The solar battle between India and China has been brought to a rather abrupt close by the government's decision to reject Indian manufacturers' plea for anti-dumping measures against cheap Chinese products. However, some other emerging trade wars may soon be fought at the WTO level.

Brazil, China or India, the new global trade champions, are ready to seize their legal weapons, hence possibly transforming the WTO dispute settlement system.

China on the offensive

Last July, the Dispute Settlement Body (DSB) of the WTO first offered a triumph to Beijing in a case China introduced against the European Union in response to anti-dumping measures taken by Brussels on Chinese iron and steel products.

Beijing had already won a difficult battle against the US in March, while the WTO Appellate Body acknowledged that Washington had partly acted inconsistently with its obligations under the Agreement on Subsidies and Countervailing Measures (SCM), by imposing anti-dumping and countervailing duties on questionable grounds.

A diligent student in international trade, China now adopts a more offensive stance against its major commercial partners. After 10 years of participation in the WTO and a first study phase during which Beijing has become familiar with the WTO dispute settlement mechanism as a third party in as many as 87 cases, China has appeared 23 times to the DSB as a defendant, and already eight times as a complainant.

With a better in-house expertise of international trade law, and now convinced of the benefits to be derived from a quasi-judicial settlement of international trade disputes, Chinese lawyers have caught up on legal techniques, and developed sophisticated reasoning.

Brazil, India in picture

Interestingly, the next contesters of Beijing may not be the EU or the US, but rather Brazil or India.

With the recent imposition of a 30 percentage-point tax increase on cars with less than 65 per cent local content, the Brazilian government firmly reacted to the significant imports of Chinese cars, and the risk to see the country “de-industrialised”.

Following Tata Motors' announcements, some other foreign car companies may decide to build car factories in Brazil, hence avoiding high taxes, but this may also result in a major WTO dispute as Brazilian — as Indian industrialists seem to distinguish between Chinese and some other trade competitors.

Be it chicken, tyres, paper, steel, intellectual property or solar panel, the China-related disputes cover all possible areas of international trade, but one finds rapidly that the vast majority of cases deal with anti-dumping measures adopted in reaction to what is often perceived as unfair trade.

The WTO agreement indeed makes it possible for its Members to respond to dumping to the extent an “important” damage to the domestic industry is demonstrated. In this respect, the complicated calculation of dumping differs depending on whether the accused unfair trader is a market economy or not.

Without a market economy status and with a fundamental role for the State in its economy, China is now in a complicated position.

It will soon face many more dumping-related disputes, possibly introduced by some other emerging trade champions who want to protect themselves against unfair Chinese competition, but aren't known to be in favour of liberal orthodoxy either.

‘State Capitalists'

Having emerging or developing countries fighting against each other at the WTO is not something new. India, for instance, has brought a number of complaints against Brazil, Argentina or South Africa, but something else is at stake today.

Many of these emerging trade champions are, to a very large (China) or much smaller extent (Brazil), “State Capitalists”, as recently described in a survey by The Economist .

Ambiguous market economies or economies in transition play with different rules than those ideally imagined for a free trade scenario.

They skilfully select those of the legal tools available in the WTO Agreement that could better protect their syncretic economic model, hence contributing to the creation of a hybrid system, and a possible redefinition of the WTO's values and role.

Is this something to worry about or, on the contrary, an opportunity for clarification of the rules of the game?

One can indeed wonder if free trade has ever existed, when the EU or the US keep fighting regarding the unacceptable character of their respective highly subsidised industries or agriculture.

This eruption of new players on the commercial scene may lift the veil of hypocrisy that reigns in an idealised model of international trade that is not always respected by its main proponents known to be in favour of liberal orthodoxy.

(The author is with Maastricht University Law Faculty.

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