CHINA’S EXPERIENCE IN DEALING WITH WTO DISPUTE RESOLUTION AND LESSONS FOR VIETNAM

MINISTRY OF EDUCATION AND TRAINING FOREIGN TRADE UNIVERSITY MASTER THESIS CHINA’S EXPERIENCE IN DEALING WITH WTO DISPUTE RESOLUTION AND LESSONS FOR VIETNAM International Trade Policy and Law FULL NAME: DANG THI TRANG Hanoi, 2019 MASTER THESIS CHINA’S EXPERIENCE IN DEALING WITH WTO DISPUTE RESOLUTION AND LESSONS FOR VIETNAM Major: Economics Specialization: International Trade Policy and Law Code: 8310106 Full name: Dang Thi Trang ID: 1606060020 Supervisor: Dr Nguyen Binh Minh Hanoi, 2019 REASSURANCE I hereby declare that my work is the result of my personal research and study under the support and supervision of Dr Nguyen Binh Minh In the whole content of the thesis, what is presented is either personal or aggregated from multiple sources of references which are legible and legally cited Hanoi, April 2019 Dang Thi Trang ACKNOWLEDGEMENT First and foremost, I would like to express my sincere gratitude to my advisor Dr Nguyen Binh Minh for the continuous support of my graduation master thesis, for his patience, guidance and knowledge Hardly could I complete my work without his enthusiastic guidance and suggestions throughout the past five months Beside my advisor, I would like to thank all professors and lecturers in Foreign Trade University, especially professors and lecturers teaching in Master Program of International Trade Policy and Law, who spent all enthusiasm and dedication to bring knowledge to students The knowledge acquired in the learning process is not only necessary for me to finish my thesis but also the luggage that I would confidently carry into the outside world My special thanks also goes to my family, my best friends and my classmates for the encouragement and spiritual supports they gave me to overcome hardness when doing my master thesis Hanoi, April 2019 Dang Thi Trang TABLE OF CONTENT REASSURANCE ACKNOWLEDGEMENT LIST OF ABBREVIATION LIST OF TABLE LIST OF FIGURE LIST OF DIAGRAM LIST OF MAP INTRODUCTION CHAPTER 1: MECHANISM OF DISPUTE RESOLUTION IN WTO 1.1 Definition of Dispute resolution 1.2 Procedure of Dispute Settlement Mechanism 1.2.1 Procedure of Dispute Settlement Mechanism 1.2.2 WTO Dispute Mechanism with the participation of third party 15 1.3 Overview of WTO dispute settlement mechanism 19 CHAPTER 2: CHINA’S EXPERIENCES IN DEALING WITH DISPUTE RESOLUTION UNDER WTO 24 2.1 Overview about China’s economy and policy 24 2.1.1 China’s economy and policy 24 2.1.2 Overview of China in dispute resolution under WTO 27 2.2 China’s experience in dealing with WTO dispute resolution as a complaint.29 2.2.1 China’s experience in dealing with WTO dispute resolution as a complaint in “Acceptance” period 29 2.2.2 China’s experience in dealing with WTO dispute resolution as a complaint in “Consolidation” period 31 2.2.3 China’s experience in dealing with WTO dispute resolution as a complaint in “Activation” period 34 2.3 China’s experience in dealing with WTO dispute resolution as a respondence .37 TABLE OF CONTENT 2.3.1 China’s experience when being the respondence during the “Acceptance” period 37 2.3.2 China’s experience when being the respondence during the “Consolidation” period and “Activation” period 39 China’s experience in dealing with WTO dispute resolution as a third party42 2.5 Experiences from China in dealing with WTO dispute resolution .45 2.5.1 China’s characteristics in dealing with WTO dispute resolution 45 2.5.2 Experiences from China in dealing with WTO dispute resolution 48 CHAPTER 3: LESSONS FOR VIETNAM IN DEALING WITH WTO DISPUTE RESOLUTION 50 3.1 Overview about Vietnam’s economy after WTO accession 50 3.2 Vietnam participates in WTO dispute resolution 51 3.2.1 Vietnam in dealing with WTO dispute resolution as complaint .52 3.2.2 Vietnam in dealing with WTO dispute resolution as a respondence 56 3.2.3 Vietnam in dealing with WTO dispute resolution as a third party 58 3.3 Advantages and challenges of Vietnam in WTO disputes resolution after WTO accession 59 3.3.1 Advantages 59 3.3.2 Challenges 60 3.4 Lessons for Vietnam when joining WTO Dispute Resolution .60 CONCLUSION 67 LIST OF REFERENCES 70 APPENDIX 72 APPENDIX 01: CHINA INVOLVING IN WTO DISPUTE SETTLEMENT AS COMPLAINT 72 APPENDIX 02: US – CHINA TRADE WAR 74 APPENDIX 03: VIETNAM INVOLVING IN WTO DISPUTE SETTLEMENT AS THIRD PARTY 81 LIST OF ABBREVIATION Number Abbreviation Expansion ACWL DSB Dispute Settlement Body DSM Dispute Settlement Mechanism DSU Dispute Settlement Understanding GATT General Agreement on Tariffs and Trade GATS General Agreement on Trade in Services GDP Gross Domestic Product IMF International Monetary Fund US United State 10 TRIPS Trade-Related Aspects of Intellectual Property Rights 11 VCCI Vietnam Chamber of Commerce and Industry 12 VASEP 13 WTO Advisory Center on WTO Law Vietnam Association of Seafood Exporters and Producers World Trade Organization LIST OF TABLE Table 1.1: Leadtime for processing a dispute 10 Table 2.1: China: Structure of the Economy 2017 24 Table 2.2: China economy data, 2017 25 Table 3.1: Vietnam economy data, 2018 .50 Table 3.2: Vietnam participates in WTO dispute settlement as a complaint 43 Table 3.3: WTO members participate in dispute settlement as a respondence .57 LIST OF FIGURE Figure 1.1: WTO agreements referred to in requests for consultations, 1995 - 2016 21 LIST OF DIAGRAM Diagram 1.1: Process of solving a case in Dispute settlement mechanism 11 LIST OF MAP Map 1.1: Map of disputes between WTO Members, 2019 20 Map 2.1: China involving in WTO dispute settlement 28 Map 3.1: Vietnam participates in WTO disputes settlement 52 INTRODUCTION Overview World Trade Organization (WTO) was officially established after the date of January 1st 1995 as a result of the Uruguay Round (1986 to 1995) with the predecessor the General Agreement on Tariffs and Trade (GATT 1947) WTO is considered as a significant success in the development of legal framework in international trade of the twentieth century with a massive system of treaties and agreements, the list of tariff concessions which regulate the commercial rights and obligations of the member states WTO dispute settlement mechanism (DSM) is one of the systems which was established to protect the rights and interests of WTO members in international trade Learning from the shortcomings of the old mechanism, some basic improvements in procedures have been included in the new mechanism, a significant contribution in improving the judicial nature of this procedure as well as enhancing the binding decisions of the dispute resolution On 11 December 2001, China became a Member of the World Trade Organization (WTO) after seventeen years of tough negotiations This was an important step towards making the WTO a truly world organization China considers that its ability to use dispute settlement mechanism to defend its rights and interests which is an important benefit of its WTO membership Regarding to Vietnam, after 12 years of WTO membership, Vietnam had an important beginning in using the dispute settlement mechanism of the WTO to protect the rights and interests of its enterprises in international trade: On the day of the 1st of February 2010, the Government of Vietnam set a very first step in its WTO mission by sending a request for consultations to the US government related to the antidumping measures on products frozen warm water shrimp imported from Vietnam From then, Vietnam seemed to realize the importance of using WTO Dispute Settlement Mechanism as an effective measure to protect the interests in international trade relations On the other hand, the use of this mechanism as a defendant or plaintiff requires an abundance of human resources, experiences as well as financial support Meanwhile the participation as a third party is very noticeable because it will be an opportunity to learn and accumulate lessons and experience in how to take part in a WTO dispute settlement Moreover, although not directly involved in the settlement, Vietnam can gain some benefits from the outcomes of a settlement It cannot be denied that being a developed country, as well as the fact that compared with many other members of WTO, China is becoming the country who use the dispute settlement mechanism effectively Vietnam is rather weak and short in dispute settlement experience, it is necessary for Vietnam to pay more attention in enhancing the ability and capability in disputing a settlement, by learning lessons from China like joining as a third party in WTO dispute settlement Therefore, the purpose of this paper is that, through the analysis about China’s experience in WTO dispute settlement in particular, give the lessons for Vietnam in how to be more effective in using DSM and protecting its benefits Literature review China in dealing with Dispute settlement in WTO has attracted domestic and foreign researchers From 2001 to 2012, there are many researches analyze about the participation of China in WTO and how China using Dispute settlement mechanism to protect themselves However, these researches only point out the facts of China in dealing with WTO dispute settlement and attitude for this problem That study only went into understanding the general and basic issues of WTO dispute settlement mechanism and offering some solutions to overcome difficulties and obstacles and improve the efficiency in the process dispute resolution The analysis of the reasons for winning and lessons learned from China has not yet been drawn The Chinese expert who first studied this problem who we have to mention is Dr Ji Wenhua - an official in charge of dispute settlement activities at China’s WTO Mission in Geneva He was the one who contributed and advised the Chinese government on how to face international dispute resolution in the integration WTO in particular, it should be strengthened cooperation between government and private sectors Moreover, Vietnam should mobilize resources outside the country such as the WTO Secretariat or the WTO Law Advisory Center (ACWL) Hopefully this article can contribute some arguments to make Vietnam more effective in participating in the WTO Dispute Resolution in general and as a third party in particular LIST OF REFERENCES Andrew L Stoler, China’s Role in World Trade Organization and the Doha Round of Multilateral Trade Negotiations, Second World Forum on China Studies, Shanghai, China, 2006 Bryan Mercurio and Mitali Tyagi, China’s Evolving Role in WTO Dispute Settlement: Acceptance, Consolidation and Activation, 2012 Han Liyu & Henry Gao, Dispute settlement at WTO - developing country experience, 2010 Henry S GAO, China in the Wto dispute settlement system: From passive ruletaker to active rule-maker, 2011 Henry S GAO, Elephants in the Room: Challenges of integrating China into the WTO system, 2011 Henry GAO, Taming the Dragon: China 's Experience in the WTO Dispute Settlement System, 2007 Nguyen Thi Thu Trang, Dispute Settlement Mechanism, 2010 Nguyen Tien Vinh, , Foreign experience and the enhancing of the effective participation of Vietnam in the Dispute Settlement Mechanism of the World Trade Organization, Hanoi National University Magazine, Episode 28 (2012) page 117‐ 133 Xiaoming Pan, Developing Countries Participating As Third Parties in the WTO Dispute Settlement, Nagoya University, 2011 10 Wenhua Ji & Huang, Cui China’s Experience in Dealing with WTO Dispute Settlement: A Chinese Perspective, 2011 11 World Trade Organization, Dispute Settlement, 2019 12 Analysis of the Status Quo of China's International Trade Disputes and Countermeasures, 2015, at http://chinawto.mofcom.gov.cn/article/ap/tansuosikao/201507/20150701042921 shtml 13 China annual economic report, 2018, https://www.sinoptic.ch/embassy/textes/eco/20181211_China_Annual.economi c.report.pdf 14 China annual report, 2018, at https://www.uscc.gov/Annual_Reports/2018annual-report 15 Decision No 70/2002/QD TTg, https://thuvienphapluat.vn/van-ban/Bo-mayhanh-chinh/Quyet-dinh-70-2002-QD-TTg-kien-toan-Uy-ban-Quoc-gia-Hop-tackinh-te-quoc-te-49533.aspx 16 Focuseconomics, Vietnam economy data, 2018, at https://www.focuseconomics.com/countries/vietnam 17 US and China trade war, at file:///C:/Users/TECOMEN/Downloads/BVSC++B%C3%A1o+c%C3%A1o+chuy%C3%AAn+%C4%91%E1%BB%81++To%C3%A0n+c%E1%BA%A3nh+cu%E1%BB%99c+chi%E1%BA%BFn+T M+M%E1%BB%B9-Trung+09.2018%20(3).pdf 18 VCCI WTO center, Cơ chế giải tranh chấp quốc tế WTO, http://www.trungtamwto.vn/wto/34-gioi-thieu-co-che-giai-quyet-tranh-chap/1 19 VCCI WTO center, Giải tranh chấp số DS404, http://trungtamwto.vn/chuyen-de/2333-giai-quyet-tranh-chap-so-ds404 20 World Trade Organiztion, Understanding on rules and procedures governing the settlement of disputes, https://www.wto.org/english/tratop_e/dispu_e/dsu_e.htm 21 World trade organization, Trade Policy Review: China, 2016, at https://www.wto.org/english/tratop_e/tpr_e/tp442_e.htm 22 World Trade Organiztion, WTO annual report https://www.wto.org/english/res_e/booksp_e/anrep_e/anrep17_e.pdf 2017, at APPENDIX APPENDIX 01: CHINA INVOLVING IN WTO DISPUTE SETTLEMENT AS COMPLAINT Case number Defendant Case Tittle Year request for consultation DS252 United States United States — Definitive Safeguard Measures on Imports of Certain Steel Products 2002 DS368 United States United States — Preliminary Anti-Dumping and Countervailing Duty Determinations on Coated Free Sheet Paper from China 2007 DS379 United States United States — Definitive Anti-Dumping and Countervailing Duties on Certain Products from China 2008 DS392 United States United States — Certain Measures Affecting Imports of Poultry from China 2009 DS397 EC European Communities — Definitive AntiDumping Measures on Certain Iron or Steel Fasteners from China 2009 DS399 United States United States — Measures Affecting Imports of Certain Passenger Vehicle and Light Truck Tyres from China 2009 DS405 EU DS405: European Union — Anti-Dumping Measures on Certain Footwear from China 2010 DS422 United States United States — Anti-Dumping Measures on Shrimp and Diamond Sawblades from China 2011 DS437 United States United States — Countervailing Duty Measures on Certain Products from China 2012 DS449 United States United States — Countervailing and Antidumping Measures on Certain Products from China 2012 DS452 EU European Union and certain Member States — Certain Measures Affecting the Renewable Energy Generation Sector 2012 DS471 United States United States — Certain Methodologies and their 2013 Application to Anti-Dumping Proceedings Involving China DS492 EU European Union — Measures Affecting Tariff Concessions on Certain Poultry Meat Products 2015 DS515 United States United States — Measures Related to Price Comparison Methodologies 2016 DS516 EU European Union — Measures Related to Price Comparison Methodologies 2016 DS543 United States United States — Tariff Measures on Certain Goods from China 2018 DS544 United States United States — Certain Measures on Steel and Aluminium Products 2018 DS562 United States United States — Safeguard Measure on Imports of Crystalline Silicon Photovoltaic Products 2018 DS563 United States United States — Certain Measures Related to Renewable Energy 2018 DS565 United States United States — Tariff Measures on Certain Goods from China II 2018 APPENDIX 02: US – CHINA TRADE WAR Time Action United State China USTR is authorized to investigate the imposition of import duties on 28/04/2017 aluminum/steel from countries around the world, considering it as a threat to national security The US and China agreed on a trade agreement Accordingly, China 22/05/2017 expanded to enter the agricultural, energy and financial markets for US businesses China is allowed to export cooked poultry to the US USTR initiated an investigation of the Chinese government's policies, 18/08/2017 laws and measures related to technological transformation, intellectual property and patents 7/2/2018 US imposes import duties on washing machine products and solar cells While these products are not imported from China, but in their thesis, the US has only made China a dominant source of global supply US president – Mr Trump signed a memo, including: - Filing a lawsuit against China on the violation of intellectual 22/03/2018 property rights - Limiting investment in major technology areas - Applying taxes on products from China (machinery and technology in telecommunications, space, ) The US imposes import duties on steel and aluminum from most 23/03/2018 countries around the world, including China China imposes import duties (1525%) on 128 goods (worth $ billion) from the US including recycled fruits, wine, steel pipes, pigs, and aluminum, in response to US import duties applied to Chinese steel and aluminum products 2/4/2018 3/4/2018 USTR announced the initial list of 1,334 items from China (worth $ 50 billion) will be subject to a 25% import tax (the list is revised on June 15, 2018), mainly public goods High-tech, to compensate for the damage caused by China stealing intellectual property rights China opposes the US list, and proposes to impose a 25% import tax on 106 US products (worth $ 50 billion) including soybeans, cars, and chemical products (the list has revised on June 16, 2018) 4/4/2018 5/4/2018 President Trump announced that he would consider applying more import taxes to 100 billion dollars of goods imported from China China complained to the WTO about the US imposing import duties on its steel and aluminum (DS The US Chamber of Commerce concluded that China's ZTE company violated agreements to 16/04/2018 ban trade with Iran and North Korea, so the company was prohibited from trading with US businesses for seven years China claims to impose an antidumping duty of 178.6% on Cao Luong goods imported from the US 17/04/2018 3-7/05/ 2018 China and the US in Beijing have no dialogue The US requested a $ 200 billion cut in trade deficit within two years, while China opposed ZTE's decision and demanded an end to the Chinese government investigation ZTE stopped all operations in the US 10/5/2018 17/05/2018 The US and China began dialogue in Washington 18/05/2018 The Chinese Chamber of Commerce announced that it would stop imposing anti-dumping duties on US salaries at the dialogue round 20/05/2018 China and the United States agree to suspend import tariffs when China proposes that it will buy more goods from the United States Trump announced to withdraw from the agreement on May 22, 29/05/2018 proceeding with a tax-imposed plan 04-05/06/ 2018 China and the US conduct a two-day dialogue in Beijing 7/6/2018 The US and ZTE agreed to allow ZTE to restore operations in a limited way in the United States America announced the list of final taxes List will impose a 25% tax rate on 818 products worth USD 34 billion (reduced 15/06/2018 from 1,334 initial products) and officially take effect on July 6, 2018 List includes 284 products (worth $ 16 billion), still in the process of consideration China also changed its list of taxes (25% for 106 products) List will impose a 25% tax on 545 products (worth $ 34 billion), officially in effect on July 6, 2018 List includes 114 products (16 billion 16/06/2018 USD) 6/7/2018 10/7/2018 2/8/2018 The US officially applies a 25% China responded with a similar import tax package to USD 34 25% tariff package to US $ 34 billion from China billion of imports from the US The US announced List is expected to impose a 10% tax on 6,000 products originating from China, worth $ 200 billion The US considers to impose a 25% tax instead of the 10% expected to raise USD 200 billion from China in List The US Department of Commerce also added 44 Chinese goods to its export control list, considering them to be "a serious risk" of threatening US national security In response to the US List 3, China also announced its List 3, which is expected to impose additional taxes on 5,207 items from the US worth $ 60 billion 3/8/2018 7/8/2018 The US announced the final list of List 2, applying 25% tax (instead of 10% as expected) to 279 items from China, worth about $ 16 billion (dropping items compared to the original) China filed a lawsuit against the United States on the WTO about the US imposing tariffs on solar cells, affecting China's commercial interests 14/08/2018 22-23/08/ 2018 In response, China also announced List to impose a 25% tax on US $ 16 billion of goods from the US, officially taking effect on August 23, 2018 Representatives from the US and China met and discussed for the first time since the commercial war began No significant progress China's list of tax repayments worth US $ 16 billion aimed at 333 items from the United States that are in effect at the same time as US The US officially imposes a 25% tax orders 23/08/2018 import tax on 279 items from On the same day, China also China (US $ 16 billion) complained to the WTO about the imposition of import duties under Article 301 to $ 16 billion of goods from China (according to US List 2) 6/9/2018 At the end of the deadline, public opinion for the 200 billion USD package is proposed by the Trump administration China claims to retaliate by imposing a tax on 60 billion dollars of goods imported from the United States 7/9/2018 President Trump threatened to tax an additional 267 billion USD of imports from China after a $ 200 billion package if deemed necessary 12/9/2018 The United States proactively proposed a negotiation with China and the leader would be US Secretary of Finance Mnuchin, before the tax-imposed package of $ 200 billion of Chinese goods was officially in effect USTR announced the official version of List worth $ 200 billion, imposing a 10% tax rate 17/09/2018 effective from September 24, 2018; then increase the tax rate to 25% since January 1, 2019 18/09/2018 China announced that it would conduct a tax repayment package worth US $ 60 billion on goods from the United States, which will come into effect at the same time as the US $ 200 billion tax package on Chinese goods, on September 24, 2018 22/09/2018 China canceled a meeting with the US to negotiate a US $ 200 billion tax package The US officially imposed a 10% tax on 200 billion USD from 24/09/2018 China, bringing the total value of Chinese goods to 250 billion USD This tax rate will increase to 25% China officially imposes 5-10% tax on 60 billion USD from the US China released the "White Book", referring to the position of from January 1, 2019 25/10/2018 government in US-China trade relations The US and China officially resumed contact, preparing for the meeting on the sidelines of the G20 Conference The US announced it would be prepared to announce a list of tariffs on all remaining Chinese 30/10/2018 goods worth US $ 257 billion at the beginning of December 2018 if the G20 sideline meeting failed to progress The United States and China reached a "commercial truce", agreed not to impose new tariff measures within 90 days, until March 1, 2019; and the two sides will negotiate to reach a common trade agreement 2/12/2018 The United States will postpone the List tax increase plan from 10% to 25% expected to apply on January 1, 2019, and not impose new taxes on US $ 267 billion of goods from China In return, China will buy more goods from the US, especially agricultural and energy products APPENDIX 03: VIETNAM INVOLVING IN WTO DISPUTE SETTLEMENT AS THIRD PARTY No Dispute Number Dispute Name DS343 United States — Measures Relating to Shrimp from Thailand DS360 India — Additional and Extra-Additional Duties on Imports from the United States DS 375 European Communities and its Member States — Tariff Treatment of Certain Information Technology Products DS 376 European Communities and its Member States — Tariff Treatment of Certain Information Technology Products DS 377 European Communities and its Member States — Tariff Treatment of Certain Information Technology Products DS399 United States — Measures Affecting Imports of Certain Passenger Vehicle and Light Truck Tyres from China DS402 United States — Use of Zeroing in Anti-Dumping Measures Involving Products from Korea DS405 European Union — Anti-Dumping Measures on Certain Footwear from China DS414 China — Countervailing and Anti-Dumping Duties on Grain Oriented Flat-rolled Electrical Steel from the United States 10 DS422 United States — Anti-Dumping Measures on Shrimp and Diamond Sawblades from China 11 DS430 India — Measures Concerning the Importation of Certain Agricultural Products 12 DS431 China — Measures Related to the Exportation of Rare Earths, Tungsten and Molybdenum 13 DS432 China — Measures Related to the Exportation of Rare Earths, Tungsten and Molybdenum DS433 China — Measures Related to the Exportation of Rare Earths, Tungsten and Molybdenum 15 DS437 United States — Countervailing Duty Measures on Certain Products from China 16 DS449 United States — Countervailing and Anti-dumping Measures on Certain Products from China 17 DS464 United States — Anti-dumping and Countervailing Measures on large residential washers from Korea 18 DS471 United States — Certain Methodologies and their Application to Anti-Dumping Proceedings Involving China 19 DS474 European Union — Cost Adjustment Methodologies and Certain Anti-Dumping Measures on Imports from Russia 20 DS484 Indonesia — Measures Concerning the Importation of Chicken Meat and Chicken Products 21 DS490 Indonesia — Safeguard on Certain Iron or Steel Products 22 DS504 Korea — Anti-Dumping Duties on Pneumatic Valves from Japan 23 DS508 China — Export Duties on Certain Raw Materials 24 DS509 China — Duties and other Measures concerning the Exportation of Certain Raw Materials 25 DS511 China — Domestic Support for Agricultural Producers 26 DS517 China — Tariff Rate Quotas for Certain Agricultural Products 27 DS518 India — Certain Measures on Imports of Iron and Steel Products 28 DS529 Australia — Anti-Dumping Measures on A4 Copy Paper 14 DS533 United States — Countervailing Measures on Softwood Lumber from Canada 30 DS534 United States — Anti-Dumping Measures Applying Differential Pricing Methodology to Softwood Lumber from Canada 31 DS545 United States — Safeguard measure on imports of crystalline silicon photovoltaic products 32 DS546 United States — Safeguard measure on imports of large residential washers 29 ... 2.5 Experiences from China in dealing with WTO dispute resolution .45 2.5.1 China’s characteristics in dealing with WTO dispute resolution 45 2.5.2 Experiences from China in dealing with WTO dispute. .. dispute resolution under WTO 27 2.2 China’s experience in dealing with WTO dispute resolution as a complaint.29 2.2.1 China’s experience in dealing with WTO dispute resolution as a complaint in. .. 2.2.2 China’s experience in dealing with WTO dispute resolution as a complaint in “Consolidation” period 31 2.2.3 China’s experience in dealing with WTO dispute resolution as a complaint in