D.	U.S. Use of Transitional Rights (textile safeguards; Section 421; AD NME status)

1.	Protocol of accession provisions

            The protocol on China's accession, as well as the working party report, include special provisions unique to China's accession to the WTO that apply to the transitional period following China's accession.  First, there is available to WTO members a special safeguard provision applicable to textile and apparel products in order to deal with market disruption due to increased imports of Chinese textile and apparel products.  Second, WTO members may apply a product-specific transitional safeguard to deal with import surges of particular products from China that cause market disruption.

Textile safeguards

Upon accession, China became a party to the Agreement on Textiles and Clothing (ATC).  As such, China is subject to the rights and obligations of the ATC, including quotas.  The ATC, and the textile and apparel quotas under the ATC, will expire on December 31, 2004.  However, the special textile safeguard mechanism that China agreed to as part of its accession commitments will be applicable through the end of 2008. 

The working party report to China's accession (at paragraph 242)[1] sets out the terms of the special textile safeguard.  Under that provision, if a WTO Member believes (and can show) that imports of certain Chinese textile and apparel products are “threatening to impede orderly development of trade in these products” due to “market disruption,” the WTO Member can request consultations with China “with a view to easing or avoiding such market disruption.”[2]  The scope of products for which this regime applies includes those textile and apparel products covered by the ATC as of the date the WTO Agreement entered into force, that is, January 1, 1995.  Upon receipt of a request, China has agreed to “hold its shipments ... to a level no greater than 7.5 per cent (6 per cent for wool product categories) above the amount entered during the first 12 months of the most recent 14 months preceding” the request.[3]  Consultations would be held within 30 days of the request with the aim of reaching a "mutually satisfactory solution" within 90 days of the request.[4]  If no solution can be reached, consultations, and export restraints, continue.[5]

There is a time limit on the application of special textile safeguards.  Export restraints may be applied from the date that consultations are requested through December 31 of that year.  If, however, three or fewer months remain in that year, then the export restraints may stay in place for up to one year from the date of the request for consultations.[6]  In general, no export restraint may last longer than one year unless it is reapplied through further consultations, or otherwise agreed to by China and the WTO member.[7]  The special safeguard provision, itself, expires on December 31, 2008.[8]

In addition to time limits, another limitation applies to the special textile safeguard.  A measure under the special textile safeguard provision may not be applied to the same product at the same time as a measure under the accession protocol’s “transitional product-specific safeguard mechanism” (Article 16 of the protocol of accession; referred to as “Section 421” in U.S. law).  However, a WTO member could apply a special textile safeguard measure and a regular safeguard measure under GATT Article XIX and the WTO Agreement on Safeguards to the same product at the same time.

Under the special textile safeguard provision, a WTO Member can request consultations and secure export restraints by showing that imports from China are “threatening to impede orderly development of trade in these products” due to “market disruption.”  The standard of injury required here -- “market disruption” -- is less stringent than the “serious injury” test of a regular safeguard action under GATT Article XIX and the WTO Agreement on Safeguards.  The consultative procedure of the special textile safeguard was established as a less formal means of temporarily limiting the impact on WTO members of increased Chinese textile and apparel imports.  Thus, it should be easier for WTO Members to use the special textile safeguard than the regular safeguard mechanism.

The box below shows the working party report commitments agreed to by China with respect to textiles and apparel.

Special Textile Safeguards

Working Party Report, WT/MIN(01)/3 (10 November 2001)

11.      Textiles

241.     Some members of the Working Party proposed and the representative of China accepted that the quantitative restrictions maintained by WTO Members on imports of textiles and apparel products originating in China that were in force on the date prior to the date of China's accession should be notified to the Textiles Monitoring Body ("TMB") as being the base levels for the purpose of application of Articles 2 and 3 of the WTO Agreement on Textiles and Clothing ("ATC").  For such WTO Members, the phrase "day prior to the date of entry into force of the WTO Agreement", contained in Article 2.1 of the ATC, should be deemed to refer to the day prior to the date of China's accession.  To these base levels, the increase in growth rates provided for in Articles 2.13 and 2.14 of the ATC should be applied, as appropriate, from the date of China's accession.  The Working Party took note of these commitments.

242.     The representative of China agreed that the following provisions would apply to trade in textiles and clothing products until 31 December 2008 and be part of the terms and conditions for China's accession:

(a)       In the event that a WTO Member believed that imports of Chinese origin of textiles and apparel products covered by the ATC as of the date the WTO Agreement entered into force, were, due to market disruption, threatening to impede the orderly development of trade in these products, such Member could request consultations with China with a view to easing or avoiding such market disruption.  The Member requesting consultations would provide China, at the time of the request, with a detailed factual statement of reasons and justifications for its request for consultations with current data which, in the view of the requesting Member, showed:  (1) the existence or threat of market disruption;  and (2) the role of products of Chinese origin in that disruption;

(b)       Consultations would be held within 30 days of receipt of the request.  Every effort would be made to reach agreement on a mutually satisfactory solution within 90 days of the receipt of such request, unless extended by mutual agreement;

(c)       Upon receipt of the request for consultations, China agreed to hold its shipments to the requesting Member of textile or textile products in the category or categories subject to these consultations to a level no greater than 7.5 per cent (6 per cent for wool product categories) above the amount entered during the first 12 months of the most recent 14 months preceding the month in which the request for consultations was made;

(d)       If no mutually satisfactory solution were reached during the 90‑day consultation period, consultations would continue and the Member requesting consultations could continue the limits under subparagraph (c) for textiles or textile products in the category or categories subject to these consultations;

(e)       The term of any restraint limit established under subparagraph (d) would be effective for the period beginning on the date of the request for consultations and ending on 31 December of the year in which consultations were requested, or where three or fewer months remained in the year at the time of the request for consultations, for the period ending 12 months after the request for consultations;

(f)        No action taken under this provision would remain in effect beyond one year, without reapplication, unless otherwise agreed between the Member concerned and China;  and

(g)       Measures could not be applied to the same product at the same time under this provision and the provisions of Section 16 of the Draft Protocol.

The Working Party took note of these commitments.

Product-Specific Safeguards

In addition to the textile specific export restraint mechanism, China’s accession protocol provides for a general “product-specific special safeguard” measure, which is applicable to any type of product (i.e., industrial and agricultural goods) and will be available to the U.S. (and other WTO Members) for 12 years following China’s accession to the WTO, that is, until December 11, 2013. This measure will allow the United States to take action necessary to curtail imports of Chinese goods that cause or threaten to cause “market disruption” to the domestic industry producing such goods.

The transitional product-specific safeguard is unique to China.  Before China, no other acceding country (either to GATT or the WTO) has been subject to a transitional product-specific safeguard.  The product-specific safeguard mechanism was applied to China, however, because the WTO members recognized that, even though China was admitted to the WTO in December 2001, China still remained a long way from fully meeting all obligations of WTO membership.  As a measure of protection for other WTO Members during China's transition to full acceptance of all WTO obligations, the product-specific safeguard allows existing WTO members to bring a China-only safeguard action where there is market disruption from increased imports from China.  This is an exception from the normal rules governing safeguard actions (i.e., Article XIX of GATT 1994 and the WTO Agreement on Safeguards) which require that safeguard actions be brought against imports from all countries. 

A product-specific safeguard measure is not the only means to address cases where products of Chinese origin are being imported into the territory of a WTO Member in such increased quantities or under such conditions as to cause or threaten to cause market disruption to the domestic producers of like or directly competitive products.  The Protocol provides that WTO Members affected by market disruption caused by increased Chinese imports may request consultations with China with a view to seeking a mutually satisfactory solution.[9]  If such consultations conclude that Chinese imports are causing market disruption and action is necessary, China "shall take such action as to prevent or remedy the market disruption."[10]  If, however, consultations do not lead to a mutually satisfactory solution within 60 days of the date of request for consultations, then the WTO member is to take action to prevent or remedy the market disruption through the imposition of a product-specific safeguard measure.[11]

The injury standard underlying a product-specific safeguard is "market disruption."  "Market disruption” exists wherever imports of an article, like or directly competitive with an article produced by the domestic industry, are increasing rapidly, either absolutely or relatively, so as to be a significant cause of material injury, or threat of material injury to the domestic industry.[12].  This “material injury” standard is substantially less than the “serious injury” standard of a typical safeguard action. 

In the case of critical circumstances, where delay would cause damage that would be difficult to repair, provisional safeguard measures can be imposed (for up to 200 days) pursuant to a preliminary determination that imports have caused or threatened to cause market disruption.[13]  If a WTO Member considers that a product-specific safeguard measure taken by another WTO Member causes or threatens to cause significant diversions of trade into its market, that Member may seek consultations with China and/or the other WTO Member concerned.[14]  If such consultations do not resolve the problem, then the WTO Member may take action to the extent necessary to prevent or remedy the trade diversions at issue.[15]

Measures imposed under the product-specific safeguard mechanism may be in place for two years where there has been a relative increase in imports, and three years where the increase is absolute.  After these respective periods, China is permitted to “retaliate” by suspending substantially equivalent concessions or obligations under the WTO Agreement.[16]

The boxes below shows the protocol and working party report commitments agreed to by China concerning the product-specific transitional safeguard.

Transitional Product-Specific Safeguards

Protocol on Accession, WT/L/432 (23 November 2001)

16.     Transitional Product-Specific Safeguard Mechanism

1.       In cases where products of Chinese origin are being imported into the territory of any WTO Member in such increased quantities or under such conditions as to cause or threaten to cause market disruption to the domestic producers of like or directly competitive products, the WTO Member so affected may request consultations with China with a view to seeking a mutually satisfactory solution, including whether the affected WTO Member should pursue application of a measure under the Agreement on Safeguards.  Any such request shall be notified immediately to the Committee on Safeguards.

2.       If, in the course of these bilateral consultations, it is agreed that imports of Chinese origin are such a cause and that action is necessary, China shall take such action as to prevent or remedy the market disruption.  Any such action shall be notified immediately to the Committee on Safeguards.

3.       If consultations do not lead to an agreement between China and the WTO Member concerned within 60 days of the receipt of a request for consultations, the WTO Member affected shall be free, in respect of such products, to withdraw concessions or otherwise to limit imports only to the extent necessary to prevent or remedy such market disruption.  Any such action shall be notified immediately to the Committee on Safeguards.

4.       Market disruption shall exist whenever imports of an article, like or directly competitive with an article produced by the domestic industry, are increasing rapidly, either absolutely or relatively, so as to be a significant cause of material injury, or threat of material injury to the domestic industry.  In determining if market disruption exists, the affected WTO Member shall consider objective factors, including the volume of imports, the effect of imports on prices for like or directly competitive articles, and the effect of such imports on the domestic industry producing like or directly competitive products.

5.       Prior to application of a measure pursuant to paragraph 3, the WTO Member taking such action shall provide reasonable public notice to all interested parties and provide adequate opportunity for importers, exporters and other interested parties to submit their views and evidence on the appropriateness of the proposed measure and whether it would be in the public interest.  The WTO Member shall provide written notice of the decision to apply a measure, including the reasons for such measure and its scope and duration.

6.       A WTO Member shall apply a measure pursuant to this Section only for such period of time as may be necessary to prevent or remedy the market disruption.  If a measure is taken as a result of a relative increase in the level of imports, China has the right to suspend the application of substantially equivalent concessions or obligations under the GATT 1994 to the trade of the WTO Member applying the measure, if such measure remains in effect more than two years.  However, if a measure is taken as a result of an absolute increase in imports, China has a right to suspend the application of substantially equivalent concessions or obligations under the GATT 1994 to the trade of the WTO Member applying the measure, if such measure remains in effect more than three years.  Any such action by China shall be notified immediately to the Committee on Safeguards.

7.       In critical circumstances, where delay would cause damage which it would be difficult to repair, the WTO Member so affected may take a provisional safeguard measure pursuant to a preliminary determination that imports have caused or threatened to cause market disruption.  In this case, notification of the measures taken to the Committee on Safeguards and a request for bilateral consultations shall be effected immediately thereafter.  The duration of the provisional measure shall not exceed 200 days during which the pertinent requirements of paragraphs 1, 2 and 5 shall be met.  The duration of any provisional measure shall be counted toward the period provided for under paragraph 6.

8.       If a WTO Member considers that an action taken under paragraphs 2, 3 or 7 causes or threatens to cause significant diversions of trade into its market, it may request consultations with China and/or the WTO Member concerned.  Such consultations shall be held within 30 days after the request is notified to the Committee on Safeguards.  If such consultations fail to lead to an agreement between China and the WTO Member or Members concerned within 60 days after the notification, the requesting WTO Member shall be free, in respect of such product, to withdraw concessions accorded to or otherwise limit imports from China, to the extent necessary to prevent or remedy such diversions.  Such action shall be notified immediately to the Committee on Safeguards.

9.       Application of this Section shall be terminated 12 years after the date of accession.

Working Party Report, WT/MIN(01)/3 (10 November 2001)

13.    Transitional Safeguards

245.   With respect to implementation of the product-specific safeguard, the representative of China expressed particular concern that WTO Members provide due process and use objective criteria in determining the existence of market disruption or trade diversion, because WTO Members did not have wide experience in implementing the provisions of Section 16 of the Draft Protocol.  He stated that with respect to trade diversion, WTO Members needed to apply objective criteria to determine whether an action by China or another WTO Member under the product-specific safeguard to prevent or remedy market disruption caused or threatened to cause significant diversion of trade.  Such criteria should include the actual or imminent increase in market share or volume of imports from China, the nature or extent of the action taken by China or the other WTO Member and other similar criteria.  In addition, WTO Members should provide an opportunity for importers, exporters and all interested parties to submit their views on the matter.

246.   Members of the Working Party noted that the Draft Protocol included specific requirements that WTO Members needed to follow in connection with an action under that Section.  Members of the Working Party confirmed that in implementing the provisions on market disruption, WTO Members would comply with those provisions and the following:

(a)       An action to address market disruption would be taken only after an investigation by the competent authorities of the importing WTO Member pursuant to procedures previously established and made available to the public;

(b)       The competent authority of the importing Member would publish notice of the commencement of any investigation under the product-specific safeguard provisions of the Draft Protocol and would, within a reasonable time thereafter, hold a public hearing or provide other appropriate means  for the purpose of permitting interested parties to present evidence and their views as to the appropriateness of whether or not to take a measure and to respond to the presentations of other parties;

(c)       In determining whether market disruption existed, including the causal link between imports which were increasing rapidly, either absolutely or relatively, and any material injury or threat of material injury to the domestic industry,  the competent authorities would consider objective factors, including (1) the volume of imports of the product which was the subject of the investigation; (2) the effect of imports of such product on prices in the importing WTO Member's market for the like or directly competitive products; (3) the effect of imports of such product on the domestic industry producing like or directly competitive products;

(d)       The competent authorities would publish any measure proposed to be taken and provide the opportunity, including a public hearing, if requested, or provide other appropriate means, for importers, exporters and other interested parties to submit their views and evidence on the appropriateness of the proposed measure and whether it would be in the public interest;

(e)       The competent authority would promptly publish notice of the decision to apply a measure, including an explanation of the basis for the decision and the scope and duration of the measure;

(f)        The period of application of the measure could be extended, provided that the competent authorities of the importing WTO Member had determined that action continued to be necessary to prevent or remedy market disruption.  The competent authorities of the importing WTO Member would publish notice of the commencement of any proceeding to consider whether to extend the duration of an action and would, within a reasonable time thereafter, hold a public hearing or provide other appropriate means for the purpose of permitting all interested parties to have an opportunity to present evidence or their views and to respond to the presentations of other parties;

(g)       Except for good cause, no investigation under Section 16 of the Protocol on the same subject matter could be initiated less than one year after the completion of a previous investigation; and

(h)       A WTO Member would apply a measure only for such period of time as was necessary to prevent or remedy market disruption.

247.   Trade diversion referred to an increase in imports from China of a product into a WTO Member as the result of an action by China or other WTO Members pursuant to paragraphs 2, 3 or 7 of Section 16 of the Draft Protocol.  Members of the Working Party also noted that the Draft Protocol required a determination that any trade diversion was significant and that the action taken to address market disruption had caused or threatened to cause the diversion.

248.   Members of the Working Party agreed that objective criteria had to be applied in determining whether actions to prevent or remedy market disruption caused or threatened to cause significant diversion of trade.   Among the factors to be examined were:

(a)       the actual or imminent increase in market share of imports from China in the importing WTO Member;

(b)       the nature or extent of the action taken or proposed by China or other WTO Members;

(c)       the actual or imminent increase in the volume of imports from China due to the action taken or proposed;

(d)       conditions of demand and supply in the importing WTO Member's market for the products at issue; and

(e)       the extent of exports from China to the WTO Member(s) applying a measure pursuant to paragraphs 2, 3 or 7 of Section 16 of the Draft Protocol and to the importing WTO Member.

249.   A measure taken to address significant diversions of trade would be terminated not later than 30 days after the expiration of the action taken by the WTO Member or Members involved against imports from China.

250.   If the WTO Member or Members taking an action to address market disruption notified the WTO Committee on Safeguards of any modification of an action, the competent authorities of the WTO Member addressing trade diversion would determine whether a significant diversion of trade continued to exist and determine whether to modify, withdraw or keep in place the action taken.

2.	U.S. implementing provisions or existing laws

Special Textile Safeguards

The special China safeguard for textiles took effect in December 2001 upon China’s accession to the WTO.  On May 21, 2003, the Committee to Implement Textile Agreements (“CITA”), the official U.S. government entity responsible for administering the Agreement on Textiles and Clothing (“ATC”), promulgated the procedures for bringing a special safeguard action to seek relief from Chinese imports.[17]

The Committee for the Implementation of Textile Agreements (CITA) is an interagency group responsible for matters affecting textile trade policy and for supervising the implementation of all textile trade agreements.[18]  CITA administers the phase-out of textile and apparel quotas on WTO countries required to be completed by January 1, 2005 under the ATC.  CITA was established by the President in Executive Order 11651 on March 3, 1972 and is comprised of the Departments of Commerce, State, Labor, and Treasury and the Office of the U.S. Trade Representative.[19]  CITA is chaired by the Commerce Department's Deputy Assistant Secretary for Textiles, Apparel, and Consumer Goods Industries.

Implementation of the special textile safeguard in U.S. law through issuance of regulations did not occur until nearly 17 months after China's accession.  This delay was costly to U.S. interests.  According to the American Textile Manufacturers Institute, in the period before CITA issued its regulations, imports of Chinese textile and apparel products increased more than 165%, 50 U.S. textile plants closed, and some 39,000 textile workers lost their jobs.[20]

Under the procedures issued by CITA, a domestic interested party may file a request for a textile/apparel safeguard.  Eligible requesters are those entities (including a trade association, firm, certified or recognized union, or group of workers) that are representative of (1) a domestic producer or producers of a product that is like or directly competitive with the subject Chinese textile or apparel product, or (2) a domestic producer or producers of a component used in the production of a product that is like or directly competitive with the subject Chinese textile or apparel product.[21]  In addition, CITA may, on its own initiative, consider whether increased imports of Chinese-origin textile and apparel products are causing market disruption and threatening to impede orderly development of trade in such products.[22]

CITA will consider requests only if they contain certain specified information.  The required information concerns the following:

(1)        Product description of the product, including the applicable category under the U.S. Textile and Apparel Category System, the applicable subheading under the U.S. Harmonized Tariff Schedule, and the name and description of the like or directly competitive domestic product.[23]

(2)        Import data, in quantity by category unit, on total imports into the United States and imports from China into the United States.  Both annual (most recent five calendar years) and quarterly (current and previous year) data are required, and the data should show imports from China increasing rapidly in absolute terms.[24]

(3)        Production data, in quantity by category unit, on U.S. domestic production of the like or directly competitive products of U.S. origin indicating the nature and extent of market disruption.  Both annual (most recent five calendar years) and quarterly (current and previous year) data are required.[25]

(4)        Market share data, in quantity by category unit, on imports from China as a percentage of the domestic market, on total imports as a percentage of the domestic market, and on domestic production of like or directly competitive products as a percentage of the domestic market.  Both annual (most recent five calendar years) and quarterly (current and previous year) data are required.[26]

(5)        Additional information as to how the textile and apparel product(s) have adversely affected the domestic industry, such as the effect of imports on prices in the United States.[27]

Once a request is filed, CITA has up to 15 business days to decide whether the petition provides all the required information.[28]  If CITA accepts the request, CITA issues a notice in the Federal Register soliciting public comments on the request and establishing a 30-day public comment period.[29]  Once the comment period ends, CITA may take up to 60 days to decide whether to request consultations with China concerning the product that is the subject of the petition.  If CITA is unable to decide whether to request consultations with China within the 60-day period, CITA publishes a notice in the Federal Register indicating the date by which it will decide whether to request consultations.[30]

If CITA determines not to request consultations, it will publish a notice of its determination and the reasons therefore in the Federal Register.[31]  If CITA makes an affirmative determination that imports of Chinese-origin textiles and apparel products are causing market disruption, CITA will request consultations with China with a view to easing or avoiding such market disruption.[32]  Within 30 days of the receipt of the request for consultations, CITA will hold consultations with China; and within 90 days of the receipt of the consultation request, CITA will attempt to reach agreement on a mutually satisfactory solution.[33]

Once China receives the requests for consultations, CITA will publish a notice in the Federal Register that such consultations have been requested, and will identify the quantitative limits on imports that are subject to the request for consultations.[34]  Absent a mutually satisfactory solution, the quantitative limits identified by CITA will terminate on December 31 of the year in which the request for consultations was made, unless three or fewer months remain in that year at the time of the request, in which case the limits will terminate one year from the date on which consultations were requested.[35]

Product-Specific Safeguard: Statute

Section 421 of the Trade Act of 1974, as amended, 19 U.S.C. § 2451, establishes a product-specific safeguard mechanism designed to address product-specific import surges from China that occur for any reason.  This statutory provision implemented the agreement reached between the United States and China in the US-China Bilateral Trade Agreement by which China agreed to allow the United States to employ a temporary safeguard mechanism directed solely at products from China.  This provision was incorporated into the Protocol of the Accession of China to the World Trade Organization, thereby allowing all WTO Members to employ the same product-specific safeguard mechanism to address import surges of products from China into their countries.[36]

The United States and China concluded their Bilateral Trade Agreement on November 15, 1999.  In 2000, Congress enacted Public Law 106-286[37] which authorized the extension of nondiscriminatory treatment (normal trade relations treatment) to the People's Republic of China.  Section 103 of P.L. 106-286 created a new chapter and a new section 421 of title IV of the Trade Act of 1974 to implement the anti-surge mechanism established under the U .S.-China Bilateral Trade Agreement.  This special safeguard mechanism is codified at 19 U.S.C. § 2451.  Congress intended that this provision would replace section 406 of the Trade Act of 1974 (applicable to market disruption by imports from communist countries), which, since China joined the WTO on December 11, 2001, does not apply to China.  In February 2002, the U.S. International Trade Commission published interim rules implementing the new statutory authority.[38]  Subsequently, on November 19, 2003, the ITC published amendments to its interim rules.[39]

Section 421 permits U.S. domestic industries and workers adversely affected by increased imports from China to seek relief.  The procedure for initiating an action under Section 421 is similar to a traditional safeguard under Section 201 of the Trade Act of 1974.  A petition for an investigation under section 421 must be filed by an entity (including a trade association, firm, certified or recognized union, or group of workers) that is representative of an industry claiming injury due to import surges from China.[40]  In addition to an interested party petition, the U.S. International Trade Commission may commence an investigation upon a request by the President or the U.S. Trade Representative, a resolution of either the House Ways and Means or Senate Finance Committees, or upon its own initiative.[41]

The timeline for a Section 421 action is 150 days from commencement of the investigation to proclamation of relief, the same time period for a Section 406 investigation, but much shorter than for a normal Section 201 safeguards action.  A Section 421 investigation is commenced as of the day the petition is filed or the request received.  Within 60 days thereafter (90 days if critical circumstances are alleged), the ITC must determine whether the subject imports are causing or threatening market disruption.[42]  If critical circumstances are alleged, the ITC makes a preliminary determination within 45 days of the investigation's commencement whether market disruption exists and whether delay in taking action would cause damage which would be difficult to repair.[43]  If the Commission's preliminary determination is affirmative, within 20 days thereafter, the President shall determine whether to provide provisional relief, which shall be for a period not to exceed 200 days and be in the form of increased duties, a modification or imposition of any quantitative restriction on imports, or a combination thereof.[44]

The injury standard applicable to Section 421 investigations is "market disruption."  According to the statute, market disruption exists when subject imports “are increasing rapidly, either absolutely or relatively, so as to be a significant cause of material injury or threat of material injury to the domestic industry.”[45]  In determining whether market disruption exists, the statute directs the Commission to consider objective factors, including: (1) the volume of imports of the product subject to the investigation; (2) the effect of imports of such product on prices in the United States of like or directly competitive articles, and (3) the effect of imports of such product on the domestic industry producing like or directly competitive articles.  The presence or absence of any of these factors, however, is not necessarily dispositive of whether market disruption exists.[46]

Within 20 days after determining whether the subject imports are causing or threatening market disruption, the ITC must submit a report to the President and the U.S. Trade Representative.[47]  The Commission's report includes the determination, an explanation of the basis for the determination, and, if affirmative, recommendations on proposed remedies, an explanation of the basis for each recommendation, and a description of the short and long-term effects of implementing or not implementing the recommended remedial actions on the petitioning industry, other domestic industries, and on consumers.[48]  Within 20 days after receiving the Commission's report, the U.S. Trade Representative must publish a notice of the remedy proposed to be taken and of the opportunity, including a public hearing if requested, for comment by interested parties.[49]  Within 55 days of receiving the Commission's report, the U.S. Trade Representative must make its recommendation to the President concerning what action, if any, to take to prevent or remedy market disruption.[50]

The President is required by the statute to “provide import relief” within 15 days of receiving the U.S. Trade Representative's report.[51]  Import relief shall be in the form of "increased duties or other import restrictions."[52]  Thus, if the Commission makes an affirmative determination on market disruption, there is a statutory presumption in favor of providing relief.[53]  This presumption can be negated only if the President determines that provision of relief is not in the “national economic interest of the United States,” or in “extraordinary cases” that relief would cause serious harm to U.S. national security.[54]  The President may find that relief action is not in the national economic interest of the United States "only if the President finds that the taking of such action would have an adverse impact on the U.S. economy clearly greater than the benefits of such action."[55]  Thus, the President has limited discretion (subject to the limitations noted above) as to the remedy to be applied.  As in a Section 201 case, given the President's discretion, the remedial measures ultimately applied in a Section 421 case may be subject to influence from Congress and other constituencies.

The statute also provides for a consultation track to prevent or remedy market disruption.  If the Commission's determination respecting market disruption is affirmative, the statute provides that the U.S. Trade Representative should seek consultations with China with the aim of concluding an agreement for China to take such action as necessary to prevent or remedy market disruption.[56]  The statute directs the U.S. Trade Representative to attempt to conclude such agreements within the 60-day consultation period provided for under the Protocol of Accession.  This 60-day period begins not later than 5 days after the Commission makes an affirmative determination of market disruption.[57]  If the United States and China are unable to reach agreement within the 60 day consultation period, the President is directed to provide import relief.[58]  Any relief proclaimed by the President becomes effective 15 days thereafter.[59]

If necessary to continue to prevent or remedy market disruption, Section 421 permits the President to modify, reduce or terminate relief.  In addition, the statute provides that, upon a request from the President or a petition on behalf of the domestic industry, the Commission shall investigate whether the safeguard action continues to be necessary to prevent or remedy market disruption.[60]  If the Commission's determination is affirmative, the President may extend the effective period of the relief action.[61] [62]

Product-Specific Safeguard: Legislative History

Having reviewed the substantive provisions of Section 421, it is illuminating to review the purpose of Section 421 as illustrated by the legislative history to the provision, as well as the underlying concerns of the United States and other countries with increasing imports from China that were the raison d'être of the product-specific safeguard. 

In explaining Section 421, the report of the House Ways and Means Committee stated:

            Section 3 created a new chapter of Title IV which implements the anti-surge mechanism established under the U.S.-China Bilateral Trade Agreement.  This is intended to replace section 406 of the Trade Act of 1974, which would no longer apply to China as the result of section 1 of this Act.

            The safeguard would permit the United States to provide relief to domestic industries and workers where products of Chinese origin are being imported in such increased quantities and under such conditions as to cause or threaten to cause market disruption to the domestic producers as a whole of like or directly competitive products.[63]

* * *

            This is a temporary, extraordinary trade remedy specifically designed to address concerns about potential increased import competition from China in the future.[64]

As the House report noted, the import surge provision is temporary -- it will be in effect for 12 years -- and it is an "extraordinary" trade remedy.  The primary definition of "extraordinary" according to the New Shorter Oxford English Dictionary is "Out of the usual or regular course or order; special."[65]  Section 421 fits squarely within this definition.  That is, Section 421 is "extraordinary" in the sense that it is a "special" mechanism and "outside the usual course" of a safeguard mechanism pursuant to Section 201, but not in the sense that a Section 421 action is intended to be "rare."  Section 421 is special and outside the usual course because:

· it is a time-limited mechanism that will operate during a 12-year transition period as China accommodates its economic and trade regime to WTO requirements;

· it is directed at products from one country, China, in contrast to the global reach of a safeguard under Section 201; and

· the legal standard applied in an Section 421 import surge action is lower than that applied in a Section 201 action.  Section 421 addresses imports causing "market disruption," a condition that exists where increased imports from China are a "significant cause of material injury."  In contrast, in a Section 201 action, the legal threshold requires evidence that increased imports, from all sources, are a "substantial cause of serious injury."[66]

That Section 421 actions were intended to be applied vigorously is evident from consistent statements made by Clinton Administration officials who negotiated the US-China Bilateral Trade Agreement.  For example, the White House's summary of the product-specific safeguard indicates that the provision was a "special" mechanism intended to supply "strong protection" against increased imports and that, because of lower injury standards, would likely result in more safeguard actions involving products from China, not fewer.

PRODUCT-SPECIFIC SAFEGUARD

The agreed provisions for the protocol package also ensure that American domestic firms and workers will have strong protection against rapid increases of imports.

To do this, the Product-Specific Safeguard provision sets up a special mechanism to address increased imports that cause or threaten to cause market disruption to a U.S. industry.  This mechanism, which is in addition to other WTO Safeguards provisions, differs from traditional safeguard measures.  It permits United States to address imports solely from China, rather than from the whole world, that are a significant cause of material injury through measures such as import restrictions.  Moreover, the United States will be able to apply restraints unilaterally based on legal standards that differ from those in the WTO Safeguards Agreement.  This could permit action in more cases.  The Product-Specific Safeguard will remain in force for 12 years after China accedes to the WTO.[67]

Ambassador Barshefsky emphasized to Congress that the import surge mechanism was special in that it was directed solely at Chinese imports, that it had a lower legal threshold compared to section 201, and that a product-specific safeguard remedy could be imposed if, for any reason, increased imports from China caused market disruption.

If, for any reason, Chinese imports into the U.S. surge, as for example, they did on steel last year as you well know, we will be able to take action and on a temporary basis, somewhere between two or three years, block or otherwise reduce the volume of those imports.[68]

______________

Import Surge Protection -- China agrees to a twelve-year product-specific safeguard provision, which ensures that the U.S. can take effective action in case of increased imports from China which cause market disruption in the United States. This applies to all industries, permits us to act based on the lowest showing of injury, and act specifically against imports from China.[69]

______________

Mr. Levin.  . . .  I think one factor is if we see that there is a major surge in a particular product, the way I think the accession provision is written, that we do have some defense.  . . .  And the reason we have anti-surge provisions is because trade flows both ways. Otherwise we wouldn’t need them.  * * *

Ambassador Barshefsky. Yes.  If I might say with respect to surge, this is an area where again we are trying to look ahead.  We wanted to be sure we had strong anti-import surge mechanisms for many of the reasons that Congressman Rangel has pointed out.  That is to say China will become a much more forceful competitor in the future.  We are already seeing that in steel last year, as you may know.  And we want to be sure that we can take action—and under this provision we will be able to for 12 years after accession —to take action against import surges to the extent they are causing market disruption in the United States.

Mr. Levin.  Treating them, in other words, with a different standard than presently applies to—

Ambassador Barshefsky.  This is a much different standard than under 201 now.  One, because we can take action just against China.  Two, because a market disruption standard is a very low legal threshold as you know.  . . .[70]

______________

Mrs. Johnson.  . . . I’d like you to describe, Ambassador Barshefsky, more specifically the benefits of the surge protection that you’ve negotiated.  It is my understanding that NAFTA doesn’t have this surge protection, that the old GATT agreements, the WTO, that we have never had the ability that this agreement is going to give us to just manage big changes in imports.  * * *

Ambassador Barshefsky.  You’re quite right in pointing out that such a provision doesn’t exist in any other agreement with respect to any other country.  Nor does it exist in U.S. trade law.

            This is a provision designed to ensure that if imports from China surge into the U.S. and cause market disruption in the U.S., we can for a period between two and three years, depending on the type of action, move to curb or restrict imports in that product sector.

Mrs. Johnson.  Now, this is similar to the way the voluntary restraint agreements worked—

Ambassador Barshefsky.  It is, indeed.

Mrs. Johnson. —in the 1980s, to allow the machine tool industry to get back on its feet.

Ambassador Barshefsky. Correct.  It is quite similar in intent. It will be somewhat different procedurally in implementation.  But it is quite similar in intent and in design.

Mrs. Johnson.  I would also like to point out that had we had this protection, the American bearing industry would be much stronger today than it is, because it would have had a more sensitive tool—

Ambassador Barshefsky.  That’s exactly right.

Mrs. Johnson. —as opposed to the anti-dumping laws, to deal with the import of bearings from China.

Ambassador Barshefsky.  And had this been in effect during the recent steel upsurge in the fourth quarter of 1997 and during 1998, including from China, our steel industry would have been much better positioned.[71]

Other Administration officials made similar statements to Congress about the purpose of the special import surge mechanism and that the provision, as a new additional protection against import surges from China, would likely result in more, not fewer, cases.[72]

The foregoing points were further emphasized in the course of congressional debate over H.R. 4444, which granted China permanent normal trade relations.

Mr. Levin.  . . . I want to focus right now on the challenges, because there are challenges as well as opportunities. . . . The second {challenge} relates to the potential surges in products from China.  It is going to compete with us.  That is what trade is.  It is competition.  And there could be harmful surges from China into the U.S. that would hurt our workers and hurt our producers. 

            I will not go into detail now, but I can say, as someone who has worked on these issues now for 15 years and fought to keep the antidumping provisions in U.S. law in the Uruguay Round, and successfully. . . this provision, this specific provision as to surges from China and handling them, is the strongest anti-surge provision that will be in U.S. law.[73]

______________

Mr. Bentsen:   This agreement also includes significant safeguards against unfair Chinese imports and failure by the Chinese to move toward market liberalization.  Chinese imports will be subject to . . . tariffs for 12 years after entry into the WTO against import surges that threaten to disrupt United States markets. . . . In some cases, this language is tougher than current law.  And I want to commend our colleagues, Mr. Levin and Mr. Bereuter for their work in putting these provisions into law and lessening the discretion in their implementation.[74]

______________

Mr. Fitzgerald:  It bears emphasis that by granting PNTR, the United States gives up no trade protections.  China already enjoys normal trade relations with the United States – our markets are already open to Chinese imports.  The concessions that were made as a condition to Chinese entry to WTO were all made by the Chinese – the U.S. gave up nothing and PNTR will not affect a single American tariff or other trade barrier.[75]

______________

Mr. Baucus:  The safeguard provision . . . is a very important feature of this bill.  It ensures that if shifts in trade patterns following China’s entry into the world trading system cause or threaten dislocations to American workers, businesses, and farmers, they will be able to obtain relief quickly.[76]

The Administration, in negotiating the product-specific safeguard mechanism in the US-China Bilateral Trade Agreement, was concerned about the effects of present and past import surges from China, and sought to provide strong protections to U.S. industries from anticipated future import surges.  The expectation of future import surges was not a theoretical consideration, but an expectation based on past surges of Chinese imports.  Indeed, a review of U.S. trade statistics for imports from China during the period 1996-2000 (the period during which the US-China Bilateral Trade Agreement was negotiated) demonstrates numerous significant increases of imports from China on a yearly basis.  As an illustration, the following table shows product sectors (identified by SITC code) that experienced a greater-than-50% increase in imports (by value) between 1999 and 2000.

Selected U.S. Imports from China -- 1996-2000

(By Industrial Grouping)

	U.S. Imports from China
	1996-2000 BY INDUSTRIAL GROUPING (SITC - 3 DIGIT)
Product		SITC CODE	1996 ($000)	1997 ($000)	1998 ($000)	1999 ($000)	2000 ($000)	% Change 1999-2000
-- Live Animals Other Than Fish, Seafood		00	4,328	1,603	1,703	2,849	5,126	79.9%
* Meat, Dried, Salted, or Smoked		012	1,208	1,768	1,335	2,356	3,695	56.8%
* Crustaceans, Molluscs		036	128,145	154,446	127,533	133,853	230,548	72.2%
* Other Cereals		045	56	107	71	75	193	157.3%
* Cereal Meals & Flours		047	226	192	7	46	205	345.7%
* Fruit & Vegetable Juice		059	8,285	26,128	30,083	24,412	39,507	61.8%
* Sugar Confectionary		062	7,174	10,705	11,899	16,503	25,946	57.2%
* Chocolate		073	58	34	157	87	267	206.9%
-- Animal Feed (not including unmilled cereals)		08	4,755	12,056	8,417	9,222	21,112	128.9%
* Nonalcoholic Beverages		111	1,589	1,799	1,952	1,669	3,985	138.8%
-- Tobacco & Tobacco Products		12	6,666	9,427	11,712	11,634	19,558	68.1%
* Unmanufactured		121	6,494	9,192	11,381	10,661	17,635	65.4%
* Manufactured		122	172	235	331	973	1,924	97.7%
* Raw Furskins		212	43	15	23	9	52	477.8%
* Oil Seeds & Fruit (incl. Flours & Meals)		223	758	694	245	679	1,103	62.4%
* Wood in Chips or particles		246	72	107	160	120	191	59.2%
* Textile Fibers, not Spun		264	1,117	15	4	3	14	366.7%
* Vegetable Textile Fibers, but not spun		265	35	39	9	94	153	62.8%
* Manmade Fibers for spinning		267	3	0	0	2	229	11350.0%
* Fertilizer, Crude (excpt division 56)		272	0	9	104	67	127	89.6%
* Stone, Sand & Gravel		273	1,254	1,035	1,072	3,215	8,956	178.6%
* Base Metals, Ores & Concentrates		287	3,684	6,221	4,439	2,385	7,965	234.0%
* Nonferrous Base Metal Waste & Scrap		288	895	1,033	923	2,338	4,012	71.6%
* Precious Metals, waste and scraps		289	78	1,805	82	73	1,655	2167.1%
Mineral Fuels, Lubricants & Related Materials		3	462,465	390,659	360,998	237,729	615,373	158.9%
-- Coal, Coke & Briquettes		32	94,525	89,532	114,453	66,712	114,041	70.9%
* Coke & Semicoke of Coal		325	94,525	89,282	114,190	65,638	112,599	71.5%
-- Petroleum Products & Related Materials		33	348,963	266,663	214,390	162,035	482,528	197.8%
* Petroleum Oils, Crude		333	226,970	109,204	60,382	10,655	105,605	891.1%
* Petroleum Oils		334	94,587	81,725	70,283	84,812	267,945	215.9%
* Residual Petroleum Products		335	27,406	75,914	83,725	66,568	108,977	63.7%
-- Gas, Natural & Manufactured		34	18,976	34,464	32,155	8,981	18,804	109.4%
* Liquefied Propane and Butane		342	3,245	6,377	10,598	4,736	8,298	75.2%
* Petroleum Gases		344	15,731	28,088	21,557	4,245	10,506	147.5%
-- Animal Oils & Fats		41	7	26	30	10	145	1350.0%
* Fixed Vegetable Fats & Oils		421	3,107	1,720	677	811	2,212	172.7%
* Soap, Cleansing & Polishing Preparations		554	6,606	5,920	6,007	7,433	12,635	70.0%
-- Fertilizers (incl. group 272)		56	850	537	861	645	4,809	645.6%
* Polymers of Styrene, in Primary Forms		572	224	81	417	229	1,159	406.1%
* Monofilament		583	135	575	175	969	1,644	69.7%
* Leather		611	1,912	1,745	2,358	585	2,596	343.8%
* Furskins, Tanned or Dressed		613	1,119	2,511	905	793	1,618	104.0%
* Cork Manufactures		633	555	858	579	1,125	1,933	71.8%
* Paper & Paperboard		641	4,426	5,878	5,022	7,134	12,961	81.7%
* Woven Manmade Fabrics		653	32,727	77,102	69,751	50,585	84,938	67.9%
-- Iron and Steel		67	291,744	314,659	398,424	349,843	623,265	78.2%
* Semifinished Iron & Steel Products		672	1,051	1,360	4,203	6,850	31,770	363.8%
* Non-alloy, Non-coated Steel Flat Products		673	110,637	100,666	117,926	115,476	181,044	56.8%
* Alloy Steel Flat Products		675	209	180	856	1,449	7,364	408.2%
* Steel Bars, Rods, Angles, Shapes & Sections		676	14,020	12,355	12,895	16,372	68,385	317.7%
* Steel Rails and Railway Products		677	288	705	1,895	1,789	3,025	69.1%
* Steel Pipe & Tube, Fittings		679	82,659	105,237	151,245	126,479	228,020	80.3%
* Metal Structures		691	7,026	9,191	13,991	34,704	54,916	58.2%
* Steam/Vapor Generating Boilers		711	1,565	1,708	368	3,798	12,938	240.7%
* Other Nonelectric Engines & Motors		714	49,019	15,385	25,129	32,176	50,360	56.5%
* Agricultural (excl. tractors)		721	13,343	13,993	15,906	19,469	29,702	52.6%
* Tractors		722	6,526	5,427	3,495	3,144	6,321	101.0%
* Food Processing Machines		727	1,712	1,625	1,951	2,978	6,953	133.5%
* Metal Working Machines used solely w/ metal machines		735	16,079	14,045	15,209	19,577	30,441	55.5%
* Automatic Data Processing Machines		752	1,407,603	2,044,187	2,783,390	4,105,935	6,299,714	53.4%
* Medical & Dental Electric Diagnostic Equip		774	19,065	22,421	16,041	27,159	47,827	76.1%
-- Road Vehicles		78	417,344	574,361	731,255	923,424	1,800,180	94.9%
* Trailers & Semi-Trailers		786	44,416	53,813	81,942	91,232	624,229	584.2%
* Prefabricated Buildings		811	17	1,297	1,060	1,223	3,961	223.9%
* Sanitary, Plumbing & Heating Fixtures		812	846	3,265	8,650	15,952	24,979	56.6%
* Meters & Counters		873	5,991	4,716	6,668	7,890	14,177	79.7%
* Photography & Cinematographic Supplies		882	7,821	13,057	9,904	9,779	29,962	206.4%
* Printed Matter		892	110,056	134,510	184,413	254,389	384,354	51.1%

Source:       U.S. Department of Commerce, International Trade Administration, Monitoring of Imports from the PRC, http://ia.ita.doc.gov/monitor/china/china-monitor-3-digit.htm.

Import surges of products from China were not a concern of the United States alone.  As noted, the Transitional Product-Specific Safeguard Mechanism was a WTO protocol commitment of China and, as such, the mechanism is available for use by other WTO Members.  China export statistics indicate that countries other than the United States have experienced significant increases in imports from China.  For instance, statistics published by the WTO show significant yearly increases in China's exports to the European Union and Japan occurred in the period before China's WTO accession.

EU and Japanese Imports From China: 1990-00, 1998, 1999 and 2000

	Annual Percentage Change in Total Merchandise Imports from China
	1990-00	1998	1999	2000
EU	16%	12%	13%	22%
Japan	16%	-11%	16%	29%

Source:     WTO, International Trade Statistics, 2001, at 90 (Table III.76).

In addition, WTO statistics demonstrate that, over the pre-accession period of 1995-2001, WTO Members initiated more antidumping investigations and imposed more antidumping measures against imports from China than against any other country.  Thus, it is evident that many other countries, not only the United States, had experienced increased, injurious imports from China in the period prior to China's WTO accession.  Statistics show that, over the 1995-2001 period, antidumping measures imposed on imports from China were more than double the number of measures imposed on Korea, the next most affected country.

Antidumping Initiations: Top Ten Affected Countries -- 01/01/95 to 31/12/01

Affected Country	1995	1996	1997	1998	1999	2000	2001	Totals:
Brazil	8	10	5	6	13	9	12	63
China, P.R.	20	43	33	28	41	43	47	255
Chinese Taipei	4	9	16	10	22	16	19	96
Germany	7	9	13	8	13	4	9	63
India	3	11	8	12	13	10	12	69
Indonesia	7	7	9	5	20	13	13	74
Japan	5	6	12	13	22	9	12	79
Korea, Rep. of	14	11	15	24	34	21	19	138
Thailand	8	9	5	2	19	12	16	71
United States	12	21	15	15	14	12	13	102
Totals for 01/01/95 - 31/12/01	157	224	243	254	356	281	330	1845

Source:     WTO website, http://www.wto.org/english/tratop_e/adp_e/adp_e.htm.  Only 33 of the 255 initiations against China concerned U.S. actions.

Antidumping Measures: Top Ten Affected Countries -- 01/01/95 to 31/12/01

Affected Country	1995	1996	1997	1998	1999	2000	2001	Totals:
Brazil	9	10	6	5	5	8	2	45
China, P.R.	26	15	33	24	20	30	30	178
Chinese Taipei	2	2	6	11	7	18	9	55
India	4	1	5	6	9	7	6	38
Japan	5	6	5	7	10	19	8	60
Korea, Rep. of	4	5	3	12	13	21	12	70
Russia	8	2	9	4	15	9	6	53
Thailand	5	7	2	5	1	13	7	40
Ukraine	5	0	3	5	7	7	6	33
United States	8	4	9	11	8	13	4	57
Totals for 01/01/95 - 31/12/01	118	84	124	162	181	234	163	1066

Source:     WTO website, http://www.wto.org/english/tratop_e/adp_e/adp_e.htm.  Only 29 of the 178 measures against China were imposed by the United States.

3.	Efforts by U.S. industries to use the provisions

(a)	Textile safeguards

The special textile safeguard set out in the Working Party Report to China's WTO accession became effective upon China's entry into the WTO on December 11, 2001.  As noted above, CITA did not issue procedural rules implementing the special textile safeguard in U.S. law until May 2003.  However, even before CITA's issued its procedural rules, U.S. textile groups attempted to employ the special textile safeguard.

In September 2002, pursuant to the specific textile safeguard mechanism established in the Working Party Report (at paragraph 242), the American Textile Manufacturers Institute (ATMI) petitioned CITA to impose special textile quotas on five product categories: (1)  knit fabric; (2)  gloves; (3)  dressing gowns; (4)  brassieres; and (5)  textile luggage.[77]  In addition, ATMI identified a sixth product, textured filament yarn from China, and asked CITA to prepare a case for the possible imposition of quota restraints on imports of that product in the event that imports continued to increase.[78]

In making its request, ATMI cited a 119% increase in textile imports from China in the first six months of 2002 and stated that imports of Chinese textile products were "experiencing their greatest surge in history."[79]

During the first six months of the year, Chinese exports of textile and apparel products to the United States increased by almost 900 million square meters, with the textile portion increasing by more than 700 million square meters. On the strength of this increase, China surpassed both Pakistan and Canada to become the second largest textile and apparel exporter to the United States, shipping 1.9 billion square meters during the first six months of the year. China accounted for 60 percent of the increase in world-wide imports of textile and apparel products during the first half of the year.[80]

ATMI also presented the following data with respect to the product categories identified in its petition. 

1)   Knit fabric – Chinese  knit fabric exports rose 22 thousand percent and the average price of Chinese knit fabric dropped by 60 percent, catapulting China from being the 26th largest supplier of such exports to the U.S. to the 5th place among all foreign suppliers;

2)   Gloves – China’s exports of gloves to the United States tripled over the last six months, with the result that Chinese exports are now twice as large as those from the next largest supplier;

3)   Nightwear/Dressing Gowns – Chinese exports of nightwear more than quadrupled, vaulting China from seventh to first place among supplying countries.  The Chinese surge was accompanied by a 47% drop in Chinese prices;

4)   Brassieres – In less than six months, China leapfrogged the top two long-standing largest suppliers – Mexico and the Dominican Republic – as China’s price per dozen dropped to $29, by far the lowest of any major supplier;

5)   Luggage – Chinese exports of textile luggage have quadrupled to 71 million kilograms while imports from every other supplier have simultaneously dropped, some by as much as 60 percent.  Chinese prices fell by 62% during the same period of time. China now ships more than five times as much as the next largest supplier;

6)   Textured filament yarn – Chinese exports have only recently begun to surge and remain relatively small.  However, over the past two months, Chinese exports increased at a rate of 400,000 kilograms a month.[81]

At the time the petitions were filed, importers questioned whether ATMI was eligible to request textile safeguards with respect to certain of the products identified because ATMI members do not make four of the five products for which ATMI petitioned for relief (i.e., dressing gowns, brassieres, gloves, and textile luggage).[82]  However, ATMI members do produce and supply the fabric used in making these products.  A press article noted at the time that:

For CITA to impose a safeguard, it would have to apply an expansive definition of market disruption that would cover upstream suppliers of a given product, an ATMI source said.  Under this definition, quotas could be imposed on a given product if it disrupted U.S. exports of fabric used to make these items, he said.  This would be consistent with the market disruption definition CITA has applied in the past to invoke quotas under the Multifiber Arrangement (MFA), he said.

* * *

A Commerce Dept. official said this week that given this first request, CITA is looking at both the specific categories as well as the whole process for evaluating the request.  This includes questions of whether upstream suppliers can claim market disruption or whether petitioners have to meet a standing requirement, he said. He said that CITA would “at some point” decide how to proceed on the request.[83]

Prior to CITA's issuance of procedural rules applicable to special textile safeguard requests in May 2003, CITA took no official action with respect to ATMI's September 2002 petitions.[84]  When CITA issued its procedural rules, however, it resolved the question about ATMI's standing by determining that, in accord with past CITA practice, domestic producers of components used in producing like or directly competitive products were eligible to request safeguards:

Consistent with longstanding Committee practice in considering textile safeguard actions, requests may be filed by an entity (which may be a trade association, firm, certified or recognized union, or group of workers) that is representative of either: (A) a domestic producer or producers of a product that is a like or directly competitive with the subject Chinese textile or apparel product; or (B) a domestic producer or producers of a component used in the production of a product that is like or directly competitive with the subject Chinese textile or apparel product.[85]

Once the new procedural rules were issued, it was determined that ATMI (the only petitioner for a China-specific textile safeguard so far) would need to re-file the petitions it had initially filed in September 2002. 

. . . Commerce has indicated that it will have to re-file a petition on Chinese safeguards now that the regulations outlining the process have been published . . . .  One source said that while some officials have said a new petition is not needed, ATMI will need to include new information, which means it will effectively have to file a new document with CITA before the process begins.[86]

On July 24, 2003, ATMI, together with certain other textile groups, filed petitions requesting that a textile and apparel safeguard action be taken against China with respect to four product categories.  In August 2003, CITA accepted three of the petitions filed by ATMI (knit fabric, dressing gowns, and brassieres) and rejected the fourth (gloves).  The following summarizes the petitioners, product categories, and status of and the four petitions:

Petitioners	Product	Category	Status
· American Yarn Spinners Association · American Manufacturing Trade Action Coalition · American Textile Manufacturers Institute · National Textile Association	Knit fabric	222	Accepted by CITA
· American Manufacturing Trade Action Coalition · American Textile Manufacturers Institute · National Textile Association	Cotton and man-made fiber dressing gowns	350/650	Accepted by CITA
· American Manufacturing Trade Action Coalition · American Textile Manufacturers Institute · National Textile Association	Cotton and man-made fiber brassieres	349/649	Accepted by CITA
· American Manufacturing Trade Action Coalition · American Textile Manufacturers Institute · National Textile Association	Cotton and man-made fiber gloves	331/631	Rejected by CITA

On August 18, 2003, CIT published a notice in the Federal Register soliciting public comments on the three safeguard requests that it had accepted.[87]  The petitions on these three product categories showed substantial increases in imports of various textile and apparel products from China.  For example, the petition on certain knit fabrics showed an increase in imports from a little over 31,000 kilograms in 2001 to more than 7 million kilograms in 2002, accompanied  by price declines of more than 50 percent.[88]  The petitions on the other products also showed increases in imports from China of 300 to more than 500% and price declines of 44-50 percent between 2001 and 2002.[89]

The public comment period for the three textile petitions ended on September 17, 2003.  On December 23, 2003, CITA determined that Chinese-origin knit fabric, dressing gowns, and brassieres are, due to market disruption (and the threat thereof), threatening to impede the orderly development of trade in such products, and that imports of such products from China play a significant role in the existence (and threat) of market disruption.  Pursuant to these findings, on December 29, 2003, CITA issued notices in the Federal Register announcing that it had (1) established import limits for knit fabric, dressing gowns, and brassieres, and (2) requested consultations with China.[90]  The import limits established by CITA on these textile products from China became effective on December 24, 2003 and will extend through December 23, 2004.[91]

(b)	Import surges and Section 421 of the Trade Act of 1974 as amended

To date, five investigations have been initiated under Section 421 covering the following imported products from China: (1) pedestal actuators, (2) steel wire garment hangers, (3) brake drums and rotors, (4) ductile iron waterworks fittings (DIWF), and (5) innersprings.  All five have been completed.  In the first (pedestal actuators), second (wire hangers), and fourth (DIWF) cases, the International Trade Commission made an affirmative determination of injury, finding in each case that the Chinese products were being imported into the United States in such increased quantities or under such conditions as to cause market disruption to the domestic producers of like or directly competitive products.[92]  In those three cases, the ITC recommended that the President grant relief to the domestic industry.  However, no domestic industry has been granted relief under Section 421.  In each of these three affirmative cases (pedestal actuators; wire hangers; DIWF), the President denied relief.

China has lobbied hard in the United States to discourage the President from granting relief to domestic industries under Section 421.  For example, in the first Section 421 case involving pedestal actuators, press stories reported that the Chinese government conducted an intense and wide ranging lobbying campaign to block relief.  China's Vice-Minister for Trade, Long Yongtu, came to Washington and met with Commerce Department officials in December 2002, arguing that the use of Section 421 would undermine China’s market access to the United States.  The Commerce Department’s General Counsel, Theodore Kassinger, told Minister Yongtu that President Bush would take account of China's concerns in deciding on a remedy.[93]  In addition, a press report indicated that some administration officials believed imposition of a safeguard measure on Chinese imports could have negative political consequences in that "a decision to impose the ITC remedy could lead to increased use of the China-specific safeguard, which could further complicate the bilateral trade relationship."[94]

After the President denied relief in the second Section 421 case concerning steel wire garment hangers, an observer commented that one possible view of the President's action was that it was "an overtly political decision by the President made under pressure from the Chinese government and a signal that this administration has no intention of ever granting relief under Section 421."[95]  The result has been that the first two cases under Section 421 were denied relief by the President, even though the purpose of the statute and Congressional intent were that relief would be reasonably available.

The following tables summarize the five Section 421 actions that have been initiated to date.

TA-421-01: Pedestal Actuators from China

Petition Filed:   August 19, 2002, on behalf of Motion Systems Corp., Eatontown, NJ.

Investigation Instituted:  effective August 19, 2002; Pedestal Actuators from China, 67 Fed. Reg. 54822 (Institution) (ITC August 26, 2002).

ITC Injury Determination:  Affirmative.  On October 18, 2002, by a vote of 3-2, the USITC determined that pedestal actuators from the People’s Republic of China are being imported into the United States in such increased quantities or under such conditions as to cause market disruption to the domestic producers of like or directly competitive products.  See Pedestal Actuators from China, 67 Fed. Reg. 69557 (Determination) (ITC November 18, 2002).

ITC Remedy Recommendation:  October 29, 2002.  The Commission recommended import relief in the form of a quota.

· Commissioners Hillman and Miller recommended a quantitative import restriction for 3 years in the amount of 5,626 units in year 1; 6,470 units in year 2; and 7,440 units in year 3.

· Commissioner Koplan recommended a quantitative import restriction for 3 years in the amount of 4,425 units in year 1; 4,514 units in year 2; and 4,604 units in year 3. 

The Commission transmitted its remedy proposals to the President and U.S. Trade Representative on November 7, 2002.  See Pedestal Actuators from China, 67 Fed. Reg. 69557 (Determination) (ITC November 18, 2002).

Views of Commission:  Pedestal Actuators from China, TA-421-1, USITC Pub. 3557 (November 2002).

President's Decision:  On January 17, 2003, the President announced that he was not providing relief because he had determined that import relief was not in the national economic interest and that import relief would have an adverse impact on the United States economy clearly greater than the benefits of such action.  The President provided the following reasons for his decision not to grant relief:

In determining not to provide import relief, I considered its overall costs to the U.S. economy.  The facts of this case indicate that imposing the USITC's recommended quota would not likely benefit the domestic producing industry and instead would cause imports to shift from China to other offshore sources.

Even if the quota were to benefit the primary domestic producer, the cost of the quota to consumers, both the downstream purchasing industry and users of the downstream products, would substantially outweigh any benefit to producers' income.  The USITC's analysis confirms this conclusion.

In addition, downstream industries are already under pressure to migrate production offshore to compete with lower-cost imports of finished products.  Higher component costs resulting from import relief would add to this pressure.  Given the significantly larger number of workers in the downstream purchasing industry when compared with the domestic pedestal actuator industry, I find that imposing import restrictions would do more economic harm than good.

Finally, a quota would negatively affect the many disabled and elderly purchasers of mobility scooters and electric wheelchairs, the primary ultimate consumers of pedestal actuators.

Memorandum of January 17, 2003--Presidential Determination on Pedestal Actuator Imports From the People's Republic of China, 68 Fed. Reg. 3155 (Presidential Document January 22, 2003).

TA-421-02: Steel Wire Garment Hangers from China

Petition Filed:  November 27, 2002, on behalf of CHC Industries, Inc., Palm Harbor, FL; M&B Hangers Co., Leeds, AL; and United Wire Hanger Corp., South Hackensack, NJ.

Investigation Instituted:  effective November 27, 2002; Certain Steel Wire Garment Hangers from China, 67 Fed. Reg. 72700 (Institution) (ITC December 6, 2002).

ITC Injury Determination:  Affirmative.  On January 27, 2003, by a vote of 5-0, the USITC determined that certain steel wire garment hangers from the People’s Republic of China are being imported into the United States in such increased quantities or under such conditions as to cause market disruption to the domestic producers of like or directly competitive products.  See Certain Steel Wire Garment Hangers from China, 68 Fed. Reg. 8926 (Determination) (ITC February 26, 2003).

ITC Remedy Recommendation:  February 5, 2003.  The Commission recommended import relief in the form of an additional duty.

· Commissioners Okun, Hillman, and Miller recommended relief in the form of an additional duty for 3 years: 25% year 1; 20% in year 2; and 15% in year 3.  In addition, they recommended expedited consideration of trade adjustment assistance for firms and/or workers affected by the subject imports.

· Commissioner Bragg recommended relief in the form of an additional duty for 2 years: 20% year 1; 15% in year 2.

· Commissioner Koplan recommended relief in the form of an additional duty of 30% for 3 years.  In addition, he recommended expedited consideration of trade adjustment assistance for firms and/or workers affected by the subject imports.  See Certain Steel Wire Garment Hangers from China, 68 Fed. Reg. 8926 (Determination) (ITC February 26, 2003).

The Commission transmitted its remedy proposals to the President and U.S. Trade Representative on February 14, 2003.  See Notice of Proposed Measure and Opportunity for Public Comment Pursuant to Section 421 of the Trade Act of 1974: Certain Steel Wire Garment Hangers From the People's Republic of China, 68 Fed. Reg. 10765 (USTR March 6, 2003).

Views of Commission: Certain Steel Wire Garment Hangers from China, TA-421-2, USITC Pub. 3575 (February 2003).

President's Decision:  On April 25, 2003, the President announced that he was not providing relief because he had determined that import relief was not in the national economic interest and that import relief would have an adverse impact on the United States economy clearly greater than the benefits of such action.  The President provided the following reasons for his decision not to grant relief:

The facts of this case indicate that imposing additional tariffs on Chinese imports would affect domestic producers unevenly, favoring one business strategy over another.  While most of the producers would likely realize some income benefits, additional tariffs would disrupt the long-term adjustment strategy of one major producer, which is based in part on distribution of imported hangers, and cause that producer to incur substantial costs.

In addition, most domestic producers, including the petitioners, have begun to pursue adjustment strategies.  While these strategies have included consolidation, modernization of production facilities, and expansion into complementary products and services, domestic producers are also expanding their use of imports. Indeed, a substantial part of the surge in imports during the most recent period measured was brought in by domestic producers themselves, including the petitioners.

Moreover, after 6 years of competing with Chinese imports, domestic producers still account for over 85 percent of the U.S. wire hanger market.  With this dominant share of the market, domestic producers have the opportunity to adjust to competition from Chinese imports even without import relief.

Furthermore, there is a strong possibility that if additional tariffs on Chinese wire hangers were imposed, production would simply shift to third countries, which could not be subject to section 421's China-specific restrictions.  In that event, import relief would have little or no benefit for any domestic producer.

Additional tariffs would have an uneven impact on domestic distributors of wire hangers. For some distributors, the tariffs would likely lead to some income benefits.  However, the tariffs would likely harm other distributors in light of their business models.

Additional tariffs would also likely have a negative effect on the thousands of small, family-owned dry-cleaning businesses across the United States that would either have to absorb the resulting increased costs or pass them on to their customers.

Memorandum of April 25, 2003--Presidential Determination on Wire Hanger Imports from the People's Republic of China, 68 Fed. Reg. 23017 (Presidential Document April 29, 2003).

TA-421-03: Brake Drums And Rotors from China

Petition Filed:  June 6, 2003, on behalf of the Coalition for the Preservation of American Brake Drum and Rotor Aftermarket Manufacturers (consisting of Dana Corp. (Brake and Chassis Division)/Brake Parts, Inc.; Federal Mogul Corp.; and Thyssen Krupp Waupaca/Waupaca Foundry, Inc.).

Investigation Instituted:  effective June 6, 2003; Certain Brake Drums and Rotors from China, 68 Fed. Reg. 35702 (Institution) (ITC June 16, 2003).

ITC Injury Determination:  Negative.  On December 4, 2003, by a vote of 5-0, the USITC determined that certain brake drums and rotors from the People’s Republic of China are not being imported into the United States in such increased quantities or under such conditions as to cause market disruption to the domestic producers of like or directly competitive products.  See Certain Brake Drums and Rotors from China, 68 Fed. Reg. 48938 (Determination) (ITC August 15, 2003).

ITC Remedy Recommendation:  None.

Views of Commission:  Certain Brake Drums and Rotors from China, TA-421-3, USITC Pub. 3622 (August 2003).

President's Decision:  None.

TA-421-04: Ductile Iron Waterworks Fittings from China

Petition Filed:  September 5, 2003, on behalf of McWane, Inc., Birmingham, AL, and three subsidiaries: Clow Water Systems Co., Coshocton, OH, Tyler Pipe Co., Tyler, TX, and Union Foundry Co., Anniston, AL.

Investigation Instituted:  effective September 5, 2003; Certain Ductile Iron Waterworks Fittings from China, 68 Fed. Reg. 54010 (Institution) (ITC September 15, 2003).

ITC Injury Determination:  December 4, 2003.  By a vote of 6-0, the USITC determined that certain ductile iron waterworks fittings from the People’s Republic of China are being imported into the United States in such increased quantities or under such conditions as to cause market disruption to the domestic producers of like or directly competitive products.  See Certain Ductile Iron Waterworks Fittings from China, 68 Fed. Reg. 69421 (Determination) (ITC December 12, 2003).

ITC Remedy Recommendation:  December 15, 2003.  The Commission recommended import relief in the form of a tariff-rate quota for a three-year period:

· 50% tariff on imports exceeding 14,324 short tons in year 1;

· 40% tariff on imports exceeding 15,398 short tons in year 2; and

· 30% tariff on imports exceeding 16,553 short tons in year 3.

The Commission further recommended expedited consideration of trade adjustment assistance for firms and/or workers affected by the subject imports.

The Commission transmitted a report on its determination, as well as its remedy proposals, to USTR on December 24, 2003.

Views of Commission: Certain Ductile Iron Waterworks Fittings from China, TA-421-4, USITC Pub. 3657 (December 2003).

President's Decision:  On March 3, 2004, the President announced that he was not providing relief because he had determined that import relief was not in the national economic interest and that import relief would have an adverse impact on the United States economy clearly greater than the benefits of such action.  The President provided the following reasons for his decision not to grant relief:

The facts of this case indicate that imposing the USITC's recommended tariff-rate quota remedy or any other import relief available under section 421 would be ineffective because imports from third countries would likely replace curtailed Chinese imports. The switch to third country imports could occur quickly because the major U.S. importers already import substantial quantities from countries such as India, Brazil, Korea, and Mexico. Because importers' existing inventories of imports will likely cover demand for approximately 6 to 12 months from the imposition of import relief, a switch from China to alternative import sources would not likely lead to significant additional demand for domestically produced pipe fittings, even accounting for a time lag in making that switch. Under these circumstances, import relief would provide no meaningful benefit to domestic producers.

In addition, import relief would cost U.S. consumers substantially more than the increased income that could be realized by domestic producers. Indeed, the USITC estimated that its recommended remedy would generate a negative net domestic welfare effect of between $2.3 million and $3.7 million in the first year alone.

While not necessary in reaching my determination that imposing import relief would have an adverse impact on the United States economy clearly greater than the benefits, it is also worth noting two additional points:

· First, evidence suggests that domestic producers enjoy a strong competitive position in the U.S. market, and in fact the largest domestic producer recently announced price increases nationwide ranging from 8 to 35 percent.  The two smaller domestic producers and the major U.S. importers have publicly indicated that they would follow these price increases.

· Second, in 2002 and 2003, imports of this product have been relatively stable in volume terms and have shown a slight decline in value terms.

The circumstances of this case make clear that the U.S. national economic interest would not be served by the imposition of import relief under section 421. I remain fully committed to exercising the important authority granted to me under section 421 when the circumstances of a particular case warrant it.

Memorandum of March 3, 2004--Presidential Determination on Imports of Certain Ductile Iron Waterworks Fittings From the People's Republic of China, 69 Fed. Reg. 10597 (Presidential Document March 8, 2004).

TA-421-05: Innersprings from China

Petition Filed:  January 6, 2004, on behalf of the U.S. member companies of The American Innerspring Manufacturers (AIM), Memphis, TN.  Petitioning firms include Atlas Spring, Gardena, CA; Hickory Springs Manufacturing Co., Hickory, NC; Leggett & Platt, Carthage, MO; and Joseph Saval Spring & Wire Co., Inc., Taylor, MI.

Investigation Instituted:  effective January 6, 2004; Innersprings from China, 69 Fed. Reg. 2002 (Institution) (ITC January 13, 2004).

ITC Injury Determination:  Negative.  On March 8, 2004, by a vote of 6-0, the USITC determined that uncovered innerspring units from the People’s Republic of China are not being imported into the United States in such increased quantities or under such conditions as to cause market disruption to the domestic producers of like or directly competitive products.  See ITC News Release 04-022: ITC Announces Determination in China Safeguard Investigation Concerning Uncovered Innerspring Units from China (March 8, 2004).

ITC Remedy Recommendation:  None.

Views of Commission:  To be submitted by March 26, 2004.

President's Decision:  None.

The President's failure to grant relief in any of the Section 421 cases in which the ITC has recommended relief has been criticized as not respecting congressional intent and an abuse of presidential discretion.  Representative Sander Levin (Dem.-MI), for example, issued the following comments after the President denied relief to domestic producers of DIWF on March 3, 2004:

The President's determination flies in the face of the ITC's clear decisions and, in so doing, demonstrates a disturbing approach to the safeguard law and U.S. fair trade laws.  The President once again gives short shrift to the harm found to have been suffered by U.S. workers and businesses and the benefits to the U.S. economy from a stable and predictable rules-based trading system.

The President's approach is inconsistent with the letter of U.S. law and the clear intent of Congress - and the strong bipartisan, bicameral majorities in Congress that have consistently supported the safeguard and fair trade laws.  The China-specific safeguard was a vital feature of the China PNTR legislation, which I worked to include because it was clear that China would increasingly be a competitor with U.S. products, as well as a consumer market for those products.  As a result, when Congress created the China-specific safeguard, Congress carefully limited the President's discretion to deny relief when the ITC, after an extensive investigation, makes an affirmative determination.  This was a key difference between the special China safeguard and the broader safeguard rules.

*  *  *

A rules-based system has been a key pillar of congressional support for trade expanding efforts, including the legislation to grant permanent normal trade relations (PNTR) to China.  As a result, the content of the President's determination reinforces serious concerns about the Administration's dedication to vigorous enforcement of U.S. trade laws and to preserving US jobs.  Many of the President's justifications for his denial of relief in this case could be used to deny relief in virtually every safeguard case - whether under the China-specific safeguard or under safeguard cases more generally.  Many of his other justifications reflect selective examination of the facts, and were specifically considered and rejected by the independent ITC when it came to its unanimous conclusion.  As in the two prior cases in which the President chose to deny relief, the case - and the American workers and businesses involved - deserved not a rationalization, but respect for Congress' intent when we created the law.[96]

(c)	Treatment of China as a non-market economy under U.S. antidumping duty law

In U.S. law, the general antidumping rules apply to imports from China as well as other countries.  However, U.S. antidumping law provides a special methodology for calculating normal value in proceedings involving imports from countries with non-market economies ("NMEs").  The U.S. Department of Commerce (Commerce) considers China to be an NME country.  This means that Chinese exporters are deemed to be operating within a centrally planned economy in which the government controls pricing and production decisions.  Therefore, except in cases where individual companies can demonstrate an absence of government control over their export activities, the Commerce treats all exporters as a single enterprise for dumping purposes by virtue of the presumption of common government control over Chinese exporters' trade activities.  Exporters who show an absence of government control, however, are eligible to receive a separate dumping margin specific to their imports.

Because Commerce considers the Chinese economy not to operate on market principles of cost and pricing structures, the prices and costs in the Chinese market are regarded as unreliable, and, as a result, Commerce will not use those prices and costs for purposes of a dumping calculation.  Instead, Commerce uses the "NME" methodology which is essentially a modification of the constructed value methodology that Commerce employs in ordinary antidumping investigations.  Under the "NME" methodology, Commerce selects the prices of inputs and the expense and profit percentages experienced in other, "surrogate" market economies to build up a theoretical price that would be charged in China if China were a "market economy country."  Under this methodology, for example, Commerce might decide to use India as a "surrogate economy" for China, and, using the prices of inputs in India, build up a theoretical price that would have been charged to home-market customers in China, if China were a market economy. 

In the U.S.-China Bilateral Trade Agreement (signed November 15, 1999), the United States negotiated with China for the right to continue applying its so-called "non-market economy" methodology to Chinese imports subject to antidumping investigations in the United States for 15 years after China's WTO accession.  In the Protocol of Accession, this commitment was multilateralized to all WTO Members for antidumping (and countervailing duty) cases.  Thus, for 15 years, to the extent they choose to do so and so long as they consider China a non-market economy country, the United States and other WTO Members may, in determining price comparability in antidumping investigations concerning imported products from China, employ the special "NME" methodology that is not based on a strict comparison with domestic prices or costs in China.  However, China is permitted to demonstrate that market conditions prevail in its economy as a whole or in a particular industry, and, if such a demonstration is accepted by a WTO Member's investigating authority and it concludes that China is a market economy country, the Member must thenceforward employ the normal rules in determining price comparability in antidumping and countervailing duty cases.  To date, in U.S. antidumping duty investigations of imported products from China, Commerce has consistently maintained its position that China is a non-market economy country and has applied the NME methodology.

China's commitment with respect to allowing use of the "NME" methodology was set out in Article 15 of the Protocol on Accession and is reproduced in the following box.

Protocol on Accession, WT/L/432 (23 November 2001)

15.    Price Comparability in Determining Subsidies and Dumping

Article VI of the GATT 1994, the Anti-Dumping Agreement and the SCM Agreement shall apply in proceedings involving imports of Chinese origin into a WTO Member consistent with the following:

(a)     In determining price comparability under Article VI of the GATT 1994 and the AD Agreement, the importing WTO Member shall use either Chinese prices or costs for the industry under investigation or a methodology that is not based on a strict comparison with domestic prices or costs in China based on the following rules:

(i)    If the producers under investigation can clearly show that market economy conditions prevail in the industry producing the like product with regard to the manufacture, production and sale of that product, the importing WTO Member shall use Chinese prices or costs for the industry under investigation in determining price comparability;

(ii)   The importing WTO Member may use a methodology that is not based on a strict comparison with domestic prices or costs in China if the producers under investigation cannot clearly show that market economy conditions prevail in the industry producing the like product with regard to manufacture, production and sale of that product.

(b)     In proceedings under Parts II, III and V of the SCM Agreement, when addressing subsidies described in Articles 14(a), 14(b), 14(c) and 14(d), relevant provisions of the SCM Agreement shall apply; however, if there are special difficulties in that application, the importing WTO Member may then use methodologies for identifying and measuring the subsidy benefit which take into account the possibility that prevailing terms and conditions in China may not always be available as appropriate benchmarks.  In applying such methodologies, where practicable, the importing WTO Member should adjust such prevailing terms and conditions before considering the use of terms and conditions prevailing outside China.

(c)     The importing WTO Member shall notify methodologies used in accordance with subparagraph (a) to the AD Practices Committee and shall notify methodologies used in accordance with subparagraph (b) to the SCM Committee.

(d)     Once China has established, under the national law of the importing WTO Member, that it is a market economy, the provisions of subparagraph (a) shall be terminated provided that the importing Member's national law contains market economy criteria as of the date of accession.  In any event, the provisions of subparagraph (a)(ii) shall expire 15 years after the date of accession.  In addition, should China establish, pursuant to the national law of the importing WTO Member, that market economy conditions prevail in a particular industry or sector, the non-market economy provisions of subparagraph (a) shall no longer apply to that industry or sector.

---

[1] Report of the Working Party on the Accession of China, WT/MIN(01)/3 (10 November 2001), para. 242.

[2] Report of the Working Party on the Accession of China, WT/MIN(01)/3 (10 November 2001), para. 242(a).

[3] Report of the Working Party on the Accession of China, WT/MIN(01)/3 (10 November 2001), para. 242(c).

[4] Report of the Working Party on the Accession of China, WT/MIN(01)/3 (10 November 2001), para. 242(b).

[5] Report of the Working Party on the Accession of China, WT/MIN(01)/3 (10 November 2001), para. 242(d).

[6] Report of the Working Party on the Accession of China, WT/MIN(01)/3 (10 November 2001), para. 242(e).

[7] Report of the Working Party on the Accession of China, WT/MIN(01)/3 (10 November 2001), para. 242(f).

[8] Report of the Working Party on the Accession of China, WT/MIN(01)/3 (10 November 2001), para. 242.

[9] Protocol on the Accession of the People's Republic of China, WT/L/432 (23 November 2001) art. 16.1.

[10] Protocol on the Accession of the People's Republic of China, WT/L/432 (23 November 2001) art. 16.2.

[11] Protocol on the Accession of the People's Republic of China, WT/L/432 (23 November 2001) art. 16.3.

[12] Protocol on the Accession of the People's Republic of China, WT/L/432 (23 November 2001), art. 16.4.

[13] Protocol on the Accession of the People's Republic of China, WT/L/432 (23 November 2001), art. 16.7.

[14] Protocol on the Accession of the People's Republic of China, WT/L/432 (23 November 2001), art. 16.8.

[15] Protocol on the Accession of the People's Republic of China, WT/L/432 (23 November 2001), art. 16.8.

[16] Protocol on the Accession of the People's Republic of China, WT/L/432 (23 November 2001), art. 16.6.

[17] See Procedures for Considering Requests from the Public for Textile and Apparel Safeguard Actions on Imports from China, 68 Fed. Reg. 27787 (CITA, May 21, 2003).

[18] See http://otexa.ita.doc.gov/cita.htm.

[19]       CITA also coordinates the administration's efforts to combat illegal textile and apparel transshipment; it implements the short supply and other provisions of the African Growth and Opportunity Act and the United States Caribbean Basin Trade Partnership Act; and it takes textile and apparel safeguard actions, when appropriate, under the WTO Agreement on Textiles and Clothing (ATC) and the North American Free Trade Agreement.  The Commerce Department's Office of Textiles and Apparel (OTEXA) provides the staff support for the Committee, monitors all agreements and provides economic analysis and statistical data upon which the Committee relies in taking action.

[20] See ATMI News Release, ATMI Says U.S. Must Use the Safeguard or Risk Unprecedented Upheaval, (May 21, 2003).

[21] See Procedures for Considering Requests from the Public for Textile and Apparel Safeguard Actions on Imports from China, 68 Fed. Reg. at 27788.

[22] See Procedures for Considering Requests from the Public for Textile and Apparel Safeguard Actions on Imports from China, 68 Fed. Reg. at 27789.

[23] See Procedures for Considering Requests from the Public for Textile and Apparel Safeguard Actions on Imports from China, 68 Fed. Reg. at 27788.

[24] See Procedures for Considering Requests from the Public for Textile and Apparel Safeguard Actions on Imports from China, 68 Fed. Reg. at 27788.

[25] See Procedures for Considering Requests from the Public for Textile and Apparel Safeguard Actions on Imports from China, 68 Fed. Reg. at 27788.

[26] See Procedures for Considering Requests from the Public for Textile and Apparel Safeguard Actions on Imports from China, 68 Fed. Reg. at 27789.

[27] See Procedures for Considering Requests from the Public for Textile and Apparel Safeguard Actions on Imports from China, 68 Fed. Reg. at 27789.

[28] See Procedures for Considering Requests from the Public for Textile and Apparel Safeguard Actions on Imports from China, 68 Fed. Reg. at 27789.

[29] See Procedures for Considering Requests from the Public for Textile and Apparel Safeguard Actions on Imports from China, 68 Fed. Reg. at 27789.

[30] See Procedures for Considering Requests from the Public for Textile and Apparel Safeguard Actions on Imports from China, 68 Fed. Reg. at 27789.

[31] See Procedures for Considering Requests from the Public for Textile and Apparel Safeguard Actions on Imports from China, 68 Fed. Reg. at 27789.

[32] See Procedures for Considering Requests from the Public for Textile and Apparel Safeguard Actions on Imports from China, 68 Fed. Reg. at 27789.

[33] See Procedures for Considering Requests from the Public for Textile and Apparel Safeguard Actions on Imports from China, 68 Fed. Reg. at 27789.

[34] See Procedures for Considering Requests from the Public for Textile and Apparel Safeguard Actions on Imports from China, 68 Fed. Reg. at 27789.

[35] See Procedures for Considering Requests from the Public for Textile and Apparel Safeguard Actions on Imports from China, 68 Fed. Reg. at 27789.

[36] See Protocol on the Accession of the People's Republic of China, WT/L/432 (23 November 2001) at Article 16 ("Transitional Product-Specific Safeguard Mechanism").

[37]       Pub. L. 106-286, October 10, 2000, 114 STAT. 880.

[38] See Investigations Relating to Global and Bilateral Safeguard Actions, Market Disruption, Trade Diversion, and Review of Relief Actions, 67 Fed. Reg. 8183-93 (interim rules with request for comments) (ITC February 22, 2002).  The Commission noted that it was necessary to amend its rules in order to "implement provisions of Public Law 106-286 that require the Commission to conduct new types of investigations of market disruption or trade diversion and reviews of relief actions."  Id. at 8183.

[39] See Investigations Relating to Global and Bilateral Safeguard Actions, Market Disruption, Trade Diversion, and Review of Relief Actions, 68 Fed. Reg. 65164-68 (interim rules with request for comments) (ITC November 19, 2003).  The Commission noted that amendments were necessary "to respond to exigencies created by statutory time constraints and to address concerns created by the existing rules."  Id. at 65164.

[40]       Section 421(b)(1); 19 U.S.C. § 2451(b)(1).

[41]       Section 421(b)(1); 19 U.S.C. § 2451(b)(1).

[42]       Section 421(e); 19 U.S.C. § 2451(e).

[43]       Section 421(i)(1); 19 U.S.C. § 2451(i)(1).

[44]       Section 421(i); 19 U.S.C. § 2451(i).

[45]       Section 421(c)(1); 19 U.S.C. § 2451(c)(1).

[46]       Section 421(d); 19 U.S.C. § 2451(d).

[47]       Section 421(g)(1); 19 U.S.C. § 2451(g)(1).

[48]       Section 421(g)(2); 19 U.S.C. § 2451(g)(2).

[49]       Section 421(h)(1); 19 U.S.C. § 2451(h)(1).

[50]       Section 421(h)(2); 19 U.S.C. § 2451(h)(2).

[51]       Section 421(k)(1); 19 U.S.C. § 2451(k)(1).

[52]       Section 421(a); 19 U.S.C. § 2451(a).

[53] See House Report No. 106-632, 106^th Cong., 2d Sess. 18 (May 24, 2000) (emphasis added):

The bill establishes clear standards for the application of Presidential discretion in providing relief to injured industries and workers.  If the ITC makes an affirmative determination on market disruption, there would be a presumption in favor of providing relief.  That presumption can be overcome only if the President finds that providing relief would have an adverse impact on the United States economy clearly greater than the benefits of such action, or, in extraordinary cases, that such action would cause serious harm to the national security of the United States.

[54]       Section 421(k); 19 U.S.C. § 2451(k).

[55]       Section 421(k)(2); 19 U.S.C. § 2451(k)(2).

[56]       Section 421(j)(1); 19 U.S.C. § 2451(j)(1).

[57]       Section 421(j)(1); 19 U.S.C. § 2451(j)(1).

[58]       Section 421(j)(2); 19 U.S.C. § 2451(j)(2).

[59]       Section 421(m); 19 U.S.C. § 2451(m).

[60]       Section 421(o)(1); 19 U.S.C. § 2451(o)(1).

[61]       Section 421(o)(4); 19 U.S.C. § 2451(o)(4).

[62]       The statute also addresses trade diversion, which occurs when a third country safeguard measure applied by a WTO Member to Chinese goods causes or threatens to cause significant diversions of trade into the United States.  Section 422(b)(1) of the Trade Act of 1974; 19 U.S.C. § 2451a(b)(1).  If the ITC determines that a third country safeguard measure on Chinese goods causes or threatens to cause significant diversions of trade into the United States, the U.S. Trade Representative must request consultations with China and/or the third country Member imposing the measure.  Section 422(e)(2); 19 U.S.C. § 2451a(e)(2).  Should consultations fail to resolve the issue within 60 days, the President must determine, within 40 days after consultations end, what action to take to prevent or remedy the trade diversion or threat thereof.  Section 422(g) & (h); 19 U.S.C. § 2451a(g) & (h).  As with a Section 421 investigation, the timeline for a Section 422 trade diversion investigation is 150 days from petition to relief.

[63]       H.R. Rep. No. 632, 106^th Cong., 2^nd Sess. 16 (May 22, 2000). 

[64] Id. at 19.

[65] The New Shorter Oxford English Dictionary, Clarendon Press, Oxford, 1993, Vol. 1 at 897.

[66]       19 U.S.C. § 2251.

[67]       The White House, China Trade Relations Working Group, Summary of U.S.-China Bilateral WTO Agreement, Feb. 2, 2000 (emphasis added) (available at http://usinfo.state.gov/regional/ea/uschina/bilatsum.htm).

[68] U.S.-China Bilateral Trade Agreement and the Accession of China to the World Trade Organization: Hearing Before the Committee on Ways and Means, House of Representatives, 106^th Cong., 2^nd Sess. 63 (Feb. 16, 2000) (testimony of Charlene Barshefsky, US. Trade Representative), available at http://frwebgate.access.gpo.gov/
cgi-bin/getdoc.cgi?dbname=106_house_hearings&docid=f:67129.pdf.

[69] U.S.-China Bilateral Trade Agreement and the Accession of China to the World Trade Organization: Hearing Before the Committee on Ways and Means, House of Representatives, 106^th Cong., 2^nd Sess. 48 (Feb. 16, 2000) (statement of Charlene Barshefsky, US. Trade Representative), available at http://frwebgate.access.gpo.gov/
cgi-bin/getdoc.cgi?dbname=106_house_hearings&docid=f:67129.pdf.

[70] U.S.-China Bilateral Trade Agreement and the Accession of China to the World Trade Organization: Hearing Before the Committee on Ways and Means, House of Representatives, 106^th Cong., 2^nd Sess. 67-68 (Feb. 16, 2000) (testimony of Charlene Barshefsky, US. Trade Representative) (emphasis added), available at http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=106_house_hearings&docid=f:67129.pdf.

[71] Accession of China to the WTO: Hearing Before the Committee on Ways and Means, House of Representatives, 106^th Cong., 2^nd Sess. 61 (May 3, 2000) (testimony of Charlene Barshefsky, US. Trade Representative), available at http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=106_house_hearings
&docid=f:67832.pdf.

[72] See Accession of China to the WTO: Hearing Before the Committee on Ways and Means, House of Representatives, 106^th Cong., 2^nd Sess. (May 3, 2000) (available at http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=106_house_hearings&docid=f:67832.pdf):

· At 26, Statement of Lawrence H. Summers, Secretary, U.S. Dept. of Treasury: "we will benefit from unprecedented special safeguards . . . to defend American workers and farmers from import surges . . . .  A ‘‘China-specific’’ safeguard . . . provides stronger and more targeted relief than our current Section 201 law."

· At 31-32, Statement of Dan Glickman, Secretary, U.S. Dept. of Agriculture: "The product-specific safeguard provision sets up a special mechanism to address increased imports that cause or threaten to cause market disruption to a U.S. industry.  . . .  This could permit action in more cases."

· At 36, Statement of William M. Daley, Secretary, U.S. Dept. of Commerce: "The agreed provisions include special protections to guard against import surges from China. China has agreed to a 12-year product-specific safeguard provision which ensures that the United States can take effective action in case of increased exports from China which cause market disruption in the United States.  This applies to all industries, permits us to act on a lower showing of injury to domestic industry than under existing safeguard law and allows us to act specifically against imports from China."

[73]       146 Cong. Rec. H3957 (daily ed. May 23, 2000) (statement of Mr. Levin).

[74]       146 Cong. Rec. H3606 (daily ed. May 23, 2000) (statement of Mr. Bentsen).

[75]       146 Cong. Rec. S8614 (daily ed. September 15, 2000) (statement of Mr. Fitzgerald).

[76]       146 Cong. Rec. S8633 (daily ed. September 15, 2000) (statement of Mr. Baucus).

[77]       ATMI press release, ATMI Calls for New Quotas on Surging Chinese Imports, September 5, 2002 (available at http://www.atmi.org/NewsRoom/releases/pr200302.htm).

[78]       ATMI press release, ATMI Calls for New Quotas on Surging Chinese Imports, September 5, 2002 (available at http://www.atmi.org/NewsRoom/releases/pr200302.htm).

[79]       ATMI press release, ATMI Calls for New Quotas on Surging Chinese Imports, September 5, 2002 (available at http://www.atmi.org/NewsRoom/releases/pr200302.htm).

[80]       ATMI press release, ATMI Calls for New Quotas on Surging Chinese Imports, September 5, 2002 (available at http://www.atmi.org/NewsRoom/releases/pr200302.htm).

[81]       ATMI press release, ATMI Calls for New Quotas on Surging Chinese Imports, September 5, 2002 (available at http://www.atmi.org/NewsRoom/releases/pr200302.htm).

[82] ATMI Seeks Relief Under China-Specific Safeguard on Five Import Categories, Inside US-China Trade, September 11, 2002.

[83] ATMI Seeks Relief Under China-Specific Safeguard on Five Import Categories, Inside US-China Trade, September 11, 2002.

[84]       A press report noted:  "The [ATMI's] petition has so far been held in abeyance because there are no rules governing the process of receiving and deciding on petitions under the safeguards."  China Seeks Meeting to Convince ATMI to Drop Safeguard Petition, Inside US-China Trade, May 7, 2003.

[85] See Procedures for Considering Requests from the Public for Textile and Apparel Safeguard Actions on Imports from China, 68 Fed. Reg. at 27788.

[86] ATMI May File Limited Petition In Light Of New China Textile Safeguard, Inside US-China Trade, May 29, 2003.

[87] See Solicitation of Public Comments on Request for Textile and Apparel Safeguard Action on Imports from China, 68 Fed. Reg. 49440 (knit fabric; category 222) (CITA, August 18, 2003); Solicitation of Public Comments on Request for Textile and Apparel Safeguard Action on Imports from China, 68 Fed. Reg. 49444 (dressing gowns; category 350/650) (CITA, August 18, 2003); Solicitation of Public Comments on Request for Textile and Apparel Safeguard Action on Imports from China, 68 Fed. Reg. 49448 (brassieres; category 349/649) (CITA, August 18, 2003).

[88] See Solicitation of Public Comments on Request for Textile and Apparel Safeguard Action on Imports from China, 68 Fed. Reg. at 49444.

[89] See Solicitation of Public Comments on Request for Textile and Apparel Safeguard Action on Imports from China, 68 Fed. Reg. at 49448 and 49452.

[90] See Announcement of Request for Bilateral Textile Consultations with the Government of the People’s Republic of China and the Establishment of an Import Limit for Knit Fabric, Category 222, Produced or Manufactured in the People’s Republic of China, 68 Fed. Reg. 74944 (CITA, December 29, 2003); Announcement of Request for Bilateral Textile Consultations with the Government of the People’s Republic of China and the Establishment of an Import Limit for Brassieres and Other Body Supporting Garments, Category 349/649, Produced or Manufactured in the People’s Republic of China, 68 Fed. Reg. 74945 (CITA, December 29, 2003); Announcement of Request for Bilateral Textile Consultations with the Government of the People’s Republic of China and the Establishment of an Import Limit for Cotton and Man-Made Fiber Dressing Gowns and Robes, Category 350/650, Produced or Manufactured in the People’s Republic of China, 68 Fed. Reg. 74947 (CITA, December 29, 2003).

[91] Id.

[92]       In the third Section 421 case, the ITC made a negative determination of injury.  See Certain Brake Drums and Rotors from China, 68 Fed. Reg. 48938 (Determination) (ITC August 15, 2003).

[93] See Chinese Official Complains about China-Specific Safeguards, ChinaTradeExtra.com, posted December 6, 2002.

[94] See U.S. Holds Door Open to Settlement in First China-Specific Safeguard Case, Inside US-China Trade, November 13, 2002.

[95] See Eliza Patterson, The U.S. President, Once Again, Rejects Import Sanctions Against China, ASIL Insights (May 2003) (available at the website of the American Society of International Law: www.asil.org.insights/
insigh106.htm).

[96] Administration Keeps Unbroken Record of Not Standing Up for American Workers and Businesses Against Injurious Imports from China - Puts Another 5000 U.S. Manufacturing Jobs at Peril, Comments of Rep. Sander Levin regarding President's Bush decision to deny relief in the DIWF 421 case (March 5, 2004) (emphasis in original); available at http://www.insidetrade.com/secure/pdf5/wto2004_1302.pdf.