WTO Dispute Panel Rejects EU's Bid to Countervail Chinese Transnational Subsidies
A World Trade Organization dispute panel on Oct. 2 found that the EU violated its WTO commitments in its antidumping and countervailing duty proceedings on stainless steel cold-rolled flat products from Indonesia. Specifically, the dispute panel rejected the European Commission's attempt to countervail Chinese transnational subsidies in the Indonesian steel sector.
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However, the panel said it didn't need to address whether the Agreement on Subsidies and Countervailing Measures (SCM Agreement), which allows signatories to countervail subsidies "by a government," categorically bars countervailing transnational subsidies. The panel said it limited its finding to the EU's specific means of addressing transnational subsidies from China to the Indonesian steel sector.
The EU said the SCM Agreement's phrase "by a government" lets it attribute the assistance made by the Chinese government to the Indonesian government. The commission said that under Article 11 of the International Law Commission's Articles on the Responsibility of States for Internationally Wrongful Acts, "conduct can be attributed to a State 'if and to the extent that the State acknowledges and adopts the conduct in question as its own.'"
The commission then made a host of findings on whether the Indonesian government actually "induced" the Chinese government to support its steel industry through certain preferential financing and other support measures. The determination that the Indonesian government induced the Chinese government to provide such support was the basis for the EU's decision to attribute the subsidies to the Indonesian government.
The dispute panel held that the SCM Agreement doesn't allow a signatory nation to countervail another nation's efforts to induce subsidies from another nation. While the agreement does cover a foreign government's efforts to induce private parties to provide these subsidies, it doesn't extend to "government-to-government inducement." Such action isn't specifically included in the SCM Agreement, and the text of the agreement indicates that the list of actions that a nation is permitted to countervail is a "closed" list, the panel said.
In the WTO dispute, Indonesia also challenged the European Commission's findings that the Indonesian government provided nickel ore for less than adequate remuneration and had forgone "revenue that was otherwise due under an import duty exemption scheme, an income tax holiday, and an income tax allowance facility."
The dispute panel held that the commission violated Article 1.1(a)(1) of the SCM Agreement by "concluding that information on the record demonstrated that all nickel ore mining companies in Indonesia are 'public bodies'" and finding that the Indonesian government "entrusted or directed nickel ore mining companies -- as private bodies -- to provide nickel ore to the stainless steel producers in Indonesia."
Regarding the forgone revenue argument, the panel said the commission violated the SCM Agreement "by deeming import duty exemptions for raw materials imported into bonded zones to be financial contributions and subsidies without providing Indonesia an appropriate opportunity to undertake a 'further examination.'"
While the panel found a host of SCM Agreement violations in the EU's CVD investigation, it found no such violations in the AD agreement. The panel said Indonesia didn't establish that the commission failed to "make comparisons at the same level of trade," make adjustments to normal value or adjust export price due to the involvement of related traders in the export sales.