China - Tariff Rate Quotas for Certain Agricultural Products: Against the Grain: Can the WTO Open Chinese Markets? A Contaminated Experiment

Joseph W William Glauber,Simon Lester

doi:10.2139/ssrn.3745609

Joseph W William Glauber, Simon Lester

Open Access

https://doi.org/10.2139/ssrn.3745609

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Abstract

The U.S. complaint about Chinese tariff-rate quotas (TRQs) on certain grain products helps illustrate several key issues in U.S. - China trade relations and the effectiveness of WTO disputes. First, do international obligations based on transparency and fairness work in relation to an authoritarian country not known for the rule of law domestically? Second, can there be a disconnect between the legal aspects of a dispute and the underlying economic interests, with a DSB ruling sometimes not leading to improved trade flows? And third, given the bilateral trade war and phase one trade deal between the United States and China, has the WTO been superseded in this trade relationship? This paper summarizes the facts and law of the China - TRQs dispute, and examines each of these questions in that context.

Highlights

In the midst of the U.S.-China trade war that has emerged over the last couple years, the prevailing view in Washington, DC policy circles is that WTO dispute settlement is only of limited value in addressing Chinese trade barriers
The U.S claimed that "four of the basic criteria for eligibility to receive wheat, rice, and corn tariff-rate quotas (TRQs) are inconsistent with four obligations set forth in Paragraph 116, namely, the obligations to administer TRQs on a transparent, predictable, and fair basis, and to use clearly specified requirements." The four criteria contained in the National Development and Reform Commission of China (NDRC)'s 2017 Allocation Notice were as follows: (1) "Possessing 'a good financial condition'"; (2) "Possessing '[a good] integrity situation'"; (3) "Possessing 'no record of violating regulations with respect to customs, industry and commerce, taxation, credit and loans, inspection and quarantine, grain distribution, environmental protection, and other areas'"; and (4) "having fulfilled social responsibilities associated with [their] operations.'"
The Panel found that "this practice renders China's TRQ administration inconsistent with its 'fair basis' obligations," noting that the "disparity between what is written in China's legal instruments and what China states that the NDRC does in practice in allocating TRQ amounts does not represent administration in accordance with the applicable rules and standards."

Summary

Introduction

In the midst of the U.S.-China trade war that has emerged over the last couple years, the prevailing view in Washington, DC policy circles is that WTO dispute settlement is only of limited value in addressing Chinese trade barriers. The U.S claimed that "four of the basic criteria for eligibility to receive wheat, rice, and corn TRQs are inconsistent with four obligations set forth in Paragraph 116, namely, the obligations to administer TRQs on a transparent, predictable, and fair basis, and to use clearly specified requirements." The four criteria contained in the NDRC's 2017 Allocation Notice were as follows: (1) "Possessing 'a good financial condition'"; (2) "Possessing '[a good] integrity situation'"; (3) "Possessing 'no record of violating regulations with respect to customs, industry and commerce, taxation, credit and loans, inspection and quarantine, grain distribution, environmental protection, and other areas'"; and (4) "having fulfilled social responsibilities associated with [their] operations.'". The Panel found that "this practice renders China's TRQ administration inconsistent with its 'fair basis' obligations," noting that the "disparity between what is written in China's legal instruments and what China states that the NDRC does in practice in allocating TRQ amounts does not represent administration in accordance with the applicable rules and standards."

Reallocation procedures

Findings

Conclusions