Colombia

The U.S. Modifies the List of Developing and Least Developed Countries Under U.S. Countervailing Duty Law

During the Uruguay Round, various special and differential treatment provisions were included in the agreements being negotiated. The Agreement on Subsidies and Countervailing Measures (“ASCM”) included provisions that would give developing countries and least developed countries higher subsidy de minimis levels and higher negligibility levels. See ASCM Art. 11.9 (de minimis level of subsidies is 1%; negligible imports not subject to orders), Art. 27.10 (de minimis level of subsidies is 2% for developing countries; negligibility is 4% of total imports for developing countries or 9% for multiple developing countries).

The Uruguay Round Agreements Act implemented these requirements within U.S. law. Negligible imports from any country are 3% of total imports (7% for multiple countries each less than 3%) and 4% and 9% for developing/least developed countries. De minimis subsidy levels are 1% generally but 2% for developing and least developed countries. See 19 U.S.C. 1671b(b)(4) and 19 U.S.C. 1677(24)(A) and (B).

Under U.S. law, the U.S. Trade Representative is charged with developing a list of developing and least developed countries for purposes of U.S. countervailing duty law. Such a list should be published and should be updated as necessary. 19 U.S.C. 1677(36). While some criteria are listed in the statute, USTR is given discretion on what other criteria to consider.

The first list was published in 1998 on June 2, 63 FR 29945-29948. https://www.govinfo.gov/content/pkg/FR-1998-06-02/pdf/98-14737.pdf. A revised list was published on February 10, 2020, 85 FR 7613-7616. https://www.govinfo.gov/content/pkg/FR-2020-02-10/pdf/2020-02524.pdf.

The New List Brings Forward the U.S. Position at the WTO on Need for Differentiation Among Countries

The Federal Register notice of February 10, while not referencing the U.S. position at the WTO on the need for differentiation for purposes of which WTO Members take advantage of special and differential treatment, largely uses the same factors proposed at the WTO for determining which countries should not be afforded developing country/least developed country status for purposes of U.S. countervailing duty law.

Specifically, USTR for its new list looked to (1) per capita GNI excluding any country listed as a high income country by the World Bank, (2) share of world trade (reduced from 2% in 1998 to 0.5% in 2020), (3) membership or application for membership in the OECD, (4) G20 membership, (5)(not in the WTO differentiation proposal) membership in the EU and (6) any WTO members who did not declared itself a developing country during accession to the WTO where its per capita GNI is lower than high income. A country that satisfied any of the five criteria are excluded from the higher de minimis and higher negligibility standards

High income countries based on World Bank June 2019 data

The World Bank list shows 218 countries/territories and identifies whether they are high income or lower income countries on a per capita GNI. The last data for June 2019 shows 80 of 218 countries being high income. See https://blogs.worldbank.org/opendata/new-country-classifications-income-level-2019-2020.

Various countries or territories like Korea, Taiwan, Saudi Arabia, UAE, Qatar, Hong Kong, Macao, Singapore, Oman, Chile are listed as high income and would not be eligible for increased de minimis or higher negligibility standards under U.S. countervailing duty law based on this criteria.

Share of world trade (0.5% or greater)

Besides Korea, Hong Kong and Singapore which had been excluded from the 1998 list based on their share of global trade, the new list excludes Brazil, India, Indonesia, Malaysia, Thailand and Viet Nam based on share of world trade figures. 85 FR at 7615.

Membership in or application to the OECD

Colombia and Costa Rica are excluded from higher de minimis and negligibility levels under U.S. countervailing duty law based on their application for membership to the OECD. 85 FR at 7615.

Membership in the G20

The G20 came into existence in 1999, thus after the 1998 list was published by USTR. China has not been treated as eligibile for higher de minimis or higher negligibility levels and continues not to be considered for eligibility. Other G20 countries (besides China) who are not eligible despite per capita GNI levels below high income are Argentina, Brazil, India, Indonesia, and South Africa. 85 FR at 7615.

Membership in the EU

Several EU member countries are not high income countries on the World Bank list but are excluded from higher de minimis and negligibility levels on the new list — Bulgaria and Romania. 85 FR at 7615.

WTO Members who have not claimed developing country status at accession

While the U.S. would not have flagged countries who did not claim developing country status at accession but whose per capita GNI was below high income as needing to be addressed in its differentiation papers at the WTO, such countries are not included in the list of countries eligible for higher de minimis and negligibility levels under U.S. countervailing duty law. This list includes Albania, Armenia, Georgia, Kazakhstan, the Kyrgyz Republic, Moldova, Montenegro, North Macedonia and Ukraine.

Likely Importance of the Changes in the USTR List

Data compiled by the WTO from country notifications of investigations brought under national countervailing duty laws, shows that between January 1, 1995 and June 30, 2019 (latest data presently available), the U.S. initiated 254 countervailing duty investigations. One or more investigations were brought against imports of products from 37 countries. See the WTO chart below.

CV_InitiationsRepMemVsExpCty

While there have been no countervailing duty cases in the United States against the vast majority of WTO Members during the first twenty-five years of the WTO, the changes in the list could be relevant for some countries where there have been CVD cases in the past — Argentina, Brazil, India, Indonesia, Malaysia, South Africa, Vietnam being the most likely countries affected. Any changes in results would depend on the underlying facts and may be relevant in only some cases or for one or more producers in a given case.

Conclusion

Monday’s Federal Register notice from the U.S. Trade Representative will not result generally in significant changes in how U.S. countervailing duty law operates. It could be important in particular cases or against particular exporters.

The real importance would appear to be the Administration’s taking its views on differentiation and applying them to an important U.S. trade remedy as a sign of the seriousness of the need to obtain a modification to who is eligible for special and differential treatment. The larger issue is viewed by the United States as critical to restoring the negotiating function at the WTO.

WTO Dispute Settlement – January 24, 2020 Statement by Ministers at Davos, Switzerland on Interim Appeal Arrangement Amongst Certain Major Countries

The WTO’s Appellate Body has not been in a position to handle any appeals from panel reports where the appeal was filed after December 10, 2019 and is processing some but not all of the appeals that were pending on that date. This situation flows from the existence of just one of seven Appellate Body slots currently being filled and the Dispute Settlement Understanding (“DSU”)requirement that appeals be heard by three members of the Appellate Body. The slots are unfilled as the United States has blocked the start of the process over the last two years while pressing WTO Members to acknowledge longstanding problems in how disputes are handled and to come up with effective reforms. For the United States, this requires WTO Members to come to grips with why clear requirements of the DSU were being ignored or violated by the Appellate Body.

For most members of the WTO, achieving a resolution of the dispute settlement impasse is a high priority with many countries looking to see if some form of interim approach could be adopted by those with an interest in having an interim process for a second tier review of panel reports by participating members. The European Union had announced bilateral arrangements with Canada and with Norway in 2019 and discussions have occurred with and among other countries about whether arbitration-type arrangements based on Article 25 of the DSU should be agreed to during the period when a solution to the impasse is pursued.

Earlier this week on the sidelines of the annual World Economic Forum, ministers from a number of WTO Members issued a statement indicating that a large number of WTO Members would work towards contingency measures. The statement was on behalf of seventeen WTO Members (46 Members if the EU’s 28 member countries are counted instead of the EU). The list includes a number of large trading nations including the EU, China, Canada, Mexico, Brazil, Australia and Korea along with ten others (Chile, Colombia, Costa Rica, Guatemala, New Zealand, Norway, Panama, Singapore, Sitzerland and Uruguay. The joint statement follows:

Statement by Ministers, Davos, Switzerland, 24 January 2020
“’We, the Ministers of Australia, Brazil, Canada, China, Chile, Colombia, Costa Rica, European Union, Guatemala, Republic of Korea, Mexico, New Zealand, Norway, Panama, Singapore, Switzerland, Uruguay, remain committed to work with the whole WTO membership to find a lasting improvement to the situation relating to the WTO Appellate Body. We believe that a functioning dispute settlement system of the WTO is of the utmost importance for a rules-based trading system, and that an independent and impartial appeal stage must continue to be one of its essential features.

“Meanwhile, we will work towards putting in place contingency measures that would allow for appeals of WTO panel reports in disputes among ourselves, in the form of a multi-party interim appeal arrangement based on Article 25 of the WTO Dispute Settlement Understanding, and which would be in place only and until a reformed WTO Appellate Body becomes fully operational. This arrangement will be open to any WTO Member willing to join it.

“We have instructed our officials to expeditiously finalise work on such an arrangement.

We have also taken proper note of the recent engagement of President Trump on WTO reform.’”

https://trade.ec.europa.eu/doclib/docs/2020/january/tradoc_158596.pdf

Since Australia and Brazil had been looking at a different approach than that announced by the EU and Canada or the EU and Norway, it will be interesting to see what type of contingency measures the larger group agrees upon. The U.S. had significant problems with the EU approach when it was announced last year as it simply continued many of the problems that the U.S. has identified as needing correction. A similar approach by the larger group would likely add complications to finding a permanent solution and also likely discourage at least some other WTO Members from joining the group’s approach.

Likely Coverage of Disputes by the 17 WTO Members

There are 164 WTO Members at the present time and there have been a total of 593 requests for consultations filed by WTO Members since the WTO came into existence in January 1995. The WTO webpage lists all disputes where a Member has been the complainant, the respondent or acted as a third party. Not all requests for consultations result in panels being requested, and not all panel proceedings result in appeals being filed. But a review of number of requests for consultations filed by a Member and the number of such requests where a Member was the respondent helps understand the coverage likely from the seventeen Members (46 at individual country level) who released the joint statement.

However, the data from the WTO webpage needs to be modified to eliminate requests for consultations where one party was not one of the seventeen Members. The following table reviews the data and then corrects to eliminate cases where the complainant or respondent was not another of the seventeen Members.

WTO Member# of cases complainant # of cases respondentcomplainant among 17respondent among 17
Australia91644
Brazil3316117
Canada40231811
China2144519
Chile101346
Colombia5735
European Union10486*/1123323*/49
Guatemala10272
Korea211847
Mexico2515118
New Zealand9030
Norway5030
Panama7161
Singapore1010
Switzerland5020
Uruguay1111
Subtotal306242/26811694/120
All countries593593593593

NOTE: EU numbers as a respondent differ based on whether include cases where EU is listed or just one or more of the EU member states (26 individual member disputes).

While the seventeen Members are obviously important WTO trading nations and participants in the dispute settlement system, the percent of disputes where the seventeen members are engaged in disputes with each other is obviously much smaller than their total number of disputes. Thus, the seventeen members accounted for 51.6% of the requests for consultations filed in the first twenty-five years and were respondents in 45.2% of the requests for consultations. However, when disputes with any of the 118 WTO Members who are not part of the joint statement are removed, the seventeen Members accounted for 19.56% of the cases where one was a complainant and 20.2% of the cases where one was a respondent. This is not surprising as there are many important trading nations who are not part of the seventeen signatories who are active both as complainants and as respondents – United States, Japan, India, South Africa, Argentina to name just five.

Of course, WTO Members do not have to be part of a group interim arrangement to handle ongoing or new disputes. Members can agree not to take an appeal, can agree (as the U.S. and India have done in one case) to hold up appeal until the Appellate Body is back functioning, to name two approaches some are pursuing.

While an interim approach is obviously of interest to many, the core issue remains finding a road forward to address needed reforms to the dispute settlement system. There seems to be little progress on that front. Procedural issues appear easier to resolve if consequences are added for deviation from procedural requirements. However, there is little active consideration of how to address the problem of overreach both prospectively and retroactively to permit a restoration of rights and obligations where panel reports or Appellate Body decisions created obligations or rights not contained in the Agreements.

In a Member driven organization, the hard work of the Secretariat doesn’t overcome fundamentally different views of how the dispute settlement system is supposed to operate. Thus, while it is a positive development that Director-General Azevedo and his team will visit Washington in the near future to discuss U.S. reform ideas, the real challenge is getting agreement on what the system is supposed to be and how to restore the balance that existed when the WTO commenced in 1995.