Study On Actionability Of China's Current Subsidies

It is known that Chinese exported products have deeply and widely suffered hardship in the anti-dumping investigation and anti-dumping duty for a long time. However, it seems that we do not pay much attention to the anti-subsidy investigation and countervailing duty. The main reason for neither Chinese government nor Chinese manufacturers realizes the importance of establishing anti-subsidy system is that compared with overwhelming anti-dumping investigation, there have been few anti-subsidy investigations conducted against China. But, in the year of 2004, Canada Border Service Agency started several subsidy investigations into certain Chinese exports and some countries, including the United States, Canada, Japan and EU filed the request to China for providing a new and full subsidy notification under the transitional review mechanism pursuant to Section 18 of the Protocol on the Accession of the People's Republic of China.This article tries to analyze the following two questions: (1) whether China's current subsidies could constitute the"Actionable Subsidy"under the WTO rules; (2) whether it is possible for other WTO members seeking remedies against China's current subsidies, such as imposing the countervailing duty or bring the dispute in the WTO system. Then, if the answer of these questions is"YES", what Chinese government and Chinese manufacturers could do in order to avoid anti-subsidy investigations or win the disputes.This article consists of 5 parts, around 36,000 words. Part I is the Introduction, presenting the objective and scope of discussion of this article. Then, Chapter I first discusses the classification of subsidies, the definition of subsidies, the Specificity standard, the Adverse Effects, the special and differential treatment of developing country members respectively according to the Subsidies and Countervailing Measures and panel reports or appellate body reports. According to the Subsidies and Countervailing Measures, if a government or any public body provides a financial contribution and a benefit is thereby conferred, a subsidy shall be deemed to exist. Moreover, if such a subsidy is specific, and through the use of any subsidy, it causes the adverse effects and there is a causal link between the subsidized imports and the alleged injury, such subsidy is actionable under WTO legal system.Chapter II is main part of the article and it reviews China's current subsidies policy and its actionability. At first, this chapter makes a brief introduction of anti-subsidy investigations and other WTO members'requests for explanation in the transitional review mechanism. Then, it analyzes whether these subsidies will be deemed as"Actionable Subsidies"on the base of relevant WTO rules stated in Chapter I and relevant promises made in the Protocol on the Accession of the People's Republic of China. Finally, this chapter expounds both legal and practical challenges for other WTO members using remedies against China's subsidies.In particular, State-owned subsidies present special challenges to the world trading system because they occur in a giant transition economy. Throughout the era of economic reforms of State-owned Enterprises (SOEs), central and local governments have provided direct or indirect financial assistance to the SOE sector. Therefore, Chapter III provides a special analysis on the legal issues related to the actionability of SOEs subsidies.Last part is the conclusion of this article and makes some general suggestions on China's strategy under the international anti-subsidy rules. The author's suggestions are as follows: on one hand, it is necessary for a government to offer some subsidies; on the other hand, we need to realize problems of our current subsidyies policy, especially subsidies for SOEs. It is also recommended to establish a more transparent and unified subsidies system rather than canceling all subsidies.It shall be also noted that this article only discusses the actionability issue on subsidies for enterprises, not involves in the agriculture subsidies. Since in the WTO legal system, there is a special rule for agriculture subsides and such subsidies reflected more complicated interests balance among WTO members, also including some developed countries.