Saturday, 3 February 2007

China's Accession and Auto Parts: the debate

There has been some interesting debate at the International Economic Law and Policy Blog on the auto case against China. I've copied the contents here for ease of reference.

China Accession and Auto Parts

The WTO Director-General has recently named the panel in the China Auto Parts case.  It appears to be an excellent panel.  It will be chaired by Julio Lacarte, a former Appellate Body member and veteran of at least six GATT or WTO panels.  The other two panelists are Ujal Singh Bhatia, India's ambassador to the WTO, and Wilhelm Meier, a Swiss diplomat.  Meier has served on four previous WTO panels.  (Of course, the WTO lacks the transparency to disclose the background or qualifications of panelists, but I was able to gather this information from published reports and the website.)

This is the first dispute against China and the first dispute claiming a violation of an accession agreement.  The accession-related claims will be particularly interesting because the panel may be asked to decide whether an accession commitment is enforceable under the DSU and, if so, why.  This is a more difficult conceptual question than may appear at first blush because the status of accession agreements is unclear.  Are they WTO secondary law?  Or are they constitutional changes to the WTO text that rise to the level of covered agreements. 

I recently finished a paper that explores some of these issues.  It is called "Mapping the Law of WTO Accession" and is available at


Dear Steve,

This is a very interesting issue. In my discussions with the MOFCOM officials in the past, I've mentioned to them the possibility of challenging certain accession commitments (special safeguard measures) as inconsistent with WTO basic principles but they have been very reluctant to entertain such argument. Some of my arguments can be found in my recent article "China's Participation in the WTO: A Lawyer's Perspective" at With regard to the current case, the only argument they made when we discussed this back in last April was that the extra charge is not tariff thus would not come under para. 93, instead of arguing the whole para. 93 commitment is invalid. I wonder whether they would later change their mind with the help of aggressive western lawyers.

Also, this is the second dispute against China as there was the case China — Value-Added Tax on Integrated Circuits in 2004. China quickly settled that case so no panel was established. In this case, however, China seems to be ready to fight along. Is China finally being converted to "aggressive legalism"?

You say in you article that for China all WTO plus commitments are spelled out in detail in China's accession protocol. Now, China's protocol, including the rule commitments set out in the Working Party Report, constitutes "an integral part of the WTO Agreement" (Section 1.2 of the Protocol). It seems then that, at least for China, the Protocol becomes part of a "covered agreement" which is under the DSU.


I think Steve's point, if I understand correctly, is which level of hierarchy the accession commitments stand at in the whole legal system. This might not be a big problem in the current auto parts case, as the commitment under para. 93 WPR is essentially a tariff binding commitment as commonly found in Members' schedules. It would create difficult problem, however, when you have accession commitments which derogate from the key WTO principles. One example is the special textile safeguard measure. As I've argued in my article "China's Participation in the WTO: A Lawyer's Perspective":

"The legal validity of some of the provisions seems to be rather questionable. Take the special textile safeguard measure for example: China is required to consult with the Member invoking the clause to limit its own exports and to hold its textile exports during the consultation period. This is the very kind of measures that have been explicitly prohibited under Article 11(b) of the Safeguard Agreement, i.e., grey area measures which include voluntary export restraints, orderly marketing arrangements or other similar measures. One might argue that the prohibition here does not apply to the Chinese Accession Protocol because Article 11(c) states that the entire Safeguards Agreement does not apply to "measures sought, taken or maintained … pursuant to protocols … concluded within the framework of GATT 1994". The author wishes to point out, however, the Chinese Accession Protocol, legally speaking, is not concluded "within the framework of GATT 1994" as the old Accession Clause, Article XXXIII of the GATT, has been replaced by Article XII of the Marrakech Agreement. Thus, it is a protocol concluded within the framework of the Marrakech Agreement, and, as such, does not fall under the carve-out of Article 11(c) of the Safeguards Agreement. Second, many of these provisions are ambiguous and nobody is quite sure as to exactly how they work. This is illustrated in the recent spat between the Chinese and US governments as to whether the US has properly satisfied the requirements under paragraph 242 of the Working Party Report before applying special textile safeguard measures against Chinese textile products."

I've discussed this with several former colleagues at the WTO Secretariat but different people seem to have different views. I would love to hear what everyone else think on this issue.

Hi Henry,

Are you certain regarding the limited reading you give to "within the framework of GATT 1994?" Without having done any research, I suppose that it is initially technically better to understand it as requiring protocols to the GATT 1994, but it might be understood as absurd, as the GATT 1994 is not a separate treaty.

Dear Prof. Trachtman,

Thanks for the excellent point. I totally agree that it seems to be absurd to talk about protocols to the GATT 94 as it is impossible to join the GATT alone after the WTO was established, but joining the GATT was possible before the WTO was established. Furthermore, GATT 94 Article 1 states that:

" 1. The General Agreement on Tariffs and Trade 1994 ("GATT 1994") shall consist of:
(b) the provisions of the legal instruments set forth below that have entered into force under the GATT 1947 before the date of entry into force of the WTO Agreement:

(i) protocols and certifications relating to tariff concessions;

(ii) protocols of accession"

Thus the protocols referred to are the protocols under the old GATT 47, which has been incorporated into GATT 94. On the other hand, if the protocols have been concluded under the WTO Agreement, as in China's case, the carve-out under Article 11.1(c) of SG Agreement does not apply.

I believe Steve's new article is the first piece that examines WTO accession-related legal issues in a comprehensive and systematic manner. Although I have not read the final version of the article, I will throw out some thoughts here (some old, some new).

Interpretation of China's accession protocol (and Vietnam's) may raise complex law of treaty questions at various levels. The ultimate problem stems from article XII of the WTO Agreement, which permits the accession agreement to include country-specific commitments (both commercial and rule commitments) in addition to the market access commitments set out in the goods and services schedules of the acceding country. If the only country-specific commitments were those in the schedules, no issue of interpretation would arise from the accession protocol in the first place. The WTO Agreement, however, is silent as to how such country-specific commitments fit into the WTO legal structure.

It is true that all accession protocols have been 'integrated' into the WTO Agreement by a simple declaration to that effect in the protocols. But technically, the parties to the accession protocol are the acceding country and the WTO (a bilateral treaty between a state and an international organization), which are not the same as the parties to the WTO Agreement. How should the two treaties integrate when the parties are not the same? This is not just a pure theoretical question. For instance, how can the substantive terms of the accession protocol be amended? Article X of the WTO Agreement may not apply technically.

Further, it is unclear whether the commercial commitments set out in the protocol and the Working Party Report outside the schedules should be treated the same way as the scheduled commitments. For example, the market access commitments in the goods schedule can be renegotiated periodically under GATT art. XXVIII. But can the commercial commitments in the Protocol be renegotiated according to the same rule? China has made various commercial commitments outside the schedule, including a tariff commitment on auto parts (now under dispute), a commitment on foreign direct investment in the auto sector, and a commitment not to impose export tariffs. The commitment not to impose export tariffs may become an issue of dispute between EU and China over China's restrictions on coke exports, as indicated in the most recent annual review of China's compliance. Since GATT schedules do not include export tariff concessions, how should China's export commitment be treated in terms of revision or withdrawal?

Technically, the accession terms will prevail when in direct conflicts with general provisions of the WTO agreements (such as the conflict between the China textile safeguard and the Safeguard Agreement mentioned by Henry) under the principle of lex specialis. The fundamental problem, of course, is that many country-specific terms cannot square with the WTO basic principles of nondiscrimination, trade liberalization, and multilateralism. They undermine the credibility of the WTO as a rule-based system. The panels and the AB may be able to reduce the damage through sophisticated legal techniques in interpreting the accession protocols. But they cannot declare particular accession terms as "unconstitutional" under WTO law.

Hi Julia,

Two comments on your post:
1. You mentioned that "the parties to the accession protocol are the acceding country and the WTO (a bilateral treaty between a state and an international organization), which are not the same as the parties to the WTO Agreement." While indeed Art. XII.1 only mentions the WTO, which can be interpreted as an IO, Art. III and IV, however, state that the WTO shall only function through the Min. Conf. and Gen. Council. Moreover, under Art. XII.2, decisions on accession shall be taken by the Min. Conf. Thus, this essentially means that the agreement is between China and all the existing Members.
2. In relation to your comment on the conflict between the WTO accession commitments and basic WTO principles, I also want to point to the fact that under the WTO Agreement, accessions only have to be approved by 2/3rd of the membership, while amending GATT Art. I would need unanimity from the membership (Art. X.2). Even though the WTO has adopted decision of requiring accessions now be approved by consensus, that is still a lower requirement compared to unanimity. The China-specific provisions apparently violated MFN. So now the question is, can you approve by consensus something which requires unanimity according to the WTO Agreement?

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