong Kong or Macao, or an RMB bank card issued in Hong Kong or Macao that is used in China’.143 As far as China’s NT commitments are concerned, the panel observed that while China undertook full NT commitments through the inscription ‘None’ under Mode 1, the inscription ‘Unbound’ under the corresponding Market Access column means that China is allowed to maintain any measures under subsector (d) and Mode 1 that are inconsistent with both Articles XVI and XVII of the GATS.144 Accordingly, the panel was unable to find any NT violations under Mode 1 in relation to the Hong Kong/Macao requirements which are subject to China’s market access commitments and GATS Article XVI.145 However, as the

138 ibid,

paras 7.297–299, 7.334, 7.357–360, 7.390–497, 7.507. paras 7.503, 7.506. 140 ibid, paras 7.518–538. 141 ibid, paras 7.539–575. 142 ibid, paras 7.582–605. 143 ibid, paras 7.606–624. 144 ibid, paras 7.645–665. 145 ibid, paras 7.666–670. 139 ibid,

124  China’s Regulation of Trade in Services & WTO Rulings panel had already concluded that the issuer, terminal equipment, and acquirer requirements are not captured by GATS Article XVI, it found that they infringed China’s NT commitments under Modes 1 and 3 (where restrictions on NT must not be imposed after December 2006 except for a few conditions or qualification requirements as shown in Section IV.A above). Specifically, the panel condemned these requirements as modifying the conditions of competition in favour of CUP and to the detriment of like EPS suppliers of other WTO Members.146 Neither China nor the US appealed to the Appellate Body. The panel’s findings of violations are summarised in Table 3 below. Table 3  China – Electronic Payment Services: Summary of China’s Violations Measures & requirements

Violations

Document Nos 8, 16 and 254: Hong Kong/ Macao requirements

Market access: Limitation on the number of EPS suppliers in the form of a monopoly in violation of GATS Article XVI:2(a)

Document Nos 37, 57, 76 (in conjunction with Article 64 of Document No 17) and 129: issuer requirements

NT: Less favourably treatment of EPS suppliers of other WTO Members in favour of CUP

Document Nos 37 and 153: terminal equipment requirements

As above

Document Nos 37, 76 and 153: acquirer requirements

As above

D.  China’s Implementation and an Assessment The parties agreed that China shall implement the WTO rulings by 31 July 2013.147 On 11 July 2013, China notified the DSB that it had repealed or invalidated five measures at issue in their entirety as well as the WTO-illegal provisions of another three measures.148 China’s implementation measures included the following: 1.

Announcement [2013] No 7 of the PBOC, which repealed Document Nos 37, 57, 76, 129 and 153.149 As a result, the inconsistencies relating to the issuer, terminal equipment, and acquirer requirements were completely removed.

146 ibid, paras 7.679–740. 147 China – Certain Measures Affecting Electronic Payment Services, Agreement under Art 21.3(b) of the DSU (WT/DS413/8, 26 November 2012). 148 China – Certain Measures Affecting Electronic Payment Services, Status Report by China (WT/DS413/9/Add 1, 12 July 2013). 149 《中国人民银行公告第7号》 (2013) [Announcement No 7 of the PBOC 2013], issued by the PBOC on 28 June 2013, effective on the same date.

China – Electronic Payment Services  125 Regarding the issuer requirements, amendment of Document No 17 was unnecessary since the panel did not find that Article 64 of that instrument ‘itself require[s] the use of the unified standards set out in the Appendix on Business Practices contained in Document No. 76’.150 It was therefore sufficient to abolish Document No 76 which set out the technical standards applicable to issuers leading to the interoperability requirement. 2. Circular on Streamlining the Process of Cross-border RMB Business and Improving Relevant Policies.151 Article 2.5 of the measure invalidated ­Article 6 of Document No 8, Article 6 of Document No 16, and Articles 3, 4 and 17 of Document No 254, being all the provisions and measures that the panel found to establish the Hong Kong/Macao requirements in breach of China’s GATS commitments on market access.152 Thus, as China claimed in its compliance status report, it did bring all WTOinconsistent measures into compliance in a timely fashion. Accordingly, the USTR’s China Compliance Report 2013 which blamed China for partial ­compliance is not accurate.153 In this regard, the USTR acknowledged the actions that China had taken to ensure compliance but remained concerned about the lack of ‘a process for foreign suppliers actually to obtain needed licenses to provide electronic payment services for payment card transactions denominated in RMB through commercial presence in China.’154 In essence, this is a concern about the monopoly position of CUP as secured by various measures of the PBOC which allegedly continued to prohibit foreign EPS suppliers from entering the market.155 However, as discussed at length above, the US had failed to convince the WTO tribunal that these alleged measures, in law or in effect, established CUP as the sole EPS provider in China or otherwise precluded foreigners from providing the service. While this issue remains critical and contentious, there were no adverse WTO rulings that China was required to implement. E.  China’s Approach to Compliance and Implications China’s timely and satisfactory implementation in the dispute may be attributable to the same factors discussed in the previous disputes. First of all, the full compliance with WTO rulings allowed China to continue to build reputation 150 Panel Report, above n 98, para 7.286. 151 《中国人民银行关于简化跨境人民币业务流程和完善有关政策的通知》 (2013) [Circular on Streamlining the Process of Cross-border RMB Business and Improving Relevant Policies 2013], Notice No 168 of the PBOC, issued on 5 July 2013, effective on the same date. 152 Panel Report, above n 98, paras 7.372–377, 7.402–404. 153 USTR, 2013 Report to Congress on China’s WTO Compliance (December 2013) 6, available at https://ustr.gov/sites/default/files/2013-Report-to-Congress-China-WTO-Compliance.pdf. 154 ibid, 26. 155 ibid, 124–25.

126  China’s Regulation of Trade in Services & WTO Rulings and credibility as a good citizen of the WTO. Secondly, from technical and rulemaking perspectives, the WTO rulings were easy to implement. While the panel had to examine highly complex legal issues against a long list of Chinese measures, its findings of violations were limited to a handful of measures issued by one Chinese Government organ, ie the PBOC. The rule-making process, therefore, did not involve complex substantive or procedural issues of decision-making such as coordination between multiple administrations. Thirdly, the economic impact of China’s compliance tended to be limited. By the time of China’s implementation in 2013, CUP had already been a dominant EPS supplier in China for a decade and had expanded at a phenomenal pace to become one of the world’s largest EPS providers.156 Thus, the removal of the WTO-unlawful measures was unlikely to jeopardise CUP’s dominant position in the Chinese market or its global expansion. After China’s implementation, CUP continued to grow and expand internationally. In 2017, CUP issued nearly 6.7 billion UnionPay cards, and its network had extended to 168 countries and regions covering nearly 50  million merchants and 2.6 million ATMs, and processed transactions of RMB 93.9 trillion ($14.7 trillion), making CUP the largest EPS provider globally in terms of transaction value.157 Fourthly, the limited WTO rulings meant that China was able to maintain many existing policy and regulatory preferences, as well as develop new ones, in support of its industry policy. These continued to afford CUP considerable competitive advantages over foreign EPS providers by enabling CUP to, for example, offer lower transaction fees.158 Thus, the implementation of WTO rulings had an insignificant impact on China’s regulatory framework designed to foster the development of the bankcard industry. Despite the limited impact of the WTO rulings on China’s regulation of EPS, China has gradually opened the EPS market for foreign suppliers. The reasons for China’s unilateral opening-up may be two-fold. The first has to do with the US’s lasting concern about the regulatory barriers to its EPS suppliers and hence constantly pushing China to take action. While the US failed to use the WTO dispute settlement system to dismantle these barriers, it convinced China to do so via bilateral talks.159 Secondly, further liberalisation of the market serves China’s longer-term interest as a EPS market with a de facto monopoly would ‘reduce the prospects for innovation and adoption of new technologies.’160

156 PR Newswire, ‘The Nilson Report: ChinaUnion Pay Debit Cards Most Popular Payment Method in 2013’ (PR Newswire), available at www.prnewswire.com/news-releases/the-nilsonreport-chinaunion-pay-debit-cards-most-popular-payment-method-in-2013-254175571.html. 157 China UnionPay, ‘China’s Bankcards Industry Development Report 2018’ (China UnionPay, 22 May 2018), available at http://corporate.unionpay.com/infonewsCenter/infoCompanyNews/ file_142386191.html. 158 Hoekman and Meagher, above n 107, 440–41; Engen Tham, ‘Online Threat to China’s UnionPay Outweighs Foreign Card Rivals’ (Reuters, 13 November 2014), available at www.reuters.com/ article/china-banks-clearing-idUSL4N0ST2OT20141112. 159 USTR, above n 35, 28–29. 160 Hoekman and Meagher, above n 107, 438.

China – Electronic Payment Services  127 In this connection, the rapid growth of non-traditional digital financial service providers (eg Alibaba Group) and their third-party online payment platforms (eg Alipay) demonstrates China’s recognition of the importance of competition and commitments to innovation and technological development.161 Thus, since 2015, China has rolled out a series of regulations to grant access to foreign EPS suppliers. These included, for example, the Decision on the Administration of Market Entry of Bankcard Clearing Institutions issued by the State Council in April 2015162 laying down the terms on the admission of foreign EPS ­suppliers, and the implementing measures such as the Rules on the Administration of Bankcard Clearing Institutions issued jointly by the PBOC and the CBRC in June 2016163 detailing the licensing requirements and application rules and procedures. These have provided the legal basis for foreign companies to establish a commercial presence in China to provide EPS. However, issues may remain in the implementation of these market liberalising measures given China’s industrial policy in the EPS sector. In China – Electronic Payment Services, China claimed that the contested legal instruments served to establish the first national inter-bank network for RMB payment card transactions pursuant to uniform technical and commercial standards.164 This may be seen as a legitimate regulatory objective in China’s interest as these instruments contributed to the establishment and growth of a nationally welfare-enhancing network industry with positive spill-over effects on the economy.165 However, for the US and other foreign stakeholders, China’s industrial policy served to create a national champion (ie CUP) that can leverage its exclusive access to the Chinese market in support of its expansion of EPS network abroad.166 Arguably, China’s regulatory protection was likely to have resulted from a mix of policy objectives which would continue to impact on China’s regulatory development and practice. With China’s move to formally allowing foreign EPS suppliers to enter the market, the obstacles to foreign companies are likely to lie in implementation. Such implementation issues may well arise from the lack of transparency and due process in assessing applications from foreign suppliers of EPS and other more covert regulatory hurdles. In practice, foreign companies have already faced such obstacles in the application process.167 The existence of

161 For a comprehensive study of the development of digital financial services in China, see generally Weihuan Zhou, Douglas Arner and Ross Buckley, ‘Regulation of Digital Financial Services in China: Last Mover Advantage’ (2015) 8(1) Tsinghua China Law Review 25. 162 《国务院关于实施银行卡清算机构准入管理的决定》 (2015) [Decision on the Administration of Market Entry of Bankcard Clearing Institutions 2015], Order No 22 of the State Council, promulgated on 9 April 2015, effective on 1 June 2015. 163 《银行卡清算机构管理办法》 (2016) [Rules on the Administration of Bankcard Clearing Institutions 2016], Order No 2 of the PBOC and the CBRC, promulgated on 6 June 2016, effective on the same date. 164 Delimatsis, above n 109. 165 Hoekman and Meagher, above n 107, 437–38. 166 USTR, above n 35, 19. 167 ibid, 129.

128  China’s Regulation of Trade in Services & WTO Rulings these ­practical barriers may trigger another WTO dispute on this matter and necessitates a continuous monitoring of the Chinese practice and a push on China to enhance transparency and due process. V. CONCLUSION

Consistent with the discussions of China’s WTO compliance in ‘trade in goods’ disputes in Chapters 3 and 4, China’s implementation of adverse rulings on its regulation of trade in services has been timely and satisfactory with very few exceptions. China’s approach to implementation suggests that China has become a sophisticated player in the DSM with full comprehension of the demands and limitations of WTO rulings. A mix of factors seem to be relevant to China’s choice of compliance including reputational costs of non-compliance, the complexity of the rule-making process, the economic impact of compliance, and implications for industrial policies or regulatory goals. Amongst these factors, difficulties in compliance would likely arise if it may contradict or undermine China’s overarching industrial policies and economic development goals. Despite China’s textual compliance, it remains necessary for WTO Members to monitor the implementation of the revised measures in practice and the regulatory development in China, as well as to push China to improve transparency and due process in administrative decisions and procedures. Trade in services has been an important and yet under-litigated area in the WTO. Given the economic potential of China’s service market and the lasting controversies over China’s lack of observation of WTO commitments, more disputes are foreseeable. However, given the limitations of the GATS disciplines and China’s specific commitments, it is not legitimate to label China as a ­rule-breaker in the absence of rulings of WTO tribunals.

6 China’s Regulation of Intellectual Property and Implementation of WTO Rulings I. INTRODUCTION

C

hina’s regulation of intellectual property (IP) and enforcement has generated lasting and overwhelming concerns worldwide. Two  major concerns pertain to the protection of intellectual property rights (IPRs) and the transfer of technology. There has been only one WTO d ­ ispute – China – IPRs1 – in which China was found to have failed to meet the WTO standards on IPR protection and consequently was required to implement WTO rulings. Most recently, the US brought another dispute over China’s protection of IPRs in China – IPRs II,2 and the EU challenged Chinese measures that purportedly forced technology transfer in China – Transfer of Technology.3 Both of the cases are currently at an early stage of the WTO dispute settlement process. The WTO Agreement on Trade-Related Aspects of Intellectual Property Rights4 (TRIPs) is ‘the world’s most comprehensive multilateral treaty on’ IP and ‘the only multilateral treaty in its field with a functioning mechanism to settle disputes between governments’.5 The Agreement is aimed at promoting ‘­effective and adequate protection’ of IPRs and ensuring the relevant

1 For a summary of the dispute, see WTO, Dispute Settlement, China – Measures Affecting the Protection and Enforcement of Intellectual Property Rights (DS362) (US), available at www.wto.org/ english/tratop_e/dispu_e/cases_e/ds362_e.htm. 2 For a summary of the dispute, see WTO, Dispute Settlement, China – Certain Measures Concerning the Protection of Intellectual Property Rights (DS542) (US), available at www.wto.org/ english/tratop_e/dispu_e/cases_e/ds542_e.htm. 3 For a summary of the dispute, see WTO, Dispute Settlement, China – Certain Measures on the Transfer of Technology (DS549) (EU), available at www.wto.org/english/tratop_e/dispu_e/cases_e/ ds549_e.htm. 4 Agreement on Trade-Related Aspects of Intellectual Property Rights, 15 April 1994, Marrakesh Agreement Establishing the World Trade Organization, annex 1C, 1869 UNTS 299, 33 ILM 1197 (1994) [hereinafter TRIPS Agreement]. 5 Matthew Kennedy, WTO Dispute Settlement and the TRIPs Agreement: Applying Intellectual Property Standards in a Trade Law Framework (Cambridge, Cambridge University Press, 2016) 1.

130  China’s IP Regulation and Implementation of WTO Rulings e­ nforcement mechanism does not constitute ‘barriers to legitimate trade’.6 Indeed, a lack of IPR protection would undermine the accomplishments of trade liberalisation, as it would create a market for goods with unauthorised use of IPRs (eg  pirated or counterfeit goods) to compete with copyrighted goods.7 Besides the potential adverse effects on trade, inadequate IPR protection would also diminish the incentive for research, innovation and creative activities. In the meantime, however, the protection of IPRs must not unduly impede Members’ pursuit for social and economic welfare. This requires a balance between ‘the promotion of technological innovation’ and ‘the protection of public ­interest’.8 Thus, the TRIPs Agreement merely imposes an obligation on Members to ensure a minimum level of protection and enforcement of IPRs in their ­territory,9 leaving flexibility for Members to adopt a higher level of protection. It also lays down the same general principles that apply to other areas of trade such as the most-favoured nation (MFN) and the national treatment (NT) rules with necessary variations.10 To strike the aforementioned balance, the Agreement envisages a list of exemptions from the general obligations including, for example, the protection of public health and nutrition, the promotion of public interest in critical sectors, and the prevention of anti-competitive practices.11 Besides the general obligations and exceptions, the Agreement sets out detailed rules for the protection of different types of IPRs including copyright and related rights,12 trademarks,13 geographical ­indications,14 industrial designs,15 patents,16 layout-designs of integrated circuits,17 and undisclosed information.18 In addition, the Agreement provides detailed requirements on enforcement procedures and remedies.19 Accordingly, a violation of the TRIPs Agreement may involve all kinds of laws, regulations, and legal instruments related to IPR protection and enforcement. 6 TRIPS Agreement, above n 4, the chapeau. 7 Peter Van den Bossche and Werner Zdouc, The Law and Policy of the World Trade Organization: Text, Cases and Materials (Cambridge, Cambridge University Press, 2017) 995; Carlos M  Correa, Trade Related Aspects of Intellectual Property Rights: A Commentary on the TRIPS Agreement (Oxford, Oxford University Press, 2007) 3. 8 TRIPS Agreement, above n 4, chapeau and art 7. Also see Van den Bossche and Zdouc, above n 7, 996–97. 9 See Van den Bossche and Zdouc, above n 7, 994. 10 TRIPS Agreement, above n 4, arts 3–4. However, these principles have a different formulation ‘in order to take into account the intangible nature of IP rights’ and are subject to certain exceptions. See Van den Bossche and Zdouc, above n 7, 1003–11. 11 TRIPS Agreement, above n 4, arts 8 & 40. 12 ibid, arts 9–14. 13 ibid, arts 15–21. 14 ibid, arts 22–24. 15 ibid, arts 25–26. 16 ibid, arts 27–34. 17 ibid, arts 35–38. 18 ibid, art 39. 19 ibid, arts 41–61.

China’s Regulatory Regime for Intellectual Property  131 Against this background, the remainder of the chapter proceeds as follows. Section II provides an overview of China’s regulatory regime for the protection of IPRs and the transfer of technology as well as the major issues that arise under the multilateral trading system. Section III focuses on the China – IPRs case by analysing the WTO rulings, China’s implementation of the rulings, and implications for WTO Members and the DSM. Section IV briefly discusses the two pending disputes. This discussion does not involve a detailed examination of the claims and potential violations. Instead, it considers how China may respond to any adverse WTO rulings resulted from the disputes. Section V concludes the chapter. II.  CHINA’S REGULATORY REGIME FOR INTELLECTUAL PROPERTY

The birth of the modern Chinese IP system dates back to the introduction of the 1982 Trademark Law which was followed by the promulgation of the Patent Law in 1984, the Copyright Law in 1990, and the Anti-Unfair Competition Law in 1993.20 These laws have been amended several times so far with the currently applicable ones being the 2010 Copyright Law,21 the 2008 Patent Law,22 the 2013 Trademark Law,23 and the 2017 Anti-Unfair Competition Law.24 While the first three legislations deal with the matters relevant to the different types of IPs (eg definition and scope, registration, protection, enforcement etc), the last one prevents and penalises unfair competition activities which involve unlawful use of trademarks, products’ names and logos, etc, misleading commercial promotions, as well as infringements of trade secrets or undisclosed information. These laws, coupled with numerous implementing regulations, rules and legal instruments, constitute the major elements of

20 The development of China’s IP laws and regulations and its participation in the major international conventions on IPRs has been widely-documented. The latest comprehensive studies by scholars and practitioners are respectively Peter K Yu, ‘A Half-Century of Scholarship on the Chinese Intellectual Property System’ (2018) 67(4) American University Law Review 1045; Laura Wen-yu Yong, ‘Intellectual Property Law’ in Michael Moser & Fu Yu (eds), Doing Business in China, vol 2 (New York, Juris Publishing, 2015) ch 10.1. 21 《中华人民共和国著作权法》 (1990) [Copyright Law of the People’s Republic of China 1990], adopted by the Standing Committee of the National People’s Congress on 7 September 1990; amended on 27 October 2001, and subsequently on 26 February 2010, effective 1 April 2010. 22 《中华人民共和国专利法》 (1984) [Patent Law of the People’s Republic of China 1984], adopted by the Standing Committee of the National People’s Congress, 12 March1984; amended on 4 September 1992, on 25 August 2000, and subsequently on 27 December 2008, effective 1 October 2009. 23 《中华人民共和国商标法》 (1982) [Trademark Law of the People’s Republic of China 1982], adopted by the Standing Committee of the National People’s Congress, 23 August 1982; amended on 22 February 1993, on 27 October 2001, and subsequently on 30 August 2013, effective 1 May 2014. 24 《中华人民共和国反不正当竞争法》 (1993) [Anti-Unfair Competition Law of the People’s Republic of China 1993], adopted by the Standing Committee of the National People’s Congress, 2 September 1993; amended on 4 November 2017, effective 1 January 2018.

132  China’s IP Regulation and Implementation of WTO Rulings China’s regulatory regime for IP.25 Laws and regulations on other types of IPs were promulgated more recently, such as the Domain Name Rules 200426 and the Geographical Indications Rules 2005.27 In addition, the protection of IPRs also covers infringements by imported goods under China’s Foreign Trade Law and is enforced by the General Administration of Customs (GAC).28 Apart from the GAC, the administration and enforcement of the IP regime has involved many other regulators and authorities such as the State Intellectual Property Office (SIPO), the National Copyright Administration (NCA), the General Administration for Quality Supervision, Inspection and Quarantine (AQSIQ), and the State Administration for Industry and Commerce (SAIC). As part of the latest overhaul of the government administration commenced in March 2018,29 the State Administration for Market Regulation (SAMR) was established to consolidate the existing authorities and streamline regulatory and enforcement activities.30 Amongst other functions, the SAMR took over the responsibilities of the SAIC and the AQSIQ31 which are now abolished. In addition, the SIPO was restructured with expanded mandates covering not only its existing functions but also the functions of the NCA, the Geographical Indication Administration Bureau of the AQSIQ, and the trademark office of the SAIC. The SIPO is under the supervision of the SAMR. The establishment and development of a modern IP system has been an ­essential element of China’s economic reform and opening-up. Soon after the launch of the reform in 1978, China entered into a bilateral agreement with the US whereby the parties agreed to afford reciprocal protection of copyrights, patents and trademarks.32 Just one month after the agreement took effect in ­February 1980, China joined the World Intellectual Property O ­ rganization  (WIPO)

25 For a comprehensive list of the legislations, see World Intellectual Property Organization (WIPO), National IP laws and regulations, China, available at www.wipo.int/wipolex/en/profile. jsp?code=CN. 26 《中国互联网络域名管理办法》 (2004) [Rules for the Administration of Internet Domain Names of China 2004], Order No 30 of the Ministry of Industry and Information Technology (MIIT), promulgated on 5 November 2004, effective on 20 December 2004. This measure was repealed and replaced by 《互联网域名管理办法》 [Rules for the Administration of Internet Domain Names], Order No 43 of the MIIT, promulgated on 24 August 2017, effective on 1 ­November 2017. 27 《地理标志产品保护规定》 (2005) [Rules on the Protection of Products with Geographical Indications 2005], Order No 78 of the General Administration of Quality Supervision, Inspection and Quarantine (AQSIQ), promulgated on 7 June 2005, effective on 15 July 2005. 28 See generally Xin Zhang, International Trade Regulation in China: Law and Policy (Oxford, Hart Publishing, 2006) 277–85. 29 《深化党和国家机构改革方案》 (2018) [Plans for Furthering the Institutional Reform of the Party and the State 2018], issued by the Government of China on 21 March 2018, available at www. gov.cn/zhengce/2018-03/21/content_5276191.htm#1. 30 The official website of the State Administration for Market Regulation is available at http:// samr.saic.gov.cn/ (English version is not available yet). 31 The import and export inspection and quarantine functions of the AQSIQ were merged into the GAC. 32 Agreement on Trade Relations Between the United States of America and the People’s Republic of China, China-US, July 7, 1979, 31 UST 4652, cited and discussed in Yu, above n 20, 1058–60.

China’s Regulatory Regime for Intellectual Property  133 and became a member three months later.33 Since then, China has joined most of the IP conventions administered by the WIPO and many other IP-related conventions and bilateral treaties including the TRIPs Agreement upon its accession to the WTO.34 China’s active participation in the governance of IP globally and continuous reform of its IP system domestically shows a strong commitment to standardising and strengthening the administration and protection of IPRs. Despite the ongoing concerns about the Chinese IP system, it is undeniable that the progress that China has made in the IP field in the past decades is unparalleled and has not been seen in any other country.35 A number of factors have incentivised China to modernise and improve its IP system. The initial incentive was to attract foreign direct investment (FDI).36 Since the commencement of its reform, the Chinese Government anticipated that FDI would introduce new technologies and know-how, and thus committed itself to promoting FDI that facilitates transfer of technology to domestic firms. In this regard, Long, Yongtu, China’s Chief Negotiator for WTO accession, observed that: [the] protection of IPRs has become a precondition for China to attract more FDI, especially in the high-tech area, as the preferential treatment provided in taxation and other incentives is not sufficient to maintain China’s appeal to foreign ­investors.37

As empirically established, the diffusion of new and advanced technology, expertise and knowledge has been one of the most significant benefits that FDI has generated for China’s economic growth.38 China’s regulatory framework for technology transfer and the related issues will be discussed later. The second driver was China’s accession to the WTO. As a major issue in the accession negotiations, WTO Members’ concerns about China’s IP regime and the ensuing Chinese commitments were documented in 55 paragraphs (out of 341 paragraphs in total) of the Working Party Report on the Accession of China (Working Party Report). China took enormous efforts to fulfil its commitments including modifying the IP laws, strengthening IPR protection and enforcement and complying with WTO rulings, and actively engaged in the discussions and development of new IP-related norms under the WTO.39 In doing so, the Chinese 33 WIPO, Contracting Parties, WIPO Convention, China, available at www.wipo.int/treaties/en/ ShowResults.jsp?treaty_id=1&country_id=38C. 34 See WIPO, above n 25. 35 See Yu, above n 20, 1049; Yongtu Long, ‘Implications of China’s Entry into the WTO in the Field of Intellectual Property Rights’ in Magarinos, Long & Sercovich (eds) China in the WTO: The Birth of A New Catching-Up Strategy (New York, Palgrave MacMillan, 2002) 165–66. 36 See Yong, ‘Intellectual Property Law’ in Michael Moser & Fu Yu (eds), above n 20, 575. 37 See Long, ‘Implications of China’s Entry into the WTO in the Field of Intellectual Property Rights’ in Magarinos, Long & Sercovich (eds), above n 35, 169. 38 See generally Zhiqiang Liu, ‘Foreign Direct Investment and Technology Spillover: Evidence from China’ (2002) 30(3) Journal of Comparative Economics 579. 39 See generally Peter K Yu, ‘The First Decade of TRIPS in China’ in Ka Zeng & Wei Liang (eds) China and Global Trade Governance: China’s First Decade in the World Trade Organization (London, Routledge, 2013) 126–43.

134  China’s IP Regulation and Implementation of WTO Rulings Government held the belief that a stronger IP system also serves the country’s long-term interest, including protecting and promoting China’s own technological advancement, enhancing China’s attractiveness to high-tech FDI, and securing equal IP treatment and protection for Chinese outbound investment in foreign jurisdictions.40 Thus, the establishment of a balanced and effective IP system that affords adequate protection of IPRs reflects China’s own policy goals and needs for economic reform and growth. The third driver for the development of the Chinese IP system lies in China’s ambitious policy objectives for the promotion of technological advancement and innovative capacity. In 2008, the State Council released the National Intellectual Property Strategy41 (Strategy) setting out the overarching goal to develop an advanced IP system by 2020 in support of invention, utilisation, protection and administration of IPs. Four of the five key strategies to achieve that goal concern IPR protection, including to improve the IP regulatory regime, strengthen enforcement, prevent abuse of IPs, and promote education of the general public and cultivate an ‘IPR culture’. Subsequently, a series of implementation plans have been published on a yearly basis to detail the tasks in pursuit of the Strategy.42 Ultimately, these measures are expected to serve China’s new growth model based on innovation with a focus on fostering indigenous technological innovation, as affirmed in the thirteenth Five-Year Plan (2016–2020).43 As pointed out by other commentators, the Strategy ‘reflected China’s eagerness to make adjustment to its intellectual property system based mostly on internal needs, as opposed to external demands.’44 Indeed, China’s IP development policies have secured remarkable accomplishments. China has become one of the world’s largest jurisdictions in international IP applications, and Chinese companies such as Haiwei Technologies have become global leaders in technological innovation and patent applications.45 In 2018, the Global Innovation Index ranked China

40 See Long, ‘Implications of China’s Entry into the WTO in the Field of Intellectual Property Rights’ in Magarinos, Long & Sercovich (eds), above n 35, 166–69. 41 《国务院关于印发国家知识产权战略纲要的通知》 (2008) [Outline of the National Intellectual Property Strategy 2008], Circular No 18 of the State Council, issued on 5 June 2008, effective on the same date. For more discussions of the Strategy, see Yu, above n 20, 1079–81. 42 See, eg,《2014年国家知识产权战略实施推进计划》 (2014) [The Promotion Plan for the Implementation of the National Intellectual Property Strategy 2014], available at www.nipso.cn/ onews.asp?id=21429; 《2017年深入实施国家知识产权战略加快建设知识产权强国推进计划》 (2017) [Further Promotion Plan for the Implementation of National Intellectual Property Strategy 2017], available at www.gov.cn/xinwen/2017-06/28/content_5206337.htm. 43 《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》 (2016) [Thirteenth FiveYear Plan for National Economic and Social Development of the People’s Republic of China 2016], promulgated on 17 March 2016, available at www.xinhuanet.com\\politics\\2016lh\\ 2016-03\\17\\c_1118366322.htm. 44 See Yu, above n 20, 1082. 45 See WIPO, World Intellectual Property Indicators 2018 (Geneva, WIPO, 2018) 8, available at www.wipo.int/edocs/pubdocs/en/wipo_pub_941_2018.pdf; Yu, above n 20, 1047–48.

China’s Regulatory Regime for Intellectual Property  135 the s­ eventeenth most innovative economy in the world, being the only middleincome country in the top 20 list.46 However, the progress that China has made in improving its IP system is seemingly inadequate to dispel the concerns of the developed world especially the US. As recently reiterated in the US’s Section 301 Report, these concerns have loomed for many years and cover a wide range of IP infringements and numerous IP protection problems.47 Under the 2017 report of the US Commission on the Theft of American Intellectual Property, China was singled out as the key infringer of US IPs and the major cause of tremendous damages to the US economy.48 Given the US’s constant discontent with China’s IP protection and enforcement, the USTR’s China Compliance Report 2017 continued to explore various specific areas of IP infringements and assess whether the relevant Chinese measures have provided the level of protection as required under China’s WTO obligations.49 The so-called ‘forced technology transfer’ has been the other major concern of the developed economies on the Chinese IP system. China’s regulatory framework for the transfer of technology is not built upon the IP laws but upon provisions scattered in other laws and regulations particularly those relating to foreign trade and investment. In this regard, the EU’s request for consultations in the China – Transfer of Technology dispute challenged a list of Chinese measures that allegedly require transfer of technology by foreign IP holders to Chinese companies.50 These challenges seem to be supported by the findings in the USTR’s Section 301 Report51 which essentially blamed China for pressuring foreign firms to transfer technology through foreign ownership restrictions and non-transparent and discretionary decision-making in China’s FDI approvals system.52 The report gathered abundant evidence from various sources to show that transfer of technology did in fact occur.

46 Soumitra Dutta, Bruno Lanvin and Sacha Wunsch-Vincent (eds), Global Innovation Index 2018: Energizing the World with Innovation, eleventh edn (Ithaca, Cornell University, 2018). 47 Office of the USTR, 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 (22 March 2018) 179–80, available at https://ustr.gov/sites/default/files/Section%20301% 20FINAL.PDF [hereinafter ‘US 301 Report I’]. 48 See generally Commission on the Theft of American Intellectual Property, Update to the IP Commission Report – The Theft of American Intellectual Property: Reassessments of the Challenge and United States policy (February 2017), available at http://ipcommission.org/report/ IP_­Commission_Report_Update_2017.pdf. 49 See USTR, 2017 Report to Congress on China’s WTO Compliance (December 2017) 16–19, available at https://ustr.gov/sites/default/files/files/Press/Reports/China%202017%20WTO%20 Report.pdf. 50 China – Certain Measures on the Transfer of Technology, Request for Consultations by the European Union (WT/DS549/1, 6 June 2018). 51 See US 301 Report I, above n 47, 19–43. 52 Office of the USTR, Update Concerning China’s Acts, Policies and Practices related to Technology Transfer, Intellectual Property, and Innovation (20 November 2018) 22, available at https://ustr. gov/sites/default/files/enforcement/301Investigations/301%20Report%20Update.pdf.

136  China’s IP Regulation and Implementation of WTO Rulings However, the question is whether the Chinese measures are mandatory in nature and would constitute an ‘as such’ breach of China’s WTO obligations. Consider the following major measures under China’s regulatory regime for technology transfer. The Regulation on the Administration of Import and Export of Technology 200153 (Technology Import and Export Regulation 2001) applies to the transfer of technology through international trade (including both imports and exports), investment (including both inbound and outbound investment), and other forms of economic and technological cooperation. The measure requires that technology import and export must comply with national industrial, technology and social development policies and shall be conducive to China’s technological advancement (Article 4). It encourages the importation of advanced and applicable technologies (Article  7) which does not need approval from the Ministry of Commerce (MOFCOM) although the contract involving the technology import needs to be filed with the MOFCOM to obtain a contract registration certificate (Articles 17–19). This certificate is necessary for applicants to proceed alongside other formalities such as foreign exchange, banking, taxation, and customs (Article 20).54 These provisions, however, do not seem to mandate transfer of technology in general, although additional requirements apply to the establishment of foreign-invested enterprises (FIEs) in China (Article 22). The principal Chinese legislations on foreign investment are Sino-Foreign Joint Venture Enterprise Law 197955 (Equity JV Law), Sino-Foreign Cooperative Joint Venture Enterprise Law 1988 (Cooperative JV Law),56 and Wholly Foreign-Owned Enterprise Law 1986 (WFOE Law),57 all amended several times and lately in 2016, as well as their respective implementing regulations.58 The legislations require foreign

53 《中华人民共和国技术进出口管理条例》 (2001) [The Regulation on the Administration of Import and Export of Technology 2001], Order No 331 of the State Council, promulgated on 10 December 2001, effective on 1 January 2002. 54 The detailed registration requirements and procedures are provided in《技术进出口合同登记管理办法》 (2009) [Administrative Measures for the Registration of Technology Import and Export Contracts], Order No 3 of the Ministry of Commerce, promulgated on 1 February 2009, effective on 1 March 2009. 55 《中华人民共和国中外合资经营企业法》 (1979) [Law of the PRC on Sino-Foreign Equity Joint Ventures 1979], adopted by the second session of the fifth National People's Congress on 1 July 1979, effective on 8 July 1979; amended on 4 April 1990, 15 March 2001, and 3 September 2016, effective on 1 October 2016. 56 《中华人民共和国中外合作经营企业法》 (1988) [Law of the PRC on Sino-Foreign Cooperative Joint Venture Enterprises 1988], adopted by the fifth session of the seventh National People’s Congress on 13 April 1988, effective on the same date; amended on 31 October 2000, and 7 ­November 2016, effective on the same date. 57 《中华人民共和国外资企业法》 (1986) [Law of the PRC on Wholly Foreign-Owned Enterprise 1986], adopted 12 April 1986 at the fourth Session of the sixth National People's Congress, amended on 31 October 2000 and 3 September 2016, effective on 1 October 2016. 58 《中华人民共和国中外合资经营企业法实施条例》 (1983) [Rules on the Implementation of the Law of the PRC on Sino-Foreign Equity Joint Ventures 1983], promulgated by the

China’s Regulatory Regime for Intellectual Property  137 investment to choose one of the permitted forms and obtain approval from the relevant authorities. In forming a joint venture (JV), a foreign investor is permitted to use technology as capital contributions in FIEs, and details of such contributions must be included in the relevant JV contract. The Equity JV Law further requires that the technology contributions of a foreign investor must be advanced technology that satisfies the needs of China (Article 5). The Equity JV Regulation adds that relevant information and materials of the technology shall be attached to the JV contract.59 This requirement does not appear in the other two laws. Despite this requirement, however, the Equity JV Law and Regulation do not explicitly mandate the transfer of technology. In short, it is unclear and controversial whether China maintains measures that force technology transfer.60 Accepting that technology transfer did occur in practice, it is not necessarily a result of Chinese policies and approval procedures. Rather, it may well be an outcome of private negotiations between JV parties. Therefore, the actual impacts of the Chinese policies and administrative requirements on foreign firms may have been overstated.61 Without technology contributions by the foreign party, a Sino-foreign JV may be created on terms less favourable to the foreign party in many other aspects. Moreover, as Nicholas Lardy, a leading US expert on China, observed, ‘China’s payments of licensing fees and royalties for the use of foreign technology have soared in recent years, reaching almost $30 billion last year [i.e. 2017], nearly a four-fold increase over the last decade.’62 This suggests that the transfer of technology has been based on commercial terms and compensations agreed by JV parties. In addition, if one also takes into account the enormous benefits that a foreign investor gains from investing and operating in the Chinese market (eg closer to 1.3 billion consumers, cheaper cost for production, no tariff or non-tariff barriers that usually apply to the sale of goods to the Chinese market from overseas), the alleged regulatory impacts tend to be even less significant. State Council on 20 September 1983, effective on the same date, amended on 22  July  2001 and 8 January 2011, effective on 8 January 2011 [hereinafter JV Regulation 1983]; 《中华人民共和国中外合作经营企业法实施细则》 (1995) [Rules on the Implementation of Law of the PRC on Sino-Foreign Cooperative Joint Venture Enterprises], promulgated on 4 September 1995, amended on 19 February 2014 and 1 March 2017, effective on 1 March 2017; 《中华人民共和国外资企业法实施细则》 (1990) [Rules on the Implementation of the Law of the PRC on Wholly Foreign-Owned Enterprise 1990], promulgated on 12 December 1990, amended on 12 April 2001 and 19 February 2014, effective 1 March 2014. 59 JV Regulation 1983, above n 58, art 26. 60 This issue will be further discussed in Section IV. 61 See Daniel Gros, ‘The Myth of China’s Forced Technology Transfer’ (Project Syndicate, 8 November 2018), available at www.project-syndicate.org/commentary/myth-of-forced-technologytransfer-china-by-daniel-gros-2018-11. 62 See Nicholas R Lardy, ‘China: Forced Technology Transfer and Theft?’ (Peterson Institute for International Economics, 20 April 2018), available at https://piie.com/blogs/china-economic-watch/ china-forced-technology-transfer-and-theft.

138  China’s IP Regulation and Implementation of WTO Rulings The brief discussion above is not to deny the fact that technology transfer has long been rooted in the heart of China’s FDI policy63 and remains fundamental for China’s transformation to an innovative economy.64 Rather, it is to show the need to rethink the validity and legitimacy of the widespread criticism of China as ‘forcing’ technology transfer and ‘stealing’ technology from developed economies. It is absolutely legitimate for a developing country to maintain investment promotion policies and measures to encourage technology transfer. All countries do so at different stages of development and in different ways.65 As other nations, China should and has every right to upgrade its economic model and promote more value-added growth by learning from others’ experience and utilising existing knowledge and expertise instead of reinventing the wheel.66 Whether China has done so by breaking its WTO obligations and if so, to what extent, is an unsettled issue and cannot be decided by any country unilaterally. China’s FDI policy that creates an environment for technology transfer does not in itself ‘force’ technology transfer. In addition, if the acquisition of technology has been undertaken by private negotiations with fair compensation, then labelling China as the ‘theft’ of foreign technology is conspicuously unjustified. III.  CHINA – INTELLECTUAL PROPERTY RIGHTS

A. Background Despite its longstanding concerns about China’s IP system, the US did not resort to the WTO dispute settlement system until the China – IPRs case in 2007. Before the outbreak of the dispute, the USTR’s China Compliance Report 2006 strongly criticised China’s inadequate IPR enforcement, although it a­ cknowledged the

63 See Ross Buckley and Weihuan Zhou, ‘Navigating Adroitly: China’s Interaction with the Global Trade, Investment, and Financial Regimes’ (2013) 9(1) University of Pennsylvania East Asia Law Review 1, 20–23. 64 See Scott Kennedy, Testimony before the Section 301 Committee Office of the United States Trade Representative for a hearing on ‘Section 301 Investigation: China’s Acts, Policies, and Practices Related to Technology Transfer, Intellectual Property, and Innovation’ (Centre For Strategic & International Studies, 10 October 2017), available at www.csis. org\\analysis\\chinas-acts-policies-and-practices-related-technology-transfer-intellectualproperty-and. 65 See Przemyslaw Kowalski, Daniel Rabaioli and Sebastian Vallejo, ‘International Technology Transfer Measures in An Interconnected World: Lessons and Policy Implications’ (20  ­November 2017) OECD Trade Policy Papers No 206, 5, available at www.oecd-ilibrary.org/ trade/international-technology-transfer-measures-in-an-interconnected-world_ada51ec0-en. 66 For a recent analysis in this regard, see James Bacchus, Simon Lester and Huan Zhu, ‘Disciplining China’s Trade Practices at the WTO: How WTO Complaints Can Help Make China More Market-Oriented?’ (15 November 2018) CATO Institute Policy Analysis Number 856, 4–5, available at https://object.cato.org/sites/cato.org/files/pubs/pdf/pa856.pdf.

China – Intellectual Property Rights  139 significant efforts that China had taken to overhaul its legal regime for IPR protection.67 The Report suggested that there were at least two reasons for the absence of WTO actions against China in the IP field before 2007: (1) the US was monitoring China’s IP regulatory reform and conducting detailed studies of the WTO-consistencies of the Chinese IP system; and (2) the US and China were in bilateral negotiations whereby China was taking continuous actions to improve its IP system in response to various requests of the US.68 However, the US was unsatisfied with the progress that China had made in addressing IPR protection and enforcement problems,69 and consequently brought a test case against China, calling for the first WTO decision on not only the deficiencies of the Chinese IP system but also the boundaries of the IP enforcement provisions of the TRIPs Agreement.70 B.  The Measures The US’s claims included three parts and a number of Chinese measures as set out below.71 1.

China failed to provide criminal procedures and penalties for the protection of trademarks and copyrights under the Criminal Law 1979 (as amended)72 and as interpreted by China’s Supreme People’s Court and Supreme People’s Procuratorate. 2. The Chinese measures on the disposal of goods confiscated by the GAC that infringe IPRs were WTO-illegal. These measures included the Regulation on Customs Protection of Intellectual Property Rights 200373

67 USTR, 2006 Report to Congress on China’s WTO Compliance (11 December 2006) 70–71, available at https://ustr.gov/archive/assets/Document_Library/Reports_Publications/2006/asset_ upload_file688_10223.pdf. 68 ibid, 71–75. 69 ibid, 76–78. 70 According to Watal, this dispute was ‘the first detailed WTO ruling on an IP enforcement dispute.’ Jayashree Watal, ‘US-China Intellectual Property Dispute – A Comment on the Interpretation of the TRIPs Enforcement Provisions’ (2010) 13(5) Journal of World Intellectual Property 605, 608. 71 Panel Report, China – Measures Affecting the Protection and Enforcement of Intellectual Property Rights (WT/DS362/R, adopted 20 March 2009) [hereinafter China – IPRs], paras 2.2–2.4. 72 《中华人民共和国刑法》 (1979) [Criminal Law of the People’s Republic of China 1979], promulgated by Order No 5 of the Chairman of the Standing Committee of the National People’s Congress on 6 July 1979, effective on 1 January 1980; revised on 14 March 1997 and effective on 1 October 1997; amended on 25 December 1999, 31 August 2001, 29 December 2001, 28 ­December 2002, 28 February 2005, 29 June 2006, 28 February 2009, 25 February 2011, 29 August 2015, 4 ­November 2017. 73 《中华人民共和国知识产权海关保护条例》 (2003) [Regulation on the Customs Protection of Intellectual Property Rights 2003], Order No 395 of the State Council, promulgated on 2 ­December 2003, effective on 1 March 2004, amended on 24 March 2010 and effective on 1 April 2010, amended on 19 March 2018 and effective on same date.

140  China’s IP Regulation and Implementation of WTO Rulings (GAC Regulation 2003) and its Implementing Measures,74 and Circular No 16 [2007] of the GAC (GAC Circular).75 3. China failed to afford protection of copyright and related rights to works that have not been authorised for publication or distribution within China. The measure in dispute was the Copyright Law 2001. The US alleged that these measures were in violation of the TRIPs Agreement. C.  WTO Rulings76 The panel started with the last claim of the US which targeted Article 4 of the Copyright Law 2001. The first sentence of that provision excluded prohibited works from the protection of copyright and related rights under the law. The evidence before the panel showed that works were prohibited from publication or distribution primarily because they failed to pass the required content review.77 The prohibited content was specified in other laws and regulations and may include gambling, violence, state secrets and security information, etc.78 The panel ruled that the works that have failed content review may nevertheless carry protectable copyrights, and therefore that the denial of copyright protection for these works under the Chinese measure was in breach of Article 9.1 of the TRIPs Agreement.79 The panel further ruled that the Chinese measure

74 《中华人民共和国海关关于〈中华人民共和国知识产权海关保护条例〉的实施办法》 (2004) [Measures for the Implementation of the Regulation on the Customs Protection of Intellectual Property Rights 2004], Order No 114 of the General Administration of Customs (GAC), promulgated on 25 May 2004, effective on 1 July 2004. 75 《关于没收侵犯知识产权货物依法拍卖有关事宜》 (2007) [Issues relating to the Auction of Confiscated Goods that Infringe Intellectual Property Rights 2007], Circular No 16 of the GAC, issued on 4 April 2007. 76 This section does not discuss in detail the panel’s interpretation and application of the relevant provisions of the TRIPs Agreement, which is unnecessary for the examination of compliance. For a discussion of the panel’s rulings, see generally Watal, above n 70. For a discussion of the economic rationale of the TRIPs Agreement and the Panel’s rulings in this dispute, see generally Kamal Saggi and Joel Trachtman, ‘Incomplete Harmonisation Contracts in International Economic Law: Report of the Panel, China – Measures Affecting the Protection and Enforcement of Intellectual Property Rights, WT/DS362/R, adopted 20 March 2009’ (2011) 10(1) World Trade Review 63. For a more detailed and comprehensive study of the dispute including the broader implications of the panel report, see Peter Yu, ‘The TRIPs Enforcement Dispute’ (2010) 89(4) Nebraska Law Review 1046. 77 Panel Report, above n 71, paras 7.52–60. 78 ibid, para 7.79. 79 ibid, paras 7.104–117. Article 9.1 of the TRIPs Agreement reads: ‘Members shall comply with Articles 1 through 21 of the Berne Convention (1971) and the Appendix thereto. However, Members shall not have rights or obligations under this Agreement in respect of the rights conferred under Article 6bis of that Convention or of the rights derived therefrom.’ Article 5(1) of the Berne Convention provides: ‘Authors shall enjoy, in respect of works for which they are protected under this Convention, in countries of the Union other than the country of origin, the rights which their respective laws do now or may hereafter grant to their nationals, as well as the rights specially granted by this Convention.’ The panel report cited and discussed this provision and other relevant provisions of the Convention.

China – Intellectual Property Rights  141 violated Article 41.1 of the TRIPs Agreement as the denial of copyright protection necessarily resulted in the lack of enforcement procedures against any infringements of such rights.80 With respect to IPR protection by the GAC, Article 27 of the GAC Regulation 2003 allowed the goods confiscated by the GAC due to IPR infringements to be released for social public welfare, to IPR holders with compensation, or once the infringing features are removed, by auction.81 Article 30 of the Implementing Measures required the GAC to undertake necessary supervision over the use of confiscated goods by charities. The GAC Circular clarified that auction must not be undertaken before infringing features are completely removed. The relevant provisions of the TRIPs Agreement are Articles 59 and 46 which essentially require WTO Members to ensure that competent authorities are empowered to order the destruction or disposal of infringing goods outside the channels of commerce.82 The panel found that the Chinese measures were not WTOinconsistent ‘as such’ because they did give the GAC the authority to dispose infringing goods in a way that complies with the requirements of the two provisions of the TRIPs Agreement.83 In this regard, the panel found that a vast majority of infringing goods were donated to the Red Cross Society of China or destroyed.84 When the goods were donated, there was no evidence to show that the GAC had not taken steps to ensure that these goods were not re-distributed

80 ibid, paras 7.166–181. Article 41.1 of the TRIPs Agreement reads: ‘Members shall ensure that enforcement procedures as specified in this Part are available under their law so as to permit effective action against any act of infringement of intellectual property rights covered by this Agreement, including expeditious remedies to prevent infringements and remedies which constitute a deterrent to further infringements. These procedures shall be applied in such a manner as to avoid the creation of barriers to legitimate trade and to provide for safeguards against their abuse.’ 81 For a mutual agreed translation of the relevant provisions, see Panel Report, above n 71, paras 7.193–195. 82 For the panel’s detailed interpretation of the provisions, see Panel Report, above n 71, paras  7.212–285. Article 59 reads: ‘Without prejudice to other rights of action open to the right holder and subject to the right of the defendant to seek review by a judicial authority, competent authorities shall have the authority to order the destruction or disposal of infringing goods in accordance with the principles set out in Article 46. In regard to counterfeit trademark goods, the authorities shall not allow the re-exportation of the infringing goods in an unaltered state or subject them to a different customs procedure, other than in exceptional circumstances.’ Article 46 states: ‘In order to create an effective deterrent to infringement, the judicial authorities shall have the authority to order that goods that they have found to be infringing be, without compensation of any sort, disposed of outside the channels of commerce in such a manner as to avoid any harm caused to the right holder, or, unless this would be contrary to existing constitutional requirements, destroyed. The judicial authorities shall also have the authority to order that materials and implements the predominant use of which has been in the creation of the infringing goods be, without compensation of any sort, disposed of outside the channels of commerce in such a manner as to minimize the risks of further infringements. In considering such requests, the need for proportionality between the seriousness of the infringement and the remedies ordered as well as the interests of third parties shall be taken into account. In regard to counterfeit trademark goods, the simple removal of the trademark unlawfully affixed shall not be sufficient, other than in exceptional cases, to permit release of the goods into the channels of commerce.’ 83 See Panel Report, above n 71, paras 7.286–355. 84 ibid, paras 7.232, 7. 350.

142  China’s IP Regulation and Implementation of WTO Rulings into the channels of commerce.85 However, to the extent that the Chinese measures, particularly Article 27 of the GAC Regulation 2003, allowed the auction of counterfeit trademark goods by the simple removal of the trademark, they constituted a breach of Articles 59 and 46 of the TRIPs Agreement.86 Turning to the criminal procedures and penalties, the panel considered a list of provisions of the Chinese Criminal Law and the relevant judicial interpretations, and their consistencies with Article 61 of the TRIPs Agreement which requires WTO Members to ‘provide for criminal procedures and penalties to be applied at least in cases of wilful trademark counterfeiting or copyright piracy on a commercial scale.’87 After a detailed analysis of the legal elements of Article 61 especially the term ‘on a commercial scale’, the panel ruled that the criminal thresholds codified in the Chinese measure did not fail to meet the level of protection envisaged under Article 61.88 D.  China’s Implementation and an Assessment The parties agreed that China had until 20 March 2010 to implement the WTO rulings.89 On 8 March 2010, China notified the DSB that it had brought the Copyright Law into compliance with the TRIPs Agreement and had submitted the legislative proposals relating to the amendment of the GAC Regulation to the State Council for review and approval.90 The Copyright Law 2010 amended Article 4 by removing the wording that denies copyright protection to prohibited works.91 The revised article states that ‘copyright holders must not violate China’s Constitution or laws, or prejudice public interest when exercising their copyright. The State shall supervise the publication or dissemination of works as prescribed by laws.’ 85 ibid, para 7.306. 86 ibid, paras 7.356–394. 87 ibid, paras 7.399–479. The remaining part of Article 61 reads: ‘Remedies available shall include imprisonment and/or monetary fines sufficient to provide a deterrent, consistently with the level of penalties applied for crimes of a corresponding gravity. In appropriate cases, remedies available shall also include the seizure, forfeiture and destruction of the infringing goods and of any materials and implements the predominant use of which has been in the commission of the offence. Members may provide for criminal procedures and penalties to be applied in other cases of infringement of intellectual property rights, in particular where they are committed wilfully and on a commercial scale.’ 88 ibid, paras 7.494–669. 89 China – Measures Affecting the Protection and Enforcement of Intellectual Property Rights, Communication from China and the United States concerning Article 21.3(b) of the DSU (WT/ DS362/13, 3 July 2009). 90 China – Measures Affecting the Protection and Enforcement of Intellectual Property Rights, Status Report of China: Addendum (WT/DS362/14/Add 2, 9 March 2010). 91 《全国人民代表大会常务委员会关于修改〈中华人民共和国著作权法〉的决定》 (2010) [Decision of the Standing Committee of the National People’s Congress on Amending the Copyright Law 2010], adopted at the thirteenth Session of the Standing Committee of the eleventh National People’s Congress of the PRC on 26 February 2010, effective on 1 April 2010.

China – Intellectual Property Rights  143 ­ ccordingly,  the new provision no longer denies copyright protection of A prohibited works, although such works may continue to fail China’s censorship and as a result are banned from publication or distribution in the territory of China. On 17 March 2010, the State Council adopted a decision to revise the GAC Regulation 2003.92 Amongst other changes, the GAC Regulation 2010 added a new sentence to Article 27 which prohibits the release of counterfeit trademark goods into the stream of commerce after simply removing the trademark, except in special circumstances. The WTO rulings did not specify the additional acts, other than the removal of the trademark, that must be undertaken before the release of counterfeit trademark goods. Taking advantage of that flexibility, the new Article 27 strictly addressed the WTO-inconsistency and apparently left to the GAC to decide what to do on a case-by-case basis. However, the WTO decision did shed light on some general principles related to the additional acts, including: (1) the re-distribution of counterfeit trademark goods must not cause harm to right holders;93 and (2) some changes to the state of the goods may need to be made to ‘deter further acts of infringement with those goods’ (ie reaffixing the trademark to such goods).94 Based on these principles, the panel contemplated that ‘special circumstances’ may involve cases in which the simple removal of the trademark would be sufficient to deter further infringements.95 Thus, the panel’s rulings imposed some requirements on what additional acts needed to be undertaken before the release of counterfeits into the channels of commerce. However, the fact that Article 27 does not set out such additional acts according to these principles does not affect the quality of China’s compliance. The WTO decision only required China to prevent counterfeit trademark goods from re-entering the stream of commerce as long as the trademark is removed. The new sentence of Article 27 has incorporated that decision. Webster questioned the quality of China’s compliance in this dispute, ­arguing that Article 27 of the revised GAC Regulation merely tackled imported counterfeits and did not address those produced in China.96 This argument shows a lack of understanding of the Chinese IP regulatory regime and the WTO decision. The GAC Regulation is specifically designed to prevent IPR infringements by imported or exported goods (Articles 2 and 3) and is not intended to tackle counterfeits produced domestically. Domestic counterfeits 92 《国务院关于修改〈中华人民共和国知识产权海关保护条例〉的决定》 (2010) [Decision of the State Council on Amending the Regulation on the Customs Protection of Intellectual Property Rights 2010], Order No 572 of the State Council, promulgated on 24 March 2010, effective on 1 April 2010. 93 See TRIPs Agreement, above n 4, arts 59 and 46. Also see Panel Report, above n 71, paras 7.281–284. 94 See TRIPs Agreement, above n 4, art 59. Also see Panel Report, above n 71, paras 7.373–379. 95 See Panel Report, above n 71, paras 7.391–392. 96 See Timothy Webster, ‘Paper Compliance: How China Implements WTO Decisions’ (2014) 35(3) Michigan Journal of International Law 525, 560–62.

144  China’s IP Regulation and Implementation of WTO Rulings are tackled under the other IP legislations, eg chapter 7 of the Trademark Law, which are enforced by different authorities, eg the SIPO. Such a regulatory framework is perfectly aligned with the structure of the TRIPs Agreement, particularly Part III, which distinguishes domestic enforcement measures from border enforcement measures. As far as border measures are concerned, the GAC Regulation provided ‘a level of protection higher than the minimum standard required’ under the TRIPs Agreement which only applies to ‘counterfeit trademark’ and ‘pirated copyright goods’ and does not apply to goods destined for e­xportation.97 Furthermore, China’s obligation to comply with a WTO decision is confined to correct the inconsistencies found by WTO tribunals. In China – IPRs, China was not required to make any changes to its legislations that tackle domestic counterfeits. These were not included in the US’s claims and were not adjudicated by the panel. The fact that there are outstanding deficiencies in China’s IP system and enforcement does not mean that China failed to achieve compliance in this particular dispute. Therefore, Webster’s disparagement of China’s compliance in the dispute was misplaced. Indeed, China’s compliance was found to be satisfactory by the US, as shown in the USTR’s China Compliance Report 2010.98 E.  China’s Compliance Approach and Implications In light of the above, it is reasonable to conclude that China implemented the China – IPRs decision in a satisfactory and timely manner. The factors contemplated in the previous chapters of this book also offer a good explanation for China’s approach to compliance in this dispute. Firstly, China – IPRs was only the second dispute, after China – Auto Parts (discussed in Chapter 3), that China fully participated in the WTO adjudication process as a respondent. Compliance helped China to build reputation and credibility in terms of its adherence to WTO rules, full respect for WTO rulings, and commitments to the improvement of its IP system. Secondly, although the legislative process involved amendments of a statutory law by the Standing Committee of the National People’s Congress and a regulation by the State Council, the changes required by the WTO decision were relatively uncontroversial and could be easily addressed. Despite China’s lack of experience and expertise in WTO litigation at the time, its implementation approach demonstrated a good understanding of the limitations of the WTO rulings and growing sophistication in delivering adequate compliance. 97 See Panel Report, above n 71, paras 7.224–228. Also see Henning Gross Ruse-Khan, ‘China – Intellectual Property Rights: Implications for the TRIPs-Plus Border Measures’ (2010) 13(5) Journal of World Intellectual Property 620, 623–24. 98 USTR, 2010 Report to Congress on China’s WTO Compliance (December 2010) 84, available at https://ustr.gov/sites/default/files/uploads/gsp/speeches/reports/2010/2010%20Report%20to%20 Congress%20-%20Dec%2023%20Final.pdf.

China – Intellectual Property Rights  145 Thirdly, the economic and political impacts of the WTO decision on China tended to be rather limited.99 The decision did not require China to change or reduce the rigour of its censorship regime. Nor did it prevent China from releasing seized counterfeit goods to public welfare bodies or by auction once infringing features are completed removed. Nor did it require China to modify its thresholds for criminal procedures and penalties. Accordingly, there was little domestic resistance to China’s implementation of the WTO decision. It was observed that the US brought the China – IPRs dispute under unbearable political pressure domestically.100 The US declared victory immediately after the issuance of the panel report. For example, the then Acting USTR Peter Allgeier called the WTO rulings ‘an important victory, because they confirm the importance of IPR protection and enforcement, and clarify key enforcement provisions of the TRIPs Agreement.’101 In fact, however, the US’s victory was a clear overstatement and was most likely a necessary political rhetoric. Indeed, trade and IP experts have explained why the outcome of the dispute was merely a ‘superficial victory’ for the US which was legally unfavourable and practically meaningless.102 From the legal perspective, the US appeared to intend to use the dispute to expand the boundaries of the TRIPs Agreement, squeeze the flexibilities of IP enforcement, and impose TRIPs-plus obligations on China.103 Given the aforementioned limitations of the WTO rulings, it is obvious that the US failed to achieve the intended outcomes. From the practical perspective, the WTO decision had little effect in compelling China to improve IP protection and enforcement. First of all, the impact of the revised GAC Regulation on the GAC’s practice in redistributing confiscated goods tended to be minimal. In practice, the GAC had rarely redistributed such imported goods by auction.104 If anything, the change to the GAC Regulation would 99 Tomer Broude, ‘It’s Easily Done: The China – Intellectual Property Rights Enforcement Dispute and the Freedom of Expression’ (2010) 13(5) Journal of World Intellectual Property 660, 668–69; Daniel Gervais, ‘China – Measures Affecting the Protection and Enforcement of Intellectual Property Rights’ (2009) 103(3) American Journal of International Law 549, 553. 100 Wenhua Ji and Cui Huang, ‘China’s Experience in Dealing with WTO Dispute Settlement: A Chinese Perspective’ (2011) 45(1) Journal of World Trade 1, 18–19. 101 The relevant USTR webpage has been removed. The statement of Peter Allgeier was cited in Yu, above n 76, 1081–82. 102 Hong Xue, ‘An Anatomical Study of the United States versus China at the World Trade Organization on Intellectual Property Enforcement’ (2009) 31(6) European Intellectual Property Review 292, 293; Michael Geist, ‘Why the U.S. Lost Its WTO IP Complaint Against China Badly? (Michael Geist’s Blog, 27 January 2009), available at www.michaelgeist.ca/2009/01/ wto-china-ip-decision/; Yenkong Ngangjoh Hodu and Qi Zhang, The Political Economy of WTO Implementation and China’s Approach to Litigation in the WTO (Cheltenham, Edward Elgar Publishing, 2016) 158–59. 103 Xuan Li, ‘The Agreement on Trade-Related Aspects of Intellectual Property Rights Flexibilities on Intellectual Property Enforcement: The World Trade Organization Panel Interpretation of China – Intellectual Property Enforcement of Criminal Measures and Its Implications’ (2010) 13(5) Journal of World Intellectual Property 639, 639, 648–50. Also see Yu, above n 76, 1053. 104 Jianguo Hu and Haicong Zuo, ‘中美知识产权案显国际著作权和贸易法灵活性’ [The US-China IPR Dispute: The Flexibilities of International Copyright Law and Trade Law] (2009) 71(6) China WTO Tribune 88, 89.

146  China’s IP Regulation and Implementation of WTO Rulings tighten the restriction on the release of imported counterfeits with unlawfully affixed trademarks in the Chinese market, thereby creating a market for more domestic counterfeits. Secondly, as far as the revision of the Copyright Law is concerned, China’s rigorous censorship regime may well continue to restrict the access of US copyrighted goods to, and also reduce their competitiveness in, the Chinese market.105 As Yu observed, ‘to some extent, the panel report provided an unintended opportunity for the public security bureaucracy to demand greater power and resources as a compromise for supporting a semantic change in the Copyright Law.’106 Thirdly, despite the legislative changes made by China, whether the revised measures would provide effective protection for right holders would depend on the implementation by Chinese authorities.107 To the extent that the WTO decision delineated the flexibilities and boundaries of the TRIPs Agreement, it may introduce more discretion in the competent authorities at both central and local levels in the IP enforcement in China.108 In addition, the initiation of the dispute impeded the progress of the US-China bilateral negotiation on IP-related issues, which may have achieved more favourable outcomes than the dispute if it were continued.109 Given the limitations of the WTO decision, China was placed in a better bargaining position in the bilateral negotiation.110 The limitations of the China – IPRs decision reflected the limits of the TRIPs Agreement. As mentioned in Section I above, the TRIPs Agreement merely imposes minimum standards for IP protection and enforcement and leaves flexibility for WTO Members to decide whether to pursue a higher level of protection and how to achieve it.111 However, WTO litigation is just one of the US’s strategies in pushing China to improve IPR protection and enforcement. The other important strategies of the US have involved bilateral negotiations via the US-China Joint Commission on Commerce and Trade and more recently the US-China Strategic and Economic Dialogue as well as unilateral actions by way of Section 301 investigations.112 From the Chinese 105 The importance and potential trade impacts of China’s censorship regime was discussed as part of the studies of the China – Publications and Audiovisual Products dispute in Chs 3&5. 106 See Yu, above n 76, 1099. 107 ibid, 1092. 108 ibid, 1094. 109 Ji and Huang, above n 100, 18–19. 110 See Yu, above n 76, 1108. 111 For a brief summary of such flexibilities, see WIPO, ‘Advice on Flexibilities under the TRIPs Agreement’, available at www.wipo.int/ip-development/en/policy_legislative_assistance/advice_ trips.html. For a recent analysis of the limitations and flexibilities of the TRIPs Agreement on patent protection, see generally Eric Solovy and Pavan Krishnamurthy, ‘TRIPs Agreement Flexibilities and Their Limitations: A Response to the US Secretary-General’s High-Level Panel Report on Access to Medicines’ (2017) 50(1) George Washington International Law Review 69. 112 See USTR, above n 49, 107–17. For a brief overview of Section 301 investigations, see Wayne Morrison, ‘Enforcing U.S. Trade Law: Section 301 and China’ (Congressional Research Service, 3 December 2018), available at https://fas.org/sgp/crs/row/IF10708.pdf. For the latest Section 301 reports, see above n 47 & 52. For an overview of other possible unilateral redress by the US and the EU in this regard, see Kennedy, above n 5, at 8–18.

The Pending Disputes  147 perspective, all these actions may provide necessary external levers to propel further improvement of IPR protection and enforcement in China. However, aggressive actions would be counter-productive if they ignore the reality that China needs to pursue stronger IP enforcement incrementally to ensure a balance between the protection of IPR holders and the protection of public interest. Overall, one should be positive that China is committed to creating an effective IP system based on international standards as doing so is in China’s own interests in the long run. IV.  THE PENDING DISPUTES

A.  China – IPRs II After China – IPRs, the US did not challenge China’s IP system at the WTO until very recently, although bilateral talks and unilateral actions continued. On 23 March 2018, the US initiated another WTO dispute over China’s inadequate IP protection and enforcement. The US’s claims focused on patent protection in Sino-foreign JVs, contending that China (1) ‘denies foreign patent holders the ability to enforce their patent rights against a Chinese joint-venture party after a technology transfer contract ends’, and (2) ‘imposes mandatory adverse contract terms that discriminate against and are less favourable for imported foreign technology.’113 Most of the US’s contentions are confined to discriminatory treatment of foreign IPR holders vis-a-vis Chinese ones. It is not the purpose of this book to examine the merits of these contentions based on the relevant provisions of the TRIPs Agreement. However, even if one or more of the contentions prevail, it would not be hard for China to implement WTO rulings because such implementation merely requires the removal of WTO-prohibited discrimination. In this sense, China may alter or remove the discriminatory requirements on foreign IPR holders or impose the same requirements on domestic ones. If the latter is adopted, foreign IPR holders will continue to be subject to these requirements. Only one claim of the US went beyond non-discrimination. The US argued that Article 43 of the JV Regulation 1983 (as amended)114 ‘denies foreign patent holders their exclusive rights, including to prevent third parties not having the foreign patent holder’s consent from acts listed in Article 28.1(a), (b) of the TRIPS Agreement.’115 In particular, the US challenged Article 43(4) of the Chinese measure which in the US’s words, ‘provides a Chinese joint-venture

113 China – Certain Measures Concerning the Protection of Intellectual Property Rights, Request for Consultations by the United States (WT/DS542/1, 26 March 2018). 114 See JV Regulation 1983, above n 58. 115 See China – Certain Measures Concerning the Protection of Intellectual Property Rights, above n 112, 2.

148  China’s IP Regulation and Implementation of WTO Rulings party the right to continue to use technology transferred under a technology transfer contract after the expiration of the contract.’116 There are at least two issues in this claim. Firstly, while paragraph 4 does allow the use of transferred technology after the expiration of a technology transfer contract, it is debatable who is entitled to do so. Article 43(4) does not refer to the ‘Chinese JV party’ but to the ‘technology import party’. According to Article 41 of the regulation, the ‘technology import party’ is the JV, not the Chinese party in the JV or any other third parties. Therefore, Article 43 does not give the Chinese party or a third party the right to continue to use the transferred technology which remains the property of the JV held jointly by the JV parties. Secondly, the right to use transferred technology after the end of the technology transfer contract may well come out of the negotiations between the JV parties based on agreed compensation. In this regard, Article 43(1) of the regulation provides that the licensing fee for the use of foreign technology must be fair and reasonable. Article 22 states that the value of technology, if used as capital contributions to the JV, must be determined by the JV parties based on fair and reasonable negotiations. Thus, insofar as the foreign JV party has agreed to the continuous use of its technology by the JV under the technology transfer contract or the JV contract, Article 43(4) does not deny its patent holder rights. From the perspective of compliance, how may China respond to unfavourable WTO rulings on this matter? While this question will depend on the exact findings of inconsistencies, China may simply remove Article 43(4) in its entirety. The question then becomes whether the removal of Article 43(4) would change the established practice of administrative approvals based on that provision. Finally, it is worth noting that the US did not challenge the Chinese measures as mandating or forcing technology transfer in this dispute. Amongst the measures identified in the US’s request for consultations, only Article 43(4) of the JV Regulation may be used as a basis for that challenge. However, it is important to realise that Article 43 deals with technology transfer contracts rather than JV contracts. As briefly discussed in Section II above, the Chinese foreign investment legislations do not explicitly require technology transfer as a precondition for foreign investment in any of the three permitted forms. As far as the JV Regulation is concerned, there is no provision that mandates a foreign JV party to use technology as capital contributions or transfer technology in other ways. Thus, the regulation, at least on its face, provides the freedom for the foreign party to decide whether to enter into a technology transfer contract. B.  China – Transfer of Technology In contrast with China – IPRs II which continues to focus on China’s IP protection, the China – Transfer of Technology dispute is dedicated to the issue of

116 ibid.

The Pending Disputes  149 technology transfer. In its request for consultations communicated on 1 June 2018, the EU alleged that China’s domestic legislation ‘imposes a different set of rules on the import of technology, including industrial property rights, other intellectual property rights and undisclosed information.’117 More specifically, the EU’s allegations pointed to: (1) restrictions on the rights of foreign IPR holders ‘to freely negotiate market-based contractual terms in licensing and other technology-related contracts’, and (2) mandatory contract terms which discriminate against foreign IPR holders and restrict their ability to protect their IPRs. While a detailed examination of the strengths and weaknesses of these arguments is not offered here, it is interesting to note that none of the provisions of the TRIPs Agreement invoked in the EU’s request for consultations directly deal with technology transfer. It is surprising that the EU did not refer to China’s specific commitments on technology transfer under Section 7(3) of the Protocol on the Accession of China118 as elaborated in paragraph 203 of the Working Party Report.119 In essence, these commitments prohibit China from conditioning the approval of foreign investment upon the transfer of technology. It is unclear why the EU did not rely on these commitments. It may have to do with the difficulties in identifying any Chinese measures that mandate technology transfer ‘as such’. The EU’s claims have indicated such difficulties as they remain limited to the lack of protection of IPR holders’ rights under the Chinese laws, which allegedly deprive the right holders of the freedom to negotiate the terms and conditions of a technology transfer contract. Nevertheless, the EU may well gather new evidence and expand and improve its arguments as the dispute proceeds. On 20 December 2018, the EU announced that it had significantly broadened its request for consultations with China on the issue of forced technology transfer.120 The new request expanded the original request in two important ways: (1) the inclusion of two ‘as applied’ claims in relation to ‘forced’ 117 See China – Certain Measures on the Transfer of Technology, above n 50, 1. 118 The relevant part of s 7(3) of the Accession Protocol provides: ‘Without prejudice to the relevant provisions of this Protocol, China shall ensure that the distribution of import licences, quotas, tariff rate quotas, or any other means of approval for importation, the right of importation or investment by national and sub national authorities, is not conditioned on: whether competing domestic suppliers of such products exist; or performance requirements of any kind, such as local content, offsets, the transfer of technology, export performance or the conduct of research and development in China.’ (emphasis added) 119 Paragraph 203 of the Working Party Report relevantly states: ‘The allocation, permission or rights for importation and investment would not be conditional upon performance requirements set by national or sub-national authorities, or subject to secondary conditions covering, for example, the conduct of research, the provision of offsets or other forms of industrial compensation including specified types or volumes of business opportunities, the use of local inputs or the transfer of technology … Consistent with its obligations under the WTO Agreement and the Draft Protocol, the freedom of contract of enterprises would be respected by China. The Working Party took note of this commitment.’ (emphasis added) 120 See European Commission, ‘EU Steps up WTO Action against China’s Forced Technology Transfers’ (European Commission, 20 December 2018), available at http://trade.ec.europa.eu/doclib/ press/index.cfm?id=1963.

150  China’s IP Regulation and Implementation of WTO Rulings technology transfer in the areas of new energy vehicles (NEVs) and biotechnology (crop seeds), and (2) the application of the aforementioned provisions of China’s WTO accession instruments to both the ‘as such’ and ‘as applied’ claims. If China loses the dispute, one can be reasonably confident that China will take efforts to comply with the WTO rulings given its record of compliance. However, China is likely to do so in a way that strictly addresses the findings of inconsistencies and minimises the impacts on its overarching policy objective and regulatory regime for its transformation to an innovative economy. In this regard, China’s National People’s Congress released a draft Foreign Investment Law on 26 December 2018, which is open for consultation until 24 February 2019.121 The Law, which seeks to overhaul China’s foreign investment regime, shows unequivocally the Chinese Government’s commitment to the promotion of foreign investment. Among many significant changes, the Law requires that transfer of technology must be voluntary based on commercial rules, and explicitly prohibits all levels of government and their officials from forcing technology transfer through administrative means. The Law will replace the existing foreign investment legislations – ie the Equity JV Law, the Cooperative JV Law and the WFOE Law – which will be abolished. If everything progresses smoothly, it is expected that the Law will be adopted in 2019 and take effect shortly after the adoption. Given the time that the WTO adjudication process may take, it is very likely that China will have already removed the WTO-inconsistencies challenged by the EU before the panel/Appellate Body decisions. However, if, as many believe, the core of the technology transfer problem lies in practice rather than in law, then it will remain necessary for the EU and the US to continue to monitor the implementation of the new law by the competent Chinese authorities. V. CONCLUSION

In the area of trade-related IPRs, there has been only one dispute, ie China – IPRs, in which China was required to implement adverse WTO rulings. In the dispute, China implemented the WTO rulings timely and satisfactorily. China’s approach to compliance demonstrated a good understanding of the limits of the rulings and its growing sophistication in delivering compliance in a way that strictly addresses the findings of inconsistencies. China’s compliance may be attributed to similar considerations in China’s implementation in the other disputes as discussed in the previous chapters. These include reputation concerns, legislative process, impacts on China’s IP system, public interest, and fundamental social and political pursuits embedded in the censorship system.

121 《中华人民共和国外商投资法（草案）》 [Foreign Investment law of the People’s Republic of China], consultation draft released by the National People’s Congress on 26 December 2018.

Conclusion  151 As a controversial and persisting issue, the Chinese IP system has generated pressing concerns as reflected in the China – IPRs II and China – Transfer of Technology disputes. While the outcomes of these disputes will not become available in any short period of time, one may reasonably predict that China will take efforts to comply with any unfavourable rulings to maintain its good record of compliance. However, since the root of the IP protection and enforcement problems in China lies more in practice than in law, WTO proceedings are unlikely to provide adequate solutions to the problems. Therefore, other approaches, such as bilateral negotiations and unilateral actions,122 will continue to be utilised to push China to create a more effective IP system in accordance with international standards. Undoubtedly, doing so is also in China’s longer-term interest if it is to pursue an innovation-driven growth model and build an innovative economy.

122 For a discussion of the other approaches, see Lee Branstetter, ‘China’s Forced Technology Transfer Problem – And What to Do About It?’ (Peterson Institute for International Economics, June 2018), available at https://piie.com/system/files/documents/pb18-13.pdf.

7 China’s Trade Remedy Regime and Implementation of WTO Rulings I. INTRODUCTION

T

his chapter discusses six ‘trade remedy’ disputes in which Chinese practices were found to be incompatible with WTO rules. As listed in Chapter 1, these disputes are (1) China – GOES (DS414); (2) China – X-Ray Equipment (DS425); (3) China – Broiler Products (DS427); (4) China – Autos (US) (DS440); (5) China – HP-SSST (DS454, 460); and (6) China – Cellulose Pulp (DS483). While trade remedy cases are essentially concerned about trade in goods, they are discussed separately from ‘trade in goods’ disputes (see Chapters 3 and 4) for two reasons. Trade remedies have been the most litigated area at the WTO and hence involve a larger group of cases that require a full chapter to explore. More importantly, trade remedies involve highly technical issues which create distinctive challenges for ensuring compliance with WTO rulings. Trade remedies consist of three areas of law and practice: anti-­dumping (AD), countervailing (CV), and safeguards (SG). Each of the areas is governed by WTO rules, including Articles VI and XIX of the GATT and the implementing WTO agreements, that is, the Agreement on Anti-Dumping1 (AD Agreement), the Agreement on Subsidies and Countervailing Measures2 (SCM Agreement), and the Agreement on Safeguards.3 In essence, AD and CV are actions taken by the competent investigating authority (IA) or authorities of a WTO Member against the practice of ‘dumping’ or the provision of subsidies by another WTO Member when the dumped or subsidised imports cause a ‘material injury’ to the relevant industries in the importing or investigating Member.4 To counteract the injurious effect of dumping or subsidisation, 1 Agreement on the Implementation of Art VI of GATT 1994, 15 April 1994, Marrakesh Agreement Establishing the World Trade Organization, annex 1A, 1868 UNTS 201. 2 Agreement on Subsidies and Countervailing Measures, 15 April 1994, Marrakesh Agreement Establishing the World Trade Organization, annex 1A, 1869 UNTS 14. 3 Agreement on Safeguards, 15 April 1994, Marrakesh Agreement Establishing the World Trade Organization, annex 1A, 1869 UNTS 154. 4 For a detailed discussion of the AD Agreement and the SCM Agreement, see Edwin Vermulst, The WTO Anti-Dumping Agreement: A Commentary (Oxford, Oxford University Press, 2005); Wolfgang Muller, WTO Agreement on Subsidies and Countervailing Measures (Cambridge, Cambridge University Press, 2017).

Introduction  153 the importing Member may impose AD/CV measures typically in the form of customs duties on top of the existing import tariffs on the subject goods. Like AD and CV actions, SG are also WTO-permitted government actions to prevent imports from causing injury to domestic industries. However, SG measures are targeted at sudden increases in certain imports (ie not dumping or subsidies), may take forms other than tariffs (eg import quotas), and are subject to different and arguably more onerous conditions.5 All the WTO disputes to be discussed in this chapter concern Chinese practices in AD/CV investigations rather than the relevant Chinese legislations. My analysis will focus on AD which has dominated China’s trade remedy actions as will be shown below. Under Article 2.1 of the AD Agreement, dumping is defined as the sale of goods in an exporting market at a price (ie export price) lower than the price of ‘like’ goods sold in the market of exportation (ie normal value). While the WTO allows Members to take unilateral actions against dumping, AD is generally perceived as a form of protectionism without sufficient economic justifications.6 Despite the belief that an AD mechanism provides a ‘safety valve’ for trade liberalisation,7 in practice AD has been used by governments frequently and predominantly to afford protection to domestic industries. The protectionist effects of AD have created strong incentives for importcompeting industries to lobby for the imposition of AD measures. The other major motivation behind AD pertains to retaliation or threat of retaliation to revenge on foreign AD actions or deter potential ones.8 These motivations have been the main contributing factors for the proliferation of AD actions worldwide. Given the protectionist nature of AD, the WTO AD rules do not target dumping but regulate the application of AD measures by imposing substantive and procedural requirements on Members that apply these measures. The SCM Agreement contains almost identical requirements with necessary variations to deal with subsidies. Accordingly, WTO rulings often concern the failure of IAs to adhere to these requirements in AD/CV investigations.

5 For a detailed discussion of the SG Agreement, see Alan Sykes, The WTO Agreement on Safeguards: A Commentary (Oxford, Oxford University Press, 2006). 6 See, eg, Petros Mavroidis, Patrick Messerlin and Jasper Wauters, The Law and Economics of Contingent Protection in the WTO (Cheltenham, Edward Elgar Publishing Limited, 2008) 7–25 (arguing that anti-dumping is ‘merely another way of protecting import-competing firms’); Michael Finger, Antidumping – How It Works and Who Gets Hurt (Ann Arbor, University of Michigan Press, 1993) (analysing the negative economic impacts of anti-dumping on selected domestic industries and generally why anti-dumping is a threat to trade liberalisation); Thomas J Prusa, ‘Anti-Dumping: A Growing Problem in International Trade’ (2005) 28(5) The World Economy 683. 7 See, eg, Aradhna Aggarwal, ‘Macro Economic Determinants of Antidumping: A Comparative Analysis of Developed and Developing Countries’ (2004) 32(6) World Development 1043. However, this is considered to be not supported by empirical studies which show that ‘antidumping has not been an effective tool in helping nations to pursue reduced tariffs at the sectoral level’. See Michael O Moore and Maurizio Zanardi, ‘Does Antidumping Use Contribute to Trade Liberalisation in Developing Countries’ (2009) 42(2) Canadian Journal of Economics 465. 8 See, eg, Thomas J Prusa and Susan Skeath, ‘The Economic and Strategic Motives for Antidumping Filings’ (2002) 138(3) Review of World Economics 389; Hylke Vandenbussche and Maurizio Zanardi, ‘What Explains the Proliferation of Antidumping Laws’ (2008) 23(53) Economic Policy 93.

154  China’s Trade Remedy Regime and Implementation of WTO Rulings The remainder of the chapter is organised as below. Section II offers a brief overview of China’s trade remedy regime with a focus on AD laws and practice. Section III discusses the WTO disputes concerned and China’s implementation of WTO rulings. This section will not focus on the details of the rulings. This is not only because these disputes involved very similar substantive and procedural issues in China’s AD/CV practices, which have already been discussed diligently by other scholars in a series of articles.9 It is also because an analysis of the approaches that China adopted in response to the WTO rulings is sufficient for an assessment of the adequacy of compliance and the relevant implications which are discussed subsequently in Section IV. Section V concludes the chapter. II.  CHINA’S TRADE REMEDY REGIME AND PRACTICE

China’s trade remedy regime was established in 1997 with the promulgation of the first Regulation on Anti-dumping and Countervailing Measures10 (AD and CV Regulation 1997). While this regulation was considered to be largely WTO-compatible in principles and substantive rules, it attracted criticisms for the lack of detailed and transparent procedural rules and certain textual inconsistencies with the WTO AD Agreement.11 During the negotiations of China’s entry into the WTO, issues relating to the determination of dumping and injury were also tabled by WTO Members, which resulted in China’s commitments to revise the regulation.12 One month before China became a WTO Member in ­December 2001, the State Council issued a set of revised r­egulations including the Regulation on Anti-Dumping13

9 See Thomas J Prusa and Edwin Vermulst, ‘China – Countervailing and Anti-Dumping Duties on Grain Oriented Flat-rolled Electrical Steel from the United States: Exporting US AD/CVD Methodologies through WTO Dispute Settlement’ (2014) 13(2) World Trade Review 229; Michael Moore and Mark Wu, ‘Antidumping and Strategic Industrial Policy: Tit-for-Tat Trade Remedies and the China – X-Ray Equipment Dispute’ (2015) 14(2) World Trade Review 239; Thomas Prusa and Edwin Vermulst, ‘China – Anti-Dumping and Countervailing Duty Measures on Broiler Products from the United States: How the Chickens Came Home to Roost’ (2015) 14(2) World Trade Review 287; Andrew Mitchell and Thomas Prusa, ‘China – Autos: Haven’t We Danced this Dance Before?’ (2016) 15(2) World Trade Review 303; Dukgeun Ahn and Maurizio Zanardi, ‘China – HP-SSST: Last Part of Growing Pains’ (2017) 16(2) World Trade Review 159. 10 《中华人民共和国反倾销和反补贴条例》 (1997) [Regulation on Anti-Dumping and Countervailing Measures 1997], Decree No 214 of the State Council, promulgated on 25 March 1997, effective on the same date. 11 Xin Zhang, International Trade Regulation in China: Law and Policy (Oxford, Hart Publishing, 2006) 178–79. For a comparison between the AD and CV Regulation 1997 and the WTO AD Agreement, see Kermit Almstedt and Patrick Norton, ‘China’s Antidumping Laws and the WTO Antidumping Agreement’ (2000) 34(6) Journal of World Trade 75. 12 Report of the Working Party on the Accession of China (WT/ACC/CHN/49, 1 October 2001) paras 147–48. 13 《中华人民共和国反倾销条例》 (2001) [Anti-Dumping Regulation of the People’s Republic of China 2001], Decree No 328 of the State Council, promulgated on 27 November 2001 and

China’s Trade Remedy Regime and Practice  155 (AD ­Regulation 2001), the Regulation on ­Countervailing,14 and the Regulation on Safeguards Measures.15 These regulations were amended subsequently in 2004 as a result of the merger of the previous IAs (ie the Ministry of Foreign Trade and Economic Cooperation (MOFTEC) and the State Economic and Trade Commission (SETC)), and hence the consolidation of investigating power, into the Ministry of Commerce (MOFCOM) in 2003.16 With separate regulations covering each of the areas of trade remedies, China’s regulatory regime conformed better to the WTO law and international practice. To implement these regulations, the MOFCOM (and its predecessor MOFTEC) has published a host of measures laying down detailed rules and procedures for various issues involved in an AD/CV/SG investigation.17 Using AD as an example, these rules cover initiation,18 sampling,19 on-site verifications,20 new exporter review,21 price undertaking,22 injury investigation,23 ­questionnaire,24

effective on 1 January 2002; as amended by Decree No 401 of the State Council, promulgated on 31 March 2004 and effective on 1 June 2004 [hereinafter AD Regulation 2001]. 14 《中华人民共和国反补贴条例》 (2001) [Countervailing Regulation of the People’s Republic of China 2001], Decree No 329 of the State Council, promulgated on 26 November 2001 and effective on 1 January 2002; as amended by Decree No 402 of the State Council, promulgated on 31 March 2004 and effective on 1 June 2004 [hereinafter CV Regulation 2001]. 15 《中华人民共和国保障措施条例》 (2001) [Regulation on Safeguards Measures of the People’s Republic of China 2001], Decree No 330 of the State Council, promulgated on 26 November 2001 and effective on 1 January 2002; as amended by Decree No 403 of the State Council, promulgated on 31 March 2004 and effective on 1 June 2004 [hereinafter SG Regulation 2001]. 16 Zhang, above n 11, 179. 17 A list of these rules can be found on the official website of the MOFCOM on China Trade Remedies Information, see http://cacs.mofcom.gov.cn/list/lf/myjj/myjjbmgz/1/noChild.html. For a detailed discussion of China’s trade remedy rules and procedures, see Thomas Weishing Huang, Trade Remedies: Laws of Dumping, Subsidies and Safeguards in China (The Hague, Kluwer Law International, 2003). 18 《反倾销调查立案暂行规则》 (2002) [Interim Rules on Initiation of Anti-dumping Investigations 2002], Order No 8 of the MOFTEC, promulgated on 10 February 2002, effective on 13 March 2002. 19 《反倾销调查抽样暂行规则》 (2002) [Interim Rules on Sampling in Anti-dumping Investigations 2002], Order No 15 of the MOFTEC, promulgated on 13 March 2002, effective on 15 April 2002. 20 《反倾销调查实地核查暂行规则》 (2002) [Interim Rules on On-Site Verification in Antidumping Investigation 2002], Order No 13 of the MOFTEC, promulgated on 13 March 2002, effective on 15 April 2002. 21 《反倾销新出口商复审暂行规则》 (2002) [Interim Rules on New Exporters Review in Antidumping Investigations 2002], Order No 21 of the MOFTEC, promulgated on 13 March 2002, effective on 15 April 2002. 22 《反倾销价格承诺暂行规则》 (2002) [Interim Rules on Price Undertakings in Anti-dumping Investigations 2002], Order No 20 of the MOFTEC, promulgated on 13 March 2002, effective on 15 April 2002. 23 《反倾销产业损害调查规定》 (2003) [Rules on Injury Investigations in Anti-dumping Investigations 2003], Order No 5 of the MOFCOM, promulgated on 17 October 2003, effective on 16 November 2003. 24 《反倾销问卷调查规则》 (2018) [Rules on Questionnaire in Anti-dumping Investigations 2018], Order No 3 of the MOFCOM, promulgated on 4 April 2018, effective on 4 May 2018.

156  China’s Trade Remedy Regime and Implementation of WTO Rulings public hearings,25 etc. While the MOFCOM is named as the IA of trade remedy matters, in practice investigations have been undertaken by the Trade Remedy and Investigation Bureau (TRIB) since April 2014 after the restructuring of the bifurcated system by combining the two former IAs – the Bureau of Fair Trade for Imports and Exports (BFT, dumping investigation authority) and the Bureau of Industry Injury Investigation (BII, injury investigation authority).26 In cases where the MOFCOM reaches a preliminary or final determination to impose AD/CV/SG measures, it reports to the Tariff Commission of the State Council (TCSC) for final decisions.27 The General Administration of Customs (GAC) is responsible for implementing the decisions of the TCSC including the collection of AD/CV/SG duties. While China is a well-known victim of trade remedy actions worldwide, it has also become a top user of trade remedies. By 31 December 2018, China has initiated 277 AD investigations, 12 CV investigations, and 2 SG investigations.28 China’s predominant reliance on AD is consistent with the practice of other major users of trade remedies such as the US, the EU, and Australia. Between 1997 and 2018, the US, the EU and Australia initiated, respectively, 659, 449 and 326 AD cases, 239, 79 and 29 CV cases, and 51, 17 and 4 SG cases (including special SG).29 The figures below illustrate China’s AD actions and the main targets of these actions from 1997 to 2018.30 Figure 1  China’s Initiation of AD Actions 1997–2018 AD Actions/Year Numbers of AD Action per year 30

27 22

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25 《反倾销和反补贴调查听证会规则》 (2018) [Rules on Public Hearings in Anti-dumping and Countervailing Investigations 2018], Order No 2 of the MOFCOM, promulgated on 4 April 2018, effective on 4 May 2018. 26 The official website of the TRIB is available at http://gpj.mofcom.gov.cn/. 27 See, eg, AD Regulation 2001, above n 13, arts 29 & 38; CV Regulation 2001, above n 14, arts 30 & 39; SG Regulation 2001, above n 15, arts 17 & 20. 28 The official website of the MOFCOM on China Trade Remedies Information provides comprehensive and updated dataset on trade remedy actions worldwide, allowing the possibility to filter by different periods of time, industries, investigating country, and responding country, available at http://cacs.mofcom.gov.cn/cacscms/view/statistics/ckajtj. 29 ibid. 30 ibid. The data is sourced from the China Trade Remedies Information website.

China’s Trade Remedy Regime and Practice  157 Figure 2  Target Countries of China’s AD Actions 1997–2018 AD Actions/Target Country AD Actions per Target Country 51 50 41 29 19 7

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11 11 10 8

Like the other countries’ AD actions, China’s use of AD has often been motivated by protectionist interests and retaliation. In fact, the protectionist motive was one of the reasons for China’s introduction of an AD regime so as to compensate for reduced import barriers.31 On this score, studies have shown a strong relationship between the recourse to AD protection and tariff reductions in China’s chemical industry, which is one of the most frequent and influential AD petitioners in China.32 Furthermore, AD duties have the effect of tilting the condition of competition in favour of protected goods and industries at the cost of imports and exporters. This applies not only to cases where China was a target of AD actions overseas,33 but also to China’s use of AD to protect domestic industries.34 Retaliatory motivation is codified in Article 56 of China’s AD Regulation 2001 which states that ‘where any country/region takes discriminative anti-dumping measures on the exports from China, China may, upon the actual circumstances, take corresponding measures against the country/ region.’ In practice, retaliation has been found to be a major driving force behind China’s application of AD measures.35 However, it seems that China does not retaliate against all countries that frequently take AD actions against Chinese exports. Instead, it has focused on the US and the EU.36 For instance, 31 See Huang, above n 17, 25–26; Scott Kennedy, ‘China’s Porous Protectionism: The Changing Political Economy of Trade Policy’ (2005) 120(3) Political Science Quarterly 407, 412. 32 See Chad Bown, China’s WTO Entry: Antidumping, Safeguards, and Dispute Settlement in Feenstra and Wei (eds) China’s Growing Role in World Trade (Chicago, University of Chicago Press, 2010) 281–337. This edited volume is available at http://papers.nber.org/books/feen07-1. 33 Chunding Li and John Whalley, ‘Chinese Firm and Industry Reactions to Antidumping Initiations and Measures’ (October 2010) National Bureau of Economic Research (NBER) Working Paper 16446, 1–28. 34 Mark Wu, Antidumping in Asia’s Emerging Giants, (2012)53(1) Harvard International Law Journal 102, 142. 35 ibid, 151–56; Xiaohua Bao and Larry D Qiu, ‘Is China’s Antidumping More Retaliatory than that of the US’ (2011) 19(2) Review of International Economics 374. 36 Umair H Ghori, ‘The Dumping Dragon: Analysing China’s Evolving Anti-Dumping Behaviour’ (2013) 4(2) The Business & Management Review 114, 116–17.

158  China’s Trade Remedy Regime and Implementation of WTO Rulings India and Australia, two of the largest AD users against China,37 have not been subject to comparable AD actions from China. This may be explained by the lack of export interest in the case of India38 and the need for imports of complementary goods in the case of Australia.39 In contrast, the number of China’s AD investigations against Japan and South Korea has been disproportionately large in comparison to the AD actions taken by the two countries against China.40 The Chinese actions may have been motivated by the need to protect domestic industries from import competition from established industries in these industrialised countries.41 In discussing the WTO disputes concerned, I will explain the motivations behind China’s AD actions which provide an important context for a thorough understanding of these disputes and China’s approach to implementing WTO rulings. Despite China’s regulatory development and improvement, its trade remedy laws and practice remain a subject of criticism. Given the frequency of AD actions, the criticism has concentrated on the AD practice. The major concerns remain on the lack of transparency and procedural fairness in the conduct of AD investigations in relation to, inter alia, information and data availability to interested parties, opportunities for interested parties to participate in investigations, reasoning for decisions, discretion of the IA, and judicial reviews of AD ­decisions.42 With respect to China’s CV practice, similar concerns did not arise until China’s first CV investigation initiated in 2009.43 As a result, the deficiencies in China’s AD/CV practices have been a major subject of the WTO disputes to be discussed below. In addition, the other main trigger of these disputes was the economic and export interests affected by China’s AD/CV measures. III.  WTO TRADE REMEDY DISPUTES AND CHINA’S IMPLEMENTATION

A.  China – GOES The China – GOES dispute came out of China’s first double-remedy investigation into US steel imports. This investigation was initiated in 2009 based on 37 ibid, 116. 38 ibid, 122. 39 For discussions of the general trade complementarity, see, eg, Yu Sheng and Ligang Song, ‘Comparative Advantage and Australia – China Bilateral Trade’ (2008) 27(1) Economic Papers 41. 40 Ghori, above n 36, 122. 41 ibid, 119. 42 USTR, 2006 Report to Congress on China’s WTO Compliance (11 December 2006) 31–35, available at https://ustr.gov/archive/assets/Document_Library/Reports_Publications/2006/asset_ upload_file688_10223.pdf. For more detailed discussions of these issues in different elements of AD investigations, see Zhang, above n 11, 181–219; Won-Mog Choi and Henry Gao, ‘Procedural Issues in the Anti-Dumping Regulations of China: A Critical Review under the WTO Rules’ (2006) 5(3) Chinese Journal of International Law 663; M Ulric Killion, ‘Quest for Legal Safeguards for Foreign Exporters under China’s Anti-Dumping Regime’ (2004) 29(3) North Carolina Journal of International Law and Commercial Regulation 417. 43 USTR, 2009 Report to Congress on China’s WTO Compliance (December 2009) 36–37, available at https://ustr.gov/sites/default/files/2009%20China%20Report%20to%20Congress.pdf.

China – GOES   159 applications lodged by two major Chinese steelmakers Wuhan Iron and Steel (Group) Corporation and Baosteel Group Corporation. In 2010, the MOFCOM made final determinations to impose AD and CV duties on grain oriented flatrolled electrical steel (GOES) exported from the US and Russia.44 AK Steel Corporation and Allegheny Ludlum Corporation, the only cooperative GOES producers in the US, were respectively subject to AD duties of 7.8 per cent and 19.9 per cent and CV duties of 11.7 per cent and 12 per cent. The ‘all other’ rates were 64.8 per cent on dumping and 44.6 per cent on subsidies. The Chinese AD and CV duties were most likely motivated by two factors. The first was to retaliate against the AD and CV actions frequently taken by the US against China.45 Before China’s GOES investigations, the US initiated one of its largest AD investigations against China, targeting steel line pipe exports.46 China’s choice of GOES in the tit-for-tat action was strategic. The US had significant export interests in China but it was not hard for China to source the same goods from other countries to satisfy its massive domestic demand.47 The second motivation was to protect the domestic steel industry which faced growing difficulties in both overseas and domestic markets. Indeed, in addition to the overwhelming AD and CV actions globally, the economic conditions of the industry had deteriorated due to the slowdown of China’s economic growth and overcapacity, amongst other problems.48 GOES are highly profitable steel products, with China being a large importer of US GOES. According to the US, the Chinese duties had effectively driven the US exports out of the Chinese market, while it had over US$250 million of GOES exports to China previously.49 Apparently, the WTO dispute was driven by the two cooperative GOES producers subject to the investigations. Equally importantly, as the first WTO dispute against China’s AD and CV actions, the dispute provided an opportunity for the US to tackle some of the most obvious shortcomings in China’s practices and hence to force China to make necessary changes.50

44 《公布关于原产于美国和俄罗斯的进口取向性硅电钢反倾销调查及原产于美国的进口取 向性硅电钢反补贴调查的最终裁定》 [Final Determinations on the Anti-dumping Investigation of Grain Oriented Flat-Rolled Electrical Steel Originating in the United States and Russia and the Countervailing Investigation of Grain Oriented Flat-rolled Electrical Steel Originating in the United States], MOFCOM Announcement No 21 on 6 May 2010, available at www.mofcom.gov.cn/article/ b/g/201005/20100506900260.shtml. 45 Prusa and Vermulst, ‘China – Countervailing and Anti-Dumping Duties on Grain Oriented ­Flat-rolled Electrical Steel from the United States’, above n 9, 253. 46 Kris Maher, ‘China Probes Imports of US Steel’ (The Wall Street Journal, 2 June 2009), available at www.wsj.com/articles/SB124387775878672771. 47 Prusa and Vermulst, ‘China – Countervailing and Anti-Dumping Duties on Grain Oriented ­Flat-rolled Electrical Steel from the United States’, above n 9, 265–66. 48 See, eg, Jasmine Ng, ‘China Confirms Steel Industry in Decline’ (­ Financial Review, 20 January 2016), available at www.afr.com/business/mining/iron-ore/china-confirms-steel-industryin-decline-20160119-gm9hkb. 49 WTO, Dispute Settlement Body, Minutes of Meeting (WT/DSB/M/367, 30 October 2015) 21. 50 Prusa and Vermulst, ‘China – Countervailing and Anti-Dumping Duties on Grain Oriented ­Flat-rolled Electrical Steel from the United States’, above n 9, 252–53.

160  China’s Trade Remedy Regime and Implementation of WTO Rulings i.  WTO Rulings Given the clear deficiencies in MOFCOM’s investigations, the panel upheld most of the US’s claims. The panel’s findings of violations covered both substantive and procedural issues, including the following. 1. MOFCOM’s initiation of CV investigations into the US subsidy programs was not based on sufficient evidence relating to the existence of a financial contribution or income or price support, a benefit conferred, and specificity as required under Article 11.3 of the SCM Agreement.51 2. MOFCOM failed to provide sufficient non-confidential summaries of confidential information to allow a reasonable understanding of the substance of such information in accordance with Articles 12.4.1 of the SCM Agreement and 6.5.1 of the AD Agreement.52 3. MOFCOM’s use of facts available was inconsistent with Article 12.7 of the SCM Agreement as the information available in the investigation did not support the application of a utilisation rate of 100 per cent (ie the US companies sold all of their output to the US Government under the subsidy programs for the payment of a 25 per cent price premium).53 4. MOFCOM’s application of facts available in determining ‘all other’ AD and CV rates was in breach of Article 6.8 and paragraph 1 of Annex II of the AD Agreement and Article 12.7 of the SCM Agreement respectively as China failed to notify the ‘all other’ exporters of the information required.54 In determining the ‘all other’ CV rate, China also erroneously ignored substantiated facts on the record.

51 Panel Report, China – Countervailing and Anti-Dumping Duties on Grain Oriented Flat-Rolled Electrical Steel from the United States (WT/DS414/R, adopted 16 November 2012) [hereinafter China – GOES], paras 7.48–148. Essentially, Art 11.2 of the SCM Agreement requires an application for CV investigations to provide sufficient evidence of the existence of a subsidy, injury, and causation. Art 11.3 then states: ‘The authorities shall review the accuracy and adequacy of the evidence provided in the application to determine whether the evidence is sufficient to justify the initiation of an investigation.’ Under Art 1 of the Agreement, a subsidy exists if there is a financial contribution or any form of income or price support which confers a benefit to the recipient, and it is countervailable only if it is specific. 52 ibid, paras 7.187–225. Essentially, Arts 12.4.1 of the SCM Agreement and 6.5.1 of the AD Agreement oblige IAs to require interested parties/Members to furnish non-confidential summaries of any confidential information submitted so as to permit a reasonable understanding of the substance of such information. 53 ibid, paras 7.266–311. Art 12.7 of the SCM Agreement provides: ‘In cases in which any interested Member or interested party refuses access to, or otherwise does not provide, necessary information within a reasonable period or significantly impedes the investigation, preliminary and final determinations, affirmative or negative, may be made on the basis of the facts available.’ While the panel found that China was entitled to use facts available due to the failure of the US companies to cooperate in the investigation, China did not consider all information or evidence submitted. 54 ibid, paras 7.383–394, 7.446–452. Art 6.8 of the AD Agreement reads: ‘In cases in which any interested party refuses access to, or otherwise does not provide, necessary information within a reasonable period or significantly impedes the investigation, preliminary and final determinations, affirmative or negative, may be made on the basis of the facts available. The provisions of annex II

China – GOES   161 5.

MOFCOM failed to disclose certain ‘essential facts’ which formed the basis of the determination of the ‘all other’ AD and CV rates as required under Article 6.9 of the AD Agreement and Article 12.8 of the SCM Agreement respectively.55 6. MOFCOM’s public notice on the final determination of the ‘all other’ AD and CV rates failed to provide sufficient information or facts as required under Articles 12.2 and 12.2.2 of the AD Agreement and Articles 22.3 and 22.5 of the SCM Agreement respectively.56 7. MOFCOM’s determination of injury was flawed as the findings of the price effects of dumped imports (ie price depression, suppression, and undercutting) were not based on an objective examination of positive evidence in accordance with Articles 3.1 and 3.2 of the AD Agreement and ­Articles  15.1 and 15.2 of the SCM Agreement.57 The MOFCOM also failed to disclose the ‘essential facts’ which formed the basis of its findings of price effects in violation of Article 6.9 of the AD Agreement and ­Article 12.8 of the SCM Agreement,58 and to provide sufficient information and facts in the public notice of final determination regarding the price effects in breach of Article 12.2.2 of the AD Agreement and Article 22.5 of the SCM Agreement.59 8. MOFCOM’s findings of causation (ie whether the alleged injury was caused by the dumped and subsidised imports) were incompatible with

shall be observed in the application of this paragraph.’ Para 1 of annex II relevantly provides: ‘As soon as possible after the initiation of the investigation, the investigating authorities should specify in detail the information required from any interested party, and the manner in which that information should be structured by the interested party in its response …’ 55 ibid, paras 7.404–412, 7.461–466. Art 6.9 of the AD Agreement states: ‘The authorities shall, before a final determination is made, inform all interested parties of the essential facts under consideration which form the basis for the decision whether to apply definitive measures. Such disclosure should take place in sufficient time for the parties to defend their interests.’ Art 12.8 of the SCM Agreement imposes the same requirement. 56 ibid, paras 7.419–426, 7.472–474. Art 12.2 of the AD Agreement states: ‘Public notice shall … set forth, or otherwise make available through a separate report, in sufficient detail the findings and conclusions reached on all issues of fact and law considered material by the investigating ­authorities …’ Art 12.2.2 also requires a public notice of affirmative determinations to contain all relevant information on the matters of fact and law and reasons which have led to the imposition of final measures. Arts 22.3 and 22.5 of the SCM Agreement impose the same requirements. 57 ibid, paras 7.511–554. Art3.1 of the AD Agreement requires a determination of injury to be ‘based on positive evidence and involve an objective examination of both (a) the volume of the dumped imports and the effect of the dumped imports on prices in the domestic market for like products, and (b) the consequent impact of these imports on domestic producers of such products.’ Art 3.2 relevantly provides: ‘… With regard to the effect of the dumped imports on prices, the investigating authorities shall consider whether there has been a significant price undercutting by the dumped imports as compared with the price of a like product of the importing Member, or whether the effect of such imports is otherwise to depress prices to a significant degree or prevent price increases, which otherwise would have occurred, to a significant degree …’ The same requirements apply under Arts 15.1 and 15.2 of the SCM Agreement. 58 ibid, paras 7.567–575. 59 ibid, paras 7.587–592.

162  China’s Trade Remedy Regime and Implementation of WTO Rulings the rules set out in Article 3.5 of the AD Agreement and Article 15.5 of the SCM Agreement.60 The MOFCOM also failed to provide the ‘essential facts’ or adequate public notice regarding the volume and prices of nonsubject imports.61 China’s appeal focused on the panel’s rulings on the MOFCOM’s analysis of price effects, disclosure of ‘essential facts’ and provision of public notice in this regard.62 The Appellate Body upheld the panel’s findings of violations on these issues.63 ii.  China’s Implementation The reasonable period of time for China to implement the WTO rulings, determined by arbitration (as requested by the US), was eight months and 15 days until 31 July 2013.64 On 14 June 2013, the MOFCOM initiated a re-investigation of the matter, which resulted in a final determination to reduce the ‘all other’ AD rate from 64.8 per cent to 19.9 per cent and the CV rate to 3.4 per cent on 31 July 2013.65 The US was unsatisfied with the result of the re-investigation and continued the WTO proceedings in January 2014 contending that China had failed to implement the WTO rulings.66 The compliance panel’s report, issued in July 2015 and adopted by the Dispute Settlement Body (DSB) one month later, found that China’s re-investigation

60 ibid, paras 7.618–638. Art 3.5 of the AD Agreement provides: ‘It must be demonstrated that the dumped imports are, through the effects of dumping, as set forth in paragraphs 2 and 4, causing injury within the meaning of this Agreement. The demonstration of a causal relationship between the dumped imports and the injury to the domestic industry shall be based on an examination of all relevant evidence before the authorities. The authorities shall also examine any known factors other than the dumped imports which at the same time are injuring the domestic industry, and the injuries caused by these other factors must not be attributed to the dumped imports. Factors which may be relevant in this respect include, inter alia, the volume and prices of imports not sold at dumping prices, contraction in demand or changes in the patterns of consumption, trade restrictive practices of and competition between the foreign and domestic producers, developments in technology and the export performance and productivity of the domestic industry.’ Art 15.5 of the SCM Agreement contains the same rules. 61 ibid, paras 7.648–675. 62 Appellate Body Report, China – Countervailing and Anti-Dumping Duties on Grain Oriented Flat-Rolled Electrical Steel from the United States (WT/DS414/AB/R, adopted 16 November 2012). 63 ibid, paras 170–267. 64 Arbitration Award, China – Countervailing and Anti-Dumping Duties on Grain Oriented FlatRolled Electrical Steel from the United States (WT/DS414/12, 3 May 2013). 65 《公布关于原产于美国的进口取向性硅电钢反倾销及反补贴再调查的裁定》 [Final Determinations on the Anti-dumping and Countervailing Re-investigation of Grain Oriented Flat-Rolled Electrical Steel Originating in the United States], MOFCOM Announcement No 51 on 31 July 2013, available at www.mofcom.gov.cn/article/b/g/201310/20131000340655.shtml. 66 Recourse to Article 21.5 of the DSU by the United States, China – Countervailing and AntiDumping Duties on Grain Oriented Flat-Rolled Electrical Steel from the United States, Request for Consultations (WT/DS414/15, 16 January 2014).

China – X-Ray Equipment  163 failed to rectify the WTO-­inconsistencies in relation to the determinations of price effects of the subject imports and causation, and the disclosure of ‘essential facts’ on these matters.67 However, it was unnecessary for China to implement the rulings as the contested AD and CV duties expired before the rulings in April 2015 pursuant to the standard five-year sunset period.68 It is arguable that the DSM was effective in inducing compliance in the dispute. While the compliance panel found some outstanding issues in China’s re-investigation, China seems to have corrected most of the deficiencies in the original investigation. Moreover, the WTO decision seems to have also dissuaded China from commencing a sunset review to continue the duties. However, as will be discussed below, due to the limitations of WTO rulings and the approach taken by China to implement the rulings in trade remedy disputes, the impact of the DSM on China’s trade remedy regime and practices has been relatively limited compared with the impact in non-trade-remedy disputes. B.  China – X-Ray Equipment The China – X-Ray Equipment dispute concerned China’s AD investigation into x-ray security inspection equipment (eg x-ray scanners) imported from the EU. The investigation was initiated in August 2009 based on an application filed by Nuctech Company Limited (Nuctech). In January 2011, the MOFCOM decided to impose a 33.5 per cent AD duty on Smiths Heimann GmbH (Smiths) the only cooperating exporter and 71.8 per cent on ‘all other’ EU exporters of the subject goods.69 China’s AD action was motivated primarily by its industrial policy and retaliation. Smiths was a major manufacturer and supplier of x-ray equipment in the world.70 Nuctech was a Chinese upstart in the industry growing

67 Panel Report, China – Countervailing and Anti-Dumping Duties on Grain Oriented Flat-Rolled Electrical Steel from the United States, Recourse to Article 21.5 of the DSU by the United States (WT/DS414/RW, adopted 31 August 2015), paras 7.40–192. 68 WTO, Dispute Settlement Body, above n 49, 21. 69 《中华人民共和国商务部公告2011年第1号》 [Announcement No 1 of 2011 of the Ministry of Commerce of China], MOFCOM Announcement No 1 on 23 January 2011, available at www. mofcom.gov.cn/article/b/g/201107/20110707638154.shtml. 70 Smiths, also known as Smiths Detection, is a subsidiary of Smiths Group plc. Its official website is at www.smithsdetection.com/. For example, in 2010 Smiths occupied 80% of the EU’s x-ray ­scanner production and 32% of the global security inspection equipment market. See The Council of the European Union, ‘Council Implementing Regulation (EU) No 510/2010 of 14 June 2010-Imposing a Definitive Anti-Dumping Duty and Collecting Definitively the Provisional Duty Imposed on Imports of Certain Cargo Scanning Systems Originating in the People’s Republic of China’ (Official Journal of the European Union L150/1, 16 June 2010), available at www.aop.bg/ fckedit2/user/File/en/Normativna%20baza/Regulation_510_2010.pdf; Smiths Group PLC, 2010 Annual Report-Opportunities to create value (2010) 18, available at www.smiths.com/-/media/files/ smiths_ar_2010.ashx.

164  China’s Trade Remedy Regime and Implementation of WTO Rulings rapidly to become not only the sole major producer of x-ray equipment in the Chinese market but also a formidable exporter supplying over 130 countries ­worldwide.71 The growth of Nuctech was backed by China’s promotion of the x-ray scanner industry as part of its strategic industrial plan and national security policy.72 Smiths and Nuctech, therefore, competed globally including the EU and the Chinese markets. In 2008, while Smiths’ non-medical x-ray equipment exports to China accounted for around 57 per cent of all such exports to China, Nuctech’s exports to the EU increased by around 334 per cent based on the previous year.73 To mitigate the impact of the Chinese imports, Smiths filed an AD petition in February 2009, leading to an imposition of an AD duty of 34 per cent in June 2010.74 The Chinese AD duty, set at the same level, was evidently a tit-for-tat retaliation. Furthermore, both the EU and Chinese actions were led by domestic firms rather than the governments with an aim to obtaining competitive advantages over each other.75 Given China’s industrial policy, the Chinese action also shows that AD may be employed for industrial development goals.76 China did not challenge the EU’s AD action at the WTO. One explanation for this is that a retaliatory AD duty was easier and quicker to impose. In bringing the WTO proceedings, the EU attempted to protect the export interest of Smiths but did so by tackling the deficiencies of China’s AD practice. i.  WTO Rulings The EU challenged similar substantive and procedural issues in the dispute as those in China – GOES. The panel upheld most of the EU’s claims, including the following. 1. MOFCOM’s analysis of price effects (particularly price undercutting and price suppression analyses), as part of the injury investigation, failed to ensure price comparability by considering whether the products

71 See Moore and Wu, above n 9, 251; China Chamber of Commerce for Import and Export of Machinery and Electronic Products, Member Company Profile – Nuctech Company Limited, available at www.cccme.org.cn/shop/cccme5080/introduction.aspx. 72 See, eg,《中华人民共和国国民经济和社会发展第十一个五年规划纲要》 (2006) [Eleventh Five-Year Plan for National Economic and Social Development of the People’s Republic of China (2006–2010)], Announcement No 12 of the State Council on 14 March 2006, available at www.gov. cn/ztzl/2006-03/16/content_228841.htm>;《中华人民共和国国民经济和社会发展第十二个五年 规划纲要》 (2011) [Twelfth Five-Year Plan for National Economic and Social Development of the People’s Republic of China (2011–2015)], issued on 14 March 2011, available at www.gov.cn/2011lh/ content_1825838.htm. 73 See Moore and Wu, above n 9, 272. 74 The Council of the European Union, above n 70. 75 See Moore and Wu, above n 9, 240–41. 76 ibid.

China – X-Ray Equipment  165

2.

3.

4. 5. 6.

concerned were comparable, and hence was not based on objective examination of positive evidence as required under Articles 3.1 and 3.2 of the AD ­Agreement.77 MOFCOM’s injury analysis failed to consider the magnitude of the dumping margin as well as to conduct an objective examination of the evidence relating to the other individual injury indicia as required under Articles 3.1 and 3.4 of the AD Agreement.78 MOFCOM’s causation analysis was inconsistent with Articles 3.1 and 3.5 of the AD Agreement as it failed to establish a causal link between the price effects and the material injury suffered by the domestic industry, to consider some known factors other than dumped imports, and to ‘separate and distinguish the injurious effects of other causal factors from those of the dumped imports’.79 MOFCOM failed to ensure the non-confidential summary of certain confidential information submitted by Nuctech was adequate, contrary to the requirements under Article 6.5.1 of the AD Agreement.80 In breach of Article 6.9 of the AD Agreement, MOFCOM failed to disclose certain ‘essential facts’ that formed the basis for its price effects analysis and determination of the ‘all other’ rate.81 In breach of Article 12.2.2 of the AD Agreement, MOFCOM’s public notice of final determination did not provide sufficient information, facts and legal basis for its price effects analysis, determination of the ‘all other’ rate, and rejection of Smith’s arguments that domestic sales to affiliated distributors were not made in the ordinary course of trade.82

The panel’s findings were not appealed. ii.  China’s Implementation The parties reached an agreement on the reasonable period of time for China to comply with the WTO rulings by 19 February 2014.83 On 10 January 2014, 77 Panel Report, China – Definitive Anti-Dumping Duties on X-Ray Security Inspection Equipment from the European Union (WT/DS425/R, adopted 24 April 2013) [hereinafter China – X-Ray Equipment], paras 7.30–97. 78 ibid, paras 7.142–185, 7.194–216. Arti 3.4 of the AD Agreement states: ‘The examination of the impact of the dumped imports on the domestic industry concerned shall include an evaluation of all relevant economic factors and indices having a bearing on the state of the industry, including actual and potential decline in sales, profits, output, market share, productivity, return on investments, or utilization of capacity; factors affecting domestic prices; the magnitude of the margin of dumping; actual and potential negative effects on cash flow, inventories, employment, wages, growth, ability to raise capital or investments. This list is not exhaustive, nor can one or several of these factors necessarily give decisive guidance.’ 79 ibid, paras 7.239–297. 80 ibid, paras 7.328–371. 81 ibid, paras 7.398–426. 82 ibid, paras 7.455–491. 83 China – Definitive Anti-Dumping Duties on X-Ray Security Inspection Equipment from the European Union, Agreement under Article 21.3(b) of the DSU (WT/DS425/8, 23 July 2013).

166  China’s Trade Remedy Regime and Implementation of WTO Rulings the MOFCOM issued an announcement of a re-investigation as the way to implement the rulings.84 However, on the day of the expiration of the reasonable period of time, the MOFCOM issued a notice to terminate the AD duties based on Nuctech’s request to withdraw its original application.85 While the reason behind Nuctech’s withdrawal is unknown, it confirms that the Chinese AD action was primarily driven by the industry. Unlike in China – GOES, the MOFCOM did not issue a determination of re-investigation in China – X-Ray Equipment. This left the WTO findings of inconsistencies unaddressed. However, the China – X-Ray Equipment litigation successfully lifted the Chinese AD duty before its expiration. This provided a temporary change of the conditions of competition in favour of Smiths which continued to benefit from the EU’s AD duties. Due to the termination of the Chinese tariff, Smiths did not request for a sunset review of the EU duties which expired on 17 June 2015.86 Therefore, the WTO dispute had the effect of discontinuing the protectionist use of AD measures by both parties. C.  China – Broiler Products The China – Broiler Products dispute arose out of another Chinese doubleremedy investigation into US exports. The investigation was initiated on 27 September 2009 based on an application filed by the China Animal Agriculture Association (CAAA) on behalf of the Chinese broiler industry. It led to the imposition of AD duties from 50.3 per cent to 53.4 per cent and CV duties from 4 per cent to 12.5 per cent, with the ‘all other’ rates being 105.4 per cent on dumping and 30.3 per cent on subsidies (collectively ‘Chicken Tariff’) on 33 US exporters of broiler products or chicken products for five years from 30 August 2010 (CV duties) and 27 September 2010 (AD duties).87 The US commenced WTO proceedings against the Chicken Tariff in September 2011.

84 《关于执行X射线安全检查设备反倾销措施世贸组织争端裁决的立案公告》 [Initiation of Re-investigation to Implement the WTO Rulings on Anti-dumping Measures on X-ray Security Inspection Equipment], MOFCOM Announcement No 1 on 10 January 2014, available at www. mofcom.gov.cn/article/b/e/201401/20140100456109.shtml. 85 《关于终止对原产于欧盟的进口X射线安全检查设备征收反倾销税的公告》 [Announcement on Termination of Anti-dumping Duties on X-ray Security Inspection Equipment Originating in the European Union], MOFCOM Announcement No 9 on 19 February 2014, available at www. mofcom.gov.cn/article/b/c/201402/20140200491753.shtml. 86 The Council of the European Union, ‘Notice of the Expiry of Certain Anti-Dumping Measures’ (Official Journal of the European Union 2015/C 199/02, 16 June 2015). 87 《公布对原产于美国的进口白羽肉鸡产品反倾销调查的最终裁定》 [Final Determinations on the Anti-dumping Investigation of Broiler Products Originating in the United States], MOFCOM Announcement No 51 on 27 September 2010, available at www.mofcom.gov.cn/article/ b/g/201101/20110107363363.shtml; 《公布关于对原产于美国的进口白羽肉鸡产品反补贴调查的 最终裁定》 [Final Determinations on the Countervailing Investigation of Broiler Products Originating in the United States], MOFCOM Announcement No 52 on 30 August 2010, available at www. mofcom.gov.cn/article/b/g/201010/20101007180994.shtml.

China – Broiler Products  167 The dispute occurred in the backdrop of an escalating trade conflict between the US and China. The conflict originated from Section 727 of the US Omnibus Appropriations Act 2009 which erected a de facto ban on the importation of Chinese poultry into the US. China brought a WTO dispute against the US measure – ie the US – Poultry case – in which the panel report adopted in October 2010 found a range of violations.88 However, by the time of the WTO rulings, the US measure had expired so that no further actions were needed for implementation.89 Another US action in the same period concerned the application of SG measures in the form of an additional 35 per cent import tariff on certain passenger vehicle and light truck tyres exported from China (hereinafter the ‘Tyre Tariff’). China also challenged the Tyre Tariff at the WTO but lost the case.90 Since the US import ban on Chinese poultry had expired, the Chinese Chicken Tariff was likely targeted at the Tyre Tariff.91 The target was chosen for at least two reasons. Firstly, while the US market absorbed one third of China’s total tyre output worth US$2.2 billion in 2008,92 the US was the largest exporter of broiler products to China and was estimated to suffer a loss of US$1 billion due to the Chicken Tariff.93 Coupled with another retaliatory action China took against US auto exports (which will be discussed in sub-section D), the impact of the Chinese measures on the US exports was comparable to the impact of the US measure on Chinese tyres. Indeed, the Chicken Tariff was also a demonstration of China’s growing sophistication in using trade remedies for cross-sector retaliation. Secondly, both the US tyre industry and the Chinese broiler industry were facing economic difficulties at the time.94 Therefore, the measures taken by the two countries against each other also served to protect the domestic industries from their largest foreign competitors. In the meantime, the measures were

88 See United States-Certain Measures Affecting Imports of Poultry from China (WT/DS392). For an official summary of this case, see www.wto.org/english/tratop_e/dispu_e/cases_e/ds392_e.htm. 89 See Panel Report, United States – Certain Measures Affecting Imports of Poultry from China (WT/DS392/R, adopted 25 October 2010) 183. 90 See United States – Measures Affecting Imports of Certain Passenger Vehicle and Light Truck Tyres from China (WT/DS339). For an official summary of the case, see www.wto.org/english/ tratop_e/dispu_e/cases_e/ds399_e.htm. 91 See Prusa and Vermulst, ‘China – Anti-Dumping and Countervailing Duty Measures on Broiler Products from the United States’, above n 9, 332. 92 People’s Daily Online, ‘“Special Safeguard” to Cause Overcapacity in China’s Tire Industry’ (People’s Daily Online, 18 September 2009), available at http://en.people.cn/90001/90778/90857/ 90861/6761802.html. 93 Tom Miles and Charles Abbott, ‘US Wins Trade Dispute with China over Chicken Parts’ (Reuters, 3 August 2013), available at www.reuters.com/article/us-usa-china-tradeidUSBRE9710S920130803. For a more comprehensive study of the US broiler exports, see ­Christopher G Davis, et al, ‘Assessing the Growth of U.S. Broiler and Poultry Meat Exports’ (United States Department of Agriculture LPDM-231-01, November 2013). 94 See, eg, Gary Clyde Hufbauer and Sean Lowry, ‘US Tire Tariffs: Saving Few Jobs at High Cost’ (Peterson Institute for International Economics, April 2012), available at https://piie.com/ publications/policy-briefs/us-tire-tariffs-saving-few-jobs-high-cost; Stephen McDonell, ‘Bird Flu Scare Hits China Poultry Sector’ (ABC News, 17 April 2013), available at www.abc.net.au/news/ 2013-04-17/bird-flu-scare-hits-china-poultry-sector27s-earnings/4633352.

168  China’s Trade Remedy Regime and Implementation of WTO Rulings also intended to secure their own export interests by pushing the counterparty to remove the prohibitive tariffs. i.  WTO Rulings On the legal front, the US’s claims were largely a repeat of those in the China – GOES dispute with a few new issues. The panel sided with the US on most of its claims, holding that MOFCOM’s AD and/or CV investigations were in breach of the AD Agreement and/or the SCM Agreement. These breaches included: insufficient non-confidential summary of confidential information;95 ­inadequate disclosure of ‘essential facts’ for the determination of dumping and the ‘all other’ AD and CV rates;96 incorrect application of facts available in determining the ‘all other’ AD and CV rates;97 inadequate public notice on issues of fact and law considered material leading to the determination of the ‘all other’ AD and CV rates and rejection of certain US arguments on price effects and ­causation;98 unjustified findings of price undercutting and price suppression as part of the price effects analysis99 which also affected the finding of the existence of a causal link between dumped imports and injury.100 In addition to these recurrent issues, the panel considered several new issues and found they were also WTO-inconsistent, including: 1. MOFCOM’s failure to provide opportunities for all interested parties to meet those parties with adverse interests in accordance with Article 6.2 of the AD Agreement;101 2. MOFCOM’s rejection of using producers’ cost and allocation of cost for the calculation of dumping margins were unjustified and contrary to Article 2.2.1.1 of the AD Agreement;102 and 95 Panel Report, China – Anti-Dumping and Countervailing Duty Measures on Broiler Products from the United States (WT/DS427/R, adopted 25 September 2013) [hereinafter China – Broiler Products], paras 7.49–65. 96 ibid, paras 7.85–107, 7.314–323, 7.361–363. 97 ibid, paras 7.298–313, 7.354–360. 98 ibid, paras 7.324–331, 7.364–366, 7.526–532, 7.601–607. 99 ibid, paras 7.473–513. 100 ibid, paras 7.582–584. 101 ibid, paras 7.20–25. Art 6.2 relevantly provides: ‘Throughout the anti-dumping investigation all interested parties shall have a full opportunity for the defence of their interests. To this end, the authorities shall, on request, provide opportunities for all interested parties to meet those parties with adverse interests, so that opposing views may be presented and rebuttal arguments offered …’. 102 ibid, paras 7.160–198. The relevant part of Art 2.2.1.1 reads: ‘For the purpose of paragraph 2, costs shall normally be calculated on the basis of records kept by the exporter or producer under investigation, provided that such records are in accordance with the generally accepted accounting principles of the exporting country and reasonably reflect the costs associated with the production and sale of the product under consideration. Authorities shall consider all available evidence on the proper allocation of costs, including that which is made available by the exporter or producer in the course of the investigation provided that such allocations have been historically utilized by the exporter or producer, in particular in relation to establishing appropriate amortization and depreciation periods and allowances for capital expenditures and other development costs …’.

China – Broiler Products  169 3. MOFCOM’s incorrect calculation of CV duty margin which exceeded the actual per unit subsidisation rate for the subject goods in violation of Article 19.4 of the SCM Agreement.103 The panel’s findings were not appealed. ii.  China’s Implementation By agreement, the reasonable period of time for China to implement the WTO rulings was nine months and 14 days until 9 July 2014.104 To implement the WTO rulings, China initiated a re-investigation of the matter on 25 ­December 2013.105 On 8 July 2014, the MOFCOM made final determinations to continue the AD duty at a rate ranging from 46.6 per cent to 73.8 per cent and the CV duty of around 4 per cent on 35 US exporters.106 The GAC applied the new rates from 9 July 2014.107 Thus, while the CV duty was significantly reduced, the AD rates remained at similar levels. On 10 July 2014, China notified the DSB that the MOFCOM’s re-investigation had fully complied with the WTO rulings.108 However, the US was unsatisfied with China’s re-determination which left the duties in place and continued to consider how to react.109 The US did not take any further action until the MOFCOM was about to issue final determinations of its sunset review on the Chicken Tariff. On 10 May 2016, the US requested for consultations on China’s implementation of the WTO rulings.110 Apparently, the US’s action was intended to push China to discontinue the duties in the sunset review. Contrary to the US’s intended outcome, the MOFCOM

103 ibid, paras 7.255–266. Art 19.4 of the SCM Agreement states: ‘No countervailing duty shall be levied on any imported product in excess of the amount of the subsidy found to exist, calculated in terms of subsidization per unit of the subsidized and exported product.’ 104 China – Anti-Dumping and Countervailing Duty Measures on Broiler Products from the United States, Agreement under Article 21.3(b) of the DSU (WT/DS427/7, 6 January 2014). 105 《关于白羽肉鸡“双反”措施世贸组织争端裁决的立案公告》 [Initiation of Re-investigation to Implement the WTO Rulings on Anti-dumping and Countervailing Measures on Broiler Products Originating in the United States], MOFCOM Announcement No 88 on 25 December 2013, available at www.mofcom.gov.cn/article/b/e/201312/20131200437470.shtml. 106 《公布关于原产于美国的进口白羽鸡产品反倾销和反补贴措施再调查的裁定》 [Final Determinations on the Re-investigation of Anti-dumping and Countervailing measures on Broiler Products Originating in the United States], MOFCOM Announcement No 44 on 8 July 2014, available at www.mofcom.gov.cn/article/b/g/201409/20140900732381.shtml. 107 《 关 于 调 整 原 产 于 美 国 的 进 口 白 羽 肉 鸡 产 品 反 倾 销 税 和 反 补 贴 税 税 率 的 公 告 》 [Announcement on the Adjustments of Anti-dumping and Countervailing Duties on Broiler Products Originating in the United States], GAC Announcement No 55 on 8 July 2014, available at www. customs.gov.cn/customs/302249/302266/302267/356121/index.html. 108 China – Anti-Dumping and Countervailing Duty Measures on Broiler Products from the United States, Status Report Regarding Implementation of the DSB Recommendations and Rulings in the Dispute (WT/DS427/8, 11 July 2014). 109 USTR, 2014 Report to Congress on China’s WTO Compliance (December 2014) 7, available at https://ustr.gov/sites/default/files/2014-Report-to-Congress-Final.pdf. 110 China – Anti-Dumping and Countervailing Duty Measures on Broiler Products from the United States, Recourse to Article 21.5 of the DSU by the United States (WT/DS427/10, 12 May 2016).

170  China’s Trade Remedy Regime and Implementation of WTO Rulings decided to continue the duties for another five years commencing on 30 August 2016 (the CV duties)111 and 27 September 2016 (the AD duties).112 As a result, the WTO compliance proceedings also continued with the panel report issued on 18 January 2018 and adopted on 28 February 2018.113 The compliance panel found that the MOFCOM’s re-investigation had most of the same substantive and procedural issues, showing that China had failed to implement the rulings of the original panel. One day before the adoption of the compliance panel report by the DSB, the MOFCOM issued a notice to terminate the Chicken Tariff.114 Although the notice referred to a request of the domestic petitioner (ie CAAA) to withdraw its application, the termination of the duties was most likely a result of the rulings of the compliance panel. Thus, the WTO DSM eventually forced China to remove the protectionist tariffs, although it took almost five years longer to achieve this result than the time taken in China – X-Ray Equipment. However, like in the previous case, the DSM did not have the effect of preventing China from repeating the same violations in subsequent AD/CV investigations. D.  China – Autos (US) The China – Autos (US) case came out of China’s double-remedy investigations into certain automobiles (ie cars and SUVs) exported from the US, which resulted in an application of an AD duty ranging from 2 per cent to 21.5 per cent and a CV duty of 6.2 per cent or 12.9 per cent (collectively ‘Auto Tariff’) on a list of major US automakers (eg General Motors, Chrysler, Mercedes-Benz, BMW).115 The MOFCOM determined that the duties were to be imposed for two years only from 15 December 2011 to 14 December 2013. 111 《关于对原产于美国的进口白羽肉鸡所适用的反补贴措施的期终复审裁定的公告》 [Final Determinations on the Sunset Review of the Countervailing Measures on Broiler Products Originating in the United States], MOFCOM Announcement No 41 on 22 August 2016, available at www. mofcom.gov.cn/article/b/e/201608/20160801383513.shtml. 112 《关于对原产于美国的进口白羽肉鸡所适用的反倾销措施期终复审裁定的公告》 [Final Determinations on the Sunset Review of the Anti-dumping Measures on Broiler Products Originating in the United States], MOFCOM Announcement No 40 on 26 September 2016, available at www.mofcom.gov.cn/article/b/c/201609/20160901400689.shtml. 113 Panel Report, China – Anti-Dumping and Countervailing Duty Measures on Broiler Products from the United States, Recourse to Article 21.5 of the DSU by the United States (WT/DS427/RW, adopted 28 February 2018). 114 《 关 于 终 止 对 原 产 于 美 国 的 进 口 白 羽 肉 鸡 产 品 征 收 反 倾 销 税 和 反 补 贴 税 的 公 告 》 [Announcement on Termination of Anti-dumping and Countervailing Duties on Broiler Products Originating in the United States], MOFCOM Announcement No 5 on 27 February 2018, available at www.mofcom.gov.cn/article/b/e/201802/20180202715401.shtml. 115 《公布关于原产于美国的部分进口汽车产品反倾销调查和反补贴调查的最终裁定》 [Final Determinations on the Anti-dumping and Countervailing Investigations on Certain Automobiles Originating in the United States], MOFCOM Announcement No  20 on 5 May 2011, available at www.mofcom.gov.cn/aarticle/b/g/201108/20110807692458.html.《关于对美部分进 口汽车实施反倾销和反补贴措施的公告》 [Announcement on the Imposition of Anti-­dumping

China – Autos (US)  171 The auto industry is of strategic importance to both the US and China. For example, as noted by the USTR, in 2013 the US auto sector had 849,400 workers and a total of $64.9 billion exports of which $8.5 billion went to China, ‘the second-largest export market for U.S. autos (after Canada)’.116 By estimation, the Chinese duties affected $5.1 billion of US auto exports to China in 2013.117 The importance of the auto industry in China and the various industrial policy instruments adopted by the Chinese Government have been discussed in the context of the China – Auto Parts case in Section III of Chapter 3. The China – Autos (US) dispute was just one of the US-China fights for markets and competitive advantages for their own domestic auto manufacturers and exporters in line with their respective industrial development goals. As flagged in sub-section C above, this dispute was also a result of China’s retaliation against the US’s Tyre Tariff. i.  WTO Rulings From a legal perspective, the dispute dealt with essentially the same substantive and procedural shortcomings of China’s AD and CV investigations as those in the previous cases. Thus, it was not difficult for the panel to find similar violations on most of these issues, including: insufficient non-confidential summaries of confidential information on certain injury factors;118 inadequate disclosure of ‘essential facts’ to certain respondents in the investigation;119 ­incorrect application of facts available in determining the ‘all other’ AD and CV rates;120 flawed analysis of price effects particularly price depression as well as ­causation.121 The panel’s findings were not appealed by either party. ii.  China’s Implementation As the MOFCOM’s determination was to impose the AD and CV duties for a period of two years only, the duties expired on 15 December 2013 before the circulation of the panel report.122 Therefore, it was unnecessary for China and Countervailing Measures on Certain Automobiles Originating in the United States], MOFCOM Announcement No 84 on 14 December 2011, available at www.mofcom.gov.cn/aarticle/ b/c/201112/20111207879064.html. 116 See USTR, ‘Fact Sheet: WTO Case Challenging Chinese Antidumping and Countervailing duties on Certain American-Made Automobiles’ (USTR, 23 May 2014), available at https:// ustr.gov/about-us/policy-offices/press-office/fact-sheets/2014/May/WTO-Case-ChallengingChinese-Antidumping-Countervailing-Duties-US-Made-Automobiles. 117 ibid. 118 Panel Report, China – Anti-Dumping and Countervailing Duties on Certain Automobiles from the United States (WT/DS440/R, adopted 18 June 2014) [hereinafter China – Auto (US)], paras 7.24–54. 119 ibid, paras 7.69–86. 120 ibid, paras 7.121–181. 121 ibid, paras 7.254–296, 7.320–363. 122 《商务部关于终止对美部分进口汽车产品双反措施的公告》 [Announcement on Termination of Anti-dumping and Countervailing Measures on Certain Automobiles Originating in the

172  China’s Trade Remedy Regime and Implementation of WTO Rulings to take any further implementation action. However, the fact that China repeated the same WTO-inconsistent practices despite the previous adverse WTO rulings suggests that ‘China has learned from the recalcitrance of other WTO members [particularly the US] in bringing their WTO inconsistent policies into compliance.’123 In addition, the imposition of the duties for a short period of time shows that China would not be hesitant in affording discretionary protection to strategic industries and indeed, has become adept at doing so through AD and/or CV measures.124 E.  China – HP-SSST The subject goods in the China – HP-SSST dispute were certain high-­ performance stainless steel seamless tubes (HP-SSST). On 8 September 2011, the MOFCOM initiated an AD investigation against the EU and Japan, with a final determination issued on 8 November 2012 to impose an AD duty of 9.2 per cent or 14.4 per cent on Japanese exports of the subject goods and of 9.7 per cent or 11.1 per cent on exports from the EU.125 The EU had some €90 million exports of the subject goods to China in 2009, which fell to under €20 million in 2012 because of the Chinese duties.126 The value of Japan’s exports of the goods to China was about US$ 140 million in 2014.127 While the export interests of the complainants were at stake, the promotion of HP-SSST production was written in China’s Twelfth Five-Year Plan (2011–2015) as one of the priorities in the restructuring and development of the domestic steel industry.128 The Chinese AD action, therefore, had a bearing on the industrial development policy. Moreover, the action was also a typical

United States], MOFCOM Announcement No 85 on 13 December 2013, available at www.mofcom. gov.cn/article/b/c/201312/20131200423944.shtml. 123 Mitchell and Prusa, above n 9, 319. 124 ibid, 324. 125 《关于对原产于欧盟和日本的进口相关高性能不锈钢无缝钢管反倾销案最终裁决的 公告》 [Final Determinations on the Anti-dumping Investigations of High-Performance Stainless Steel Seamless Tubes Originating in the European Union and Japan], MOFCOM Announcement No 72 on 8 November 2012, available at www.mofcom.gov.cn/article/b/e/201211/20121108424275. shtml. 126 See Theresa Papademetriou, ‘EU Deems Anti-Dumping Duties on Steel imports from China Discriminatory’ (Library of Congress, 13 September 2013), available at www.loc.gov/law/ foreign-news/article/european-union-china-world-trade-organization-eu-deems-anti-dumpingduties-on-steel-imports-from-china-discriminatory/. 127 See Ministry of Economy, Trade and Industry, ‘The WTO Panel Came to a Decision that China’s Measure which Imposes Anti-dumping Duties on Certain High-performance Stainless Steel Seamless Tubes from Japan is Inconsistent with the WTO Agreement’ (Ministry of Economy, Trade and Industry, February 2015), available at www.meti.go.jp/english/press/2015/0213_01.html. 128 See, eg,《关于印发的通知》 (2011) [Notice on Distributing the Twelfth Five-Year Development Plan for the Steel Industry 2011], Notice No 480 of the Ministry of Industry and Information Technology, issued on 24 October 2011, available at www.gov.cn/ zwgk/2011-11/07/content_1987459.htm.

China – HP-SSST  173 reaction to the EU’s frequent recourse to trade remedies against Chinese steel exports.129 i.  WTO Rulings While most of the substantive and procedural issues in China – HP-SSST were similar to those adjudicated in the previous cases, the panel did consider several new issues. The recurrent violations concerned MOFCOM’s failures to ensure price comparability in price effects analysis,130 to consider the magnitude of dumping in assessing injury,131 to establish a causal link between dumping and injury,132 to use correct information to establish ‘all other’ rate,133 to disclose ‘essential facts’ on dumping calculation and injury analysis,134 and to require the petitioners to justify the difficulties in providing non-confidential summaries of certain confidential information.135 The new WTO-illegalities included: 1. MOFCOM’s failure to calculate administrative, selling and general (SG&A) costs for the determination of normal values in accordance with Article 2.2.2 of the AD Agreement;136 2. MOFCOM’s failure to address one respondent’s request for adjustment to ensure ‘fair comparison’ under Article 2.4 of the AD Agreement;137 3. MOFCOM’s rejection of one respondent’s request for rectification of information in breach of Article 6.7 and paragraph 7 of Annex I of the AD Agreement;138

129 See Financial Times, ‘Stainless Steel Tubes at the Heart of EU-China Tit-for-Tat’ (Financial Times, 16 August 2013), available at www.ft.com/fastft/2013/08/16/stainless-steel-tubes/; Ahn and Zanardi, above n 9, 180. 130 Panel Report, China – Measures Imposing Anti-Dumping Duties on High-Performance Stainless Steel Seamless Tubes (‘HP-SSST’) from Japan; China – Measures Imposing Anti-Dumping Duties on High-Performance Stainless Steel Seamless Tubes (‘HP-SSST’) from the European Union (China – HP-SSST) (WT/DS454/R, WT/DS460/R, adopted 28 October 2015), paras 7.111–115. 131 ibid, paras 7.159–163. 132 ibid, paras 7.180–205. 133 ibid, paras 7.213–224. 134 ibid, paras 7.234–253. 135 ibid, paras 7.305–327. 136 ibid, paras 7.64–67. The relevant part of Art 2.2.2 reads: ‘For the purpose of paragraph 2, the amounts for administrative, selling and general costs and for profits shall be based on actual data pertaining to production and sales in the ordinary course of trade of the like product by the exporter or producer under investigation.’ 137 ibid, paras 7.76–86. The relevant part of Art 2.4 provides: ‘A fair comparison shall be made between the export price and the normal value. This comparison shall be made at the same level of trade, normally at the ex-factory level, and in respect of sales made at as nearly as possible the same time. Due allowance shall be made in each case, on its merits, for differences which affect price comparability, including differences in conditions and terms of sale, taxation, levels of trade, quantities, physical characteristics, and any other differences which are also demonstrated to affect price comparability.’ 138 ibid, paras 7.98–101. Art 6.7 essentially provides that IAs may undertake verification in the territory of the exporting Members, to which the procedures described in Annex I shall apply.

174  China’s Trade Remedy Regime and Implementation of WTO Rulings 4. MOFCOM’s acceptance of certain information provided by petitioners as confidential without assessing whether ‘good cause’ had been shown as required under Article 6.5 of the AD Agreement;139 and 5. the imposition of the provisional measure beyond the maximum of four months allowed under Article 7.4 of the AD Agreement.140 In the meantime, the panel rejected some claims of the complainants particularly on MOFCOM’s injury analysis. All parties appealed various aspects of the panel’s findings. The Appellate Body upheld the panel’s findings of violations in favour of the complainants and reversed the panel’s rulings in favour of China particularly on the determination of injury.141 ii.  China’s Implementation The parties agreed that China had until 22 August 2016 to implement the WTO rulings.142 On 20 June 2016, the MOFCOM initiated a re-investigation of the case.143 However, on the day of the expiration of the reasonable period of time, the MOFCOM issued a notice to terminate the AD duties, again referring to the petitioners’ withdrawal of the application.144 Therefore, like in the X-Ray Equipment case, the WTO rulings compelled China to remove the AD duties, but left some flexibility for the MOFCOM to fix the deficiencies in its practices in new investigations. 139 ibid, paras 7.290–303. Art 6.5 provides: ‘Any information which is by nature confidential (for example, because its disclosure would be of significant competitive advantage to a competitor or because its disclosure would have a significantly adverse effect upon a person supplying the information or upon a person from whom that person acquired the information), or which is provided on a confidential basis by parties to an investigation shall, upon good cause shown, be treated as such by the authorities. Such information shall not be disclosed without specific permission of the party submitting it.’ 140 ibid, para 7.334. The relevant part of Art 7.4 provides: ‘The application of provisional measures shall be limited to as short a period as possible, not exceeding four months or, on decision of the authorities concerned, upon request by exporters representing a significant percentage of the trade involved, to a period not exceeding six months.’ 141 Appellate Body Report, China – Measures Imposing Anti-Dumping Duties on High-Performance Stainless Steel Seamless Tubes (‘HP-SSST’) from Japan; China – Measures Imposing Anti-Dumping Duties on High-Performance Stainless Steel Seamless Tubes (‘HP-SSST’) from the European Union (China – HP-SSST) (WT/DS454/AB/R, WT/DS460/AB/R, adopted 28 October 2015). 142 China – Measures Imposing Anti-Dumping Duties on High-Performance Stainless Steel Seamless Tubes (‘HP-SSST’) from Japan, Agreement under Article 21.3(b) of the DSU (WT/DS454/14, 19 February 2016); China – Measures Imposing Anti-Dumping Duties on High-Performance Stainless Steel Seamless Tubes (‘HP-SSST’) from the European Union, Agreement under Article 21.3(b) of the DSU (WT/DS460/14, 19 February 2016). 143 《关于执行高性能不锈钢无缝钢管世贸组织争端裁决的立案公告》 [Initiation of Re-­investigation to Implement the WTO Rulings on the Anti-dumping Duties on High-Performance Stainless Steel Seamless Tubes Originating in the EU and Japan], MOFCOM Announcement No 30 on 20 June 2016, available at www.mofcom.gov.cn/article/b/c/201606/20160601341563.shtml. 144 《关于终止对原产于欧盟和日本的进口高性能不锈钢无缝钢管适用的反倾销措施的 公告》 [Announcement on Termination of Anti-dumping Measures on High-Performance Stainless Steel Seamless Tubes Originating in the EU and Japan], MOFCOM Announcement No 34 on 22 August 2016, available at www.mofcom.gov.cn/article/b/e/201608/20160801383475.shtml.

Cellulose Pulp  175 F.  China – Cellulose Pulp China – Cellulose Pulp – the latest WTO dispute against China’s AD actions – concerned the MOFCOM’s investigation into cellulose pulp exported from the US, Canada and Brazil in 2013 based on an application lodged by seven pulp and paper manufacturers representing the domestic industry. The final determination was to impose AD duties ranging from 16.9 per cent to 33.5 per cent (on the US exporters), 13 per cent to 23.7 per cent (on Canadian exporters), and 6.8 per cent to 11.5 per cent (on Brazilian exporters) from 6 April 2014 (collectively ‘Pulp Tariff’).145 Six months later, Canada commenced WTO proceedings against the AD duties. Cellulose pulp is an intermediate product used for the production of viscose fibres which are the main materials used in several downstream industries mainly the textile and apparel industry. The pulp industry was one of the few Chinese industries which had been unable to meet domestic demands. This is because China lacked the forest resources and advanced production technology needed to supply high quality pulp.146 The shortage of supply was exacerbated by the rapid growth of the downstream industries, such as the fibre industry and the textile industry. For example, in 2010, China’s fibre industry occupied over 50 per cent of the world’s fibre production and consumed 1.78 million tons of pulps, of which only 880,000 tons were supplied by the domestic pulp industry.147 Moreover, the quality of the domestically-made pulps fell short of the requirements of the fibre producers.148 Consequently, China relied heavily on imports from major producing countries such as Canada and the US to satisfy domestic needs.149 Canada, the complainant in China – Cellulose Pulp, had almost half of its annual production of the subject goods exported to China in 2013 and was estimated to suffer a C$20 million (US$17.7 million) revenue decline due to

145 《关于原产于美国、加拿大和巴西的进口浆粕反倾销终裁的公告》 [Final Determinations on the Anti-dumping Investigations of Cellulose Pulps Originating in the United States, Canada and Brazil], MOFCOM Announcement No 18 on 4 April 2014, available at www.mofcom.gov.cn/ article/b/e/201404/20140400539841.shtml. 146 See Zhong Zhuang, Lan Ding and Haizheng Li, ‘China’s Pulp and Paper Industry: A Review’ (2005) School of Economics, Georgia Institute of Technology, available at www.cpbis.gatech.edu/ files/papers/CPBIS-FR-08-03%20Zhuang_Ding_Li%20FinalReport-China_Pulp_and_Paper_ Industry.pdf. 147 《纺织工业“十二五”发展规划》 [The Twelfth Five-Year Development Plan for the Textile Industry], issued on 20 January 2012, available at www.china.com.cn/policy/txt/2012-01/20/ content_24456823.htm; 《中华人民共和国浆粕产业反倾销调查申请书》 [Application for antidumping measures filed by the Chinese Cellulose Pulp Industry], 13 December 2012, 13–14, available at http://images.mofcom.gov.cn/trb/201302/20130206084852203.pdf. 148 See Lijun Li, ‘A Further Discussion of the Antidumping Measures by the Viscose Fiber Producers’ (China Textile News, 24 December 2013), available at www.ctn1986.com/index.php?c=content &a=show&id=30576. 149 See Zhuang et al, above n 146.

176  China’s Trade Remedy Regime and Implementation of WTO Rulings the Chinese duties.150 In the meantime, given the weakness of the domestic pulp industry, the Chinese Government committed to promoting its development by, for example, listing ‘large-scale of paper and pulp production line and pulping equipment’ as an ‘Encouraged’ project in its Catalogue for Guiding Industry Restructuring.151 The industrial development policy led to a rapid growth of the pulp industry whose production capacity reached 1.2 million tons by the end of 2014, ‘making up 17% of the global total’.152 In 2014, however, the industry was also hit by economic downturn of the fibre industry and cheap imports, and suffered a huge loss.153 Thus, the Pulp Tariff served to mitigate the impacts of sluggish domestic demand and import surges on the local industry. It may also be seen as part of China’s industrial policy instruments, providing a temporary relief for the development of the pulp industry to allow it to foster production and technological catch-up. However, the Pulp Tariff was detrimental to the downstream industries which rely on cellulose pulp imports. For example, the fibre industry strongly opposed the AD duties which led to a significant increase in pulp price in the Chinese market.154 Consequently, the textile industry, which was already suffering rising labour costs,155 was also affected due to the higher fibre costs. The fact that the Pulp Tariff was imposed despite the negative impacts on the downstream industries suggests that in China, a less concentrated and influential industry (eg the pulp industry) may also successfully seek AD protection even though the protection is opposed by more concentrated and influential industries (eg the fibre industry and the textile industry) so long as the protection serves industrial development policies advanced by the government. That the Pulp Tariff was set at relatively lower rates rather than prohibitive rates, however, may reflect a compromise reached between the industries and the government. i.  WTO Rulings Canada’s legal claims concentrated on MOFCOM’s analysis of injury and causation. While the panel found some weaknesses in MOFCOM’s analysis,

150 See Euan Rocha and Lisa Von Ahn, ‘Canadian pulp makers urge gov’t to pressure China on anti-dumping duties’ (Reuters, 16 October 2014), available at www.reuters.com/article/ china-canada-wto-idUSL2N0SB0N320141016. 151 《国家发展改革委关于修改〈产业结构调整指导目录（2011年本）〉有关条款的决定》 (2013) [Decision on Amending the Relevant Provisions of the 2011 Catalogue for Guiding Industry Restructuring 2013], Order No 21 of the National Development and Reform Commission, promulgated on 16 February 2013, effective on 1 May 2013, items 19.1 and 19.2. 152 See Research and Markets, ‘Global and China Dissolving Pulp Industry Report, 2014–2017’ (Research and Markets, April 2015). 153 ibid. 154 See MOFCOM Announcement No 18, above n 145, appendix A. 155 Li Jing, ‘Slowed by Rising Labor Costs, China’s Textile Exporters Retool’ (China Daily USA, 31 July 2015), available at http://usa.chinadaily.com.cn/epaper/2015-07/31/content_21462916.htm.

Cellulose Pulp  177 it rejected almost half of Canada’s injury claims. This may be seen as an improvement in MOFCOM’s injury analysis, although it does not guarantee the quality of such analysis in future investigations. In this specific case, the weaknesses in MOFCOM’s injury analysis primarily concerned inadequate explanations of the impacts of dumped imports on the prices of ‘like’ domestic goods as part of the price effects assessment (particularly price depression).156 However, the panel held that MOFCOM’s considerations of the volume of dumped imports, the changes in the market share of dumped imports, and the impacts of dumped imports on domestic industry were not in violation of the AD Agreement.157 With respect to causation, the panel found that the MOFCOM failed to establish a causal link between dumped imports and injury and to ensure the alleged injury was not attributed to factors other than dumping.158 ii.  China’s Implementation The reasonable period of time, as the parties agreed, was 11 months until 22 April 2018.159 To implement the WTO rulings, the MOFCOM initiated a re-investigation of the matter on 25 August 2017.160 The MOFCOM’s final determination, issued on 20 April 2018, maintained the findings of injury and causation and hence the Pulp Tariff.161 On 11 September 2018, Canada commenced compliance proceedings contending that China had failed to implement the rulings of the original panel on injury and causation and had also breached a number of procedural requirements of the AD Agreement in the re-investigation.162 At the time of writing, the compliance dispute is still at the consultation stage with no compliance panel established. Thus, whether China’s re-investigation has fully complied with the WTO rulings remains to be seen. However, given China’s implementation in the previous cases, it is not unlikely for a compliance panel to discover some shortcomings in the re-investigation.

156 Panel Report, China – Anti-Dumping Measures on Imports of Cellulose Pulp from Canada, (WT/DS483/R, adopted 22 May 2017) [hereinafter China – Cellulose Pulp], paras 7.57–88. 157 ibid, paras 7.34–56, 7.89–100, 7.115–138. 158 ibid, paras 7.139–193. 159 China – Anti-Dumping Measures on Imports of Cellulose Pulp from Canada, Agreement under Article 21.3(b) of the DSU (WT/DS483/6, 7 June 2017). 160 《 关 于 执 行 “ 中 国 - 对 原 产 于 加 拿 大 的 进 口 浆 粕 反 倾 销 措 施 ” 世 贸 组 织 争端裁决的立案公告》 [Initiation of Re-investigation to Implement the WTO Rulings on the Antidumping Measures on Cellulose Pulps Originating in Canada], MOFCOM Announcement No 43 on 25 August 2017, available at www.mofcom.gov.cn/article/b/e/201708/20170802633349.shtml. 161 《关于原产于美国、加拿大和巴西的进口浆粕反倾销措施再调查裁定的公告》 [Final Determinations on the Re-investigation of the Anti-dumping Measures on Cellulose Pulps Originating in the United States, Canada and Brazil], MOFCOM Announcement No 37 on 20 April 2018, available at www.mofcom.gov.cn/article/b/c/201804/20180402734670.shtml. 162 China – Anti-Dumping Measures on Imports of Cellulose Pulp from Canada, Recourse to Art 21.5 of the DSU (WT/DS483/9, 12 September 2018).

178  China’s Trade Remedy Regime and Implementation of WTO Rulings If that occurs, one may reasonably predict that the MOFCOM will then terminate the Pulp Tariff or let the tariff expire without commencing a sunset review. Table 1  China’s AD and/or CV Duties and Implementation of WTO Rulings in Trade Remedy Cases WTO Dispute

Application of Duties

GOES (DS414)

11 Apr 2010

WTO Rulings

Expiry of RPT163

China’s implementation

Duration of Duties

Request for Consultations: 15 Sep 2010 Adoption of Panel & AB reports: 16 Nov 2012 Adoption of compliance panel report: 31 Aug 2015

31 Jul 2013

Re-investigation: 5 years 14 Jun 2013– 31 Jul 2013 Duties expired: 10 Apr 2015

X-Ray 23 Jan 2011 Request for Equipment Consultations: (DS425) 25 Jul 2011 Adoption of Panel report: 23 Apr 2013

19 Feb 2014

Re-investigation: 3 years and 10 Jan 2014 28 days Duties terminated: 19 Feb 2014

Broiler Products (DS427)

30 Aug 2010 (CVD) 27 Sep 2010 (ADD)

Request for Consultations: 20 Sep 2011 Adoption of Panel report: 25 Sep 2013 Adoption of compliance panel report: 28 Feb 2018

9 Jul 2014

Re-investigation: Around 25 Dec 2013– 7.5 years 9 Jul 2014 Duties terminated: 27 Feb 2018

Autos (DS440)

15 Dec 2011

Request for Consultations: 5 Jul 2012 Adoption of Panel report: 18 Jun 2014

N/A

Duties expired: 15 Dec 2013

2 years

(continued)



163 RPT

means ‘reasonable period of time’.

China’s Approach to WTO Compliance and Implications  179 Table 1  (Continued) Expiry of RPT

WTO Dispute

Application of Duties

HP-SSST (DS454, 460)

9 Nov 2012

Request for Consultations: 20 Dec 2012 (Japan) & 13 Jun 2013 (EU) Adoption of Panel & AB reports: 28 Oct 2015

22 Aug Re-investigation: Around 2016 20 Jun 2016 3 years and Duties 9  months terminated: 22 Aug 2016

Cellulose Pulp (DS483)

6 Apr 2014

Request for Consultations: 15 Oct 2014 Adoption of Panel report: 22 May 2017 Compliance proceedings since 11 Sep 2018

22 Apr Re-investigation: In place 2018 25 Aug 2017– (as of 20 Apr 2018 31 December 2018)

WTO Rulings

China’s implementation

Duration of Duties

IV.  CHINA’S APPROACH TO WTO COMPLIANCE AND IMPLICATIONS

Consistent with China’s behaviour in the other categories of disputes, China sought to implement the WTO rulings in the ‘trade remedy’ cases in a timely fashion, that is, before the expiry of the relevant reasonable period of time. However, its implementation in ‘trade remedy’ disputes has presented some distinctive features and challenges. The most telling distinction pertains to the poor quality of implementation as demonstrated by the findings of the compliance panels and China’s repetitive violations of the same substantive and procedural rules. The poor implementation has much to do with China’s approach to implementation which has been the initiation of a re-investigation. This approach is adopted in the MOFCOM’s Interim Rules on the Implementation of the Rulings of the World Trade Organization on Trade Remedy Disputes.164 While the rules refer to modification or termination of trade remedy 164 《执行世界贸易组织贸易救济争端裁决暂行规则》 (2013) [Interim Rules on the Implementation of the Rulings of the World Trade Organization on Trade Remedy Disputes 2013], Order No  2 of the MOFCOM, promulgated on 29 July 2013, effective on the same date, available at www.mofcom.gov.cn/article/b/c/201307/20130700219044.shtml.

180  China’s Trade Remedy Regime and Implementation of WTO Rulings measures as the way to implement WTO rulings, the MOFCOM has the discretion to re-investigate the matter concerned before making determinations of modification or termination. The re-investigation approach to WTO compliance, which the MOFCOM has consistently employed, is problematic. While this approach may be regarded as a formal process to correct WTO-­inconsistencies, it often fails to achieve full compliance. Moreover, since the MOFCOM’s decisions to modify or terminate an existing measure rely on re-investigations, such an investigation does not cause a suspension of the measure and may result in a decision to maintain it. Where a re-investigation leads to the continuation of an existing measure (at the original or a modified rate), compliance would only be achieved if the re-investigation had sufficiently addressed the substantive and/or procedural deficiencies in the original investigation. Given the technicality and complexity of these issues, it would be considerably more difficult to discern the adequacy of compliance in trade remedy cases than in the other categories of cases without resorting to compliance proceedings. Thus, re-investigation may well be (ab)used to trigger compliance proceedings and hence prolong the life of trade remedy measures. Finally, it must be noted that the termination of a challenged trade remedy measure is not equivalent to the compliance with WTO rulings. Once China removed AD/CV measures following a WTO decision, it did not have to correct the WTO-illegal practices in the investigation concerned. As the WTO decision is binding on the parties to that specific dispute only, it does not prevent the MOFCOM from repeating the same or similar practices in subsequent investigations. While some may argue that it takes time for the MOFCOM to learn how to improve its investigations to satisfy the WTO standards, others may question whether China has acted in good faith in complying with WTO rulings.165 However, from a legal perspective, one must concede that WTO rulings on the highly technical aspects of trade remedy investigations may not always provide clear guidance for implementation. In addition, the application of the same investigating approaches and procedures in different investigations is not necessarily in breach of WTO rules as the facts may vary significantly. Given the rampant (ab)use of trade remedies particularly AD worldwide, it is unlikely for China to retreat from its current practices. As discussed above, several factors may influence the decision-making of the Chinese Government as to whether to take AD actions. The most influential factor seems to be whether an AD action supports a chosen industrial development policy. Such a policy may serve more than one development goal such as fostering output and production capacity, technological advancement, export, etc. AD actions may be taken if the government holds the view that they would contribute to one or more of the policy objectives. The second most influential factor appears to be retaliation. Tit-for-tat AD actions may be taken in response to not only



165 Mitchell

and Prusa, above n 9, 318–19.

China’s Approach to WTO Compliance and Implications  181 the abuse of prohibitive trade remedy measures by foreign countries but also discriminative treatment of China through other protectionist policy instruments (eg the US Omnibus Appropriations Act). A retaliatory AD action would also serve the interests of Chinese exporters by pushing a foreign country to lift trade remedy measures against China. Finally, AD measures may be applied to afford protection to domestic import-competing industries whose influence in decision-making has proven to be significant. In short, it would only be realistic to predict that China’s AD actions will continue to flourish. WTO Members’ frequent application of trade remedies has imposed considerable pressure on the DSM. Since 1995, more than half of WTO disputes have focused on trade remedies.166 Yet, the effect of the DSM on inducing compliance in trade remedy disputes has been relatively limited. The core cause of the limitation is that WTO’s findings of violations often concern the application of domestic trade remedy legislations in individual investigations (ie an ‘as applied’ breach) rather than the legislations per se (ie an ‘as such’ breach). As a result, it is unnecessary for a losing party to change the relevant laws. Piecemeal attacks, however, tend to be ineffective to ensure meaningful compliance or systemic changes of a Member’s regulatory regime and practices.167 This limitation of the DSM reveals a systematic weakness of the system which may be exploited by all WTO Members. As a typical example in this regard, the US has maintained the notorious ‘zeroing’ practice despite a series of WTO rulings against it.168 Overall, the impact of WTO rulings on the US trade remedy regime has been limited precisely because a majority of the rulings have been ‘as applied’ only.169 Indeed, repeated violation of the same substantive and procedural rules may cause loss of reputation. However, when non-compliance has become common among WTO Members in trade remedy disputes, the reputational cost is not as significant as that in the other categories of cases. As far as China is concerned, the obligations to comply with WTO rulings may well succumb to the other motivations for the use of AD as discussed above. To cure the weakness of the DSM, therefore, one could not count on WTO Members to act in good faith. Rather, insofar as WTO rulings are likely to remain to be limited to ‘as applied’ breaches, one effective way to diminish the incentive to apply AD measures would be introducing retrospective remedies to cover at least the period from the expiry of a reasonable period of time and the termination of AD/CV measures. Doing so would discourage Members from using re-investigations to

166 See, eg, WTO, Annual Report 2017 (Geneva, World Trade Organization, 2017) 108, available at www.wto.org/english/res_e/booksp_e/anrep_e/anrep17_e.pdf. 167 Mitchell and Prusa, above n 9, 310. 168 ibid, 309. See generally Thomas J Prusa and Luca Rubini, ‘United States – Use of Zeroing in Anti-Dumping Measures Involving Products from Korea: It’s déjà vu All Over Again’ (2013) 12(2) World Trade Review 409. 169 Jacqueline D Krikorian, International Trade Law and Domestic Policy (Vancouver, UBC Press, 2012) 164–66.

182  China’s Trade Remedy Regime and Implementation of WTO Rulings extend AD/CV measures. In cases involving repeated violations, retrospective remedies may be applied for the whole period when the measures are in place to deter further repetitive violations and counteract the negative impact of these measures on trade. V. CONCLUSION

Compared with China’s compliance in the other categories of disputes, China’s implementation in trade remedy disputes has presented distinctive features and challenges. Re-investigations, as the typical approach China has undertaken to comply with WTO rulings, have been used to formally claim compliance at the DSB but have effectively extended AD/CV duties. As WTO rulings have been largely limited to the practices of IAs in individual investigations, they tend to provide considerable room for China and other WTO Members to repeat the same violations in new investigations. As a result, the DSM may be ineffective in inducing compliance or avoiding recurrent breaches in trade remedy disputes. To enhance the effectiveness of the DSM, retrospective remedies would need to be introduced to diminish the incentive for WTO Members to resort to AD measures and counteract the negative impact of these measures on trade.

8 Conclusion I. INTRODUCTION

T

his chapter draws some overall conclusions on China’s compliance with WTO rulings, China’s approaches to, and reasons for, compliance, and the major implications for WTO Members and the Dispute Settlement Mechanism (DSM). In the end, the chapter reiterates the vital importance of the DSM to the multilateral trading system. II.  CHINA’S COMPLIANCE WITH WTO RULINGS

Contrary to the overwhelming criticism of China as a ‘bad player’ in the global trading system, I have shown that China has maintained a remarkable record of compliance in the DSM. For 17 years, from its entry into the WTO in ­December 2001 to December 2018, China has timely and satisfactorily implemented the findings and recommendations of WTO tribunals in all but one dispute. China’s compliance in ‘trade remedy’ disputes has presented some distinctive issues, and hence will be reviewed separately from China’s compliance in ‘non-traderemedy’ disputes below. A.  ‘Non-Trade-Remedy’ Disputes In the six ‘non-trade-remedy’ disputes which involved numerous Chinese measures and legal issues, China only failed to implement WTO rulings on two issues in China – Publications and Audio-visual Products. The first issue concerned China’s restriction on the right to import films. China and the US reached a compensation deal, which provided the flexibility for China to maintain two WTO-illegal measures that restricted the trading right to designated stateowned enterprises (SOEs). The second issue pertained to China’s prohibition of foreign-invested enterprises (FIEs) from engaging in the distribution of network music. While China removed this prohibition, it has not provided the rules for FIEs to seek approval for undertaking network music activities. Accordingly, China has only partially implemented the WTO rulings on this issue.

184  Conclusion In all these disputes, China’s compliance was consistently confined to strictly addressing the WTO findings of inconsistencies. While one may question whether China has merely delivered ‘paper compliance’,1 it must be noted that no WTO Members are obliged to modify any measures or practices that are not found in breach of WTO rules. Nor can such measures or practices be deemed to be WTO-unlawful unless they are found to be so by WTO tribunals. As discussed in several chapters of the book, Webster’s ‘paper compliance’ theory is largely flawed as it misinterpreted China’s obligations in implementing WTO rulings and misunderstood China’s legal system.2 What makes that theory even more untenable is Webster’s selective discussion of only three disputes, which ignored China’s performance in a majority of the disputes in which China was required to comply with WTO decisions. China’s approach to settling trade disputes, either through a mutually agreed solution or implementation of WTO rulings, has been affected by economic, social, political, legal, institutional and reputational considerations. As one of the world’s largest trading nations and a major user of the DSM, China has a significant interest in building its reputation and credibility in, and maintaining the effectiveness and integrity of, the system. More generally, other commentators have rightly observed that China’s authoritarian regime has allowed a centralised decision-making ‘while relevant bureaucracies compete to influence their perception of the costs and benefits of compliance’, which has facilitated WTO compliance.3 However, at the core of China’s approach has been the use of WTO rulings as an external lever to facilitate domestic economic reforms while at the same time, limiting the impacts of the rulings on its policy objectives and the regulatory framework designed to pursue such objectives. This approach does not necessarily affect the quality of China’s compliance and shows China’s growing understanding of how to address unfavourable WTO decisions in a narrow but adequate fashion. Indeed, this approach has also been adopted by other major players in the system. For example, in a detailed assessment of the impacts of the DSM on the domestic policy-making in the US and Canada, Krikorian observed that: the US government has acted in its own self-interest and thwarted the potential impact of the dispute settlement mechanism either by effectively ignoring its decisions or by implementing them in such a way as to minimise their overall effect.4 1 See Timothy Webster, ‘Paper Compliance: How China Implements WTO Decisions’ (2014) 35(3) Michigan Journal of International Law 525. 2 For a theoretical critique of Webster’s ‘paper compliance’ theory, see Guang Ma and Jiang Li, ‘A Legalization Theory Based Response to Timothy Webster’s “Paper Compliance” of China in WTO Dispute Settlement’ (2015) 10(2) Asian Journal of WTO & International Health Law and Policy 541. 3 Xiaowen Zhang and Xiaoling Li, ‘The Politics of Compliance with Adverse WTO Dispute Settlement Rulings in China’ (2014) 23(85) Journal of Contemporary China 143, 145. Professor Jianguo Hu has also raised this point in his comments on this book. 4 Jacqueline D Krikorian, International Trade Law and Domestic Policy (Vancouver, UBC Press, 2012) 81.

China’s Compliance with WTO Rulings  185 With respect to Canada, Krikorian opined that: In order to minimise the policy consequences of WTO decision making, the government of Canada has adopted a series of strategies and avoidance techniques to respond to the dispute settlement mechanism. First, officials craft their responses to legal findings in a narrow and technical manner in order to shield the state from the dispute settlement mechanism’s influence. In some cases, officials in Ottawa have complied with a WTO decision by amending the rules or administrative practices governing a contested program without altering its fundamental objectives.5

Thus, China’s approach demonstrates that it has become a similarly sophisticated player in the system with full comprehension of the limits of WTO rulings and how to implement the rulings in a way that not only delivers adequate compliance but also maintains its own interests. B.  ‘Trade Remedy’ Disputes In the six ‘trade remedy’ disputes, China has taken a strikingly different approach to compliance. This approach has been the initiation of a re-investigation to address the WTO-inconsistencies in relation to its Ministry of Commerce (MOFCOM)’s anti-dumping (AD) and/or countervailing (CV) investigations. In some of the disputes, China ensured that the re-investigation was completed, or the AD and/or CV duties were terminated, before the expiration of the reasonable period of time that China was given to comply with the WTO rulings. In others, China decided to maintain the duties after the re-investigations and did not remove them until the re-investigations were found to continue to violate WTO rules in compliance proceedings. On its face, China’s approach has ensured a timely compliance. In practice, however, the MOFCOM has failed to sufficiently address the substantial and procedural deficiencies identified by WTO tribunals and has often repeated similar violations in re-investigations or new investigations. In effect, the re-investigation approach seems to have been used to prolong the life of the AD and/or CV duties levied. China’s strategy in implementing WTO decisions in ‘trade remedy’ disputes also shows its good understanding of the limitations of the decisions and the flexibility of the DSM. Since all the disputes were focused on the MOFCOM’s practices in individual AD/CV investigations, it was unnecessary for China to amend its trade remedy legislations. Moreover, technically speaking, it is not illegitimate for China to claim compliance after it has attempted to address the substantial and procedural deficiencies in re-investigations. In new investigations, the application of the same investigating methods and procedures does not necessarily violate WTO rules as the facts may vary significantly. Thus, it was the limitations of WTO decisions that have provided the flexibility for

5 ibid,

197.

186  Conclusion China to achieve formal compliance in individual disputes without changing practices in a significant way. China is not the only country that has utilised this flexibility but has simply learned how to do so from the other major players especially the US. As widely known, the US has maintained the notorious ‘zeroing’ practice despite a series of WTO rulings against it.6 In general, the impact of WTO rulings on the US trade remedy regime has been limited precisely because a majority of the rulings have been ‘as applied’ only.7 C.  Overall Assessment Overall, China’s record of compliance compares favourably with those of the other key players in the system. Ironically, while the US has been accusing China of not complying with WTO rules, the US’s record of compliance is evidently worse than that of China. The US’s refusal to change the practice of ‘zeroing’ has been a blunt denial of its WTO obligations and outright disrespect for WTO rulings. In addition, while China has never been subject to any request for retaliations as a result of a failure to comply, the US has been the major target of retaliation and has faced 15 requests for and authorisations of retaliation in seven disputes.8 Since the birth of the WTO, there have been only 21 such requests and authorisations under the DSM. The remaining targets of retaliation have involved the EU (four requests and authorisations in two disputes), Canada (one authorisation), and Brazil (one authorisation). These facts simply do not support the accusation of China as a ‘bad player’. Instead, they show clearly that the US has been the one who failed or refused to comply with WTO rulings the most frequently. Indeed, China’s implementations of WTO rulings are not perfect. However, China has never ignored adverse WTO rulings but has made efforts to achieve WTO compliance in every dispute. Those who criticise China’s approaches to WTO compliance should first consider the old adage that ‘those who live in glass houses should not throw stones’. III.  IMPLICATIONS FOR WTO MEMBERS AND THE DSM

Despite China’s satisfactory record of compliance, post-compliance issues may arise. The issue that immediately follows China’s compliance in a WTO dispute is how China implements the revised measures. In this regard, it is reasonable for

6 See generally Thomas J Prusa and Luca Rubini, ‘United States – Use of Zeroing in Anti-­ Dumping Measures Involving Products from Korea: It’s déjà vu All Over Again’ (2013) 12(2) World Trade Review 409. 7 See Krikorian, above n 4, 164–66. 8 WorldTradeLaw.net, ‘Article 22.6 Arbitration Decisions’, available at www.worldtradelaw.net. wwwproxy1.library.unsw.edu.au/databases/suspensionawards.php.

Implications for WTO Members and the DSM  187 WTO Members to be concerned about the application of the revised measures by the competent Chinese authorities at both national and sub-national levels. Due to the lack of transparency in China’s administrative system, it is often hard to ascertain whether China has ensured that all governments have applied the revised measures in accordance with the spirit of WTO rulings. Therefore, it is important for WTO Members to monitor China’s implementation in practice, push China to enhance transparency and due process, and when possible, seek the relevant information from businesses and other stakeholders. Furthermore, China’s compliance in a specific dispute does not preclude China from introducing similar measures and committing similar WTO offences afterwards. Given its compliance strategies discussed in this book, China is likely to prioritise domestic policy objectives over the observance of WTO rules, and when necessary, pursue the objectives through WTO-incompatible means. In this connection, the effect of WTO rulings on post-compliance activities would be limited in at least three aspects. Firstly, WTO decisions in a specific dispute only apply to the measures challenged in that dispute. This provides the flexibility for China to maintain the contested industrial policies and adopt new policy instruments that serve the same objectives. Secondly, in some disputes (eg China – Raw Materials and China – Rare Earths), the challenged measures may be temporary and subject to regular updates. This would make it easy for China to implement WTO decisions and re-introduce similar measures. Thirdly, in cases involving fundamental political and social objectives (eg censorship and protection of natural resources), WTO tribunals tend to pay deference to, and thereby leave flexibility for, China’s pursuit of these objectives. This would provide room for China to continue to develop the relevant regulatory framework and invent new measures to test the boundaries of WTO rules. Thus, for WTO Members who are concerned about China’s trade policies, it is necessary to maintain a mechanism to effectively monitor China’s policy developments and regulatory activities. The United States Trade Representative’s China Compliance Report published on a yearly basis has been a good example of such mechanisms. However, it must be noted that the aforementioned post-compliance issues apply to all WTO Members. That is, the probability of breach of WTO rules for domestic policy reasons after compliance in one dispute remains as high in every Member as it is in China. In addition, China has shown full capability to utilise AD/CV measures for various purposes which have mainly included retaliating against the application of trade remedies by certain Members against China, supporting industrial policies, promoting exports and protecting import-competing industries. Given the rampant (ab)use of trade remedies and inadequate compliance with WTO rulings by the major players in the system, it is unlikely for China to retreat from its current practices both in terms of its increasing recourse to trade remedies and its approach to implement unfavourable WTO decisions. The Chinese experience in implementing WTO rulings has revealed the weaknesses of the DSM in tackling temporary and repetitive violations.

188  Conclusion These weaknesses emphasise the need to introduce retrospective remedies to discourage Members from using WTO litigation to extend the imposition of WTO-unlawful measures as well as an expedited and simplified process for the adjudication of disputes involving identical or almost identical facts, measures, and claims.9 Again, these weaknesses may be exploited by all WTO Members, not only by China. IV.  THE ‘CROWN JEWEL’ OF THE MULTILATERAL TRADING SYSTEM

China’s record of compliance suggests that the DSM has been largely effective in inducing compliance and influencing domestic policy-making.10 The WTO decisions have led not only to changes to specific policy instruments under some complex regulatory regime in China but also gradual and systematic adjustments of such regulatory regime. While the WTO rulings have been in deference to China’s choice of policy objectives, they have effectively pushed China to use WTO-lawful and trade-friendly means to achieve such objectives. If one views the fundamental function of the WTO rules as being to discipline the use of welfare-diminishing, trade-restrictive and distorting policy instruments,11 then the DSM has served that function reasonably well in the case of China. There is little doubt that China has been a staunch defender of the multilateral trading system12 and has been making significant progress in liberalising and reforming its economy. However, as a transition economy, the Chinese 9 For a more comprehensive analysis of the shortcomings of the DSM and reform proposals, see William Davey, ‘The WTO and Rules-Based Dispute Settlement: Historical Evolution, Operational Success, and Future Challenges’ (2014) 17(3) Journal of International Economic Law 679. 10 For a general discussion of the impact of the WTO on domestic regulation, see Gregory S­ haffer, ‘How the World Trade Organization Shapes Regulatory Governance’, (2015) 9 Regulation & Governance 1. 11 See generally Ernst – Ulrish Petersmann, ‘Trade Policy as A Constitutional Problem’, (1986) 41(II/III) Aussenwirtschaft 405; Frieder Roessler, ‘The Constitutional Function of the Multilateral Trade Order’ in Meinhard Hilf & Ernst – Ulrich Petersmann (eds), National Constitutions and International Economic Law (Deventer, Kluwer, 1993) 53–62; Frieder Roessler, ‘The Scope, Limits and Function of the GATT Legal System’, (1985) 8(3) The World Economy 287. For a comprehensive analysis of literature on an array of proposed rationale for the formation of the WTO, see WTO, World Trade Report: Six Decades of Multilateral Trade Cooperation: What Have We Learnt? (Geneva, WTO, 2007) 50–98. 12 China has been actively contributing to the protection and improvement of the multilateral trading system through a series of official announcements on the significance of the WTO and China’s firm support for it as well as concrete proposals to address major and imminent issues that the system is currently facing. See, eg, 《中国与世界贸易组织》白皮书 [White Paper on China and the World Trade Organization], published by the Information Office of the State Council on 28 June 2018, available at www.scio.gov.cn/zfbps/32832/Document/1632334/1632334.htm; WTO, ‘Joint Statement by the European Union, China, Canada, Norway, New Zealand, ­Switzerland, Australia, Republic of Korea, Iceland, Singapore, Mexico, Costa Rica and Montenegro’, (WT/GC/197, 14  December 2018); WTO, ‘Communication from the European Union, China, Canada, India, Norway, New Zealand, Switzerland, Australia, Republic of Korea, Iceland, ­Singapore, Mexico, Costa Rica and Montenegro to the General Council’, (WT/GC/W/752/Rev.2, 11 December 2018).

The ‘Crown Jewel’ of the Multilateral Trading System  189 economic system, policymaking, regulations and enforcement mechanisms continue to pose perplexing and imminent challenges for the WTO. Those that have attracted longstanding and considerable attention include, for example, China’s non-market-economy status,13 state intervention via SOEs,14 ‘forced’ technology transfer,15 the so-called ‘unfair trade practices’ through dumping and subsidies, non-transparency, etc. While this book does not elaborate on these issues, it suggests that the WTO and its DSM will remain an important forum for the discussion and resolution of these challenges. Thus, the ongoing crisis in the DSM, caused by the US’s continuous block of the appointment of Appellate Body members, must be addressed properly, urgently and collectively by all WTO Members if a functioning adjudication mechanism is to be maintained. In reality, the eight pending WTO disputes against China continue to explore various WTO-consistency issues relating to China’s import16 and export17 regulatory regime, domestic subsidy programs,18 protection of

13 This issue has ignited intensive debates in the international trade community and has triggered a WTO dispute between the EU and China. For some recent analysis of the issue and the EU-China dispute, see Weihuan Zhou and Delei Peng, ‘EU – Price Comparison Methodologies (DS516): Challenging the Non-Market Economy Methodology in Light of the Negotiating History of Article 15 of China’s WTO Accession Protocol’ (2018) 52(3) Journal of World Trade 505; James Nedumpara and Weihuan Zhou (eds), Non-Market Economies in the Global Trading System: The Special Case of China (Singapore, Springer, 2018). For the US report on this issue, see United States Department of Commerce, China’s Status as A Non-Market Economy (A-570-053, 26 October 2017). For the EU’s latest amendments of anti-dumping laws to address this issue, see Regulation (EU) 2017/2321 of the European Parliament and of the Council of 12 December 2017 Amending Regulation (EU) 2016/1036 on Protection against Dumped Imports from Countries not Members of the European Union and Regulation (EU) 2016/1037 on Protection against Subsidised Imports from Countries not Members of the European Union, Official Journal of the European Union, L338, 19 December 2017. 14 This issue has generated serious concerns about the adequacy of WTO rules, leading to a call for reform of the WTO. See, eg, Office of the United States Trade Representative, ‘Joint Statement by the United States, European Union and Japan at MC11’ (USTR, 12 December 2017), available at https://ustr.gov/about-us/policy-offices/press-office/press-releases/2017/december/joint-statementunited-states. For a recent discussion of this issue, see Weihuan Zhou, Henry Gao and Xue Bai, ‘China’s SOE Reform: Using WTO Rules to Build a Market Economy’ (Sixth Biennial Global Conference of the Society of International Economic Law, Washington DC, 1 July 2018), available at https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3209613. 15 For a brief discussion of China’s regulatory framework for intellectual property and the recent WTO disputes, see Ch 6 of this book. 16 See WTO, Dispute Settlement, China – Tariff Rate Quotas for Certain Agricultural Products (DS517) (US), available at www.wto.org/english/tratop_e/dispu_e/cases_e/ds517_e.htm; WTO, Dispute Settlement, China – Additional Duties on Certain Products from the United States (DS558) (US), available at www.wto.org/english/tratop_e/dispu_e/cases_e/ds558_e.htm; WTO, Dispute Settlement, China – Certain Measures Concerning Imports of Sugar (DS568) (Brazil), available at www.wto.org/english/tratop_e/dispu_e/cases_e/ds568_e.htm. 17 See WTO, Dispute Settlement, China – Export Duties on Certain Raw Materials (DS508) (US), available at www.wto.org/english/tratop_e/dispu_e/cases_e/ds508_e.htm; China – Duties and other Measures concerning the Exportation of Certain Raw Materials (DS509) (EU), available at www. wto.org/english/tratop_e/dispu_e/cases_e/ds509_e.htm. 18 See WTO, Dispute Settlement, China – Domestic Support for Agricultural Producers (DS511) (US), available at www.wto.org/english/tratop_e/dispu_e/cases_e/ds511_e.htm; WTO, Dispute Settlement, China – Subsidies to Producers of Primary Aluminium (DS519) (US), available at www. wto.org/english/tratop_e/dispu_e/cases_e/ds519_e.htm.

190  Conclusion intellectual property rights and technology transfer via foreign investment regulation and administration.19 Interestingly, six of the eight disputes were brought by the US, which shows the US’s expectation to use the DSM to influence China’s domestic policies, regulation and administrative practices. Indeed, the USTR’s China Compliance Report 2018 shows that the US remains seriously concerned about China-related issues and expects to address these issues through WTO litigation or other means.20 Given the effectiveness of the DSM in inducing China’s compliance, it is highly possible for the DSM to fulfil US’s expectations if the system continues to function properly. Thus, it is also in the interest of the US to ensure that the system is not paralysed. A ­dysfunctional or paralysed DSM would also have far-reaching ramifications for the WTO, such as the resurrection of protectionism and unilateralism which has already occurred, and the return to the power-based system of the GATT. These may cause irreparable damages to the credibility and integrity of the entire global trading system which has taken tremendous efforts and resources from numerous stakeholders to build and develop for over 70 years. Therefore, it is time for WTO Members, their policymakers, industrial associations and businesses, non-governmental organisations and other international organisations to join forces to protect the DSM as the ‘crown jewel’ of the multilateral trading system.

19 See WTO, Dispute Settlement, China – Certain Measures Concerning the Protection of Intellectual Property Rights (DS542) (US), available at www.wto.org/english/tratop_e/dispu_e/ ­ cases_e/ds542_e.htm; WTO, Dispute Settlement, China – Certain Measures on the Transfer of Technology (DS549) (EU), available at www.wto.org/english/tratop_e/dispu_e/cases_e/ds549_e.htm. 20 USTR, 2018 Report to Congress on China’s WTO Compliance (February 2019), available at https:// ustr.gov/sites/default/files/2018-USTR-Report-to-Congress-on-China%27s-WTO-­Compliance.pdf.

Index Note: Alphabetical arrangement is word-by-word, where a group of letters followed by a space is filed before the same group of letters followed by a letter, eg ‘trade secrets’ will appear before ‘trademarks’. In determining alphabetical arrangement, initial articles and prepositions are ignored. Page numbers followed by the letter ‘n’ refer to footnotes on the quoted pages. abolition of export quotas, 83 acceptance stage, DSM, 38 Accession Protocol: export taxes and charges elimination, 71 national treatment, 53 Rare Earths dispute, 81 Taxes dispute, 19 trading rights liberalisation, 53 violation, Grants, Loans and Other Incentives dispute, 23 WTO-plus obligations, 42 acquirer requirements: Electronic Payment Services dispute, 119, 122, 124 acquiring banks: electronic payment services, 117 acquiring financial institutions: electronic payment services, 117 activation stage, DSM, 38 AD, see anti-dumping ad hoc panels, WTO: ruling on disputes, 2–3 Additional Duties on Certain Products dispute, 11 adjudicated disputes: trade in goods, 13 trade in services, 13 trade-related intellectual property rights, 13 trade remedies, 13 adjudication: disputes resolved before, 13 administration: intellectual property, 132 quotas, 75, 77, 79–81 Administration of Audiovisual Products Regulations 2001, 55, 56, 62 Administration of Audiovisual Products Regulations 2011, 58, 60–61, 63

Administration of Chinese Brand Name Products Rules, 2005, 24 Administration of Electronic Publications Rule 1997, see Electronic Publications Rule 1997 Administration of Electronic Publishing Rule 2008, see Electronic Publications Rule 2008 Administration of Films Regulations 2001 55–57 Administration of Foreign-Invested Distribution Enterprises of Books, Newspaper, and Periodicals Rules 2003, see Publications (Sub-) Distribution Rule 2003 Administration of Import and Export of Technology Regulation 2001, 136 Administration of Internet Culture, Interim Rules 2003, 101, 104, 107, 110 Administration of Master Distribution of Books, Interim Rules 1991, 102 Administration of Publications Market Rules 2004, see Publications Market Rule 2004 Administration of Publications Regulations 2001, see Publications Regulation 2001 Administration of Publications Regulations 2011, 58, 63, 108–109, 113 Administration of Sino-Foreign Contractual Joint Ventures for the Sub-Distribution of Audiovisual Products Rules, 55, 56 Administration of Special Fund for the Industrialization of Wind Power Equipment, Provisional Measure 2008, 28 Administration of the Importation of Audiovisual Products Rules 2001, 55, 56

192  Index Administration of the Importation of Audiovisual Products Rules 2011, 58, 61, 63 Administration of the Publications Market Rules 2011, see Publications Market Rule 2011 Administration of the Subscription of Imported Publications Rules 2004, 101, 113 administrative authorities delegation: legislation, 43 Administrative Regulations on Import and Export Tariffs 2003, 43 Administrative Regulations on Import and Export of Goods 2002, 43 Administrative Rule 2005, 45, 48 Administrative Rules on Importation of Automobile Parts Characterized as Complete Vehicles 2005, 45, 48 administrative system: transparency lack in, 187 adverse rulings: WTO Members’ reactions, 8 advertising services, 99 after sales services, 99 aggressive legalism, 39 Agreement on Agriculture (AoA), 23 Agricultural Products dispute, 11 Aircraft dispute, 11 discriminatory tax exemptions abolished, 35 measures, 37 MOF measures terminating tax exemptions, 35 outcome, 37 reputational cost of WTO violation, 35 request for consultations, 37 SAT measures terminating tax exemptions, 35 settlement, 34–35, 37 summary, 37 transparency lack, 34 US challenge to VAT exemptions, 34 VAT exemption expired, 35 AK Steel Corporation, US, 159 Allegheny Ludlam Corporation, US, 159 Allgeier, Peter, 145 allocation and administration of quotas, 75, 77, 79–81 aluminium: export duties, Raw Materials dispute, 73 Aluminium dispute, 11 American Express, 118

Announcement on Providing Clearing Arrangements for Banks Handling Personal RMB Business in Macao, 120, 122, 124 Announcement on Providing Clearing Arrangements for Banks Handling Personal RMB Deposit, Exchanges, Bank Cards and Remittance in Hong Kong, 120, 122, 124 anti-dumping (AD), 152–53 abuse, 180–82 Agreement, see Anti-Dumping Agreement Australia, actions against, 158 China’s provisional measures against EU, China – Fasteners dispute, 25–28 customs duties, 153 domestic import-competing industries protection, 181 duties: export promotion purposes, 187 GAC collection, 156 on GOES exports from US and Russia, 159 import-competing industries protection purposes, 187 industrial policies support purposes, 187 retaliation purposes, 187 utilised for various purposes, 187 duties continuation: Autos (US) dispute implementation, 171 Broiler Products dispute implementation, 169–70 after re-investigations, 185 duties expired: Autos (US) dispute implementation, 178 duties imposition: Autos (US) dispute, 170 Broiler Products dispute, 166, 168 Cellulose Pulp dispute, 175 GOES dispute, 159 HP-SSST dispute, 172–73 X-Ray Equipment dispute, 163–64 duties levied: MOFCOM re-investigations used to prolong, 185 duties terminated: Broiler Products dispute implementation, 178 HP-SSST dispute implementation, 174, 179 re-investigations completed before, 185 X-Ray Equipment dispute implementation, 178

Index  193 EU: duty imposition, China – Fasteners dispute, 26–27 retaliation actions against, 157 expired: GOES dispute, 178 Government decision-making, 180 India, actions against, 158 industrial development policy use, 164, 180 initiation: actions, 156–58 rules, 155 injury investigation rules, 155 investigation rules and procedures, 155 Japan, actions against, 158 measures, application, 157 new exporter review rules, 155 on-site verification rules, 155 practices, deficiencies, 158 price undertaking rules, 155 procedural fairness lack, 158 protectionist interests motivation, 157 public hearing rules, 156 questionnaire rules, 155 retaliation motivation, 157, 180–81 sampling rules, 155 South Korea, actions against, 158 tit-for-tat actions, 180–81 transparency lack, 158 US, retaliation actions against, 157 Anti-Dumping Agreement, 152–53 Broiler Products dispute WTO rulings, 168 Cellulose Pulp dispute implementation, 177 GOES dispute WTO rulings, 160–62 practices challenged, China – Fasteners dispute, 25–28 X-Ray Equipment dispute WTO rulings, 165 Anti-dumping and Countervailing Measures Regulation 1997, 154 Anti-dumping Regulation 2001, 154–55, 157 anti-competitive practices prevention, TRIPs, 130 Anti-Unfair Competition Law 1993, 131 Anti-Unfair Competition Law 2017, 131 antimony, 81, 88 AoA (Agreement on Agriculture), 23 Apparel and Textile Products dispute, 11 cash payments, 33 chemical fibres industries, 33 cotton fibres industries, 33 loans, 33

measures, 37 Mexican–Chinese competition in US market, 33 Mexico domestic regulatory framework strengthened, 34 Mexico import competition reduced, 34 Mexico not proceeded with litigation, 33 Mexico request for consultations, 33–34 outcome, 37 request for consultations, 37 settlement, 37 subsidies, 33–34 summary, 37 tax preferences, 33 Appellate Body: findings: Raw Materials dispute, export quotas, 76, 77 member appointments, US continuous block, DSM crisis from, 189 report adoption: Cellulose Pulp dispute WTO rulings, 179 GOES dispute WTO rulings, 178 HP-SSST dispute WTU rulings, 179 ruling in favour of China, EC – Fasteners (China) dispute, 27 application procedures: restrictions, 96 Application Qualifications and Procedures for Rare Earth Quotas 2012, 80 Application Qualifications and Procedures for Molybdenum Export Quotas 2012, 81 approval systems: cultural goods imports, 67, 68 FDI, 135 foreign investment, 96 trading rights, 53 AQSIQ, see General Administration for Quality Supervision, Inspection and Quarantine assets, proof of: foreign-invested enterprises trading rights, 54 ATMs, 122 audiovisual home entertainment (AVHE) products: Publications and Audiovisual Products dispute 104, 112 Sino-foreign joint ventures, 112 audiovisual products: dispute, see Publications and Audiovisual Products dispute

194  Index distribution, 104–107, 109 GAPP, 61–62, 63 importation, GAPP, 63 Sino-foreign joint ventures, 62, 109 Audiovisual Products Importation Rule 2002, 55, 56 Audiovisual Products Importation Rule 2011, 58, 61, 63 Audiovisual Products Regulation 2001, 55, 56, 62 Audiovisual Products Regulation 2011, 58, 60–61, 63 audiovisual sector: subsidies granted to domestic services suppliers in, 99 audiovisual services: China’s GATS commitments, 104 distribution by Sino-foreign joint ventures, 99 Audiovisual (Sub-)Distribution Rule 2003, 55, 56 Audiovisual (Sub-)Distribution Rule 2004, 62, 100, 105, 107, 109, 110, 114 Australia: anti-dumping actions against, 158 China – Taxes dispute, 19 authoritarian regime, 184 auto industry: automobiles imported from USA: anti-dumping and countervailing duties on, Auto Parts dispute, 51 high import tariffs and quotas, 44 importance to both China and US, 171 protectionist instruments, 44–45 rapid development: Auto Parts dispute compliance, 49 restructuring: Auto Parts dispute compliance, 50 US importance, 170–71 see also Auto Parts dispute; Autos and Auto Parts dispute; Autos (US) dispute Auto Parts dispute, 10, 68–69, 171 25 per cent charge if used in complete vehicles assembly, 45–46 abolition, 48–49 Administrative Rule 2005, 45, 48 auto industry rapid development, 49 auto industry restructuring, 50 automobiles imported from USA, anti-dumping and countervailing duties on, 51 background, 44–45 challenges and implications, 50–52

Complete Knock Down (CKD) kits, 46–48 compliance reasons, 49–50 Decision on Repealing the Administrative Rules on Importation of Automobile Parts Characterized as Complete Vehicles, 48 defence, 47 foreign partners with strong financial and technological capacity, 52 GAC Rule 2005, 45, 48 GATT national treatment (NT) rule violation, 47, 49 implementation, 48, 69 internal charges, 46–48 measures, 45–46, 49–50 monitoring by WTO Members, 68 NDRC Policy 2004, 45, 48 new energy vehicles, measures to help industry, 51–52 no longer appropriate, 49–50 not statutory laws, 50 ordinary customs duties, 46–47 Policy on Development of Automotive Industry 2009, 48 reputation at stake, 49 reviews by GAC, 46 self-evaluation by motor manufacturers, 46 Semi Knock Down (SKD) kits, 46–48 Sino-foreign joint ventures, 50 per cent foreign ownership restriction relaxed, 52 technology transfer to Chinese manufacturers, 51 value thresholds, 46 volume thresholds, 46 WTO Rulings, 46–48, 51 Auto Tariff, 170–71 Autos and Auto Parts dispute, 11, 51 export subsidies, 30 inadequate notifications of subsidy programs, 30 measures, 37 negotiations, 31 outcome, 37 request for consultations, 37 settlement, 37 summary, 37 transparency obligations, 30 US challenge, 30–31 Autos (US) dispute, 12, 51, 152 AD duties: continuation, 171

Index  195 expired, 178 imposition, 170 Auto Tariff, 170–71 background, 167, 170–171 CV duties: continuation, 171 expired, 178 imposition, 170 double-remedy investigation, 170 implementation, 171, 178 procedural shortcomings, 171 US request for consultations, 178 WTO rulings, 171 AVHE products, see audiovisual home entertainment products aviation: manufacturing industry, USA, 34 sector, subsidies granted to domestic services suppliers in, 99 Bacchus, James, 9 back-end processing, 117 bank cards: Documents, 119–21, 122, 124, 125 dual currency, 122 RMB, 120, 122–23 unified networks, 118 banking services: Electronic Payment Services dispute WTO Rulings, 121–22 banks: acquiring, 117 Documents, 120, 122, 124, 125 financial, 119 foreign, 97 issuing, 117 Baosteel Group Corporation, 159 barriers: compliance, Electronic Payment Services dispute, 127–28 to legitimate trade, 130 regulatory, see regulatory barriers trade in services, see trade in services bauxite, 72 export duties, 73 export quotas, 75, 76 BFT (Bureau of Fair Trade for Imports and Exports), 156 bidding: requirements, exports, 72 systems, export quotas allocated by, Raw Materials dispute, 75

BII (Bureau of Industry Injury Investigation), 156 biotechnology (crop seeds), 150 Bloomberg (US), 21 books, 101, 106, 108, 110, 111, 113 Border Areas, Circular on Relevant Issues on Accepting and Using RMB Bank Cards in, 120 Brand Name Products, 24 brands, famous, 23–24, 32 Brazil: Brazil – retreaded tyres dispute, 87 retaliation target, 186 breach of international obligations, 7 Brewster, Rachel, 7 Broiler Products dispute, 12, 152 AD Agreement, 168 AD duties: continuation, 169–70 imposition, 166, 168 terminated, 178 background, 167 compliance panel report adoption, 178 CV duties: continuation, 169–70 imposition, 166, 168 terminated, 178 implementation, 169–70, 178 MOFCOM: failures, 168–69 investigations, 168 re-investigations, 169, 178 termination notice, 170 Panel report adoption, 178 SCM Agreement, 168 US proceedings, 166, 169 US request for consultations, 178 WTO rulings, 168–69, 178 bulk lots, 99 Bureau of Fair Trade for Imports and Exports (BFT), 156 Bureau of Industry Injury Investigation (BII), 156 bureaucracies, 184 Business Practices for the Interoperable Service of Bank Cards, Notice on the Issuance of 120, 122, 124 CAAA (China Animal Agriculture Association), 166, 170 Canada: Cellulose Pulp dispute WTO rulings, 177

196  Index compliance: mitigating impact of rulings, 7 proceedings, Cellulose Pulp dispute implementation, 177, 179 domestic policy-making impacts of DSM, 184–85 Financial Information Services dispute, 21 Government: strategies and avoidance techniques to respond to DSM, 185 rejection of some claims: request for consultations: Cellulose Pulp dispute, 175, 179 retaliation target, 186 sophisticated player in the system, 185 capital: registered, foreign-invested enterprises, 109 requirements: export quotas, Rare Earths dispute, 80–81 see also equity; foreign equity cardholders: electronic payment services, 117 cards: bank, see bank cards credit, post-paid, 117 debit, 117 payment, 117, 118 pre-paid, 117 cash payments: Apparel and Textile Products dispute, 33 Catalogue 2007, 55, 56, 100, 102, 104–107, 110, 113, 114 Catalogue 2011, 58–59, 107, 110–11, 113, 114 Catalogue 2015, 59 Catalogue 2017, 59 Catalogue 2018, 59 Catalogue for Guiding Industry Restructuring: Encouraged projects, 176 catalogue of export quotas, 75 Catalogue of Goods subject to Export Licensing Administration 2013, 77–78 Catalogue of Goods subject to Export Licensing Administration 2015, 81–82 Catalogue of Industries for Guiding Foreign Investment 2007, see Catalogue 2007 Catalogue of Industries for Guiding Foreign Investment 2011, see Catalogue 2011 Catalogue of Prohibited Foreign Investment Industries, 58–59

CBRC, see China Banking Regulatory Commission CEIS (China Economic Information Service), 21 cellulose pulp: fibre industry and, 175, 176 pulp industry, 175 domestic, 175–76 textile industry and, 175, 176 viscose fibres production, 175 Cellulose Pulp dispute, 12, 152 AD Agreement, 177 AD duties imposed, 175 Appellate Body report adoption, 179 background, 175–76 Canada compliance proceedings, 175, 177, 179 at consultation stage, 177–78 implementation, 177–79 MOFCOM: analysis, 176–77 investigation into exports from US, Canada and Brazil, 175 re-investigation, 177, 179 Panel report adoption, 179 Pulp Tariff, 175–77 rejection of some Canada claims, 177 WTO rulings, 176–77, 179 censorship: compliance, Publications and Audiovisual Products dispute, 115 in culture sector, 115 import of cultural goods, 67, 68 Internet, 115–16 political, 66, 68 WTO tribunals paying deference to, 187 Central Committee of the Communist Party of China (CPC): WTO Accession notice, 24 central planning: pre-1978 economic reforms, exports, 70 centralised decision-making, 184 cerium, see Rare Earths dispute charges: imports, WTO rules, 42 internal, Auto Parts dispute WTO Rulings, 46–48 Charnovitz, Steve, 4 chemical fibres industries: Apparel and Textile Products dispute, 33 Chicken Tariff, see Broiler Products dispute Chilton, Adam S, 7

Index  197 China Animal Agriculture Association (CAAA), 166, 170 China Banking Regulatory Commission (CBRC): bank card circulars and rules, 121, 127 China Compliance Reports, USA, see United States Trade Representative China Economic Information Service (CEIS), 21 China UnionPay Co Ltd, see CUP Chinese-foreign Equity Joint Banks in Conducting Bank Card Business, Circular, 121 chromium, 88 Circular No 16 [2007] of GAC, 140 Circular on Further Improving Bank Card Interoperability Related Work, 120, 122, 124 Circular on Internet Culture 2003, 101, 104, 110, 114 Circular on Internet Culture 2011, 108, 110–11, 114 Circular on Issues Concerning Strengthening the Administration of Overseas Business Acceptance of Bank Cards, 121 Circular on Issues Concerning Wholly Foreign-funded Banks and Chinese-foreign Equity Joint Banks in Conducting Bank Card Business, 121 Circular on Issues of Implementation of the ‘Interim Rules on the Administration of Internet Culture’ 2003, 101, 104, 110, 114 Circular on Relevant Issues Concerning the Operation of Individual RMB Business by Mainland Banks and Hong Kong/Macao Banks, 120, 122, 124 Circular on Relevant Issues on Accepting and Using RMB Bank Cards in Border Areas, 120 Circular on Standardising the Administration of Foreign Currency Bank Cards, 121 Circular on Streamlining the Process of Cross-border RMB Business and Improving Relevant Policies, 125 Circular on Strengthening the Security Management of Bank Cards and Preventing and Fighting Crimes in Bank Cards, 121

Circular on the Implementation of the New ‘Interim Rules on the Administration of Internet Culture’ 2011, 108, 110–11, 114 Circular on Universal Use of ‘UnionPay’ Logo and its Holographic Label for Anti-counterfeiting, 120, 122, 124 CKD Complete Knock Down) kits, 46–48 claims upheld: GOES dispute WTO rulings, 160–62 X-Ray Equipment dispute WTO rulings, 164–65 clearing and settlement processes: electronic payment services, 117 Clearing Arrangements for Banks Handling Personal RMB Business in Macao, Announcement on Providing, 120, 122, 124, 125 Clearing Arrangements for Banks Handling Personal RMB Deposit, Exchanges, Bank Cards and Remittance in Hong Kong, Announcement on Providing, 120, 122, 124, 125 cobalt, 88 coke, 72, 73, 75, 76 colonialism, cultural, 66 Commerce Ministry, see Ministry of Commerce commercial presence: GATS, see General Agreement on Trade in Services: Mode 3 commercial presence commercial promotions, misleading, 131 commercial terms: technology transfer, agreed by JV parties, 137 commercial use of land, 99 Commission on the Theft of American Intellectual Property, USA, 135 commitments: export quotas, 71 unbound, 94–95 compensation: after adjudication, trade in goods disputes, 13 technology transfer, agreed by JV parties, 137 voluntary, WTO, 3, 4 competition: foreign, 66 unfair, prevention, 131 Complete Knock Down (CKD) kits, 46–48

198  Index complete vehicles: 25 per cent charge if auto parts used in assembly, Auto Parts dispute measures, 45–46 complexity, disputes, 39 compliance, 183 achieving without changing practices, 186 Auto Parts dispute, 49–50 Broiler Products dispute WTO rulings, 178 Canada, see Canada China’s record compared with other key players, 186 DSM effectiveness in inducing, 188, 190 Electronic Payment Services dispute, 125–28 GOES dispute WTO rulings, 178 implementation of revised measures following, 186–88 inadequate, by major players in system, 187 Intellectual Property Rights (IPRs) dispute, 144–46 non-trade-remedy disputes, 183–85 overall assessment, 186 panel reports adoption, 178 ‘paper compliance’, 184 post-compliance issues, 186–88 Publications and Audiovisual Products dispute, see Publications and Audiovisual Products dispute Rare Earths dispute, 83–84 Raw Materials dispute, 83–85 selective, WTO, 8 studies, WTO Members, 7 trade remedy disputes, 185–86 under DSM, see dispute settlement mechanism United States, see United States WTO, see World Trade Organization concessions, suspension, WTO, 3 conflict of interests: Financial Information Services dispute, 21 Congress, USA, see United States consultation stage: Cellulose Pulp dispute implementation at, 177–78 consumption abroad: GATS Mode 2, 95 content reviews: import of cultural goods, 67, 68 WTO rulings on violations, Publications and Audiovisual Products dispute, 57 control, ideological, 66

Cooperative JV Law, 136–37, 150 copper, 88 copyright: protection failures, Intellectual Property Rights (IPRs) dispute, 140–41 related rights protection and, TRIPs, 130 US bilateral agreement on reciprocal protection, 132 Copyright Law 1990, 131 Copyright Law 2001, 140 Copyright Law 2010, 131, 142–43, 146 costs, indirect, 7 cotton fibres industries: Apparel and Textile Products dispute, 33 counterfeits: domestic, 143–44, 146 imported, 146 countervailing (CV), 152–53 customs duties, 153 duties: Autos (US) dispute, 170, 171, 178 Broiler Products dispute, 166, 168, 169–70, 178 continuation, 169–70, 171, 185 expired, 178 export promotion purposes, 187 GAC collection, 156 GOES dispute, 159, 178 import-competing industries protection purposes, 187 imposition, 159, 166, 168, 170 industrial policies support purposes, 187 levied, 185 MOFCOM re-investigations used to prolong, 185 re-investigations, 185 retaliation purposes, 187 terminated, 178, 185 utilised for various purposes, 187 investigation rules and procedures, 155 practices, deficiencies, 158 Countervailing Regulation 2001, 155 covered agreements, WTO, 2 covered sectors, 94 CPC, see Central Committee of the Communist Party of China credibility: Intellectual Property Rights (IPRs) dispute compliance building, 144 credit cards, post-paid, 117 Criminal Law 1979, 139

Index  199 criminal penalties: failure to provide, US claims, 139 no failure to provide, WTO rulings, 142 crop seeds, 150 cross-border distance education, 95 Cross-border RMB Business, Circular on Streamlining the Process of and Improving Relevant Policies, 125 cross-border supply: GATS Mode 1: 94–95, 119, 123–24 cross region/inter-bank prohibitions: Electronic Payment Services dispute, 119 cultural colonialism, 66 cultural goods, foreign, 68 cultural imports, 67 culture: Internet culture entities, see Internet culture entities culture activities: foreign investment prohibited, 116 culture industry: cultural colonialism combating, 66 foreign competition, 66 fundamental social values, 65 ideological control, 66 import of cultural goods: approval system, 67, 68 censorship, 67, 68 content reviews, 67, 68 restrictions, 66, 68 WTO rulings, 68 political censorship, 66 political interests, 65 Publications and Audiovisual Products dispute compliance (partial), 65–66 regulation of population’s consumption of cultural content, 66 transparency issues, 67 Culture Ministry, see Ministry of Culture culture sector: censorship in, 115 content self-reviews on Internet culture products, 116 importance and sensitivity: Publications and Audiovisual Products dispute compliance, 114–16 Internet distribution of cultural goods, 115 CUP (China UnionPay Co Ltd), 118, 122, 123, 125, 126 customs duties: anti-dumping, 153

countervailing, 153 ordinary, 46–47 Customs Law 1987, 43, 72 Customs Protection of Intellectual Property Rights Regulation 2003, 139–42 customs purposes: trading rights, requirements for obtaining, 53 Customs Tariff Commission: Notice on Adjusting Export Tariffs of Some Products, 82 tariff schedules determined by, 43 CV, see countervailing Davey, William J, 6 debit cards, real-time payment, 117 decision-making: centralised, 184 Decision on the Administration of Market Entry of Bankcard Clearing Institutions, 127 decisions: WTO Rulings limitations, 185–86 defence: Auto Parts dispute WTO Rulings, 47 deficiencies: MOFCOM failures to address, 185 delivery services, 99 Demonstration Bases dispute, 11, 38 export subsidies, 31–32 measures, 37 Memorandum of Understanding, subsidies terminated, 32 outcome, 37 request for consultations, 37 settlement, 37 summary, 37 US request for consultations, 31 WTO panel established, 32 departmental rules: foreign trade, 71 Several Opinions 2005 as, 63 development, sustainable, 29, 84 Development and Administration of Network Music, Several Opinions on 2006, see Network Music Opinions 2006 Development of Automotive Industry 2009, Policy on, 48 direct solicitation, 21 discriminatory requirements: for foreign suppliers, 20 disputants, WTO: consultations prior to adjudications, 2

200  Index Dispute Settlement Body (DSB), 3 GOES dispute, 162–63 unresolved disputes, 6 dispute settlement mechanism (DSM), 1–2 Canada: domestic policy-making impacts, 184–85 strategies and avoidance techniques to respond to, 185 China: acceptance stage, 38 activation stage, 38 asserting influence in, 38 as complainant, 10 consolidation stage, 38 engagement in, 9, 38 escalating involvement in, 38 experience in using, 38 legal capacity, 38–39 legal expertise, 38 participation, 8–13, 38 as respondent, 10–13 as rule-maker, 9, 38 as rule-shaker, 9, 38 as rule-taker, 9, 38 selective approach, 38, 39 as third party, 10 utilising system for own benefits, 39 compliance under: good record, 6–7 rates of, 6 reports issued by panels and Appellate Body, 6 unresolved disputes due to lack of, 6 crisis, US continuous block of Appellate Body member appointments, 189 crown jewel of multilateral trading system, 188–90 defective design, 89 dysfunctional, ramifications for WTO, 190 effectiveness, 6 compliance inducing, 188, 190 domestic policy-making influencing, 188 implementation inducing, 67 enforcement mechanism shortcomings, 6 flexibility, 185 China’s sophistication in leveraging, 89 function, 2–3 initial debate over, 3–4 systemic issue, 5 GOES dispute, 163 implementation records, 6

as important forum for discussion and resolution of challenges, 189 integrity maintaining, 39 limitation, 181 paralysed, ramifications for WTO, 190 post-compliance issues, 186–88 pressure on, 181 repetitive violations, weaknesses in tackling, 187–88 reputation maintaining, 39 retaliation, 6 settlements before panel reports circulated, 6 temporary violations, weaknesses in tackling, 187–88 trade remedies, pressure and limitations, 181 US domestic policy-making impacts, 184 Dispute Settlement Understanding (DSU), 2 aims and objectives, 5 disputes: aggressive legalism, 39 challenged measures, difficulty in amending, 39 China’s approach to settling by agreement and implications, 38–39 complexity, 39 domestic stakeholders, managing, 39 economic sector impacts, 39 industrial policies impacts, 39 political implications, 39 reputational costs, 39 settlement mechanism, see dispute settlement mechanism stakeholder impacts, 39 trade remedies, see trade remedies unresolved, 6 see also individual disputes distorting policy instruments: WTO rules disciplining use of, 188 distribution: audiovisual products, 104–107, 109 audiovisual services by Sino-foreign joint ventures, 99 electronic, 104 limited category, 101, 106, 108 master, see master distribution music, 111, 114, 183 non-limited category, 101 online, 95, 115 publication entities, 102 reading materials, 101–103, 109, 113

Index  201 by sales through market, 101–102 services, 95, 98–100 liberalisation, 115 online, 115 sound recordings, 104, 111 by subscription, 101 unlimited category, 108 Documents Electronic Payment Services dispute, see Electronic Payment Services dispute Domain Names Rules 2004, 132 domestic competing interests: affecting EU compliance, 7 domestic counterfeits, 143–44, 146 domestic economic reforms, 184 domestic import-competing industries, 181 domestic manufacturers, 28–30 domestic measures, rare earths, 87 domestic policy, 187, 188 domestic pulp industry, 175–76 domestic regulation disciplines, GATS, 92–93 domestic resistance to environmental policies, 85 domestic stakeholders, 39 domestic steel industry, 159 double-remedy investigations, 158–59, 170 DSB, see Dispute Settlement Body DSM, see dispute settlement mechanism DSU, see Dispute Settlement Understanding dual currency bank cards, 122 dual regulatory framework, 109 due process: Electronic Payment Services dispute compliance, 128 obligations, WTO Members pushing, 68 Publications and Audiovisual Products dispute compliance, 116 WTO Members pushing for enhancement, 187 dumping: unfair trade practice through, WTO challenge, 189 see also anti-dumping durations of stay, restrictions, 96 duties: imports, WTO rules, 42 see also anti-dumping; countervailing; exports Duties and Other Measures Concerning the Exportation of Certain Raw Materials dispute, 88

DVDs: Publications and Audiovisual Products dispute, WTO rulings on violations, 104 dysprosium, see Rare Earths dispute e-commerce, 95 economic considerations: trade disputes settling, 184 economic development policies: consistency, Rare Earths dispute, 84 economic factors: WTO Members’ reactions to adverse rulings, affecting, 8 economic impacts: Intellectual Property Rights (IPRs) dispute compliance, 145 limited, Electronic Payment Services dispute compliance, 126 economic reforms: domestic, 184 before WTO membership, 41 economic sector impacts, disputes, 39 economic sovereignty: natural resources, 86–87 economic system: WTO challenge, 189 economic welfare: pursuit, IPR protection and, 130 economy: liberalisation and reforming, 188 transition, 188–89 education services, 95 effectiveness: dispute settlement mechanism, 6 efficient breach theory, WTO, 3–4, 5 Ehring, Lothar, 5 EIFI (European Industrial Fasteners Institute), 26 electronic distribution, 104 electronic payment services (EPS): acquirer requirements, 122, 124 acquiring banks, 117 acquiring financial institutions, 117 ATMs, 122 back-end processing, 117 cardholders, 117 China UnionPay Co Ltd (CUP) establishment, 118 China’s description, 118 clearing and settlement processes, 117 CUP, 122, 123, 125, 126

202  Index dispute, see Electronic Payment Services dispute dual currency bank cards, 122 foreign-invested financial banks providing RMB business, 119 foreign-invested financial institutions providing RMB business, 119 foreign suppliers, 126–27 front-end processing, 117 Hong Kong/Macao requirements, 122, 124 interbank payment card transactions, 118 issuer requirements, 122, 124 issuing banks, 117 issuing financial institutions, 117 licences, 117 market, 118 access, 123, 124 liberalisation, 126 merchant processing devices, 122 merchants, 117 NT commitments, 123, 124 outsourced technology services, 118 payment card companies, 117 payment card transactions, 117 POS terminals, 122 post-paid credit cards, 117 pre-paid cards, 117 real-time payment debit cards, 117 RMB bank cards, 122–23 RMB-dominated, 118 suppliers, 123, 126 terminal equipment requirements, 122, 124 unified bankcard network, 118 UnionPay system, 118–19 US description, 117–18 Yin Lian/UnionPay logo, 122 Electronic Payment Services dispute, 11, 91 acquirer requirements, 119, 122, 124 Announcement [2013] No 7: 124–25 ATMs, 122 background, 117–19 banking services, 121–22 barriers, 127–28 China’s GATS schedule analysis, 121–22 Circular on Streamlining the Process of Cross-border RMB Business and Improving Relevant Policies, 125 compliance approach and implications, 125–28 cross region/inter-bank prohibitions, 119

CUP, 122, 123 dominance, 126 monopoly position, 125 Document No 8 (PBOC), 120, 122, 124, 125 Document No 16 (PBOC), 120, 122, 124, 125 Document No 17 (PBOC), 119, 122, 124, 125 Document No 37 (PBOC), 120, 122, 124 Document No 49 (CBRC), 121 Document No 53 (SAFE), 121 Document No 57 (PBOC), 120, 122, 124 Document No 76 (PBOC), 120, 122, 124 Document No 103 (PBOC), 120 Document No 129 (PBOC), 120, 122, 124 Document No 142 (PBOC, CBRC, Ministry of Public Security, SAIC), 121 Document No 149 (PBOC), 121 Document No 153 (PBOC), 121, 122, 124 Document No 219 (PBOC), 120 Document No 254 (PBOC), 120, 122, 124, 125 Document No 273 (PBOC), 121 dual currency bank cards, 122 due process, 128 ease of implementation, 126 economic impact limited, 126 foreign EPS suppliers, 126–27 full compliance allowing reputation building, 125–26 Hong Kong/Macao requirements, 119, 122, 124 implementation and assessment, 124–26 industrial policy, 127 issuer requirements, 119, 122, 124, 125 limited WTO rulings, 126 market access, 123, 124 market liberalisation, 126 measures, 119–122, 124, 125 merchant processing devices, 122 NT commitments, 123, 124 POS terminals, 122 regulatory barriers, US concern, 126 regulatory protection, 127 RMB bank cards, 122–23 sole supplier requirements, 119 terminal equipment requirements, 119, 122, 124 transparency, 128 violations summary, 234 WTO Rulings, 121–24 Yin Lian/UnionPay logo, 122

Index  203 electronic publications: distribution of products, foreign-invested enterprises, 113 imported, 101 Publications and Audiovisual Products dispute implementation, 108, 111 wholesale foreign-invested enterprises of products, 102, 103, 110 Electronic Publications Rule 1997, 100, 103, 106, 113, 110 Electronic Publications Rule 2008, 103, 108, 109–10, 113 eligibility: export quotas, Rare Earths dispute, criteria, 80–81 restrictions, 96 ‘encouraged’ category: foreign-invested projects, 59 Encouraged projects, 176 enforcement, WTO, 4 DSM mechanism shortcomings, 6 intellectual property, 129, 132, 135 reputational costs, 7 TRIPs, 130, 139 Enterprise Income Tax Law 2007, 20 Entry Criteria for Operating Film Enterprises, Provisional Rules on 2004, 56, 57 environmental policies: consistency, Rare Earths dispute, 84 domestic resistance to, 85 environmental protection: export quotas, Raw Materials dispute, 76 national policy priority, 84 natural resources, 86 EPS, see electronic payment services equity: foreign, see foreign equity restrictions on foreign investors or partners in Sino-foreign JVs, 107 see also capital Equity JV Law, 136–37, 150 Equity JV Regulation 1983, 137 erbium, see Rare Earths dispute establishment rules: Sino-foreign joint ventures, 111 EU, see European Union European Industrial Fasteners Institute (EIFI), 26 European Union: anti-dumping duty imposition, China – Fasteners dispute, 26

China proceedings against: anti-dumping actions, EC – Fasteners (China) dispute, 26–27 China – Duties and Other Measures Concerning the Exportation of Certain Raw Materials dispute, 88 China – Fasteners dispute, provisional antidumping measures against, 25, 26 China – Rare Earths dispute, 72 China – Taxes dispute, European Communities joined, 19 compliance: domestic competing interests affecting, 7 proceedings targets, 6 trade sanctions inducement, 5 consultation request, China – Fasteners dispute, 25 domestic competing interests affecting compliance, 7 EC – Fasteners (China) dispute, 26–27 European Industrial Fasteners Institute (EIFI) AD petition to, 26 fastener exports, Chinese investigation into, China – Fasteners dispute, 26 fastener producers, 26 non-market economy treatment of China, 28 proceedings targets, compliance, 6 Raw Materials dispute joined, 72 request for consultations: Financial Information Services dispute, 20 HP-SSST dispute, 179 Raw Materials dispute, 88 Transfer of Technology dispute, 129, 135, 149 retaliation: anti-dumping actions against, 157 requests targets, 6 target, 186 trade sanctions: WTO compliance inducement, 5 X-Ray Equipment dispute, 164, 178 europium, see Rare Earths dispute even-handedness test, 76 examination and approval system: trading rights, 53 exhaustible natural resources conservation, 86 Export Duties on Certain Raw Materials dispute, 88 Export Licensing Administration, Catalogue of Goods Subject to 2015, 81–82 Export Licensing Catalogue 2009, 75 Export Licensing Catalogue 2012, 79

204  Index export-oriented growth, 87 Export Quota Administration Measures 2001, 75, 80, 83 Export Quota Amounts 2012, 79–80 Export Tariffs of Some Products, Notice on Adjusting, 82 exports, 70 bidding requirements, 72 central planning pre-1978 economic reforms, 70 contracts: submission to obtain licences, 82 duties: abolition on some tariff items, 82 bauxite, 73 coke, 73 commitments, 71 continued imposition, 72, 78 denied, WTO rulings, 87–88 fluorspar, 73 magnesium, 73 manganese, 74 molybdenum products, 79 Rare Earths dispute, see Rare Earths dispute Raw Materials dispute, see Raw Materials dispute refractory clay, 73 silicon metal, 74 sub-optimal, 87 tungsten products, 79 WTO Members, use by, 88 yellow phosphorus, 73 zinc, 72, 74 interests, safeguarded using DSM, China – Fasteners dispute, 27 licences: export contracts submission, 82 foreign trade operators, 82 general system, 82, 83 MOFCOM approval documents submission, 82 non-automatic, 71 quotas, Raw Materials dispute, 75 raw materials, 72 market-oriented system transition to, 70 performance: export quotas, Rare Earths dispute, 80–81 prices: minimum, Raw Materials dispute, 72, 77 prior experience, Rare Earths dispute, 80–81

promotion: anti-dumping or countervailing duties for purposes of, 187 quotas: abolition, 83 application, 71 bauxite, 75, 76 coke, 75, 76 commitments, 71 fluorspar, 75, 76 imposition, 79 licensing, rare earths, tungsten and molybdenum removed, 82 molybdenum, 80, 81, 82 not warranted, Rare Earths dispute, 86 rare earths, 80, 82 Rare Earths dispute, see Rare Earths dispute raw materials, 72 Raw Materials dispute, see Raw Materials dispute re-imposition in hands of MOFCOM, 83 refractory grade bauxite, 75–76 silicon carbide, 75, 76 sub-optimal, Rare Earths dispute, 87 tungsten, 80, 82 tungsten products, 82 zinc, 72, 75, 77 Rare Earths dispute, see Rare Earths dispute raw materials: dispute, see Raw Materials dispute restraints, 72 regulation, 70–72 restraints: WTO tribunals adjudicating and clarifying, 83–84 restrictions: condemnation, WTO rulings, Rare Earths dispute, 86 elimination, trading rights, 71 removal, Rare Earths dispute 83 WTO-illegal, 88 subsidies: Autos and Auto Parts dispute, 30 Demonstration Bases dispute, 31–32 elimination, 71 Grants, Loans and Other Incentives dispute, 23–24 WTO-illegal, 23 tariffs, legislation, 43 taxes, 71

Index  205 technology transfer, 136 trading rights commitments, 71 WTO-plus obligations, 71 famous brands: Grants, Loans and Other Incentives dispute, 23, 32 Fasteners dispute, 12 China – Fasteners dispute, 12 Anti-Dumping Agreement practices challenged, 25 anti-dumping duty on Kamax, 26 anti-dumping measures, 25–28 export interests safeguarded using DSM, 27 fastener industry, 26 China’s provisional anti-dumping measures against EU, 25, 26 EU AD duty imposition, 26 EU consultation request, 25 EU fastener exports, Chinese investigation into, 26 measures, 36 outcome, 36 request for consultations, 36 settlement, 36 summary, 36 EC – Fasteners (China) dispute: Appellate Body ruling in favour of China, 27 China proceedings against EU AD actions, 26–27 FDI, see foreign direct investment fees restrictions, 96 fibre industry, 175, 176 FIEs, see foreign-invested enterprises Film Enterprise Rule 2004, 56, 57 Film Regulation 2001, 55–57 films: imports by entities designated by SARFT, 64, 65 Publications and Audiovisual Products dispute implementation, 58, 64–65, 66, 112 special interests, 66 state-owned enterprises control, 66 Finance Ministry, see Ministry of Finance Financial Information Services dispute, 11, 20 Bloomberg (US), adverse effects on, 21 Canada request for consultations, 21 China Accession Working Party Report, 21

China Economic Information Service, 21 conflict of interests, 21 discriminatory requirements for foreign suppliers, 20 foreign investment in financial information services, 21 foreign providers, prohibition from direct solicitation, 21 foreign suppliers, service licences, 21 GATS, discriminatory requirements for foreign suppliers under, 20 European Communities request for consultation, 20 independent regulator creation, 21 Information Office of the State Council, approval authority, 21 licensing system newly introduced, 21–23 market access restrictions, 20 measures, 36 Memorandum of Understanding, China with each complainant, 21, 22 outcome, 36 Regulation on the Provision of Financial Information Services by Foreign Institutions in China, 2009, 21–22 request for consultations, 20, 21, 36 Reuters (UK), adverse effects on, 21 settlement, 36 summary, 36 Thomson (Canada), adverse effects on, 21 US request for consultations, 20 Xibhua News Agency, 21 financial institutions: acquiring, 117 foreign-invested, 119 issuing, 117 Financial Services Annex, GATS, 122 financial services providers: non-traditional digital, 127 First Batch Export Quotas of Tungsten, Antimony and Other Non-ferrous Metals 2012, 81 First Batch Rate Earth Export Quotas (Supplement) 2012, 80–81 fiscal purposes: trading rights, requirements for obtaining, 53 fluorspar, 72, 73, 75, 76 forced technology transfer, see technology transfer foreign banks, limitations, 97 foreign competition, 66

206  Index foreign cultural goods: market access, trading rights liberalisation, 68 Foreign Currency Bank Cards, Circular on Standardising the Administration of, 121 foreign direct investment (FDI): approvals system, 135 attraction: in China, Taxes dispute, 20 incentive, intellectual property, 133 policy, technology transfer rooted in heart of, 138 technology transfer rooted in heart of, 138 foreign equity: in Sino-foreign joint ventures, 109, 110 limitations imposed inconsistently with GATS: Publications and Audiovisual Products dispute, WTO rulings on violations, 104–105 foreign individuals and enterprises: non-discrimination, WTO-plus obligations, 42 Foreign-Invested Distribution Enterprises of Books, Newspaper, and Periodicals, Rules on the Administration of 2003, see Publications (Sub-) Distribution Rule 2003 foreign-invested enterprises (FIEs): beneficiaries of subsidies in form of tax refunds, Taxes dispute, 20 capital requirements, 106 conditions on in distributing reading materials, 103 distribution of products: conditions in distributing reading materials, 103 electronic publications, 113 manufactured in China, 99 master distribution of reading materials ban, 103 non-limited distribution category, 101 reading materials, 109, 113 establishment requirements, 136 full national treatment, 98 imported reading materials wholesale prevention, 101 Internet culture entities, 110 music distribution, 111, 114, 183 operating terms, 109 Publications and Audiovisual Products dispute, WTO rulings on violations, 106, 107

prohibition of: Publications and Audiovisual Products dispute, WTO rulings on violations, 106 registered capital, 109 sound recordings distribution prohibition, 111 trading rights: proof of asset and funding, 54 wholesale of products: electronic publications, 102, 103, 110 imported reading materials, 109 publication importing entities, 108 foreign-invested financial banks, 119 foreign-invested financial institutions, 119 foreign-invested Internet culture entities, 104 foreign-invested Internet information services providers, 104 foreign-invested projects, 59 foreign investment: approval-based system, 96 in financial information services, 21 legislation, 95, 136–37 notification-based system, 96 regime, reform, 96 regulation, negative approach to, 96 Foreign Investment, Catalogue of Industries for Guiding 2011, see Catalogue 2011 Foreign Investment Law (draft), 150 Foreign Investment Regulation 2002, 55–56, 59, 100, 102, 105–107, 110, 113, 114 foreign investors: equity restrictions, 107 forms of, 95 prohibition, 62–64 foreign law firms, 97 foreign partners, 52 foreign providers, see foreign suppliers foreign representative offices, 99 foreign services providers: imported reading materials distribution prohibition, 102 market access to, 94 network music businesses, 112, 183 related subordinated services provision, 99 retail sector market share growth, 115 sound recording distribution services, 104 wholesale sector market share growth, 115 foreign suppliers: discriminatory requirements for, 20 electronic payment services, 126, 127 prohibition from direct solicitation, 21 service licences, 21

Index  207 foreign trade: departmental rules, 71 laws, 71 regime, overhaul, 43 regulations, 71 Foreign Trade and Economic Cooperation Ministry, see Ministry of Foreign Trade and Economic Cooperation Foreign Trade Law 1994, 43, 74–75, 94 Foreign Trade Law 2004, 83, 132 foreign trade operators (FTO), 53 export licences, 82 front-end processing: electronic payment services, 117 FTO, see foreign trade operators full compliance, WTO, 8 fundamental social values, 65 funding: proof of, foreign-invested enterprises trading rights, 54 GAC Circular, 140 GAC Regulation 2003, 139–42 GAC Rule 2005, 45, 48 GAC, see General Administration of Customs gadolinium, see Rare Earths dispute Ganin, Daniel, 5 Gao, Henry S, 38 GAPP, see General Administration of Press and Publication garage services, 99 GATS, see General Agreement on Trade in Services GATT, see General Agreement on Tariffs and Trade General Administration for Quality Supervision, Inspection and Quarantine (AQSIQ): Geographical Indication Administration Bureau, 132 Grants, Loans and Other Incentives dispute, 24 General Administration of Customs (GAC): AD duties collection, 156 Administrative Rules on Importation of Automobile Parts Characterized as Complete Vehicles 2005, 45, 48 Auto Parts dispute measures reviews by, 46 catalogue of export quotas, 75 Catalogue of Goods Subject to Export Licensing Administration 2013, 77–78

Catalogue of Goods Subject to Export Licensing Administration 2015, 81–82 confiscated goods disposal: in breach of TRIPs Agreement, 141–42 WTO-illegal, Intellectual Property Rights (IPRs) dispute, US claims, 139 CV duties collection, 156 EG duties collection, 156 GAC Circular, 140 GAC Regulation 2003, 139–40 imported goods infringements of IPRs, 132 redistributing confiscated goods: Intellectual Property Rights (IPRs) dispute compliance, 145 Rules on the Administration of the Importation of Audiovisual Products 2002, 55, 56 Rules on Verification of Imported Automobile Parts Characterized as Complete Vehicles 2005, 45, 48 SG duties collection, 156 Tariff Implementation Program 2013, 77–78 TCSC decisions implementation, 156 General Administration of Press and Publication (GAPP): audiovisual products, 61–62, 63 import entities establishment applications, 63 publication importing entities designated by, 109 publications administration, 60, 63 Rules on the Administration of Electronic Publications 1997, see Electronic Publications Rule 1997 Rules on the Administration of ForeignInvested Distribution Enterprises of Books, Newspaper, and Periodicals 2003, see Publications (Sub-) Distribution Rule 2003 Rules on the Administration of Publications Market 2004, see Publications Market Rule 2004 Rules on the Administration of the Subscription of Imported Publications 2004, 101, 113 Several Opinions on the Introduction of Foreign Capital into the Cultural Sector 2005, see Several Opinions 2005 General Agreement on Tariffs and Trade (GATT): Anti-Dumping Agreement, see AntiDumping Agreement

208  Index challenges, Taxes dispute, 19 export quotas: imposition in violation of, 79, 80 raw materials, 75, 76, 77 national treatment, see national treatment power-based system, 190 Raw Materials dispute, defence based on, 74 rebalancing, 4 violations: export quotas, Raw Materials dispute, 75, 77 Grants, Loans and Other Incentives dispute, 23 VAT on Integrated Circuits dispute, 18 General Agreement on Trade in Services (GATS), 91 China’s commitments: audiovisual services, 104 China’s schedule analysis: Electronic Payment Services dispute WTO Rulings, 121–22 commercial presence, see Mode 3 commercial presence below consumption abroad, see Mode 2 consumption abroad below cross-border supply, see Mode 1 crossborder supply below discriminatory requirements for foreign suppliers under: Financial Information Services dispute, 20 domestic regulation disciplines, 92–93 Financial Services Annex, 122 Mode 1 cross-border supply, 94–95, 119, 123–24 Mode 2 consumption abroad, 95 Mode 3 commercial presence, 95, 98, 119, 123–24 Mode 4 presence of natural persons, 96 most-favoured nation, 92 presence of natural persons, see Mode 4 presence of natural persons above transparency, 92 violations: VAT on Integrated Circuits dispute, 18 General Electric Co, 30 Geographical Indication Administration Bureau of the AQSIQ, 132 geographical indications: protection, TRIPs, 130 Geographical Indications Rules 2005, 132

global community: China’s recognition as market economy, 28 Global Innovation Index, 134–35 goals, regulatory, 116 GOES: exports from US and Russia, CV duties on, 159 see also GOES dispute GOES dispute, 12, 152 AD Agreement, 160–62 AD duties: expired, 178 imposition, 159 appeal, 162 Appellate Body report adoption, 178 claims upheld, 160–62 compliance panel report adoption, 178 consultation request, 178 CV duties: expired, 178 imposition, 159 Dispute Settlement Body (DSB), 162–63 dispute settlement mechanism (DSM), 163 domestic steel industry production motive, 159 double-remedy investigation, 158–59 implementation, 162–63, 178 MOFCOM investigations, 158–59, 162–63 flawed, 160–62 Panel report adoption, 178 re-investigation, 178 retaliation motive, 159 SCM Agreement, 160–62 US claims, 158–59 US request for consultations, 178 WTO rulings, 160–62, 178 goods: with counterfeit trademarks, 143 imported, see imported goods trade in, see trade in goods see also products Goods Schedule, 42 Goods subject to Export Licensing Administration, Catalogue of, 77–78 Government: decision-making: WTO compliance and implications, trade remedies, 180 procurement: non-discrimination, WTO-plus obligations, 42

Index  209 Grain Oriented Flat-rolled Electrical Steel from the United States dispute, see GOES dispute grants: trading rights, see trading rights Grants, Loans and Other Incentives dispute, 10 Agreement on Agriculture violation, 23 China Accession Protocol violation, 23 China World Top Brand Program subsidies, 23 Chinese Brand Name Products, 24 Chinese Famous Brand Program subsidies, 23 export subsidies, 23–24 famous brands, 23, 32 GATT violation, 23 Guatemala challenge, 23 Guiding Opinions on Promoting World Famous Brand, 2009, 23–24 local governments, 24–25 MAS with each complaining party, 23 measures, 36 Mexico challenge, 23 Ministry of Commerce consultation, 25 outcome, 36 provincial governments, 24–25 request for consultations, 36 Rules on the Administration of Chinese Brand Name Products, 2005, 24 SCM agreement violation, 23 settlement, 36 sub-national level measures, 24 US challenge, 23 world famous brands, 23–24 WTO Centres, 24–25 WTO-illegal export subsidies, 23 graphite: WTO-illegal export restrictions on, 88 Guatemala: China – Grants, Loans and Other Incentives dispute, 23 Guiding Opinions on Promoting World Famous Brand, 2009, 23–24 Guiding Opinions on Regulating and Promoting the Development of Bank Card Acceptance Market, 121, 122, 124 High-performance Stainless Steel Seamless Tubes dispute, see HP-SSST dispute holmium, see Rare Earths dispute

Hong Kong: CUP, 123 electronic payment services requirements, 122, 124 requirements: Electronic Payment Services dispute, 119, 122, 124 RMB bank cards issues in, 123 Hong Kong, Announcement on Providing Clearing Arrangements for Banks Handling Personal RMB Deposit, Exchanges, Bank Cards and Remittance in, 120, 122, 124, 125 Hong Kong/Macao Banks, Circular on Relevant Issues Concerning the Operation of Individual RMB Business by Mainland Banks and, 120, 122, 124 horizontal commitments, 99 HP-SSST dispute, 12, 152 AD duties: imposition, 172–73 termination, 174, 179 Appellate Body report adoption, 179 background, 172 EU request for consultations, 179 implementation, 174, 179 Japan request for consultations, 179 MOFCOM: failures, 173–74 investigations against EU and Japan, 172 re-investigation, 174, 179 Panel report adoption, 179 WTU rulings, 173–74, 179 Huang, Cui, 9, 27 human health protection: export quotas, Raw Materials dispute, 76 IA (investigating authorities), 152, 155 ICTSD (International Centre for Trade and Sustainable Development), 29 ideological control, 66 illegal distribution, rare earths, 85 illegal extraction, rare earths, 85, 86 implementation: Auto Parts dispute, 48, 69 Autos (US) dispute, 171, 178 Broiler Products dispute, 169–70, 178 Cellulose Pulp dispute, 177–79 DSM effectiveness in inducing, 67 Electronic Payment Services dispute, 124–26 GOES dispute, 162–63, 178

210  Index HP-SSST dispute, 174, 179 Intellectual Property Rights (IPRs) dispute, 142–44 post-compliance issues, 186–88 Publications and Audiovisual Products dispute, 57–68, 107–14 records, DSM, 6 of revised measures following compliance, 186–88 WTO Members monitoring, 187 X-Ray Equipment dispute, 165–66, 178 import-competing industries protection, 187 Importation of Automobile Parts Characterized as Complete Vehicles, Administrative Rules on, 45, 48 imported books, 101 imported counterfeits, 146 imported electronic publications, 101 imported goods: infringements, IPR protection, 132 imported newspapers, 101 imported periodicals, 101 Imported Publications Subscription Rule 2004, 100, 101, 106, 113 Imported Publications Subscription Rule 2011, 108–109 imported reading materials: foreign services providers distribution prohibition, 102 wholesale foreign-invested enterprises of products, 109 importing: publication entities, see publication importing entities imports: Auto Parts dispute, see Auto Parts dispute charges, WTO rules, 42 cultural goods, see culture industry duties, WTO rules, 42 entities establishment applications, GAPP, 63 licensing: legislation, 43 publishing and notifying, 42 WTO rules, 42 non-tariff measures, phasing out, 42 Publications and Audiovisual Products dispute, see Publications and Audiovisual Products dispute quotas, 43 high, auto industry, 44 regulation, 41

regulation: licensing requirements, 41 quotas, 41 tariff-rate quotas, 41 tariffs, 41 trading rights restrictions, 41–42 steel, see steel imports tariff-rate quotas: administration, WTO-plus obligations, 42 legislation, 43 regulation, 41 tariffs: high, auto industry, 44 legislation, 43 reduction, WTO-plus obligations, 42 schedules, 43 technology, 148 technology transfer, 135 trading rights liberalisation: WTO-plus obligations, 42 WTO disputes, 44 Imports and Exports Regulation 2001, 72, 75 Imports and Exports Regulation 2002, 43 Imports and Exports Tariff Regulation 2003, 43 Imports of Sugar dispute, 11 imposition, export quotas, 79 inadequate compliance by major players in system, 187 independent regulators creation: Financial Information Services dispute, 21 India: anti-dumping actions against, 158 indirect costs, 7 indium, 88 industrial designs protection, TRIPs, 130 industrial development: anti-dumping policy use, 164, 180 policy use: trade remedies, WTO compliance and implications, 180 industrial policies, 127 Electronic Payment Services dispute compliance, 127 impacts, disputes, 39 minimising compliance impact on: Publications and Audiovisual Products dispute, 116 motives: X-Ray Equipment dispute, 163

Index  211 as root cause, Wind Power Equipment dispute, 29 support: anti-dumping or countervailing duties for purposes of, 187 industry-driven action, 166 industry reforms, 85 information, undisclosed, see undisclosed information infringements, 131 injury investigation: anti-dumping rules, 155 innovative capacity, 134 installation services, 99 institutional considerations: trade disputes settling, 184 institutional factors: WTO Members’ reactions to adverse rulings, affecting, 8 integrated circuit layout designs: protection, TRIPs, 130 Integrated Circuits, VAT on dispute, see VAT on Integrated Circuits dispute integrity, maintaining, DSM, 39 intellectual property (IP): administration, 132 enforcement, 129, 132 US constant discontent with, 135 modernisation and improvement incentives: foreign direct investment attraction incentive, 133 technological advancement and innovative capacity, 134 WTO membership, 133–34 regulation, 129 regulatory regime, 131–38 rights, see intellectual property rights; Intellectual Property Rights (IPRs) dispute; Intellectual Property Rights (IPRs) II dispute US–China bilateral agreement, 132, 146 intellectual property rights (IPR): discrimination of foreign holders against Chinese, 147 disputes, see Intellectual Property Rights (IPRs) dispute; Intellectual Property Rights (IPRs) II dispute enforcement: minimum level of, TRIPs, 130 protection, 129 economic welfare pursuit and, 130 imported goods infringements, 132

public interest, 130 social welfare pursuit and, 130 TRIPs, 129–30 technological innovation promotion: public interest protection and, balance between, 130 Intellectual Property Rights (IPRs) dispute, 12, 129, 150 background, 138–39 changes required relatively uncontroversial, 144 compliance approach and implications, 144–46 Copyright Law 2001, 140 Copyright Law 2010, 142–43, 146 copyright protection failures in breach of TRIPs Agreement, 140–41 counterfeit trademark goods re-distribution, 143 Criminal Law 1979, 139 criminal penalties: failure to provide, 139 no failure to provide, 142 domestic counterfeits, 146 excluded, 143–44 economic and political impacts rather limited, 145 GAC Circular, 140 GAC confiscated goods disposal: in breach of TRIPs Agreement, 141–42 WTO-illegal, 139 GAC redistributing confiscated goods, 145 GAC Regulation 2003, 139–42 GAC Regulation 2010, 143–44 implementation and assessment, 142–44 imported counterfeits with unlawfully affixed trademarks, 146 measures, 139–40 reputation and credibility building, 144 Trademark Law 1982, 144 TRIPs, 145, 146 US claims, 139–40 US declared victory, 145 US test case, 139 WTO rulings, 140–42 Intellectual Property Rights (IPRs) II dispute (pending), 12, 151 discrimination of foreign IPR holders against Chinese, 147 JV Regulation 1983, 147–48 patent protection in Sino-foreign JVs, 147 technology import parties, 148

212  Index technology transfer contracts ending, 147–48 US challenge, 129, 147–48 interbank payment cards: transactions, electronic payment services, 118 interests: conflict of, 21 export: safeguarded using DSM, China – Fasteners dispute, 27 political, see political interests protectionist, motivation, anti-dumping, 157 public, 130 special interests, films, 66 Interim Rules on the Administration of Internet Culture 2003, see Internet Culture Rule 2003 Interim Rules on the Administration of Master Distribution of Books 1991, 102 Interim Rules on the Implementation of the Rulings of the World Trade Organization on Trade Remedy Disputes, 179–80 internal charges: Auto Parts dispute WTO Rulings, 46–48 International Centre for Trade and Sustainable Development (ICTSD), 29 international law obligations, 3, 5 international obligations, breach, 7 Internet: censorship, 115–16 culture: activities, foreign investment prohibited, 116 entities, see Internet culture entities: distribution: cultural goods, 115 Publications and Audiovisual Products dispute, WTO rulings on violations, 104 information services providers: foreign-invested not accepted, 104 products, content self-reviews on, 116 retail through, 107 wholesale through, 107 Internet culture entities: foreign-invested enterprises, 110

foreign-invested establishment prohibited, 104 Publications and Audiovisual Products dispute: implementation, 110, 111 WTO rulings on violations, 104, 107 Internet Culture, Interim Rules on the Administration of, see Internet Culture Rule 2003 Internet Culture Rule 2003, 101, 104, 107, 110 Internet Culture Rule 2011, 110–11 Introduction of Foreign Capital into the Cultural Sector, Several Opinions on 2005, see Several Opinions 2005 inventory management, 99 investigating authorities (IA), 152, 155 investigations: anti-dumping rules and procedures, 155 rules and procedures: countervailing, 155 safeguards, 155 IP, see intellectual property IPRs, see intellectual property rights IPRs dispute, see Intellectual Property Rights (IPRs) dispute IPRs II dispute, see Intellectual Property Rights (IPRs) II dispute issuer requirements: Electronic Payment Services dispute WTO Rulings, 119, 122, 124, 125 issuing banks and financial institutions: electronic payment services, 117 Jackson, John H, 3–4, 5 Japan: anti-dumping actions against, 158 China – Rare Earths dispute joined, 72 China – Taxes dispute, 19 request for consultations: HP-SSST dispute, 179 Ji, Wenhua, 9, 27 Jiang Zemin, 65 joint ventures (JVs): formation, 135 Sino-foreign, see Sino-foreign joint ventures technology transfer parties: commercial terms and compensations agreed by, 137 JV Regulation 1983, 147–48 JVs, see joint ventures; Sino-foreign joint ventures

Index  213 KAMAX-Werke Rudolf Kellermann GMBH & Co. KG, 26 Krikorian, Jacqueline D, 7, 184–85 labour market tests, restrictions, 96 land, commercial use, 99 lanthanum, see Rare Earths dispute Lardy, Nicholas, 137 law firms, foreign, 97 law in action, 5 lead, 88 legal capacity, 38–39 legal considerations: trade disputes settling, 184 legal expertise, 38 legal factors: WTO Members’ reactions to adverse rulings, 8 legal services, 97 legalism, aggressive, 39 legitimate trade barriers, 130 Lester, Simon, 9 Li, Xiaoling, 7 liberalisation: commitments violation: trading rights, Raw Materials dispute, 76 distribution services, 115 economy, 188 electronic payment service markets, 126 service industry, 93 trading rights, see trading rights licences: electronic payment services, 117 export: contracts submission to obtain, 82 quotas, Raw Materials dispute, 75 imports, requirements, see imports replaced by registration: trading rights, 53 requirements: import regulation before WTO membership, 41 systems: newly introduced, Financial Information Services dispute, 21–23 limited distribution category, 101, 106, 108 loans: Apparel and Textile Products dispute, 33 Loans dispute, see Grants, Loans and Other Incentives dispute

local governments: Grants, Loans and Other Incentives dispute, 24–25 Several Opinions 2005, continuing to apply, 64 Long Yongtu, 133 lutetium, see Rare Earths dispute Macao: CUP, 123 electronic payment services requirements, 122, 124 requirements, Electronic Payment Services dispute, 119, 122, 124 RMB bank cards issues in, 123 Macao, Announcement on Providing Clearing Arrangements for Banks Handling Personal RMB Business in, 120, 122, 124, 125 Macao Banks, Circular on Relevant Issues Concerning the Operation of Individual RMB Business by Mainland Banks and Hong Kong and, 120, 122, 124 ‘Made in China 2025’ ten-year action plan, 51 magnesia, 88 magnesium, 72, 73 Mainland Banks and Hong Kong/Macao Banks, Circular on Relevant Issues Concerning the Operation of Individual RMB Business by, 120, 122, 124 maintenance services, 99 Management of Investment in Automotive Industry, Rules on (Consultation Draft) 2018, 52 manganese, 72, 74 manufacturing capacity: robust industrial policy fostering, 35 market: access, 94 Electronic Payment Services dispute WTO Rulings, 123, 124 foreign cultural goods, trading rights liberalisation, 68 to foreign services providers, 94 restrictions, Financial Information Services dispute, 20 economy: planned economy transition to, 28

214  Index electronic payment services, see electronic payment services liberalisation: Electronic Payment Services dispute compliance, 126 before WTO membership, 41 sales through: Publications and Audiovisual Products dispute, WTO rulings on violations, 106 market-oriented system: transition to exports, 70 marketing services, 99 Marrakesh Agreement Establishing the World Trade Organization (1994), 2 MAS, see mutually agreed solutions master distribution: Publications and Audiovisual Products dispute: implementation, 110, 111, 113 WTO rulings on violations, 102, 103, 106 of reading materials ban: distribution of products, foreign-invested enterprises, 103 Master Distribution of Books, Interim Rules on the Administration of 1991, 102 master wholesale: Publications and Audiovisual Products dispute, 106 MasterCard, 118 Mavroidis, Petros C, 4 McRae, Donald, 4 Measures for the Administration of Bank Card Business, 119, 122, 124, 125 medical services sector: subsidies granted to domestic services suppliers in, 99 Members, WTO, see WTO Members Memoranda of Understanding (MOU): Financial Information Services dispute, 21, 22 Publications and Audiovisual Products dispute, films, China with USA, 58, 64–65, 66 subsidies terminated, Demonstration Bases dispute, 32 Taxes dispute, China with USA and Mexico, 19–20 merchant processing devices, 122 merchants: electronic payment services, 117 Mercurio, Bryan, 5, 38

Mexico: China – Grants, Loans and Other Incentives dispute, 23 China – Taxes dispute, 19 domestic regulatory framework strengthened: Apparel and Textile Products dispute, 34 import competition reduced: Apparel and Textile Products dispute, 34 joined Raw Materials dispute, 72 not proceeded with litigation: Apparel and Textile Products dispute, 33 US market for textile exports, 33 MFN, see most-favoured nation minimum export prices: Raw Materials dispute, 72, 77 Ministry of Commerce (MOFCOM): AD duties imposition: X-Ray Equipment dispute, 163 Administrative Rules on Importation of Automobile Parts Characterized as Complete Vehicles 2005, 45, 48 allocation and administration of quotas, Raw Materials dispute, 75 analysis: Cellulose Pulp dispute WTO rulings, 176–77 catalogue of export quotas, 75 Catalogue of Goods subject to Export Licensing Administration 2013, 77–78 Catalogue of Goods Subject to Export Licensing Administration 2015, 81–82 Catalogue of Industries for Guiding Foreign Investment 2007, see Catalogue 2007 consultation, Grants, Loans and Other Incentives dispute, 25 determinations to impose AD and CV duties on steel exports from USA and Russia, 159 export licences approval documents submission, 82 export quotas: allocated, Raw Materials dispute, 75, 80 re-imposition in hands of, 83 failures: to address deficiencies, 185 Broiler Products dispute WTO rulings, 168–69 HP-SSST dispute WTU rulings, 173–74 Foreign Trade Law, 74–75

Index  215 investigating authority, 155, 156 investigations: Broiler Products dispute, 168 into exports from US, Canada and Brazil, Cellulose Pulp dispute, 175 flawed GOES dispute WTO rulings, 160–62 against EU, HP-SSST dispute, 172 GOES dispute, 158–59, 162–63 against Japan, HP-SSST dispute, 172 rules, 155 X-Ray Equipment dispute WTO rulings, 164–65 Provisional Rules on Entry Criteria for Operating Film Enterprises 2004, 56, 57 re-investigations: Broiler Products dispute implementation, 169, 178 Cellulose Pulp dispute implementation, 177, 179 HP-SSST dispute implementation, 174, 179 used to prolong AD and/or CV duties levied, 185 X-Ray Equipment dispute implementation, 166, 178 Rules on the Administration of Sino-Foreign Contractual Joint Ventures for the Sub-Distribution of Audiovisual Products 2003, 55, 56 Several Opinions on the Introduction of Foreign Capital into the Cultural Sector 2005, see Several Opinions 2005 technology import, 136 termination notice: Broiler Products dispute implementation, 170 trading rights registration with, 53–54 Ministry of Culture (MOC): Circular on Issues of Implementation of the ‘Interim Rules on the Administration of Internet Culture’ 2003, 101, 104, 110, 114 Circular on the Implementation of the New ‘Interim Rules on the Administration of Internet Culture’ 2011, 108, 110–11, 114 culture products surveillance, 116 Interim Rules on the Administration of Internet Culture 2003, 101, 104, 107, 110

Internet culture entities approved by, 104 Rules on the Administration of Sino-Foreign Contractual Joint Ventures for the Sub-Distribution of Audiovisual Products 2003, 55, 56 Rules on the Administration of the Importation of Audiovisual Products 2002, 55, 56 Several Opinions on the Development and Administration of Network Music 2006, see Network Music Opinions 2006 Several Opinions on the Introduction of Foreign Capital into the Cultural Sector 2005, see Several Opinions 2005 Sino-foreign JVs, establishment rules, 111 Ministry of Finance (MOF): Administrative Rules on Importation of Automobile Parts Characterized as Complete Vehicles 2005, 45, 48 measures terminating tax exemptions, Aircraft dispute, 35 Ministry of Foreign Trade and Economic Cooperation (MOFTEC), 155 Rules on the Administration of ForeignInvested Distribution Enterprises of Books, Newspaper, and Periodicals 2003, see Publications (Sub-) Distribution Rule 2003 Ministry of Public Security: Circular on Strengthening the Security Management of Bank Cards and Preventing and Fighting Crimes in Bank Cards, 121 misleading commercial promotions, 131 Mitchell, Shannon K, 7 MOC, see Ministry of Culture Mode 1 cross-border supply, GATS, see General Agreement on Trade in Services Mode 2 consumption abroad, GATS, see General Agreement on Trade in Services Mode 3 commercial presence, GATS, see General Agreement on Trade in Services Mode 4 presence of natural persons, GATS, see General Agreement on Trade in Services MOF, see Ministry of Finance MOFCOM, see Ministry of Commerce

216  Index MOFTEC, see Ministry of Foreign Trade and Economic Cooperation molybdenum, 78 Application Qualifications and Procedures for Molybdenum Export Quotas 2012, 81 quotas, 80, 81, 82 molybdenum products: export duties, 79 quotas, 82 monopolisation: trading rights by state-owned enterprises, 68 morals, public, 57 most-favoured nation (MFN): GATS, 92 TRIPs and, 130 motor manufacturers: self-evaluation by, Auto Parts dispute measures, 46 MOU, see Memoranda of Understanding multilateral trading system, 188–90 music: distribution: foreign-invested enterprises, 111, 114, 183 network, see network music mutually agreed solutions (MAS), 3 Grants, Loans and Other Incentives dispute, with each complaining party, 23 trade in goods disputes, 13 trade in services disputes, 13 trade remedies disputes, 13 VAT on Integrated Circuits dispute, 18 NAFTA, see North American Free Trade Agreement National Copyright Administration (NCA), 132 National Development and Reform Commission (NDRC): Administrative Rules on Importation of Automobile Parts Characterized as Complete Vehicles 2005, 45, 48 Catalogue of Industries for Guiding Foreign Investment 2007, see Catalogue 2007 Policy on Development of Automotive Industry 2004, 45, 48 Rules on the Management of Investment in Automotive Industry (Consultation Draft), 52 Several Opinions on the Introduction of Foreign Capital into the Cultural Sector 2005, see Several Opinions 2005

National Intellectual Property Strategy, State Council, 134 national treatment (NT): Accession Protocol, 53 breadth of commitments, 94 commitments, 105 electronic payment services, 123, 124 depth of commitments, 94 full, foreign-invested enterprises, 98 rule violation: Auto Parts dispute, 47, 49 Publications and Audiovisual Products dispute, 102, 103, 104 TRIPs and, 130 natural persons, presence of: GATS, Mode 4 presence of natural persons, 96 natural resources: exhaustible, conservation of, 76, 86 economic sovereignty, 86–87 environmental protection, 86 policy instruments for protection, 86 prerogative rights for depletion prevention, 86 protection, WTO tribunals paying deference to, 187 security, Rare Earths dispute, compliance reasons, 84 NCA (National Copyright Administration), 132 NDRC, see National Development and Reform Commission negative consensus rule, WTO, 3 negotiations: Autos and Auto Parts dispute, 31 neodymium, see Rare Earths dispute network music: businesses, foreign services providers, 112, 183 Publications and Audiovisual Products dispute compliance, 116 Sino-foreign joint ventures, 111, 112, 114 Network Music Opinions 2006, 101, 104, 107, 110, 112, 114 new energy vehicles (NEVs), 32 measures to help industry, Auto Parts dispute, 51–52 Transfer of Technology dispute, 150 new exporters: anti-dumping review rules, 155 newspapers: Publications and Audiovisual Products dispute, 101, 106, 108, 110, 111, 113 NME, see non-market economy

Index  217 non-automatic export licences, 71 non-discretionary grants, trading rights, 71 non-discretionary trading rights grants, 53 non-discrimination, 42 grants, trading rights, 53, 71 non-limited distribution category, 101 non-market economy (NME): European Union treatment of China, 28 status, WTO challenge, 189 non-tariff measures: barriers to trade in services, 91 imports, phasing out, 42 non-trade-remedy disputes: compliance, 183–85 non-traditional digital financial services providers, 127 non-transparency, see transparency: lack non-uniform administration of quotas, 77 North American Free Trade Agreement (NAFTA): Mexico, 33 Notice on Adjusting Export Tariffs of Some Products, 82 Notice on the Issuance of Business Practices for the Interoperable Service of Bank Cards 120, 122, 124 notification-based system: foreign investment, 96 NT, see national treatment Nutech Company Limited, 163–66 nutrition protection: exemption, TRIPs, 130 obligations of result, WTO, 4 obligatory compliance, WTO, 4 official journal for trade law, 44 Omnibus Appropriations Act 2009, USA, 167, 181 on-site verification: anti-dumping rules, 155 online distribution, 95, 115 online education, 95 online payment platforms, third-party, 127 operating term: foreign-invested enterprises, 109 limitations, Sino-foreign joint ventures, 105, 109 operation capacity: entities without, export quotas, Raw Materials dispute, 77 of export quota applicants, Rare Earths dispute, 80

Opinions on the Implementation of the Circular on Strengthening the Security Management of Bank Cards and Preventing and Fighting Crimes in Bank Cards, 121 Opinions on the Implementation of the Work in Bank Card Interoperability 2001, 120, 122, 124 ordinary customs duties: Auto Parts dispute WTO Rulings, 46–47 Orientation of Foreign Investment, Regulations Guiding 2002, see Foreign Investment Regulation 2002 Other Incentives dispute, see Grants, Loans and Other Incentives dispute outsourced technology services: electronic payment services, 118 Overseas Business Acceptance of Bank Cards, Circular on Issues Concerning Strengthening the Administration of, 121 panel establishment: Taxes dispute, 19 panel findings: export quotas, Raw Materials dispute, 75–76 violations, Publications and Audiovisual Products dispute, 57, 60, 62–63, 64 panel reports: adoption: Autos (US) dispute WTO rulings, 178 Broiler Products dispute WTO rulings, 178 Cellulose Pulp dispute WTO rulings, 179 GOES dispute WTO rulings, 178 HP-SSST dispute WTU rulings, 179 X-Ray Equipment dispute WTO rulings, 178 settlements before circulated, 6 panels: compliance, WTO, 3, 4 Demonstration Bases dispute, 32 ‘paper compliance’, 184 Patent Law 1984, 131 Patent Law 2008, 131 patents: protection: Intellectual Property Rights (IPRs) II dispute, 147 TRIPs, 130 US bilateral agreement on reciprocal protection, 132

218  Index Pauwelyn, Joost, 5, 6 payment cards, 117, 118 see also electronic payment services payment platforms: third-party online, 127 Payment Services, Electronic dispute, see Electronic Payment Services dispute PBOC, see People’s Bank of China Pelc, Krzysztof J, 5 pending disputes: trade in goods, 13 trade-related intellectual property rights disputes, 13 People’s Bank of China (PBOC): Announcement [2013] No 7: 124–25 Announcement on Providing Clearing Arrangements for Banks Handling Personal RMB Business in Macao, 120, 122, 124, 125 Announcement on Providing Clearing Arrangements for Banks Handling Personal RMB Deposit, Exchanges, Bank Cards and Remittance in Hong Kong, see Document No 16 Circular on Further Improving Bank Card Interoperability Related Work, 120, 122, 124 Circular on Issues Concerning Strengthening the Administration of Overseas Business Acceptance of Bank Cards, 121 Circular on Relevant Issues Concerning the Operation of Individual RMB Business by Mainland Banks and Hong Kong/Macao Banks, 120, 122, 124 Circular on Relevant Issues on Accepting and Using RMB Bank Cards in Border Areas, 120 Circular on Streamlining the Process of Cross-border RMB Business and Improving Relevant Policies, 125 Circular on Strengthening the Security Management of Bank Cards and Preventing and Fighting Crimes in Bank Cards, 121 Circular on Universal Use of ‘UnionPay’ Logo and its Holographic Label for Anti-counterfeiting, 120, 122, 124 Guiding Opinions on Regulating and Promoting the Development of Bank Card Acceptance Market, 121, 122, 124

Measures for the Administration of Bank Card Business, see Document No 17 Notice on the Issuance of Business Practices for the Interoperable Service of Bank Cards, 120, 122, 124 Opinions on the Implementation of the Circular on Strengthening the Security Management of Bank Cards and Preventing and Fighting Crimes in Bank Cards, 121 Opinions on the Implementation of the Work in Bank Card Interoperability 2001, 120, 122, 124 Rules on the Administration of Bankcard Clearing Institutions, 127 Several Opinions on Promoting the Development of Bank Card Industry, 120 periodicals: implementation, Publications and Audiovisual Products dispute, 108, 110, 111, 113 imported Publications and Audiovisual Products dispute, 101 Publications and Audiovisual Products dispute, WTO rulings on violations, 106 ‘permitted’ category: foreign-invested projects, 59 phosphorus, yellow, 72, 73 planned economy: market economy transition from, 28 policy instruments, 86, 188 policy-making: domestic, 187, 188 WTO challenge, 189 Policy on Development of Automotive Industry 2004, 45 political censorship, 66, 68 political considerations: trade disputes settling, 184 political factors: WTO Members’ reactions to adverse rulings, affecting, 8 political impacts: Intellectual Property Rights (IPRs) dispute compliance, 145 political implications, disputes, 39 political interests: culture industry, 65 minimising compliance impact on, 116 Publications and Audiovisual Products dispute compliance (partial), 65

Index  219 political objectives: WTO tribunals paying deference to, 187 POS terminals: Electronic Payment Services dispute WTO Rulings, 122 post-compliance issues, 186–88 post-paid credit cards, 117 poultry: US – Poultry dispute, 167 see also Broiler Products dispute praseodymium, see Rare Earths dispute pre-paid cards, 117 prerogative rights: for natural resources depletion prevention, 86 presence of natural persons: GATS, Mode 4 presence of natural persons, 96 prices: controls elimination: WTO-plus obligations, 42 minimum: exports, 72 Raw Materials dispute, 72, 77 undertaking rules: anti-dumping, 155 Princen, Sebastiaan, 7 procedural fairness: lack, anti-dumping, 158 procedural shortcomings: Autos (US) dispute WTO rulings, 171 proceedings targets, EU, 6 processing: back-end, 117 front-end, 117 production: scale, export quotas, Rare Earths dispute, 80 products: audiovisual, see audiovisual products logos, unlawful use, 131 names, unlawful use, 131 see also goods profit-making activities: restriction on, foreign representative offices, 99 ‘prohibited’ category: foreign-invested projects, 59 Prohibited Foreign Investment Industries, Catalogue of, 58–59 promethium, see Rare Earths dispute protection: intellectual property rights, see intellectual property rights

protectionism: instruments, auto industry, 44–45 interests, motivation, anti-dumping, 157 resurrection, 190 provincial governments: Grants, Loans and Other Incentives dispute, 24–25 Provision of Financial Information Services by Foreign Institutions in China Regulation 2009, 21–22 Provisional Measure on Administration of Special Fund for the Industrialization of Wind Power Equipment 2008, 28 public health: exemption, TRIPs, 130 public hearing rules: anti-dumping, 156 public interest, 130 public morals, 57 Public Security Ministry, see Ministry of Public Security public services: trade in services, 91–92 publication distribution entities: Publications and Audiovisual Products dispute, WTO rulings on violations, 102 publication importing entities: Publications and Audiovisual Products dispute implementation, 101, 108, 109 state-owned enterprises, 101 wholesale foreign-invested enterprises of products, 108 publications: administration, GAPP, 60, 63 see also books; electronic publications; newspapers; periodicals Publications and Audiovisual Products dispute, 10, 11, 68–69, 91 audiovisual home entertainment (AVHE) products, 104, 112 audiovisual products, 60–62, 109, 111 distribution, 104–107 Audiovisual Products Importation Rule 2002, 55, 56 Audiovisual Products Importation Rule 2011, 58, 61 Audiovisual Products Regulation 2001, 55, 56, 62 Audiovisual Products Regulation 2011, 58, 60–61

220  Index Audiovisual (Sub-)Distribution Rule 2003, 56, 55 Audiovisual (Sub-)Distribution Rule 2004, 100, 105, 107, 109, 110, 114 background, 52–54, 98–100 books, 106, 108, 110, 111, 113 capital requirements of FIEs, 106 Catalogue 2007, 55, 56, 100, 102, 104–107, 110, 113, 114 Catalogue 2011, 58–59, 107, 110–11, 113, 114 censorship, 115 challenges and implications, 67–68 Circular on Internet Culture 2003, 101, 104, 110, 114 Circular on Internet Culture 2011, 110–11, 114 compliance: approach and implications, 114–16, 183 (partial), reasons, 65–66 conditions on FIEs in distributing reading materials, 103 content reviews, 57 culture industry, 65–66 culture sector importance and sensitivity, 114–16 distribution: by sales through market, 101–102 by subscription, 101 due process, 116 DVDs, 104 electronic distribution, 104 electronic publications, 108, 111 Electronic Publications Rule 1997, 100, 106, 103, 113 Electronic Publications Rule 2008, 103, 108, 110, 113 equity restrictions on foreign investors or partners in Sino-foreign JVs, 107 failure to implement, 183 Film Enterprise Rule 2004, 56 Film Regulation 2001, 55, 56 films, 58, 64–65, 66, 112, 183 foreign equity limitations imposed inconsistently with GATS, 104–105 Foreign Investment Regulation 2002, 55, 56, 100, 102, 105–107, 110, 113, 114 foreign investors prohibition, 62–64 goods, trade in, 52–68 implementation and assessment, 57–68, 107–14 imported newspapers, periodicals, books and electronic publications, 101

Imported Publications Subscription Rule 2004, 100, 101, 106, 113 Imported Publications Subscription Rule 2011, 108–109 industrial policies, minimising compliance impact on, 116 Interim Rules on the Administration of Master Distribution of Books 1991, 102 Internet culture entities, 104, 107, 110, 111 Internet Culture Rule 2003, 101, 104, 107, 110 Internet Culture Rule 2011, 110–11 Internet electronic distribution, 104 limited distribution category, 101, 106, 108 master distribution, 102, 103, 106, 110, 111, 113 master wholesale, 106 measures, 54–56, 100–101 monitoring by WTO Members, 68 network music, 116, 183 Network Music Opinions 2006, 104, 101, 107, 110, 112, 114 newspapers, 106, 108, 110, 111, 113 non-limited distribution category, 101 NT rule violation, 102, 103, 104 operating terms requirements of FIEs, 106, 107 panel findings, 57 panel violation findings, 60, 62–63, 64 periodicals, 106, 108, 110, 111, 113 political interests, 65 minimising compliance impact on, 116 in practice hard to conclude, 67 prohibition of FIEs, 106 public morals, 57 publication distribution entities, 102 publication importing entities, 101, 108, 109 publications, 59–60 Publications Market Rule 2004, 100, 102, 103, 106, 109, 113 Publications Market Rule 2011, 58, 62, 108, 109–14 Publications Regulation 2001, 55, 56, 100, 106, 101, 113 Publications Regulation 2011, 58, 63, 108–109, 113 Publications (Sub-)Distribution Rule 2003, 100, 102, 103, 106, 109, 113 reading materials, 108, 109 distribution, 101–103 regulatory barriers, 116

Index  221 regulatory goals, minimising compliance impact on, 116 rental, 107 retail through Internet, 107 retailing services, 103 sales through market, 106 Several Opinions 2005, 55, 56, 62–64, 100, 103–107, 111–14 social values, 65 minimising compliance impact on, 116 sound recordings, 110 distribution services, 104 summary, 113–14 trade in goods, 52–68 trade in services, 91 transparency, 116 unlimited distribution category, 108 VCDs, 104 videocassettes, 104 violations summary, 106–107 wholesale: through Internet, 107 by market sales, 106 subscription, 106 trade services, 102 WTO rulings, 56–57, 67, 101–107, 183 Publications Market Rule 2004, 100, 102, 103, 106, 109, 113 Publications Market Rule 2011, 58, 62, 108, 109–14 Publications Regulation 2001, 55, 56, 100, 101, 106, 113 Publications Regulation 2011, 58, 63, 108–109, 113 Publications (Sub-)Distribution Rule 2003, 100, 102, 103, 106, 109, 113 pulp industry, 175 domestic, 175–76 Pulp Tariff: Cellulose Pulp dispute, 175–77 qualifications: restrictions, 96 questionnaire rules: anti-dumping, 155 quotas: allocation and administration, 75, 77, 79–81 auto industry, 44 bauxite, 75, 76 coke, 75, 76 export, see exports fluorspar, 75, 76

imports, see imports non-uniform administration, 77 Rare Earths dispute, see Rare Earths dispute Raw Materials dispute, see Raw Materials dispute silicon carbide, 75, 76 tariff-rate, see tariff-rate quotas tungsten, 80–02 WTO rules, 42 zinc, 75, 77 Rare Earth Quotas, Application Qualifications and Procedures for 2012, 80 rare earths, 78n dispute, see Rare Earths dispute domestic measures, 87 export duties, 79 illegal distribution, combating, 85 illegal extraction: combating, 85 rising, 86 industry White Paper, 84 quotas, 80, 82 Rare Earths dispute, 11, 70, 89–90 allocation and administration of quotas, 79–81 antimony, 81 challenges and implications, 85–89 compliance reasons, 83–84 economic development policies consistency, 84 environmental policies consistency, 84 EU joined, 72 export duties: imposition in breach of Accession Protocol, 78, 79 measures and WTO findings, 79 sub-optimal, 87 Tariff Implementation Plan 2012, 79 Tariff Implementation Program 2012, 79 export quotas: allocation and administration, 79, 80–81 allocation by MOFCOM, 80 Application Qualifications and Procedures for Molybdenum Export Quotas 2012, 81 Application Qualifications and Procedures for Rare Earth Quotas 2012, 80 capital requirements, 80–81 eligibility criteria, 80–81 essential, establishing qualitatively, 87

222  Index Export Licensing Catalogue 2012, 79 export performance, 80–81 Export Quota Administration Measures 2001, 80 Export Quota Amounts 2012, 79–80 First Batch Export Quotas of Tungsten, Antimony and Other Non-ferrous Metals 2012, 81 First Batch Rate Earth Export Quotas (Supplement) 2012, 80–81 imposition in violation of GATT and Working Party Report, 79, 80 may become necessary, 86–87 measures and WTO findings, 79–80 minimum registered capital requirements, 80–81 not warranted, 86 operation capacity of applicants, 80 prior export experience, 80–81 production scale, 80 resource status, 80 sub-optimal, 87 utilisation rates, 80 see also allocation and administration of quotas above export restrictions removal, 83 implementation and assessment, 81–83, 187 Japan joined, 72 measures and WTO findings, 78–79 export duties, see export duties above export quotas, see export quotas above trading rights, allocation and administration of quotas, 80–81 molybdenum, 78 Application Qualifications and Procedures for Molybdenum Export Quotas 2012, 81 quotas, 80, 81, 82 molybdenum products: export duties, 79 quotas, 82 natural resources security, 84 quotas, see export quotas above reputational costs of non-compliance, 83–84 sustainable development, 84 trading rights: allocation and administration of quotas, 79, 80–81 tungsten, 78 quotas, 80–82 state trading, 82–83

tungsten products: export duties, 79 quotas, 82 US initiated, 72 WTO rulings: economic development policies consistency, 84 environmental policies consistency, 84 export duties denied, 87–88 export restrictions condemnation, 86 implementation, 83 industry reforms, 85 regulatory framework examined, 86 significance, 85–86 Raw Materials dispute, 10, 70, 89–90 allocation and administration of quotas, see export quotas below aluminium: export duties, 73 bauxite, 72 export duties, 73 export quotas, 75, 76 bidding systems, allocated by, 75 challenges and implications, 85–89 coke, 72 export duties, 73 export quotas, 75, 76 compliance reasons, 83–85 defence based on GATT, 74 EU joined, 72 export duties: catalogue published by MOFCOM in collaboration with GAC, 75 Customs Law 1987, 72 denied, 87–88 Imports and Exports Regulation 2001, 72 measures and WTO findings, 72–74 minimum export prices, 72 Tariff Implementation Program 2009, 72–73 Tariff Implementation Program 2010, 73 export licences: measures and WTO findings, 72 export prices: minimum, 72, 77 export quotas: Appellate Body findings, 76, 77 bidding system, allocated by, 75 environmental protection, 76 even-handedness test, 76 exhaustible natural resources conserving, 76

Index  223 Export Licensing Catalogue 2009, 75 Export Quota Administration Measures 2001, 75 Foreign Trade Law, 74–75 GATT violations, 75, 77 human health protection, 76 Imports and Exports Regulation 2001, 75 licences, 75 measures and WTO findings, 72, 74–76 MOFCOM allocated, 75 operation capacity, entities without, 77 panel findings, 75–76 export restrictions condemnation, 86 fluorspar, 72 export duties, 73 export quotas, 75, 76 implementation, 77–78, 83, 187 magnesium, 72 export duties, 73 manganese, 72 export duties, 74 measures and WTO findings, see export duties above; export licences above; export quotas above; minimum export price below; trading rights below Mexico joined, 72 minimum export price: measures and WTO findings, 77 MOFCOM allocated, 75 non-uniform administration, 77 quotas, see export quotas above refractory clay: export duties, 73 refractory grade bauxite: export quotas, 75–76 regulatory framework examined, 86 silicon carbide, 72 export quotas, 75, 76 silicon metal, 72 export duties, 74 trading rights: liberalisation commitments violation, 76 measures and WTO findings, 76 unreasonable administration, 77 US initiated, 72 WTO rulings, 77–78, 83, 85–88 yellow phosphorus, 72 export duties, 73 zinc, 72 export duties, 74 export quotas, 75, 77

Raw Materials II dispute, 11 re-investigation: GOES dispute, 178 MOFCOM: used to prolong AD and/or CV duties levied, 185 trade remedies, WTO compliance and implications, 179–80, 181–82 reading materials: conditions in distributing: distribution of products, foreign-invested enterprises, 103 distribution, 101–103, 109, 113 imported: wholesale prevention, foreign-invested enterprises, 101 master distribution ban: Publications and Audiovisual Products dispute implementation, 108, 109 real-time payment debit cards, 117 recordings, sound, see sound recordings refractory clay, 73 refractory grade bauxite, 75–76 refrigeration services, 99 registered capital: foreign-invested enterprises, 109 registration: trading rights, 53–54 regulation: exports, 70–72 foreign trade, 71 WTO challenge, 189 regulatory barriers: compliance, Publications and Audiovisual Products dispute, 116 Electronic Payment Services dispute, US concern, 126 to trade in services, 116 regulatory framework: examined, WTO rulings, Rare Earths dispute, 86 regulatory goals: minimising compliance impact on, 116 regulatory protection, 127 regulatory regime, 188 Reich, Arie, 6 related subordinated services: foreign services providers provision, 99 renewable energy: industry growth, Wind Power Equipment dispute 29

224  Index rental: Publications and Audiovisual Products dispute, WTO rulings on violations, 107 repair services, 99 Repealing the Administrative Rules on Importation of Automobile Parts Characterized as Complete Vehicles, Decision on, 48 repetitive violations: DSM weaknesses in tackling, 187–88 representative offices: foreign law firms, 97 reputation: building, Electronic Payment Services dispute full compliance allowing, 125–26 Intellectual Property Rights (IPRs) dispute compliance building, 144 maintaining, DSM, 39 at stake, Auto Parts dispute compliance, 49 trade disputes settling, 184 reputational costs: disputes, 39 of enforcement, 7 of non-compliance, Rare Earths dispute, compliance reasons, 83–84 of WTO violation, Aircraft dispute, 35 reputational factors: WTO Members’ reactions to adverse rulings, affecting, 8 residency restrictions, 96 resources: status, export quotas, Rare Earths dispute, 80 restraints: raw materials exports, 72 ‘restricted’ category: foreign-invested projects, 59 restrictions: import of cultural goods, 66, 68 trading rights, 52 restructuring: auto industry, 50 retail sector: foreign services providers market share growth, 115 retailing: online distribution, 95 services, 98–99, 103 retaliation: actions: trade remedies, WTO compliance and implications, 180–81 see also tit-for-tat actions

anti-dumping duties for purposes of, 187 authorised, DSM, 6 Brazil target, 186 Canada target, 186 countervailing duties for purposes of, 187 EU target, 186 motives: anti-dumping, 157, 180–81 GOES dispute, 159 X-Ray Equipment dispute, 163 requests targets, 6 US target, 186 WTO, 3, 4 retreaded tyres dispute, Brazil, 87 Reuters (UK): Financial Information Services dispute adverse effects on, 21 rights, trading, see trading rights RMB bank cards, 120, 122–23 RMB Bank Cards in Border Areas, Circular on Relevant Issues on Accepting and Using, 120 RMB Business by Mainland Banks and Hong Kong/Macao Banks, Circular on Relevant Issues Concerning the Operation of Individual, 120, 122, 124 RMB-dominated electronic payment services, 118 rule-makers, DSM: China as, 9, 38 rule-shakers, DSM: China as, 9, 38 rule-takers, DSM: China as, 9, 38 rules, WTO, see WTO rules rules-based system, WTO, 1 Rulings, WTO, see WTO Rulings Russia: AD and CV duties on GOES exports from, 159 SAFE, see State Administration of Foreign Exchange safeguards (SG), 152–53 duties, GAC collection, 156 investigation rules and procedures, 155 Safeguards Agreement, 152–53 Safeguards Measures Regulation 2001, 155 SAIC, see State Administration for Industry and Commerce

Index  225 sales: distribution through market by, 101–102 promotion, 99 samarium, see Rare Earths dispute sampling rules, anti-dumping, 155 SARFT, see State Administration of Radio, Film and Television SAT, see State Administration of Taxation scandium, see Rare Earths dispute Schwartz, Warren F, 3–4 SCM Agreement, see Subsidies and Countervailing Measures Agreement sectors, covered, 94 selective compliance, WTO, 8 Semi Knock Down (SKD) kits: Auto Parts dispute WTO Rulings, 46–48 service industry: liberalisation, 93 regulation, 97 services: distribution, see distribution licences, foreign suppliers, 21 retailing, 98–99, 103 subordinated, 99 trade in, see trade in services SETC (State Economic and Trade Commission), 155 settlements: by agreement, China’s approach to and implications, 38–39 Aircraft dispute, 34–35, 37 Apparel and Textile Products dispute, 37 Autos and Auto Parts dispute, 37 Demonstration Bases dispute, 37 DSM, before panel reports circulated, 6 Fasteners dispute, 36 Financial Information Services dispute, 36 Grants, Loans and Other Incentives dispute, 36 Taxes dispute, 36 VAT on Integrated Circuits dispute, 18–19, 36 Wind Power Equipment dispute, 29, 37 settling trade disputes, 184 Several Opinions 2005, 55, 56, 62–64, 100, 103–107, 111–14 Several Opinions on Promoting the Development of Bank Card Industry, 120 Several Opinions on the Development and Administration of Network Music 2006, see Network Music Opinions 2006

SG, see safeguards Shaffer, Gregory, 5 shareholding: Sino-foreign joint ventures requirements, 99 Shi Guangsheng, 54 silicon carbide, 72, 75, 76 silicon metal, 72, 74 Sino-Foreign Cooperative Joint Venture Enterprise Law 1988, 136–37, 150 Sino-Foreign Joint Venture Enterprise Law 1979, 136–37, 150 Sino-foreign joint ventures, 95 50 per cent foreign ownership restriction relaxed, Auto Parts dispute, 52 audiovisual home entertainment (AVHE) products, 112 audiovisual products, 62 distribution, 109 audiovisual services distribution by, 99 dominant position of Chinese parties in, 105, 110, 112 establishment rules, 111 foreign equity in, 109, 110 network music, 111, 112, 114 operating term limitations, 105, 109 patent protection in: Intellectual Property Rights (IPRs) II dispute, 147 rights and interests of Chinese partners, 105 shareholding requirements, 99 SKD kits, see Semi Knock Down kits: Smiths Heimann GmbH, 163–64 social considerations: trade disputes settling, 184 social factors: WTO Members’ reactions to adverse rulings, affecting, 8 social objectives: WTO tribunals, paying deference to, 187 social values: fundamental, 65 minimising compliance impact on: Publications and Audiovisual Products dispute, 65, 116 social welfare, 130 SOEs, see state-owned enterprises sole supplier requirements: Electronic Payment Services dispute, 119 solicitation, direct, 21 sound recordings: distribution services, 104, 111 Publications and Audiovisual Products dispute, 104, 110

226  Index South Korea: anti-dumping actions against, 158 sovereignty, economic, 86–87 special interests: films, 66 stakeholder impacts, disputes, 39 State Administration for Industry and Commerce (SAIC) Circular on Strengthening the Security Management of Bank Cards and Preventing and Fighting Crimes in Bank Cards, 121 IP regime administration and enforcement, 132 trademark office: SAMR taken over responsibilities of, 132 State Administration for Market Regulation (SAMR): IP regime administration and enforcement, 132 State Administration of Foreign Exchange (SAFE): Circular on Standardising the Administration of Foreign Currency Bank Cards, 121 State Administration of Radio, Film and Television (SARFT): film imports by entities designated by, 64, 65 Provisional Rules on Entry Criteria for Operating Film Enterprises 2004, 56, 57 Several Opinions on the Introduction of Foreign Capital into the Cultural Sector 2005, see Several Opinions 2005 State Administration of Taxation (SAT): measures terminating tax exemptions, Aircraft dispute, 35 State Council: Decision on the Administration of Market Entry of Bankcard Clearing Institutions, 127 Information Office, approval authority: Financial Information Services dispute, 21 National Intellectual Property Strategy, 134 Notice on Adjusting Export Tariffs of Some Products, 82 Notice on Further Strengthening the Compliance of Trade Policies, 2014, 25 Regulations Guiding the Orientation of Foreign Investment 2002, 55, 56, 62

Regulations on the Administration of Audiovisual Products 2001, see see Audiovisual Products Regulation 2001 Regulations on the Administration of Films 2001, 55–57 Regulations on the Administration of Publications 2001, see Publications Regulation 2001 Several Opinions on Promoting the Development of Bank Card Industry, 120 Tariff Commission (TCSC), 156 tariff schedules determined by, 43 WTO Accession notice, 24 State Economic and Trade Commission (SETC), 155 State Intellectual Property Office (SIPO): IP regime administration and enforcement, 132 state intervention via state-owned enterprises: WTO challenge, 189 state-owned enterprises (SOEs): commercial-based decisions without government intervention: WTO-plus obligations, 42 films, control of, 66 publication importing entities, 101 trading rights monopolisation by, 68 state trading: tungsten, 82–83 WTO rules, 42 statutory laws: Auto Parts dispute measures not, 50 steel imports: GOES dispute, see GOES dispute MOFCOM determinations to impose AD and CV duties on exports from USA and Russia, 159 stolen technology, 138 storage services, 99 sub-national level measures: Grants, Loans and Other Incentives dispute, 24 sub-optimal export duties, 87 sub-optimal export quotas, 87 subordinated services, related, 99 subsidies, 152 Apparel and Textile Products dispute, 33–34 to domestic manufacturers: Wind Power Equipment dispute, 28–30 elimination, exports, 71

Index  227 export, see exports in form of tax refunds, Taxes dispute, 19 foreign-invested enterprises (FIEs) beneficiaries, 20 fostering technological advancement: Wind Power Equipment dispute, 29 prohibition of, SCM Agreement, Wind Power Equipment dispute, 28 termination of, Wind Power Equipment dispute, 29–30 unfair trade practice through: WTO challenge, 189 Subsidies and Countervailing Measures (SCM) Agreement, 152–53 Broiler Products dispute WTO rulings, 168 challenges, Taxes dispute, 19 GOES dispute WTO rulings, 160–62 prohibition of subsidies, Wind Power Equipment dispute, 28 violations, Grants, Loans and Other Incentives dispute, 23 Sugar Imports dispute, 11 suppliers: electronic payment services, 123, 126 foreign, see foreign suppliers Supreme People’s Court: Criminal Law 1979 interpreted, 139 Supreme People’s Procuratorate: Criminal Law 1979 interpreted, 139 sustainable development, 29, 84 Sykes, Alan O, 3–4, 5 talc: WTO-illegal export restrictions on, 88 tantalum: WTO-illegal export restrictions on, 88 Tariff Commission of the State Council (TCSC), 156 Tariff Implementation Plan 2012, 79 Tariff Implementation Program 2009, 72–73 Tariff Implementation Program 2010, 73 Tariff Implementation Program 2012, 79 Tariff Implementation Program 2013, 77–78 tariff-rate quotas (TRQs): import administration, WTO-plus obligations, 42 import regulation before WTO membership, 41 legislation, 43 Tariff-rate Quotas (TRQs) dispute, 11 tariffs: exports, legislation, 43

import regulation before WTO membership, 41 imports, see imports schedules determined by Customs Tariff Commission, 43 schedules determined by State Council, 43 WTO rules, 42 tax: discriminatory exemptions abolished: Aircraft dispute, 35 exports, 71 refunds: subsidies in form of, Taxes dispute, 19, 20 preferences: Apparel and Textile Products dispute, 33 Taxes dispute, 10 Australia joined, 19 China Accession Protocol, 19 GATT challenges, 19 Enterprise Income Tax Law, China 2007, 20 European Communities joined, 19 foreign direct investment attraction in China, 20 Japan joined, 19 measures, 36 Memorandum of Understanding, China with USA and Mexico, 19–20 Mexico joined, 19 outcome, 36 panel establishment, 19 request for consultations, 36 settlement, 36 subsidies in form of tax refunds, 19 foreign-invested enterprises beneficiaries, 20 SCM Agreement challenges, 19 summary, 36 TRIMs Agreement challenges, 19 US request for consultations, 19 TCSC (Tariff Commission of the State Council), 156 technological advancement: intellectual property modernisation and improvement incentives, 134 robust industrial policy fostering, 35 subsidies fostering, Wind Power Equipment dispute, 29 technological innovation promotion, IPRs, 130 technology: imports: parties, Intellectual Property Rights (IPRs) II dispute, 148

228  Index services, outsourced, see outsourced technology services stolen, 138 transfer, see technology transfer Technology Import and Export Regulation 2001, 136 technology transfer: to Chinese manufacturers, Auto Parts dispute, 51 commercial terms and compensations agreed by JV parties, 137 contracts ending: Intellectual Property Rights (IPRs) II dispute, 147–48 dispute, see Transfer of Technology dispute export, 136 FDI policy, rooted in heart of, 138 forced, 135, 137, 138 Transfer of Technology dispute, 149–50 WTO challenge, 189 import, 135 regulatory framework, 135 Technology Import and Export Regulation 2001, 136 Technology Transfer dispute, see Transfer of Technology dispute telecommunications administration: Internet culture entities approved by, 104 temporary non-compliance, WTO, 8 temporary violations: DSM weaknesses in tackling, 187–88 terbium, see Rare Earths dispute terminal equipment requirements: electronic payment services, 122, 124 Electronic Payment Services dispute, 119 WTO Rulings, 122, 124 textile industry: cellulose pulp and, 175, 176 Textile Products dispute, see Apparel and Textile Products dispute third-party online payment platforms, 127 Thomson (Canada): Financial Information Services dispute adverse effects on, 21 thulium, see Rare Earths dispute tin: WTO-illegal export restrictions on, 88 tit-for-tat actions: trade remedies, WTO compliance and implications, 180–81 see also retaliation Toohey, Lisa, 38

Trachtman, Joel, 5 trade barriers: legitimate, 130 see also trade in services trade disputes: settling, 184 see also trade in goods; trade in services trade in goods: disputes, 10–11 Additional Duties on Certain Products dispute, 11 adjudicated disputes, 13 Agricultural Products dispute, 11 Aluminium dispute, 11 compensation after adjudication, 13 Imports of Sugar dispute, 11 mutually agreed solutions, 13 pending disputes, 13 Raw Materials II dispute, 11 resolved before adjudication, 13 Tariff-rate Quotas (TRQs) dispute, 11 see also Aircraft dispute; Apparel and Textile Products dispute; Auto Parts dispute; Autos and Auto Parts dispute; Demonstration Bases dispute; Grants, Loans and Other Incentives; Publications and Audiovisual Products dispute; Rare Earths dispute; Raw Materials dispute; Taxes dispute; VAT on Integrated Circuits dispute; Wind Power Equipment dispute Publications and Audiovisual Products dispute, 52–68 trade in services differences, 91 trade in services: barriers, 91 dismantling, 94 existence, 127–28 non-tariff, 91 regulatory, 116 disputes, 11 adjudicated disputes, 13 mutually agreed solutions, 13 resolved before adjudication, 13 see also Electronic Payment Services dispute; Financial Information Services dispute; Publications and Audiovisual Products dispute public services, 91–92 Publications and Audiovisual Products dispute, 91

Index  229 regulation, 91–98 service industry liberalisation, 93 trade in goods differences, 91 see also electronic payment services; Electronic Payment Services dispute; Publications and Audiovisual Products dispute trade policies: WTO Members monitoring, 187 trade promotion legislation, 43 trade regime: administration, WTO-plus obligations, 42 transparency enhancement, 44 Trade-Related Aspects of Intellectual Property Rights (TRIPs), 129–30, 133, 139, 140–41, 145, 146 trade-related intellectual property rights disputes, 12 adjudicated disputes, 13 pending disputes, 13 see also Intellectual Property Rights (IPRs) dispute; Intellectual Property Rights (IPRs) II dispute; Transfer of Technology dispute Trade-Related Investment Measures (TRIM) Agreement, 19 trade remedies: abuse, 180–82 by major players in system, 187 anti-dumping, see anti-dumping countervailing, see countervailing criticism, 158 disputes, 12 adjudicated disputes, 13 compliance, 185–86 mutually agreed solutions, 13 resolved before adjudication, 13 WTO Members’ non-compliance, 181 see also Autos (US) dispute: Broiler Products dispute; Cellulose Pulp dispute; Fasteners dispute; GOES dispute; HP-SSST dispute; X-Ray Equipment dispute DSM pressure and limitations, 181 legislation, 43 regime, 25, 154–58 safeguards, see safeguards use, 180–82 by major players in system, 187 WTO compliance and implications, 179 domestic import-competing industries protection, 181

Government decision-making, 180 industrial development policy use, 180 Interim Rules on the Implementation of the Rulings of the World Trade Organization on Trade Remedy Disputes, 179–80 re-investigations, 179–80, 181–82 retaliation actions, 180–81 tit-for-tat actions, 180–81 WTO Members’ frequent application, 181 ‘zeroing’ practice, USA, 181, 186 Trade Remedy and Investigation Bureau (TRIB), 156 trade-restrictive policy instruments: WTO rules disciplining use of, 188 trade sanctions inducement, EU: compliance, 5 trade secrets: infringements, 131 trade services: wholesale, 98, 102 Trademark Law 1982, 131, 144 Trademark Law 2013, 131 trademark office of the SAIC: IP regime administration and enforcement, 132 trademarks: counterfeit, goods with, 143 protection, TRIPs, 130 unlawful use, 131 unlawfully affixed to imported counterfeits, 146 US bilateral agreement on reciprocal protection, 132 trading, see trading rights; state trading trading rights: allocation and administration of quotas, Rare Earths dispute, 79, 80–81 commitments: exports, 71 liberalisation violation, Raw Materials dispute, 76 cultural imports, subject to discretion, 67 examination and approval system, 53 export restriction elimination, 71 foreign-invested enterprises: proof of asset and funding, 54 grants: legislation, 43 non-discretionary, 53, 71 non-discriminatory, 53, 71

230  Index liberalisation, 43–44, 53, 115 Accession Protocol, 53 commitments violation, Raw Materials dispute, 76 foreign cultural goods market access, 68 imports, WTO-plus obligations, 42 licensing replaced by registration, 53 monopolisation by state-owned enterprises, 68 Raw Materials dispute: liberalisation commitments violation, 76 measures and WTO findings, 76 registration with MOFCOM, 53–54 requirements for obtaining: customs and fiscal purposes only, 53 restrictions, 52 import regulation before WTO membership, 41–42 see also Publications and Audiovisual Products dispute training services, 99 transfer of technology, see technology transfer; Transfer of Technology dispute Transfer of Technology dispute (pending), 12, 151 biotechnology (crop seeds), 150 cooperative JV law, 150 Equity JV law, 150 EU request for consultations, 129, 135, 149 forced technology transfer, 149–50 Foreign Investment Law (draft), 150 new energy vehicles, 150 WFOE Law, 150 transition economy, 188–89 transnational distance education, 95 transparency: culture industry issues, 67 Electronic Payment Services dispute compliance, 128 GATS, 92 lack: in administrative system, 187 Aircraft dispute, 34 anti-dumping, 158 Wind Power Equipment dispute, 30 WTO challenge, 189 WTO Members pushing for enhancement, 187 obligations: Autos and Auto Parts dispute, 30 WTO Members pushing, 68 Publications and Audiovisual Products dispute compliance, 116

trade regime, enhancement, 44 WTO-plus obligations, 42 WTO rules, 42 TRIB (Trade Remedy and Investigation Bureau), 156 TRIM (Trade-Related Investment Measures) Agreement, 19 TRIPs (WTO Agreement on Trade-Related Aspects of Intellectual Property Rights), 129–30, 133, 139, 140–41, 145, 146 TRQs, see tariff-rate quotas TRQs dispute, 11 tungsten, 78 quotas, 80–82 state trading, 82–83 tungsten products: export duties, 79 quotas, 82 Twelfth Five-Year Plan (2011–2015), 84 Tyagi, Mitali, 38 Tyre Tariff dispute, 167 tyres: US – Tyre Tariff dispute, 167, 171 unbound commitments, 94–95 undisclosed information: infringements, 131 protection, TRIPs, 130 unfair competition prevention, 131 unfair trade practices: dumping through, WTO challenge, 189 unified bankcard networks, 118 unilateralism resurrection, 190 UnionPay cards, 126 UnionPay logo, see Yin Lian/UnionPay logo ‘UnionPay’ Logo and its Holographic Label for Anti-counterfeiting, Circular on Universal Use of, 120, 122, 124 UnionPay system, 118–19 United States: AK Steel Corporation, 159 Allegheny Ludlam Corporation, 159 anti-dumping retaliation actions against, 157 Appellate Body member appointments continuous block, DSM crisis from, 189 auto industry importance, 170–71 Autos and Auto Parts dispute, 30–31 aviation manufacturing industry, 34 China – Grants, Loans and Other Incentives dispute, 23

Index  231 China – Taxes dispute, request for consultations, 19 China’s autos and auto parts subsidies, 30–31 China’s wind power equipment subsidies, 28–29 Chinese poultry import ban, 167 Commission on the Theft of American Intellectual Property, 135 compliance: with adverse WTO rulings, 8–10 congressional involvement, 7 delayed, 7 if in best interests, 7 non-compliance, 7 proceedings targets, 6 concerns: regulatory barriers, Electronic Payment Services dispute, 126 Congress: China compliance reports to, see United States Trade Representative China’s trade practices in auto parts industry, grave concerns about, 31 CV duties on GOES exports from, 159 Demonstration Bases dispute, 31 domestic policy-making impacts of DSM, 184 electronic payment services description, 117–18 Financial Information Services dispute, 20 GOES dispute, 158–59, 178 GOES exports from, AD duties on, 159 initiation of disputes: China – Autos (US) dispute, 178 China – Broiler Products dispute, 166, 169, 178 China – Export Duties on Certain Raw Materials dispute, 88 China – Intellectual Property Rights (IPRs) II dispute, 129, 147–48 China – Rare Earths dispute, 72 China – Raw Materials dispute, 72 China – VAT on Integrated Circuits dispute, 18 Intellectual Property Rights (IPRs) dispute claims, see Intellectual Property Rights (IPRs) dispute market for Mexico textile exports, 33 Mexican–Chinese competition in, Apparel and Textile Products dispute, 33 Omnibus Appropriations Act 2009, 167, 181 retaliation target, 6, 186

Section 301 investigation into Chinese subsidies, 29 sophisticated player in the system, 185 trade conflict with China, 167 trade remedy regime impact on, 181 US–China intellectual property bilateral agreement, 132, 146 US-China Joint Commission on Commerce and Trade, 146–47 US–China Strategic and Economic Dialogue, 146–47 US – Poultry dispute, 167 US – Tyre Tariff dispute, 167, 171 USTR, see United States Trade Representative VAT exemptions challenge to, Aircraft dispute, 34 Wind Power Equipment dispute, 28 WTO rules compliance worse than China, 186 ‘zeroing’ practice, trade remedies, 181 United States Trade Representative (USTR), 8 China Compliance Reports to Congress, 8 2006, 44, 99 2007, 54, 97 2009, 22, 49, 71–72 2013, 125 2017, 32, 97, 135 2018, 112, 190 monitoring mechanism, 187 Section 301 Report, 135 US auto sector in 2013, 171 unlawful use: product logos, names and trademarks, 131 unlimited distribution category: Publications and Audiovisual Products dispute implementation, 108 unreasonable administration of quotas: Raw Materials dispute, 77 unresolved disputes, 6 USA, see United States USTR, see United States Trade Representative utilisation rates: export quotas, Rare Earths dispute, 80 value thresholds: Auto Parts dispute measures, 46 values, social, see social values VAT exemptions: expired, Aircraft dispute, 35 US challenge to, Aircraft dispute, 34 VAT on Integrated Circuits dispute, 10, 17 China’s approach to settlement, 18–19

232  Index GATS violation, 18 GATT violation, 18 MAS settlement of, 18 measures, 36 outcome, 36 request for consultations, 36 settlement, 36 summary, 36 US initiation, 18 VCDs, 104 vehicles, see new energy vehicles Verification of Imported Automobile Parts Characterized as Complete Vehicles, Rules on 2005, 45, 48 videocassettes, 104 Vienna Convention of the Law of Treaties, 4 Visa, 118 visas, restrictions, 96 viscose fibres production, 175 volume thresholds: Auto Parts dispute measures, 46 voluntary compensation, WTO, 3, 4 warehousing services, 99 Webster, Timothy, 9, 22, 63, 112, 143–44, 184 welfare-diminishing policy instruments: WTO rules disciplining use of, 188 welfare, economic and social, 130 WFOE Law, 136–37, 150 wholesale: foreign-invested enterprises, see foreigninvested enterprises Internet, 107 by market sales, 106 master, 106 online distribution, 95 sector, foreign services providers market share growth, 115 trade services, 98, 102 by subscription, 106 Wholly Foreign-funded Banks and Chineseforeign Equity Joint Banks in Conducting Bank Card Business, Circular on Issues Concerning, 121 Wholly Foreign-Owned Enterprise Law 1986, 136–37, 150 Wilson, Bruce, 6 Wind Power Equipment dispute, 10 industrial policies as root cause, 29 measures, 37 outcome, 37

Provisional Measure on Administration of Special Fund for the Industrialization of Wind Power Equipment, 2008, 28 renewable energy industry growth, 29 request for consultations, 37 SCM agreement prohibition of subsidies, 28 settlement by consultations, 29, 37 subsidies fostering technological advancement, 29 subsidies to domestic manufacturers, 28–30 summary, 37 termination of subsidies, 29–30 transparency lack, 30 US request for consultations, 28 WIPO (World Intellectual Property Organization), 132–33 work-related permits: restrictions, 96 Working Party Report, 42 Financial Information Services dispute, 21 imposition in violation of, 79, 80 IP regime commitments, 133 Rare Earths dispute, 81 trading rights liberalisation, 53 world famous brands, 23–24 World Intellectual Property Organization (WIPO), 132–33 World Top Brand Program: subsidies, Grants, Loans and Other Incentives dispute, 23 World Trade Organization (WTO): ad hoc panels ruling on disputes, 2–3 adverse rulings, 2 Member reactions, 8 Agreement on Agriculture, 23 Agreement on Trade-Related Aspects of Intellectual Property Rights, see WTO Agreement on Trade-Related Aspects of Intellectual Property Rights Anti-Dumping Agreement, see AntiDumping Agreement Appellate Body, see Appellate Body China accession, 8 China Accession Protocol, see Accession Protocol China’s aggressive legalism, 39 China’s observance of WTO obligations, concerns, 8

Index  233 compliance: full, 8 panels, 3, 4 selective, 8 temporary non-compliance, 8 see also dispute settlement mechanism concessions, suspension of, 3 covered agreements, 2 disputants, consultations prior to adjudications, 2 Dispute Settlement Body (DSB), see Dispute Settlement Body dispute settlement mechanism, see dispute settlement mechanism economic system challenge, 189 efficient breach theory, 3–4, 5 enforcement, 4 mechanisms challenge, 189 reputational costs, 7 forced technology transfer challenge, 189 GATS, see General Agreement on Trade in Services GATT, see General Agreement on Tariffs and Trade as important forum for discussion and resolution of challenges, 189 international law obligations, 3, 5 Marrakesh Agreement, 2 Members, see WTO Members mutually agreed solutions (MAS), see mutually agreed solutions negative consensus rule, 3 non-market-economy status challenge, 189 obligations of result, 4 obligatory compliance, 4 policymaking challenge, 189 protectionism resurrection, 190 ramifications of dysfunctional or paralysed DSM for, 190 regulation mechanisms challenge, 189 retaliation, 3, 4 rules, see WTO rules rules-based system, 1 Safeguards Agreement, 152–53 sanction, 3 state intervention via state-owned enterprises challenge, 189 transparency lack challenge, 189 unfair trade practices challenge, 189 unilateralism resurrection, 190

voluntary compensation, 3, 4 Working Party Report, see Working Party Report WTO, see World Trade Organization and entries beginning with WTO WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPs), 129–30, 133, 139, 140–41, 145, 146 WTO Centres: Grants, Loans and Other Incentives dispute, 24–25 WTO compliance: trade remedies, see trade remedies WTO disputes: imports, 44 WTO-illegal export restrictions, 88 WTO-illegal export subsidies, 23 WTO Members: adverse rulings reactions, 8 Auto Parts dispute implementation monitoring by, 68 compliance studies, 7 discouraging from using WTO litigation to extend WTO-unlawful measures, 188 due process obligations, pushing, 68 export duties use by, 88 implementation, monitoring, 187 monitoring China’s implementation, policy developments and regulatory activities, 187 post-compliance issues, 186–88 practice of, 5 Publications and Audiovisual Products dispute implementation monitoring by, 68 service industry liberalisation, 93 trade policies monitoring, 187 trade remedies, 181 transparency obligations, pushing, 68 WTO membership: intellectual property modernisation and improvement incentives, 133–34 WTO-plus obligations: Accession Protocol, 42 exports, 71 import duties, 42 import licensing, 42 import tariffs reduction, 42 phasing out import non-tariff measures, 42

234  Index WTO rules: distorting policy instruments, disciplining use of, 188 domestic policy objectives prioritisation over, 187 import charges, 42 import duties, 42 trade-restrictive policy instruments, disciplining use of, 188 US compliance worse than China, 186 welfare-diminishing policy instruments, disciplining use of, 188 WTO Rulings: Auto Parts dispute, 46–48, 51 Autos (US) dispute, 171 Broiler Products dispute, 168–69, 178 Cellulose Pulp dispute, 176–77, 179 China’s implementation quality, 2 compliance with, see compliance Electronic Payment Services dispute, 121–24 as external lever to facilitate domestic economic reforms, 184 GOES dispute, 160–62, 178 HP-SSST dispute, 173–74, 179 implementation, see implementation import of cultural goods, 68 limitations of decisions, 185–86 of limited effect, Auto Parts dispute, 51 Rare Earths dispute, see Rare Earths dispute Raw Materials dispute, 77–78, 83, 85–88 US trade remedy regime, impact on, 181 X-Ray Equipment dispute, 164–65, 178 WTO tribunals: censorship, paying deference to, 187 export restraints, adjudicating and clarifying, 83–84 natural resources protection, paying deference to, 187

political objectives, paying deference to, 187 social objectives, paying deference to, 187 Wuhan Iron and Steel (Group) Corporation, 159 X-Ray Equipment dispute, 12, 152 AD Agreement, 165 AD duties: imposition, 163–64 terminated, 178 EU action, 164 EU request for consultations, 178 implementation, 165–66, 178 industrial policy motive, 163 industry-driven action, 166 MOFCOM: AD duties imposition, 163 investigations, 164–65 re-investigation, 166, 178 Panel report adoption, 178 retaliation motive, 163 WTO rulings, 164–65, 178 Xibhua News Agency: Financial Information Services dispute, 21 Xinjiang Goldwind Science & Technology Co. Ltd, 30 yellow phosphorus, 72, 73 Yin Lian/UnionPay logo: Electronic Payment Services dispute WTO Rulings, 122 ytterbium, see Rare Earths dispute yttrium, see Rare Earths dispute Yu, Peter, 146 ‘zeroing’ practice: US trade remedies, 181, 186 Zhang, Weiwei, 6 Zhang, Xiaowen, 7 Zhu, Huan, 9 zinc, 72, 74, 75, 77