Legal Characters Of Section 301(b) Of The Trade Act Of 1974 And China's Solutions In Response

USTR issued a notice regarding launching the 301 investigation towards China on August 18,2017,claiming that certain laws,policies and measures of China in the field of intellectual property,innovation and technology have caused serious damages to the U.S.economy.In the same notice,the U.S.President formally authorized USTR to launch the investigation on trade situation of China according to Section301(b).USTR submitted a Final Findings Report to the President on March 22,2018,determining that laws,policies and measures of China are actually“unreasonable” or “discriminatory”,and had caused “burdens or restrictions” on U.S.trade.The case between European Community and U.S.on Sections 301-310(DS152)in 1999 has effectively restricted the application of Section 301(a),and thus Section 301(a)has been “silent” for a long time,although not revised.However,under the contemporary situation and economic needs,U.S.now is trying to apply Section 301(b)to other countries.In 2017,China is the target country of such application.It is high time that China considered relevant solutions in response.This Paper focuses on analyzing the framework and regulations of Clause 301,the specific regulations and legal characters of Section 301(b),the reasons why U.S is now applying Section 301(b)rather than Section 301(a)to other countries.Afterwards,this Paper moves on to explore reasonable and effective solutions that China may take in response.The investigation to China under Section 301(b)occurred in 2017,the findings and determinations came out in 2018 and the retaliation procedures and bilateral consultations are still progressing till 2019.Thus the research in this paper is closely related to the contemporary background and is of great practical value.More importantly,the results of this paper may contribute to safeguarding the economic security of China,combating unilateral sanctions,regulating the order of international economic and defending the dignity of WTO.The Author mainly uses Literature Research Method and Case Analysis Method to analyze the specific provisions and general framework of Clause 301,the legal characters of Section 301(a)and Section 301(b)as well as similarities and differences between them,the restricting effects on Section 301(a)by WTO rules and the legal basis as well as internal reasons behind the current application of Section 301(b).Historical Research Method is also employed to explore the nature and several amendments of Clause 301 at different historical stages,as well as the restriction on it under the multilateral dispute settlement mechanism.In addition,the Author employs other methods such as Conceptual Analysis Method to help explain the rules and regulations in the field of international law as well as to explore the countermeasures that can be applied by China.The first Chapter is focused on the revision process and general framework of Clause 301.The birth and revision of Clause 301 have extremely strong connection with"sanctions”,“retaliations” and “purposes”.After several amendments starting from the Trade Act of 1974 to the Omnibus Trade and Competitiveness Act of 1988,the discretion power in the application of Clause 301 was gradually transferred from the President to USTR.Consequently,U.S.shows less and less concern on its international obligations.Clause 301 is more a rigorous,procedural,highly motivated and protectionist trade remedy than a diplomatic channel to address market access issues.Within the framework of Clause 301,Section 301 is the precondition to start the investigation,make determinations and conduct retaliations,which includes Section 301(a)and Section 301(b).Section 302 provides for the initiationof the investigation,Section 303 deals with the consultation process under investigation,Section 304 regulates the procedure for USTR to make determinations and Section 305 specifies the steps to implement retaliations.Section 301 contains Sections 301(a)and 301(b),which are two legal bases with equivalent validity.USTR may choose either of them to launch a 301 investigation,make decisions and take retaliation actions.Meanwhile,there are also differences between them,such as specific application conditions,relationship with trade agreements,the character of USTR rights,the reveal stage of illegality and current regulation by the WTO.As many scholars have proposed,despite of the major differences,the essence of them is still the same,namely,unilateral trade sanction imposed by the U.S.on other countries in accordance with its domestic law.The second Chapter is focused on the legal character of Section 301(b).The analysis of the legal character of Section 301(b)needs to be carried out separately from an “as such” and an “as applied” aspect.According to Article 23 of the DSU,WTO prohibits member states from determining whether other countries have violates the obligations under the WTO and from taking retaliation without the authorization of DSB.The analysis of the legal character of Section 301(b)needs to be carried out separately from an “as such” and an “as applied” aspect.Therefore,Section 301(b)as such is not illegal per se.However,there is no clear distinction between the application of Sections 301(b)and301(a),and thus the “threshold matter”,namely,the specific criteria for applying Section 301(a)or Section 301(b)is still subject to the discretion of USTR.In DS152,the Panel has mentioned that even U.S.claims that Section 301(b)is not related to the obligations under WTO treaties,there still exists possibility of violation of Article23.2(a)of the DSU.Firstly,the application of Section 301(b)or Section 301(a)is up to the choice of USTR.Secondly,the relationship between Section 301(a)and Section 301(b)is not entirely equivalent to relationship between “related to” and “not related to WTO treaties”.Thirdly,whether a 301 investigation involves any international treaties,in other words,whether the U.S.should apply Section 301(a)or Section 301(b)is actually an important “threshold matter”,which should be reviewedand determined by WTO,other than any agency in any member country.As applied,Section 301(b)is highly discriminatory against the specific country under investigation,which violates Article 1 of the GATT regarding general Most-Favored-Nation treatment.Also,U.S.imposed two additional tariff measures on China,thus the treatment of Chinese products has been far lower than the minimum treatment that U.S has previously promised in the GATT,which violates Article 2.1 of the GATT regarding Tariff Concession obligation.Moreover,when imposing two additional tariff measures,U.S.has never sued to DSB to determine whether the conducts of other countries have violated the WTO rules,let alone obtaining DSB's authorization to take retaliations,which seriously violates Articles23.1 and 23.2 of the DSU.At present,Section 301(b)is subject to rather limited regulation by WTO,which may violate the original purpose of the establishment of the WTO multilateral system as well as violate many basic principles of international law.Also,the regulation on Section 301(a)by DSU may be derogated and lose its actual legal effect by the free application of Section 301(b).Therefore,the interests of other countries and even the entire international trade order can be affected.Thus,Section 301(b)should also be under the regulation of WTO rules.The third Chapter is focused on the legal bases and internal reasons for the application of Section 301(b)to China in recent years.The primary reason why U.S.chose to apply Section 301(b)is that neither WTO rules nor panel reports have effectively restricted the application of Section 301(b).First,the U.S.Constitution stipulates that domestic laws shall have the same legal effect as approved international treaties,thus WTO rules are not able to abolish or even amend Section 301(b).Second,the first WTO case regarding the illegal application of Section 301(b)is DS6,in which the parties resolve the dispute by negotiation and did not analyze the legal character of Section 301(b).Third,DS152 only has partial regulation effect on the illegality of Section 301(a),leaving the legal characters of Section 301(b)not clear yet.Another important reason why U.S.chose to apply Section 301(b)to China isthat Section 301(b)still has its room for application out of the regulation range of WTO rules,which can help U.S.temporarily circumvent the clear restrictions of WTO rules.Violation of Section 301(a)due to other countries' violation of the provisions and obligations under WTO treaties is only one of the many reasons for the launching of 301 investigation.In addition,trade activities between non-WTO member states,activities in the areas not covered by the WTO legal framework such as service trade,and activities that do not involve denial or violation of trade agreements or basic principles of international law may become the application target of Section 301(b).The third major reason for U.S.to apply Section 301(b)is that Sections 301(a)and 301(b)have together formed an “alternative mechanism”.There is no big difference between the nature and the applicable effect of the two.Besides,the decision-making power between the two also belongs to USTR exclusively.Therefore,Sections 301(a)and 301(b)have become the “capable assistants” of U.S.to launch 301 investigation,make unilateral decisions and take retaliations.The forth Chapter is focused on exploring appropriate measures that China may take in response to the application of Section 301(b).The first solution is to properly make use of the procedural mechanisms set out in Clause 301 itself.Under Clause 301,interested parties have the chance to submit opinions and apply for public hearings before the launch of investigation.A consultation session is also set up during the procedure of investigation.After the investigation is conducted and before the final decision is made,there is another chance for submitting opinions and applying for public hearings.If China actively participates in the above-stated procedures,it will fully understand the intentions of U.S.and can have the chance to fully express our demands.We may also have the chance to weigh the losses between negotiation with U.S.and retaliation from U.S.However,the above-stated procedures are mainly under the control of U.S.and mainly operate for the interests of U.S.The second solution is to insist on prosecuting within the WTO dispute settlement mechanism.If there is no effective and friendly consultations betweenthe parties,China may face the negative decision and retaliatory measures under Section 301(b).Facing this phenomenon,it is vital for China to consider prosecuting to WTO for dispute resolution.Dispute resolution in WTO can help to urge DSB to make it clear that the unilateral application of Section 301(b)violates the WTO rules.Also,it may help to improve or even amend current WTO rules to the degree that it can explicitly prohibiting U.S.from unilaterally deciding to apply Section 301(b)rather than Section 301(a)to other member countries.The last but not least,one possible and effective solution is to take legal countermeasures in appropriate ways and meanwhile promote bilateral consultations.As early as 1995,in DS6,Japan had considered that countermeasures should be taken based on the “state's emergency status”.Nowadays,more and more countries such as Canada and Mexico are considering taking countermeasures in order to safeguard their fundamental interests against the unilateral sanctions of U.S.Taking the tangible losses currently suffered by China into consideration,it is reasonable and quite urgent for China to take countermeasures.In addition,countermeasures also have certain international legal bases.Article 21 of the GATT,Article 9.3 of the WTO Agreement,Article 51 of the UN Charter,Article 60 of the VCLT and Article 25 of the Articles on Responsibility of States for Internationally Wrongful Acts all stipulate that,a country is entitled to take appropriate measures to defend itself against other countries in an emergency.Also,it is worth mentioning that countermeasure is more a method than a purpose.Both China and U.S.ought to seize every opportunity to promote bilateral consultations and aspire after win-win results.