DIALOGUE ON TRADE REMEDIES: USTR GENERAL COUNSEL

C O N F I D E N T I A L SECTION 01 OF 02 BEIJING 003290 C O R R E C T E D C O P Y PARA MARKINGS SIPDIS STATE FOR E, EAP, EAP/CM STATE FOR EEB/TPP WCRAFT, CLAYTON HAYS, HHELM STATE FOR H/BETSY FITZGERALD, EAP/CM SHAWN FLATT,SCA/RA JOHN SIPLSBURY STATE PASS USTR FOR DMARANTIS, TREIF, TIM STRATFORD, ANN MAIN, JEAN GRIER DOC FOR IRA KASOFF, NICOLE MELCHER (5130),MAC (4420),IA CSHOWERS (5120) TREASURY FOR OASIA/DOHNER/WINSHIP GENEVA PASS USTR NSC FOR JLOI,DBELL E.O. 12958: DECL: 12/10/2019 TAGS: ETRD EFIN ECON PREL WTRO CH SUBJECT: DIALOGUE ON TRADE REMEDIES: USTR GENERAL COUNSEL MEETS MOFCOM VM ZHONG SHAN REF: BEIJING 2630 BEIJING 00003290 001.3 OF 002 Classified By: This message classified by Econ Minister Counselor William Weinstein for reasons 1.4 (b),(d) and (e). THIS MESSAGE IS CONFIDENTIAL. U.S. DELEGATION: USTR GENERAL COUNSEL TIM REIF USTR CHIEF COUNSEL CLAIRE READE AUSTR TIM STRATFORD MINISTER COUNSELOR FOR TRADE CHRISTOPHER ADAMS MINISTER COUNSELOR FOR ECONOMIC AFFAIRS WILLIAM WEINSTEIN IMPORT ADMINISTRATION SENIOR OFFICER LISA WANG ECONOMIC EXTERNAL DEPUTY UNIT CHIEF MELISSA HORWITZ IMPORT ADMINISTRATION OFFICER DAMIAN FELTON PRC MINISTRY OF COMMERCE DELEGATION: VICE MINISTER ZHONG SHAN DIRECTOR GENERAL, DEPARTMENT OF AMERICAN AND OCEANIC AFFAIRS, HE NING DIRECTOR GENERAL, BUREAU OF FAIR TRADE FOR IMPORTS AND EXPORTS, ZHOU XIAOYAN DEPUTY DIRECTOR GENERAL, DEPARTMENT OF TREATY AND LAW, LI CHENGGANG DEPUTY DIRECTOR GENERAL, DEPARTMENT OF FOREIGN TRADE, SUN JIWEN DEPUTY DIRECTOR GENERAL, DEPARTMENT OF MECHANIC, ELECTRONIC AND HI-TECH INDUSTRY, ZHOU SHIJIE DEPUTY ADMINISTRATOR, BUREAU OF FAIR TRADE FOR IMPORTS AND EXPORTS, LIU DANYANG 1.(C) SUMMARY: In a candid and constructive exchange on December 8, General Counsel to the U.S. Trade Representative Tim Reif raised the legal context and underpinning of trade remedies in a meeting with Chinese Vice Minister of Commerce ZHONG Shan. Reif said that the USG has sharp concerns about the transparency and validity of three recent investigations of U.S. exports to China (steel, chicken and autos). Zhong repeatedly claimed that the PRC would drop any investigation if the U.S. provided sufficient and convincing evidence. Zhong underscored the PRC's main principles of abiding by domestic law and WTO rules. Reif said that both governments need to remain focused on the basic rules and requirements of the WTO in the application of trade remedies in order to maintain confidence in the international trading system. The two sides agreed to continue a technical dialogue on trade remedies at the Trade Remedies Working Group to be held in late January in Washington. END SUMMARY. 2.(C) Reif discussed the critical role trade remedies play in international trade, contending not only that remedies have been a fundamental part of the rights and obligations of trading parties since Article 6 of the General Agreement on Trade and Tariffs (GATT) went into effect in 1947, but also that the proper use of trade remedies was very important to maintaining confidence in the trade system in the medium and long term. 3.(C) Reif emphasized that the USG prefers to manage the application of trade remedies and their underlying causes early rather than proceeding toward possible WTO legal disputes. On three current PRC anti-dumping and countervailing duty cases against imports of U.S. chicken, autos and steel, Reif cautioned that the USG is frustrated by the lack of transparency in a) MOFCOM's decision-making process on whether to initiate investigations and b) the specific allegations of injury or threat of injury caused by alleged U.S. dumping or subsidies in these industries. 4.(C) Reif stated that the facts in these cases show there has been no injury to the corresponding Chinese industries and that the cases should be dismissed according to Chinese law. Reif pointed out that WTO rules on trade remedies require proof of a substantial increase in import penetration or similar fact patterns. Zhong answered that imports of U.S. soybeans to China have increased by more than 35 percent so far this year. Zhong also predicted that both countries' use BEIJING 00003290 002.3 OF 002 of trade remedies would not decrease substantially in the near future and that their frequency indicated that the bilateral trade relationship has real problems. Following this logic, he underscored that if both governments are committed to advancing trade, a good mechanism for consultations was needed. 5.(C) Zhong complained about the number and total value of trade remedy investigations by the United States against Chinese products. Zhong said that so far this year, the U.S. has initiated 23 AD-CVD-Safeguard cases against China (including the tire case) and 6 cases under section 337, which total in value to over seven billion U.S. dollars. These cases, he claimed, account for 25 percent of cases and 60 percent of the value of cases against China this year. Reif countered that in 2008, only 16 of the 73 anti-dumping cases against China were initiated by the USG. He cautioned, however, that whatever the numbers, both governments need to remain focused on the basic rules and requirements of the WTO in the application of trade remedies. Zhong moved specifically to the U.S. cases against Chinese exports of tires and oil country tubular goods (OCTG),asking for evidence of harm before quickly running through a laundry list of complaints about bilateral trade (lack of market-economy status, a Cold-War era export control regime, restrictions on export of military equipment to China). 6.(C) Zhong again expressed disappointment over the U.S. decision on September 11 to use the WTO's special safeguard mechanism to apply tariffs against the importation of Chinese passenger tires. Zhong told the U.S. delegation that President Obama has the right to reevaluate the tariffs against Chinese tires six months after their application and asked for news on how that review was shaping up. Reif said that although there are some positive signs in the U.S. tire industry, that it was impossible to see the impact of the tariffs in less than six months. Assistant USTR Tim Stratford informed Zhong that U.S. law does not mandate a specific review date and that as time proceeds, the USG would remain open to bilateral communication on the issue. 7.(C) Reif closed the session by stressing the principles that should guide the use of trade remedies within the U.S.-China trade relationship: cases must follow the law and the facts of the situation and both governments must address underlying problems that give rise to trade remedy cases. Both delegations agreed to further discuss trade remedies, including working on U.S. concerns about three current Chinese CVD investigations, at the January meeting of the Joint Commission on Commerce and Trade's (JCCT) Trade Remedies Working Group. 8.(C) USTR General Counsel Reif's delegation cleared on this message. HUNTSMAN