The European Union is to go ahead with two World Trade Organization (WTO) cases against China, after failing to resolve the issues during bilateral talks. The two cases will now be brought before a WTO dispute panel.
The first case is a dispute over alleged economic coercion of Lithuania, whose exporters found themselves excluded from the Chinese market late last year. “Our preference was to solve these two significant and systemic cases in a consultation process and we have invested a considerable amount of time in doing so. However, this was to no avail. We are therefore left with no choice but to request the establishment of these WTO panels,” said Valdis Dombrovskis, EU Commissioner for Trade. The case centers on an alleged unofficial trade embargo following the opening of a controversially named Taiwanese Representative Office in Vilnius. The EU insists that the office is consistent with its own one China policy.
After the office opened in Vilnius, Lithuanian exporters complained that their goods were frozen out of the Chinese market. China has denied that there is a government-backed embargo, telling EU officials that its importers were simply patriotic and did not want to buy from a country that questioned China’s sovereignty over Taiwan. According to Chinese customs statistics, imports from Lithuania dropped by 81.4% in the first 10 months of 2022, compared with a year earlier. The case was complicated by reluctance among businesses to give evidence on the record, a requirement for the WTO tribunal in Geneva, according to EU trade sources.
In the second dispute, the EU claims China is using domestic courts to undermine intellectual property laws, thereby allowing Huawei Technologies, Xiaomi and other telecoms firms to secure cut-price technology licenses. The second case revolves around decisions by Chinese courts, known as “anti-suit injunctions”, preventing companies with hi-tech patents from “effectively protecting their technologies in non-Chinese courts, including EU courts”, the EU said.
The EU said China is using new legal mechanisms to prevent international companies from suing Chinese counterparts in foreign courts for their use of technology without licenses or permission. Firms that have made complaints – including Sharp, Ericsson and Nokia – have been threatened with daily fines of €130,000 or criminal charges, meaning executives could be jailed in China for non-compliance, according to the EU. EU officials say Chinese firms such as Huawei, Xiaomi, ZTE and Oppo had taken advantage of these injunctions – which were ushered in by a Chinese supreme court ruling in August 2020 and subsequently approved by the National People’s Congress (NPC) – to cut their licensing fees in half. The EU sees it as part of an overall Chinese strategy to transfer technology for 3G, 4G and 5G to China for a reduced fee, but also to set global rules governing intellectual property protection.
The WTO Dispute Settlement Body will discuss the EU’s request at its next meeting on December 20. China can oppose the establishment of a panel once, but it would then be automatically formed after the next meeting of the body in January, the South China Morning Post reports.
In a separate case, the WTO ruled that U.S. tariffs imposed on steel and aluminum imports by then U.S. President Donald Trump contravened global trading rules and recommended the U.S. bring them into conformity. The U.S. said it strongly rejected the “flawed” interpretation and conclusions of the panel. It could appeal the ruling, which would send it into a legal void because Washington has blocked appointments to the WTO Appellate Body, rendering it incapable of giving a judgment. China said it hoped the United States would respect the panel's ruling and “correct its wrongful conduct as soon as possible”. Trump imposed 25% tariffs on steel imports and 10% on aluminum in 2018, using Section 232 of a 1962 act that allows the President to restrict imports if they are threatening national security.
