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

This paper will analyze detailed about China in using Dispute Settlement Mechanism to protect their rights and interests as a complaint, respondence, a third party from which to make the

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

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

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

REASSURANCE 1

ACKNOWLEDGEMENT 2

LIST OF ABBREVIATION 5

LIST OF TABLE 6

LIST OF FIGURE 6

LIST OF DIAGRAM 6

LIST OF MAP 6

INTRODUCTION 1

CHAPTER 1: MECHANISM OF DISPUTE RESOLUTION IN WTO 7

1.1 Definition of Dispute resolution 7

1.2 Procedure of Dispute Settlement Mechanism 9

1.2.1 Procedure of Dispute Settlement Mechanism 9

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

2.3.2 China’s experience when being the respondence during the

“Consolidation” period and “Activation” period 39

2.4 China’s experience in dealing with WTO dispute resolution as a third party 42 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

Number Abbreviation Expansion

Producers

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

process: Wenhua JI and Cui HUANG, “China’s Experience in Dealing with WTO Dispute Settlement: A Chinese Perspective”, (2009) Besides, we also can mention many researches about this issue: Jessica C Liao, “China’s Reluctant Usage of The WTO Dispute Settlement System”, (2011)

Regarding to the foreign experts, there are many experts choosing this field for their research Since China joined WTO, Henry Gao has followed closely the process of China in dealing with WTO dispute settlement He has many in-depth articles on this issue In 2007, he had an analysis of China's experience participating

in the international dispute resolution process at the time of joining Subsequently,

in 2010 Mr Henry Gao continued to work with Hanyu Liu to study about the WTO dispute settlement, including an analysis of China's current international dispute settlement process In 2011, Henry Gao continued to make certain judgments about China's use of the international trade dispute settlement system, assessing China's transformation in acquiring the trade disputes in WTO, from passive reception at the first stage to active making comments and rules in the WTO’s intergration

Henry S GAO, “Taming the Dragon: China 's Experience in the WTO Dispute Settlement System”, (2007)

Hanyu liu & Henry S GAO, “Dispute settlement at the WTO”, 2010

Henry S GAO, “China in the WTO dispute settlement system: From passive rule-taker to active rule-maker?” (2011)

In additions, there are many researches about this field, “China’s Evolving Role in WTO Dispute Settlement: Acceptance, Consolidation and Activation” by Bryan Mercurio and Mitali Tyagi at The Chinese University of Hong Kong in 2012 This research also has a very profound analysis of China's attitude towards the international dispute settlement mechanism after its accession to the WTO in 2012 The article divided time into 3 stages: “Acceptance, consolidation and activation” which clearly analyze the attitudes of China at this stage through each specific situation However, the article has not given China's experience and reasoning and arguments in each case, it only shows the Chinese attitude

Research questions

In alignment with my interest in studying lessons for Vietnam in joining as a member of WTO and using the WTO dispute settlement mechanism effectively, this paper contributes to the research by answering the following research questions The first question which should be answered is what the WTO Dispute Settlement Mechanism is To exactly understand this issue, WTO Agreements and Dispute Settlement Understanding are the most reliable information sources to know how the Dispute Settlement Mechanism works

With nearly 20 years of in using DSM to protect their rights and interests in international trade China, which have the similar conditions as Vietnam, is very active in this kind of settlement and worth being considered as an example for Vietnam The changes in Chinese attitudes from the start of WTO accession until they became very popular users of the international dispute settlement system gave Vietnam a lot of lessons This paper analyzes China's experience when dealing with international dispute resolution for nearly twenty years from which it draws lessons for Vietnam

The second question is how China participate in WTO dispute settlement mechanism and point out that how they becoming get on well and successfully using it After that, parallel with the factual situation of Vietnam, the most essential question which should be withdrawn from this paper is the lessons for Vietnam to have more efficiency in raising capacity in WTO dispute settlement

Methodology

Any analysis of this paper will have to take account of two main methodology First, the factual record of dispute cases (Who was involved, who began each case and against whom? Who participated as the third party and what were the results?) as well as the previous researches around the major issues of WTO DSM This kind of methodology will help us have the basic understanding about DSM and give us the foundation for withdrawing findings for the case of Vietnam

Second, although the invention of third party is not so fresh, not so many public researches discussing about it At this time, opinions and comments of several professors who gained a lot of experiences in WTO for comments and opinions are very essential This paper will use them as the reliable reference to analyze this topic It means that Expert Methodology will be used in this paper

Scope of Research

This paper will discuss around the overview information of the WTO as well

as its dispute settlement like: what is dispute settlement, the procedure of WTO dispute settlement and overview of dispute settlement in WTO now

This paper will analyze detailed about China in using Dispute Settlement Mechanism to protect their rights and interests as a complaint, respondence, a third party from which to make the most objective assessments of China’s attitude to getting the experiences for each certain period

Along with the development of the economy and the participation in WTO, through analyzing China’s participation in the dispute settlement system one can see

that three distinct phases emerge, namely an Acceptance, Consolidation and

Activation (Bryan Mercurio and Mitali Tyagi, 2012) Through these three distinct

phases, the article describes how China has transitioned from a timid new member lacking the confidence and understanding to fully utilise the dispute settlement system to become on the most prolific users of the system – in short, China now fully embraces the ‘aggressive legalism’ model of using the multilateral dispute settlement process as a ‘shield’ and a ‘sword’ to defend and promote its trade interests

After going through all above research, the paper will withdraw several findings implicating to Vietnam situation and lessons for Vietnam to have more effective involvement in DSM

Structure of the paper

With all of the above reasons and background, this paper will be divided into three major parts as below:

Chapter 1: Mechanism of Dispute Resolution in WTO

Chapter 2: China’s experience in dealing with WTO dispute resolution

Chapter 3: Lessons for Vietnam in dealing with WTO dispute resolution

CHAPTER 1: MECHANISM OF DISPUTE RESOLUTION IN WTO

1.1 Definition of Dispute resolution

Dispute resolution or dispute settlement is the central pillar of the

multilateral trading system, and the WTO’s unique contribution to the stability of the global economy (World Trade Organization) A dispute arises when one member country adopts a trade policy measure or takes some action that one or more fellow members considers to a breach of WTO agreements or to be a failure to live up to obligations

Disputes in the WTO are handled by the dispute settlement system, in which the dispute settlement body is the highest body to regulate the system

According to the DSU 3.2: “Dispute Settlement system of the WTO is a central

element in providing security and predictability to the multilateral trading system The Members recognize that it serves to preserve the rights and obligations of Members under the covered agreements, and to clarify the existing provisions of those agreements in accordance with customary rules of interpretation of public international law Recommendations and rulings of the DSB cannot add to or diminish the rights and obligations provided in the covered agreements”

The basic objective of the WTO dispute settlement mechanism is to "achieve a positive solution to the dispute", and prioritize the solutions agreed by the parties to the dispute and suitable with the related Agreements To a greater extent, this mechanism aims to provide multilateral procedures for resolving disputes in place

of unilateral actions by member states that exist injustice, affect the general operation of international trade rules

When being a member of WTO, this is mandatory for this country to participate in WTO dispute settlement, whereby each member has a complaint and dispute with another member who is forced to bring the dispute to deal with the mechanism There is no choice for members state, they must accept participation in dispute resolution according to the procedures of this mechanism This is the point

of creating the difference and effectiveness of WTO's dispute settlement mechanism compared to the existing traditional mechanisms for international dispute resolution The dispute settlement body (DSB) is essentially the WTO general assembly, which includes representatives of all member states The DSB has the right to

establish a Panel, through reports of the Panel and the Appellate Body, to

supervise the implementation of decisions, to recommend dispute settlement, to allow the suspension of performance of obligations and concessions (retaliation) However, the DSB is only an agency that approves the decision, not directly considering the dispute settlement The decisions of the DSB are adopted on the principle of veto consensus This is a new principle whereby a decision is not passed when all DSB members vote not to pass This means that the DSB's decisions are almost automatically passed because it is difficult to imagine a decision that can be voted against by all DSB members This principle overcomes the fundamental disadvantage of the dispute settlement mechanism in GATT 1947 where the principle of traditional consensus applies - all decisions are passed only when all members vote through (every member has the right to veto the decision) -

a barrier in approving the decision of the dispute settlement agency

• Panel: According to the World Trade Organization, “Dispute Resolution,

panels are like tribunals But unlike in a normal tribunal, the panelists are usually chosen in consultation with the countries in dispute Only if the two sides cannot agree does the WTO director-general appoint them Panels consist of three (possibly five) experts from different countries who examine the evidence and decide who is right and who is wrong The panel’s report is passed to the Dispute Settlement Body, which can only reject the report by consensus Panelists for each case may be chosen from an indicative list of well-qualified candidates nominated

by WTO Members, although others may be considered as well, including those who have formerly served as panelist Panelists serve in their individual capacities They cannot receive instructions from any government The indicative list is maintained by the Secretariat and periodically revised according to any modifications or additions submitted by Members”

• Appellate body: In differences with Panel, the appellate body is also

established by the DSB, but the Appellate Body is a permanent body The appellate body consists of 7 members who are experienced and reputable law, international trade and not representing any government Members of the appellate body are appointed by the DSB for a term of four years and can be extended once Members

of the appellate body working by DSB under a rotating regime, each case will be reviewed by 3 members (Article 17 DSU)

1.2 Procedure of Dispute Settlement Mechanism

1.2.1 Procedure of Dispute Settlement Mechanism

Dispute resolution is the responsibility of the Dispute Settlement Body, including all WTO members The dispute settlement agency has the sole authority

to set up expert panel of experts to review the case and accept or reject Council findings or appeals It oversees the implementation of decisions and recommendations and reserves the right to allow retaliation when a country fails to comply with the ruling

The WTO dispute settlement body includes the Panel and the Appellate Body The DSB is not directly involved in the adjudication process, but is a political decision-making body in the WTO dispute settlement The Panel and Appellate Body act as legal institutions to assess the legal aspects of the dispute The DSB is the General Assembly of the WTO, which has the highest decision-making authority of the organization during the time between ministerial meetings All WTO members are naturally members of the DSB and have the right to participate

in all DSB activities In the WTO dispute settlement mechanism, the most important official functions belong to DSB (article 2 DSU)

These approximate periods for each stage of a dispute settlement procedure are target figures – the agreement is flexible In addition, the countries can settle their dispute themselves at any stage Totals are also approximate:

Table 1.1: Leadtime for processing a dispute

Total = 1 year 3 months

Source: World Trade Organization

Below is the process of solving a case in Dispute settlement mechanism

Diagram 1.1: Process of solving a case in Dispute settlement mechanism

Source: WTO publication

First stage: consultation (up to 60 days) Before taking any other actions the

countries in dispute have to talk to each other to see if they can settle their differences by themselves If that fails, they can also ask the WTO director-general

to mediate or try to help in any other way

Second stage: the panel (up to 45 days for a panel to be appointed, plus 6

months for the panel to conclude) If consultations fail, the complaining country can ask for a panel to be appointed The country “in the dock” can block the creation of

a panel once, but when the Dispute Settlement Body meets for a second time, the appointment can no longer be blocked (unless there is a consensus against appointing the panel) Officially, the panel is helping the Dispute Settlement Body make rulings or recommendations But because the panel’s report can only be rejected by consensus in the Dispute Settlement Body, its conclusions are difficult

to overturn The panel’s findings have to be based on the agreements cited The panel’s final report should normally be given to the parties to the dispute within six months In cases of urgency, including those concerning perishable goods, the deadline is shortened to three months

The agreement describes in some detail how the panels are to work The main stages are:

Before the first hearing: each side in the dispute presents its case in writing

to the panel

First hearing: the case for the complaining country and defence: the complaining country (or countries), the responding country, and those that have announced they have an interest in the dispute, make their case at the panel’s first hearing

Rebuttals: the countries involved submit written rebuttals and present oral arguments at the panel’s second meeting

Experts: if one side raises scientific or other technical matters, the panel may consult experts or appoint an expert review group to prepare an advisory report

First draft: the panel submits the descriptive (factual and argument) sections

of its report to the two sides, giving them two weeks to comment This report does not include findings and conclusions

Interim report: The panel then submits an interim report, including its findings and conclusions, to the two sides, giving them one week to ask for a review

Review: The period of review must not exceed two weeks During that time, the panel may hold additional meetings with the two sides

Final report: A final report is submitted to the two sides and three weeks later, it is circulated to all WTO members If the panel decides that the disputed trade measure does break a WTO agreement or an obligation, it recommends that the measure be made to conform with WTO rules The panel may suggest how this could be done

The report becomes a ruling: The report becomes the Dispute Settlement Body’s ruling or recommendation within 60 days unless a consensus rejects it Both sides can appeal the report (and in some cases both sides do)

Third stage: Appeals

Either side can appeal a panel’s ruling Sometimes both sides do so Appeals have to be based on points of law such as legal interpretation — they cannot reexamine existing evidence or examine new issues Each appeal is heard by three members of a permanent seven-member Appellate Body set up by the Dispute Settlement Body and broadly representing the range of WTO membership Members of the Appellate Body have four-year terms They have to be individuals with recognized standing in the field of law and international trade, not affiliated with any government The appeal can uphold, modify or reverse the panel’s legal findings and conclusions Normally appeals should not last more than 60 days, with

an absolute maximum of 90 days The Dispute Settlement Body has to accept or reject the appeals report within 30 days - and rejection is only possible by consensus

Forth stage: Implementation and enforcement

If a country has done something wrong, it should swiftly correct its fault And

if it continues to break an agreement, it should offer compensation or suffer a suitable penalty that has some bite

Even once the case has been decided, there is more to do before trade sanctions (the conventional form of penalty) are imposed The priority at this stage

is for the losing “defendant” to bring its policy into line with the ruling or recommendations The dispute settlement agreement stresses that “prompt compliance with recommendations or rulings of the DSB is essential in order to ensure effective resolution of disputes to the benefit of all Members” If the country that is the target of the complaint loses, it must follow the recommendations of the panel report or the appeal report It must state its intention to do so at a Dispute Settlement Body meeting held within 30 days of the report’s adoption

If complying with the recommendation immediately proves impractical, the member will be given a “reasonable period of time” to do so If it fails to act within this period, it has to enter into negotiations with the complaining country (or countries) in order to determine mutually-acceptable compensation - for instance, tariff reductions in areas of particular interest to the complaining side

If after 20 days, no satisfactory compensation is agreed, the complaining side may ask the Dispute Settlement Body for permission to impose limited trade sanctions (“suspend concessions or obligations”) against the other side The Dispute Settlement Body must grant this authorization within 30 days of the expiry of the

“reasonable period of time” unless there is a consensus against the request

In principle, the sanctions should be imposed in the same sector as the dispute

If this is not practical or if it would not be effective, the sanctions can be imposed in

a different sector of the same agreement In turn, if this is not effective or practicable and if the circumstances are serious enough, the action can be taken under another agreement The objective is to minimize the chances of actions spilling over into unrelated sectors while at the same time allowing the actions to be

effective In any case, the Dispute Settlement Body monitors how adopted rulings are implemented Any outstanding case remains on its agenda until the issue is resolved

The various stages a dispute can go through in the WTO At all stages, countries in dispute are encouraged to consult each other in order to settle “out of court” At all stages, the WTO director-general is available to offer his good offices,

to mediate or to help achieve a conciliation

The most striking features of the WTO dispute settlement system is the Short Time Frame within which the proceedings of both panels and Appellate Body must

be completed The time frame for consultations and implementation are also strictly regulated As per that time frame the panel proceedings should be completed within nine (9) months (Article 19 of the DSU) In effect, panel proceedings often exceed this time limit On an average, panel proceedings extend approximately to twelve months Appellate Body proceedings shall not exceed ninety days In practice, Appellate Body keeps this time limit No other international court or tribunal operates under severe time limits These time limits have been severely criticized as being, too short and demanding for both the parties to the dispute and the Appellate Body

(Source: https://www.wto.org/english/thewto_e/whatis_e/tif_e/disp1_e.htm)

1.2.2 WTO Dispute Mechanism with the participation of third party

1.2.2.1 The procedure to become a third party and the rights of third party in DSM

As mentioned above, WTO dispute settlement starts when a party make a request for consultations, in which the complainant brings a case to defend a trade measure of another country, the defendant which they consider as a violation of WTO DSU These parties firstly are encouraged to use the negotiation method to reach a mutual agreement percent of the cases are successful at this stage If a consultation does not work, the complainants can request a legal judgment which will be adjudicated by a “panel” composed of three, exceptionally five experts selected on an ad hoc basis If the decision of the Panel cannot satisfy either of the

parties, the case can be appealed by one of them, yielding a ruling by WTO Appellate Body

The third party can originally take part in the dispute settlement process starting from consultation stage under article 4.11 of DSU, which gives rights to the parties which have substantial trade interest in the matter by notifying consulting members and the Dispute Settlement Body within 10 days since the request of

consultation being made Article 10.2 of the DSU states "Any WTO member having

a substantial interest in a matter before a panel and having notified its interest to the DSB shall have an opportunity to be heard by the panel and to make written submissions to the panel These submissions shall also be given to the parties to the dispute and shall be reflected in the panel report" It means that a Member that has

“a substantial interest in a matter before a panel” qualifies as a third party to the dispute This is different than qualifying for third party participation in consultations, which must be approved by the respondent, for consultations, under DSU Article 4.11, a potential third party must show a “substantial trade interest.” However, very few requests to join consultations are rejected

If a Member wishes to exercise third party rights at the panel stage, it must notify the DSB of its interest in the dispute, in writing, within 10 days of the establishment of a panel The 10 days rule comes from the GATT Council Chairman’s Statement of June 1994, though in practice Members have made third party notifications after the 10-day period, so long as “the selection and composition

of the panel” is not “adversely affected” and “the panel process had not been hampered” late notification has been accepted, though it is generally discouraged

If the case comes into the appeal stage, the DSU Article 17 gives third parties the reserved rights at the panel stage similar access to proceedings before the panel However, provisions for third party rights at the Appellate stage is very limited Article 17.4 mentions that third party doesn’t have rights to appeal and only the parties who took part in the previous panel stage therein can have right to join in Appellate Body proceeding According to the same article, a third party who are interested in joining in Appellate Body should notify its interests no later than 21

days of the filing of the Appeal And as the result, the third party still remains the right to be heard and to make written submission during Appellate stage There are only three types of third parties which can take part in in Appellate stage, the only difference is that whether those members file a written submission or notify the Secretariat of their intent to appear in the oral hearing and whether they want to affect the outcomes of the Appellate proceedings The first type is the countries who want to “actively” influence the result of the appellate review They need to provide all the legal and factual arguments in writing to support to their intent This kind of third party has to make an oral statement and/or respond the questions addressed to them The second type is the member who notifies the Secretariat of its intent to

“passively” appear at the oral hearing (Article 24.2 of the DSU) This kind of third party is free to decide whether it wishes to make oral statement or not

1.2.2.2 Benefits of participating in dispute settlement as a third party

It is entirely possible that the complaint being brought against a respondent addresses a similar measure that another Member maintains Therefore, the Member would have a direct interest in the outcome of the proceeding, particularly if it feels the measure is justified Also, the Member may have a high volume of trade in the covered product or services at issue, or the measure at issue may be something the Member also wishes to challenge, but may not have the capacity to raise a complaint Here, third party participation allows Members a say without the high costs of bringing the complaint themselves, this is particularly useful for developing country Members

Perhaps most importantly, acting as a third party gives members the ability to see the panel process up close, but also to have their opinion on the measure at issue given consideration in the course of the proceedings Article 10.2 of the DSU states that third parties “shall have an opportunity to be heard by the panel, and to make written submissions to the panel These submissions shall also be given to the parties to the dispute and shall be reflected in the panel report.”

Therefore, when joining in WTO dispute settlement, the third party will be granted the rights to:

- Be present in all substantive meetings

- Make written submissions prior to first substantive meeting

- Make oral statement and respond questions in first/each substantive

meeting

- Be granted additional rights after agreements by parties in the settlement

Third parties have the right “to be heard by the panel,” which takes place at the first substantive meeting of the dispute This oral meeting is only open to

“parties and third parties to the dispute, the panelists, the Secretariat staff supporting the panel, and the interpreters are entitled to attend this meeting.” After the panel has heard from the complainant and respondent, there is a special session designated specifically for third parties where all third parties to the dispute get an opportunity

to present their views, all third parties may sit in on this session Once all parties have had the chance to present their views, the panel and other parties have an opportunity to ask questions for clarification, and the parties are given several days

to respond to these questions in writing as well

The written submissions of third parties are usually a few pages long and comment on the legal and factual arguments of the parties to the dispute These submissions are kept confidential, but the views of the parties are summarized in the final panel report In addition, Article 18.2 of the DSU and paragraph 3 of the Working Procedures in Appendix 3 to the DSU notes that third parties are allowed

to make their submissions public on their own

Under Article 10.3 of the DSU, third parties are also given all the written submissions of the parties to the dispute up until the first meeting of the panel These documents are helpful to third parties in drafting their written and oral submissions to the panel because they outline the legal and factual arguments being put forward by the complainant and respondent

According the article 10.3 of the DSU, suggesting that all submissions made

by the respondent and complainant must be made available to third parties up to the point of the first meeting of the panel: “third parties must be given all of the

submissions that have been made by the parties to the panel up to the first meeting

of the panel, irrespective of the number of such submissions which are made, including any rebuttal submissions filed in advance of the first meeting.” Therefore, have the right to be provided with all such submissions before the first meeting of the panel

In addition, if the dispute proceeds to the Appellate Body, Members that were third parties at the panel stage may also provide written submissions within 21 days

of the Notice of Appeal being filed, third parties can attend the oral hearing and are also given the opportunity to make an oral statement, similar to the panel stage However, third parties to a dispute cannot make claims, as it is up to the claimant to make its legal argument and the complainant “cannot rely on third parties to do so on its behalf.” Therefore, third parties only comment on the claims

as presented, and do not make any additional claims

1.3 Overview of WTO dispute settlement mechanism

Resolving trade disputes is one of the core activities of the WTO A dispute arises when a member government believes another member government is violating an agreement or a commitment that it has made in the WTO The WTO has one of the most active international dispute settlement mechanisms in the world Since 1995, there are 581 cases was brought to WTO with the participation of 72 countries

Map 1.1: Map of disputes between WTO Members, 2019

Figure 1.1: WTO agreements referred to in requests for consultations,

1995 - 2016

Source, WTO annual report 2017

Regular usage and obvious efficiency of WTO DSM, in comparison with GATT and other dispute settlement mechanisms (Nguyen Thi Thu Trang, Dispute Settlement Mechanism, 2010), can be explained by some major reasons:

Firstly, since it was founded in 1995 to present, WTO has become one of the

global international institutions with the participation of almost all the countries in the world Looking back to the end of the GATT period, with 128 members countries signed, the current number of WTO members are 164 countries with the more diversity of political systems, economic development levels The change in the number and composition of the Member States had a certain contribution to the increase in the disputes at the WTO in comparison to the previous period

Secondly, the process of trade liberalization since the Uruguay Round which

led to the establishment of the WTO has made strides Besides the traditional areas

of trade in goods in GATT, the WTO had extended its area to the field of trade in services, intellectual property-related trade Even in the field of trade in goods, the WTO had also added important subjects such as trade in agricultural products, textiles and clothing into the multilateral framework Currently, about 30 agreements of all kinds, a series of decisions and thousands of page documents containing the commitment of Member States, we can say that the scope of the WTO is extremely large, referring to all aspects of trade activities of the country In particular, the birth of the WTO was marked as a shift in the quality of international trade legal framework: international regulations moved from being mentioned only the trade measures applied at the country border, to a deeper intervention on “non-border” policies and measures of the member states, from prohibiting the Member States to make a number of acts, specific trade measures, to asking the countries issuing policies, regulations and implementation of national trade measures in line with the WTO regulations It was the expansion of the scope, adjustment field and the change in the approach of the multilateral trade provisions had an important contribution to the increase in the number of disputes at the WTO

Thirdly, since coming into operation, the WTO DSM had been evaluated as a

mechanism for resolving international disputes with many outstanding advantages not only when being compared to the GATT but also with others mechanisms Institutionally, the most important improvement was the creation of a permanent Appellate Body to review the legal issues which had been resolved by a Panel in

case of Appellate request In terms of procedure, the order and stage, procedural time limits are specified clearly and more strictly Especially, the application of the

"negative consensus" principle of the Dispute Settlement Body eliminated the risk

of the parties to deliberately slow down or cause a deadlock for the dispute resolution process The changes of the DSU contributed mainly to the strengthening

of the legal element of the WTO DSM compared with the mechanism which mainly based on negotiation and diplomacy of GATT DSM successfully built up the trust

of the member countries, especially small and developing countries in proactively using DSM

Fourthly, in fact, the trend of a rapid increase in international trade disputes

appeared immediately at the same time with Uruguay Round Since the WTO was established, this trend has continued to confirm that fact After several years of operation, even though the number of disputes tended to fall, however, if compared

to the GATT, it was still high DSM has been used as an alternative to solve the impasse between the Member States

CHAPTER 2: CHINA’S EXPERIENCES IN DEALING WITH DISPUTE

RESOLUTION UNDER WTO 2.1 Overview about China’s economy and policy

2.1.1 China’s economy and policy

Since the beginning of economic liberalization in 1978, China has been among the fastest growing economies in the world, based on a large extent on investment and export growth For nearly 30 years since 1978, China's GDP has increased 15 times, industrial production has increased more than 20 times; trade turnover increased more than 100 times By 2000, China had completed industrialization, and began to shift from broad-to-deep development, focusing on research to create new scientific and technical achievements, creating a solid basis for addressing the transformation of China from a "factory of the world" into a "factory of knowledge"

Table 2.1: China: Structure of the Economy 2017

Source: China annual report, 2018

In 2016, China's economy is the second largest in the world in nominal GDP, totaling about $11,391,619 billion according to the International Monetary Fund In terms of GDP by purchasing power parity, China reached 20,850 billion USD in

2016, surpassing the United States to be the world's best In 2016, China's GDP PPP/person was 16,660 USD, while nominal GDP/person was 8,141 USD According to both methods, China is behind about 90 countries (out of 183 countries in the IMF list) in the GDP / global ranking

Table 2.2: China economy data, 2017

Inflation Rate (CPI, annual variation

Stock Market (annual variation

in %)

Exchange Rate (vs USD) 6.05 6.21 6.49 6.95 6.51

Source: Economy annual report, 2018

China’s policy and priorities

China and the World Trade Organization: One situation, two approaches Before 1978, China's trade strategy was introverted, meaning that they had minimal interaction with the outside world by exporting simple raw materials and manufactured goods to pay for imported goods Since 1978, trade liberalization is the core content of Chinese policy and the country has benefited greatly from its integration into the global trading system The political policy and open-door economic strategy initiated a new phase in China's economic relations with foreign countries With the establishment of the socialist marketing economy and the transformation of China's economy and society, great changes have taken place in the country In terms of import regime, China focuses on reducing trade barriers and enhancing openness to the world In the two decades, China has reduced its tariffs

by at least ten times, reduced the average tax rate to 15% in 2001 and 9.8% in 2008 Meanwhile, a series of non-tariff barriers such as permits and quotas have been massively reduced Export quotas have decreased from 227 (1992) to 66 (2001) and import quotas from 53 (1992) to 33 (2001) (WTO, Trade Policy Review: China, 2016)

A big step in China's trade policy is to become the 143th member of the World Trade Organization WTO membership is a strategic decision of the Chinese government in the era of globalization economy By participating in multilateral and bilateral economic partnership agreements, China has made tremendous economic progress since its accession to the WTO Most other trading partners have eliminated restrictions on imports from China, helping to boost China's labor-intensive exports in a large number of industries China will also benefit from resolving future trade conflicts under the WTO framework Since its accession to the WTO in 2001, China has supported the organization’s monitoring and surveillance mechanism for trade measures, playing a crucial role in curbing protectionism As of October, 43 cases of violations of WTO rules had been filed against China before the DSB, mainly for illegally restricting access to its domestic market through anti-dumping duties or for granting illegal subsidies to its domestic industry Against the backdrop of the ongoing trade frictions with the USA, China has regularly stressed its fulfillment of its WTO accession commitments In so doing, China underlines its commitment to free and open-markets as well as to the rules-based multilateral trading system (China annual economic report, 2018)

2.1.2 Overview of China in dispute resolution under WTO

On 11 December 2001, China became a Member of WTO after fifteen years of tough negotiations This was an important step towards making the WTO a truly world organization China considers that its ability to use this mechanism to defend its rights and interests is an important benefit of its WTO membership Indeed, in the past several years, China’s enhanced participation in a range of WTO dispute settlement activities reflects its evolving role as one of the most active WTO Members in this area Till now, China participated in 231 cases, 20 times as the

complainants, 43 times as the respondents and 168 times as third party

Map 2.1: China involving in WTO dispute settlement

Source: World trade organization

China's attitude towards participating in international dispute resolution in the WTO as a member of the WTO changes over time Through analyzing China's participation in the dispute settlement system, it can be divided into three separate

periods (Bryan Mercurio and Mitali Tyagi, 2012)

Phase 1: from 2001 to early 2007: Acceptance

Phase 2: from 2007 to 2012: Consolidation

Phase 3: from 2012 to present: Activation

Through three different stages, China's transition from a shy new member with lacks confidence and understanding to fully utilize the dispute settlement system to become the system's most popular user, and master in using an international dispute settlement system as a 'shield' and 'sword' to protect and promote its commercial interests China become from a Rule taker to a Rule maker in the WTO dispute settlement system

2.2 China’s experience in dealing with WTO dispute resolution as a complaint

Till 2019, China has requested 20 cases as consultations in WTO dispute settlement In which, there are two main defendants: United State (US) and EU The

US has been China’s primary target, accounting for fifteen (15) cases; the EU accounted for five (5) cases (contains Italy and Greece - DS452)

China participated in WTO in 2001, its position in the international market is not high, international trade disputes have not happened much from 2003 to 2016 Therefore, their experience to participate in international dispute resolution is still limited in this period time (2003 - 2006) They only raised one case as a complaint (DS252) At this time China only focuses on participating as a third party to get the experiences on the way of being WTO member

Currently, when China has affirmed its position in the international market and has abundant experience in participating in resolving disputes, Chinese lawsuits are more plaintiffs, 20 cases as complaint In 2018, China sued the US 5 times for international trade disputes (DS543, DS544, DS562, DS563, DS565) about tariff measure related areas, Certain Measure, Safeguard measure about the Chinese goods (World Trade Organization, 2019)

(See the annex 1: WTO cases involving China as complaint)

2.2.1 China’s experience in dealing with WTO dispute resolution as a complaint

in “Acceptance” period

There is only one cases raising by China in this time as a complaint It is

“DS252 - Definitive Safeguard Measures on Imports of Certain Steel Products”,

which China requested a consultation to sue United State (US)

After 3 months join in WTO, China contacted with WTO dispute resolution as

a complaint on March 23, 2002 China initiated the WTO dispute process against a steel safeguard measure taken against it by the US Working with seven co-complainants, China carried out in this case through the consultation phase, stage workshops, and the appeal phase, and won The Appellate Body Report and the Panel Report confirmed the inconsistency of the US measures with WTO safeguard

rules, and this resulted in the repeal of these measures on 4 December 2003 by the

US, only several days before the adoption of relevant reports by the Dispute Settlement Body (DSB) This is the first lawsuit and a great spiritual encouragement for China to participate in international dispute resolution

This case also brought to China great experiences in this period:

- The first experience comes from China choosing the right time, right place

to take action

This is the period when China has just joined the WTO, is still very new in the organization and has no experience when joining the US lawsuit Although the US appeal request was brought to the WTO council independently, it was brought up in the context that 7 other members also participated This has created a lot of confidence for China in the early period of the new and early stage of WTO accession

- The second experience is: China Prepared well documents and spirit to

participate in resolving international trade disputes

With the lack of understanding and confidence in this period, China’s government has prepared very carefully and closely in the first lawsuit, contains experts and documents - this is an extremely cautious step of China’s government Winning in this case was beneficial to alleviate the general concern, suspicion, and resistance of the Chinese public about the fairness, objectivity, usefulness, and effectiveness of the WTO dispute settlement system (Wenhua Ji and Cui Huang, 2011)

With this background in mind, it is not surprising that in the Acceptance phase China chose to avoid active participation in the panel phase of the dispute settlement process During the Acceptance phase, China was subject to three separate claims and potential disputes In every instance, China hurriedly reached a mutually agreeable solution with the complainant In every case, the agreed solution was essentially that China would amend its measure as desired by the complainant

2.2.2 China’s experience in dealing with WTO dispute resolution as a complaint

in “Consolidation” period

From 2007 to 2011, China involved in WTO dispute settlement as a complaint five times For this period, China started accessing the DSM and considering it as a tool of World Trade, the attitude of China also changed from “shy” to “confident”, they moved from Rule taker to Rule shaker It can be described clearly by these

cases in this period One of the particular cases in this time is DS397 - Definitive

Anti-Dumping Measures on Certain Iron or Steel Fasteners from China, the

respondence is European Communities

The Sino-European fastener dispute was negotiated from 2009 to January

2016 The WTO Appellate Body distributed the Appellate Body report on the implementation stage, and almost completed all legal relief procedures granted to the members by the WTO The specific process is as follows:

• The original review phase: The Chinese government initiated the WTO

dispute settlement mechanism on July 31, 2009, and formally requested consultations with the EU under the WTO dispute settlement mechanism On September 14, the same year, China and the EU held consultations in Geneva In the case of unsuccessful consultations within the stipulated time, on October 12 of the same year, the Chinese government requested the Dispute Resolution Agency (DSB)

to set up an expert group At the DSB regular meeting on October 23, the expert group was formed On December 9th of the same year, the expert group was finally formed The chairman was composed of former Appellate Body member and Brazilian Baptista The members were Australian Mulgrew (lawyer) and Israeli Reich (professor)

• The original expert panel stage: After entering the expert group trial

process, China and the EU submitted their first written statements on January 20 and February 10, 2010 respectively Third-party statements were submitted by the United States, Canada, Japan, Brazil, India, Norway, Colombia, Chile, Turkey, Thailand, and Chinese Taipei On March 23-24 of the same year, the expert group held a hearing attended by the parties and third parties On June 3, a second hearing

was held with only the parties involved On August 10, the expert group distributed the first draft of the ruling report and handed it over to the parties for review and comment On September 29, the expert group submitted the final report to the parties and distributed the members on December 15

• Appeal stage of the original trial: On March 25, 2011, the EU filed an

appeal with the DSB and submitted an appeal statement, which led to the appeal process On March 30, 2011, China filed an appeal and filed an appeal statement

On April 12, 2011, both China and the EU submitted a statement by the appellant From May 4th to 6th, the Appellate Body organized a hearing On July 15, 2011, the Appellate Body ruled that the EU’s anti-dumping measures against carbon steel fasteners imported from China violated WTO rules

• Implementation phase: On August 18, 2011, the EU notified the DSB that

it would implement the rulings and recommendations of the panel and the Appellate Body On January 19, 2012, the EU and China reached an agreement on the implementation of a reasonable period of time The EU's enforcement of illegal measures and legislation was 14 months and will expire on October 12, 2012 In order to implement the DSB's ruling, the EU amended its Article 9(5) of the Basic Anti-Dumping Regulations and reviewed the fastener anti-dumping case (R548)

On October 10, 2012, the EU announced the completion of relevant illegal measures and legislative rectification

• Stage of enforcement: Since the EU anti-dumping duty rate on fasteners

after the EU review is still as high as 38-74%, the Chinese government initiated an enforcement complaint on October 30, 2013 in accordance with Article 21.5 of the DSU, and raised objections to the implementation of the EU The EU is required to hold consultations on its newly announced anti-dumping measures against fasteners

in China In the absence of consultations, the Chinese government applied for the establishment of an expert group on December 5, 2013 On August 7, 2015, the Executive Expert Group issued a ruling stating that the EU violated WTO trade rules in terms of procedural transparency, product comparison, definition of domestic industry and damage identification The EU appealed this On January 18,