(Xiao Yongping, Director and Cheung Kong Scholars Distinguished Professor, Wuhan University Institute of International Law)
Faced with the economic and trade frictions stirred up and upgraded by some Americans against China, China has always adhered to the position of “Not Willing to Fight, Not Afraid to Fight, If Necessary, We Dare to Fight”(不愿打, 不怕打, 必要时不得不打). This position not only demonstrates China’s willingness to safeguard the multilateral trading system, but also represents China’s legitimate choice to counter unilateral sanctions imposed by the United States in accordance with international law.
I. “Not Willing to Fight” reflects China’s good will to adhere to win-win cooperation and safeguard the multilateral trading system.
As to the Sections 301of the US Trade Act of 1974, the Dispute Settlement Body (DSB) of the World Trade Organization (WTO) reached a conclusion therefor as early as 1998. In retaliation for the EU’s banana import restrictions, the United States initiated a Section 301 Investigation, imposing punitive 100% tariffs on items representing US$ 520 million in imports from the EU. The EU subsequently lodged a complaint with the WTO Dispute Settlement Body. The Panel held that although Section 301 per se was inconsistent with WTO rules, it would not necessarily violate WTO rules as the United States had promised to strictly abide by the rules of the DSB in its Section 301 Investigation through the Statement of Administrative Action.
Thus, the Section 301 Investigation of the United States must be subject to the current WTO rules. However, the restriction only concerns the procedural issue of the implementation of Section 301 by the United States, and does not address the legitimacy of unilateral measures taken by the United States under Section 301. In fact, the power of Section 301 lies precisely in the threat of trade sanctions, rather than the sanctions per se. In view of the fact that before the ruling of the said case was issued, the United States brought a total of 119 Section 301 Investigations, only 15 of which eventually ended up with actual trade sanctions. Most U.S. trading partners are forced to open their markets or enter into bilateral agreements with the United States under the threat of trade sanctions. Due to the wide-coverage content and the ambiguous wording of Section 301, as well as the closeness and the slow evolution of WTO rules, the United States is highly inclined to apply Section 301.
The 301 Investigation initiated by the U.S. against China this time continues the previous practice. The difference is that the United States has been claiming that it advocates an impairment of interests outside WTO rules, which reflects the political intention of the U.S. to apply Section 301 beyond the WTO system and is a serious challenge to the WTO-centered multilateral trading system.
China has repeatedly expressed its position of “Not Willing to Fight”. However, after some Americans put forward a tariff increase of US$ 50 billion, China was forced to announce the imposition of equivalent tariffs on goods originating from the United States. At the same time, China resorted to WTO to accuse the United States of violating Articles 1, 2 of the General Agreement on Tariffs and Trade (GATT) and Article 23 of the Understanding on Rules and Procedures Governing the Settlement of Disputes (DSU). Thus it can be seen that China hopes to adopt the “two-pronged approach” - bilateral negotiations and WTO Dispute Settlement Body - to lead the gaming between the two sides into the WTO framework as far as possible, so that WTO dispute settlement mechanism can play a stabilizing and balancing role in the China-US trade war and maintain the WTO rule-oriented multilateral trading system.
However, during the China-US economic and trade negotiations, some Americans have proposed to impose tariffs on Chinese imports worth US$ 200 billion and US$ 300 billion successively, thus escalating the trade war with China. The above facts show that China strictly abides by the existing rules of international law and strives to safeguard the authority of the current multilateral trading system, while the U.S. unilateral trade measures represented by Section 301 have become a serious threat to the normal operation of the multilateral trading system.
II. “Not Afraid to Fight” demonstrates China’s basic position of opposing internationally wrongful acts and promoting the construction of new international relations.
The future direction of China-US trade war will certainly depend on the gaming of comprehensive strength between the two countries. Given the unlawfulness of the unilateral actions taken by the U.S. in accordance with Section 301, and as a Chinese saying goes “A just cause enjoys abundant support while the unjust one finds little” (得道多助、失道寡助), China is confident of successfully counteracting the unilateral sanctions imposed by the U.S. through the trade war.
Firstly, the Section 301 action of the United States includes two stages: investigation and unilateral sanctions. If the Section 301 Investigation is an administrative act of the U.S. government and can be governed by U.S. domestic law, its sanctions will inevitably involve its trade relations with other countries and must be subject to multiple restrictions of the international law. Once the relevant sanctions are imposed, the actions of the United States will directly violate the bottom line set by the WTO Panel in the “case of U.S. Section 301”, that is, the basic requirement of Article 23 of DSU as to prohibiting WTO members from taking unilateral retaliatory measures.
Secondly, in order to escape the jurisdiction of DSU, some Americans only evasively generalize in this Section 301 Investigation that China’s relevant trade policies, measures and practices are unreasonable or discriminatory, which may exert restrictions or burdens on U.S. trade interests, while not mentioning China’s violation of trade agreements. In fact, the accusations of China implementing mandatory technology transfer and discriminatory technology licensing, etc. by some Americans are all related to the General Agreement for Trade of Service (GATS), the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) and the Protocol on the Accession of the People's Republic China. Therefore, this Section 301 Investigation put forward by some Americans should fall under the jurisdiction of WTO. The United States’ special tariff imposition on China clearly violates the most-favored-nation treatment (MFN) and tariff concession commitments stipulated by GATT, and thus directly damages China’s interests under WTO.
Thirdly, even if WTO rules are not applicable according to the opinions of some Americans, their actions should comply with the provisions of general international law as well. As a countermeasure, Section 301 Sanction should be subject to the Draft Articles on Responsibility of States for Internationally Wrongful Acts (hereinafter referred to as the Draft) adopted by the International Law Commission (ILC) of the United Nations in 2001. According to the provisions of Articles 2 and 49 of the Draft, the adoption of countermeasures must be on the premises of an internationally wrongful act. However, apart from discriminatory technology licensing, the Section 301 Report by some Americans does not point out any internationally wrongful act by China. Article 51 of the Draft requires countermeasures to be commensurate with the damage suffered by the injured State. The United States only emphasizes that its future interests are damaged, but such interests themselves are difficult to measure. More importantly, Article 50 of the Draft stipulates that when a dispute has been submitted to a court or tribunal competent to make a binding decision on the parties, the State taking countermeasures must stop the relevant measures without unreasonable delay. However, after China submitted the dispute to the WTO Dispute Settlement Body, the United States not only did not stop its sanctions, but rather escalated the same. This is a blatant violation of the above provisions.
Fourthly, even under the U.S. law, the Section 301 Investigation and Sanction have also violated the procedures stipulated in Sections 303 and 304 of the US Trade Act and the commitments made by the Statement of Administrative Action. According to the above provisions, the Office of the United States Trade Representative (USTR) should refer disputes involving WTO to the WTO Dispute Settlement Body for settlement, but some Americans take unilateral measures indiscriminately on all four disputes.
This shows that the Section 301 Investigation and Sanction carried out by some Americans are illegal, whether in accordance with WTO rules, general international law or even American domestic law.
III. The position of “If Necessary, We Dare to Fight” reflects China’s strategy of safeguarding national core interests and the overall interests of the international community in accordance with the international law.
As the unilateral sanctions proposed by some Americans violate both WTO rules and general international law, China has the right to resort to WTO to settle disputes, and to take countermeasures directly against the illegal actions mentioned above by the United States as well. The international legal basis for China’s action includes:
1. The national security exception stipulated in Article 21 of GATT. Both China and the United States believe that economic security is a vital part of national security. The security exception clause in Article 21 of GATT leaves room for Member States to take exceptional measures. Although security exception is the most controversial exception clause with the broadest coverage in GATT, China can absolutely invoke this clause as the basis of international law for trade countermeasures. Of course, the security exception can neither be interpreted too accurately, or it will infringe upon national sovereignty; nor can it be interpreted too broadly, or it will impact the foundation of the multilateral trading system. We need to strike a balance between formal sovereignty and effective sovereignty.
2. The obligation exemption under Article 9 of GATT. Article 9 of GATT stipulates that Member States shall be exempted from specific obligations under special circumstances. In the context of effective economic and trade negotiations between China and the United States, the relevant measures taken by some Americans flagrantly violate many international obligations such as Article 23 of DSU, most-favored-nation treatment and binding tariffs, thus seriously jeopardizing China-US trade and world economic development. China has reason to believe that there are “special circumstances” in China-US trade and the international multilateral trading system, so it has the right to claim WTO exemption, that is, China can restrict the import of American products without being suspected of violating WTO rules.
3. Beyond the scope of Article 23 of DSU. Article 23 of DSU only restricts members to “seek the correction of WTO violations”, however, China’s trade countermeasure is not to “correct” the breach by the United States, but to mitigate the losses caused to China due to the imposition of additional tariffs by the United States. From China’s initial “equivalent strength and scale” to the later “different scale and differentiated tax rate”, it shows that the purpose of China’s countermeasures is to stop losses of and grant remedies to domestic private subjects rather than to retaliate between countries. Therefore, China’s countermeasures are not covered by Article 23 of DSU.
4. The material breach of contract stipulated in Article 60 of the Vienna Convention on the Law of Treaties. Article 60 of the Vienna Convention on the Law of Treaties stipulates that, in the case of a “material breach” by a State, the State specially affected is entitled to “invoke the breach as a ground for suspending the operation of the treaty in whole or in part in the relations between itself and the defaulting State”. Some Americans continue to escalate Section 301 Sanction, which not only exerts a huge impact on China-US trade, but also endangers the development of the world economy. It is a clear violation of the core provisions of WTO, which is enough to lead to the frustration of the purpose of WTO and is clearly a “material breach”. Comparatively speaking, China’s countermeasures are passive and temporary, and maintain considerable restraint, which are in full conformity with such conditions as “good faith, rational, considering the interests of other countries” as stipulated in the Article.
5. The state of necessity provided for in Article 25 of the Draft. Pursuant to Article 25 of the Draft, acts not in conformity with an international obligation do not constitute internationally wrongful acts under “the state of necessity”. The precondition is that the act is the only way for the State to safeguard an essential interest against a grave and imminent peril and does not seriously impair an essential interest of the State or States towards which the obligation exists, or of the international community as a whole. The decision of some Americans to implement Section 301 Sanction is obviously a “grave and imminent peril”, which affects China’s essential interests and the overall interests of the international community. China has resorted to the WTO dispute settlement mechanism, but according to the procedure of the mechanism, it takes at least two years for a case to go from bilateral consultation, panel review, appellate body deliberation to ruling enforcement. At the same time, China has conducted 12 rounds of sincere negotiations with the United States, but some Americans still decided to implement Section 301 Sanction. In this case, China has no choice but to take countermeasures. Therefore, China’s current trade countermeasures conform to the conditions stipulated in Article 25 of the Draft and do not constitute an “internationally wrongful act”.
It has been proved by facts that some Americans are using hegemony to protect hegemony; China’s adherence to the position of “Not Willing to Fight, Not Afraid to Fight, If Necessary, We Dare to Fight” is to defend China’s core interests and international rules and the world’s well-being with the rule of law, and to strive for the return of resolving differences through consultation by the two sides on the basis of the rule of law.
This article was originally published in Guangming Daily (光明日报) (02 September 2019, Section 12).
The views and opinions expressed are solely those of the authors and do not necessarily reflect the official policy or position of China Justice Observer.
Contributors: Yongping XIAO 肖永平