The US-China Safeguard Provision, the GATT, and Thinking Long Term

Article excerpt

The US is currently caught between its international obligations to the World Trade Organization ("WTO") and its domestic obligations to US workers in the textile and clothing industries. As of January 1, 2005, quantitative restrictions on Chinese imports have been officially phased out-under the auspices of the WTO-thereby allowing a greater influx of Chinese goods into Member countries. The US, however, has contracted with the People's Republic of China ("China") to work around this phase-out. By means of the US-China Safeguard Provision ("Safeguard Provision"), the US has contracted with China to allow the US to institute restrictions on Chinese imports for three additional years between January 1, 2005 and December 31, 2008. Thus, during this transition period, the US violates the WTO's mission of ensuring equality in international trade by creating its own exception to the WTO's nondiscrimination rule, as opposed to confining itself to a WTO-created exception. While China has announced its intent to impose tariffs on some of its own textile exports, such measures will not release the US from its responsibility to actively enforce WTO principles when vast numbers of cheap Chinese goods continue to enter the US market.

The actions of the US are problematic from a policy perspective, though not necessarily from a legal one, for two reasons. First, the influence of the US in working toward liberalized trade is diminished when the US chooses not to follow the uniform rules of the GATT but instead creates its own, more favorable safeguard provision, thereby opening the door for other Members to follow in its footsteps. Accordingly, as a leader in the international community and a founding member of the WTO, the US must avoid any appearance of impropriety and must avoid setting a precedent for accepted defiance of the GATT. Second, it is unclear that the Safeguard Provision actually benefits the US and its WTO trading partners in the long term. Therefore, instead of simply holding onto uncompetitive US industries for three extra years, the US must innovate to become competitive in new industries.

I. A SERIES OF PIVOTAL AGREEMENTS OUTLINE THE RESPECTIVE RIGHTS OF THE US AND CHINA WITHIN THE BROADER WTO FRAMEWORK

A. THE GENERAL AGREEMENT ON TARIFFS AND TRADE GUARANTEES EQUALITY IN INTERNATIONAL TRADE

The purpose of the WTO-as expressed in its General Agreement on Tariffs and Trade ("GATT")1-is to facilitate the ability of Members to enter "into reciprocal and mutually advantageous arrangements directed to the substantial reduction of tariffs and other barriers to trade and to the elimination of discriminatory treatment in international commerce."2 Thus, the purpose is to ensure equal treatment of domestic and imported goods, and to ensure equal treatment from every Member of the WTO to every other Member. Accordingly, the GATT's Most-Favoured-Nation ("MFN") treatment guarantees that "any advantage, favour, privilege or immunity granted by any contracting party to any product originating in or destined for any other country shall be accorded immediately and unconditionally to the like product originating in or destined for the territories of all other contracting parties."3 The GATT, therefore, requires that any quantitative restrictions be applied equally to the imports of all Members.4

B. THE MULTI-FIBER ARRANGEMENT ALLOWED A DISPARITY IN QUANTITATIVE RESTRICTIONS AMONG MEMBERS, BUT HAS BEEN PHASED OUT OF APPLICATION

The Multi-Fiber Arrangement ("MFA"),5 now phased out of application, has largely regulated the international trade of textiles since 1974(6) and has stood as an exception to the equality principles of the GATT.7 The MFA allowed different quantitative restrictions to be placed on the textiles of different Members despite the requirements of MFN status under the GATT. While the GATT requires that the same tariffs and quotas be applied to the same goods imported from any Member of the WTO, the MFA allowed "a complex system of unilateral and bilateral quotas, on a product-by-product and country-by-country basis. …