China Welcomes WTO Rule Declaring EU’s Tariff Quota Allocation for Duck Products Illegal

Yicai

2017-03-29

(Yicai Global) March 29 – The World Trade Organization issued the expert reviewers’ report on the poultry tariff quota dispute between China and the European Union, deciding that tariff quota measures adopted by the EU violated relevant WTO rules. China welcomed the decision.

The head of the department of laws and treaties at China’s ministry of commerce (Mofcom) commented on the matter, noting that the expert reviewers upheld China’s core claims, and ruled that duck product tariff quota allocation by the EU was in violation of the WTO rules, the ministry said on its website yesterday. The ruling is welcomed by the Chinese government. However, China expressed regret at the reviewers’ decision not to accept chicken tariff allocation plans that it proposed.

The Chinese poultry producers involved invested around CNY2.8 billion in farm transformation and new equipment in recent years in line with import acceptance criteria set by the EU, and the total number of their employees has reached almost 50,000, the ministry official pointed out. China urges the EU to respect the ruling issued by the WTO, correct errors in its tariff quota allocation practices, and create a fair competition environment for Chinese companies in international trade.

The Chinese government is assessing the reviewers’ report, and will follow up on the matter per the WTO dispute settlement procedures, he added.

In the expert reviewers’ report released by the WTO Dispute Settlement Dispute Body yesterday, the reviewers upheld China’s claims and ruled that duck product tariff quota allocation made by the EU was against the WTO rules, but they refused to accept China’s claims regarding tariff quota allocation for other eight poultry products.

The trade dispute started in 2009 when the EU notified the WTO that it had signed an agreement with Brazil and Thailand on poultry exports in line with relevant clauses of the General Agreement on Tariffs and Trade (GATT), and would amend its tariff regulations. The European Commission then started working on regulations about tariff quotas on poultry, which were enacted in March 2013. As a result, 96 percent of low-tariff quotas were allocated to Brazil and Thailand, and the remaining four percent was given to China and some other countries. All poultry imports exceeding the quotas were subject to custom duties as high as 50 percent, several times higher than the in-quota duty rates of around eight percent. The policy had a serious impact on Chinese poultry exports.

The WTO rules provide that its members should not practice discrimination while imposing quantitative restrictions. In addition, the reference period for determining quota allocation is usually the three years prior to quota introduction, but the EU set the reference period to be 2006 through 2008, when Chinese poultry exports slumped due to the outbreak of Avian influenza.

In April 2015, China filed a suit with the WTO Dispute Settlement Body accusing the EU of violating the WTO protocol and the General Agreement on Tariffs and Trade. The two sides failed to reach a consensus through negotiation, and the Dispute Settlement Body set up an expert reviewers group to investigate the case at China’s request in July 2015. The expert reviewers’ report was finally released yesterday.

According to the ruling, the EU failed to consider ‘special factors’ when allocating tariff quotas on poultry imports in violation of Paragraph 2, Article 13 of the GATT. It said the EU did not take into account the improvement in Chinese companies’ capabilities in exporting poultry products to Europe after the EU eased health and phytosanitary restrictions on Chinese imports in July 2008. However, the reviewers dismissed China’s claims regarding tariff quota allocation for other eight poultry products, so it was a ‘partial win’ for China.

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