WT/DS399/R 
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ANNEX C 
  
ORAL STATEMENTS OF TH E PARTIES AT THE FIRST 
SUBSTANTIVE MEETING OF THE PANEL OR 
EXECUTIVE SUMMARIES THEREOF 
 
 
Contents Page 
Annex C-1 Executive Summary of the Oral  Statement of China at the First 
Meeting of the Panel C-2 
Annex C-2 Executive Summary of the Oral Statement of the United States at 
the First Meeting of the Panel C-11 
 WT/DS399/R 
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ANNEX C-1 
 
 
EXECUTIVE SUMMARY OF THE ORAL STATEMENT OF  
CHINA AT THE FIRST M EETING OF THE PANEL 
 
 I. STANDARD OF REVIEW  
1. It is common ground among the parties that Article 11 of the DSU provides the basic, 
foundational standard for the Panel's review.  A pane l must engage in an "objective assessment."  The 
United States and Japan agree with China that, in  carrying out this inquiry in the present case, the 
Panel should examine whether the investigating auth ority's decision is "reasoned and adequate" – the 
classic formulation applying Article 11 .  This standard applies regardless of the nature of the textual 
obligations at issue.  We agree with the view that the Agreement on Safeguards  and jurisprudence 
interpreting it provide a good framework for consid ering how the general standard of review should 
apply to safeguard measures under Article 16.      II. INTERPRETATION OF ARTICLE 16   
2. The United States' attempt to isolate Artic le 16 of the Protocol from the broader global 
safeguards regime both ignores the fact that the Prot ocol is an integral part of the WTO Agreement 
and is at odds with the substantial overlap in structure and language between Article 16 and the 
Agreement on Safeguards .  The United States' interpretative position is also internally inconsistent, as 
the United States liberally cites to and relies upon global safeguards principles and jurisprudence.  
Article 16 is fundamentally a form of trade remedy , and should be read in the context of other WTO 
trade remedies, including the global safeguards provisions.  These concepts – increasing imports, 
causal link – appear in many different trade re medies under the WTO Agreem ent.  The consistent 
application of the contextual guidance provided by  other trade remedies, coupled with Article 16's 
similarities and differences with these other re medies, supports China's interpretation.   
 3. Regarding the differences between  the text of Article 16 and the Agreement on Safeguards , 
two important additions are noteworthy.  Under Article 16, imports must be "increasing rapidly
" – 
instead of merely increasing.  And under Article 16, these imports must also be a "significant  cause" 
of injury – as opposed to just a cause of injury.  Th ese key additional words must be given meaning.  
The United States, however, largely sidesteps the in terpretative significance of these two key words.   
 4. The fact that the threshold for injury is lo wer in Article 16 than in the global safeguards 
context does not change the fact that the Article  16 standards for increasing imports and causal link 
are stronger.  The fact that the injury threshol d in Article 16 is "material injury," as opposed to 
"serious injury," does not imply that the threshold of causation
 is weaker.  One simply does not follow 
from the other.  Either the threshold of "signi ficant" causation has been reached, or it has not. 
 5. The United States bases its extreme interpreta tion of Article 16 in large part on repeated 
reference to the " inclusio unius " canon of interpretation.  The argume nt generally proceeds as follows:  
where Article 16 does not provide express direction or requirements on a topic, the investigating 
authority enjoys complete discretion to do as it wishes.  This argument is fundamentally flawed.  Discretion in how to apply a standard does not mean that there is no standard and that the authorities 
are always correct.  The United States' argument i nvites action that is contrary to the object and 
purpose of the WTO Agreement, generally, and the Protocol, in particular.     WT/DS399/R 
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III. INCREASING IMPORTS 
 
A. MEANING OF "INCREASING RAPIDLY"  
 6. The text of Article 16 uses specific langua ge to define the circumstances under which 
increasing imports from China may be subject to pr oduct-specific safeguards.  The ordinary meaning 
of the phrases "are being imported" and "are in creasing rapidly," and their use of the present 
continuous tense, emphasizes the importance of ti me – specifically, the most recent period.  A 
Member seeking to restrict imports from China must also find that the imports from China are not just 
"increasing," but that they are "increasing rapidly."  Read in the context of other WTO provisions that 
address "increasing" imports as a requirement to im pose a trade remedy, this addition of the word 
"rapidly" must be given interpretative meaning.  It is not enough to find just any increase.  Appellate 
Body decisions confirm that domestic authorities must focus on the most recent past.  Trends – 
especially the most recent ones – must be examined and interpreted in context of the entire period.  
An increase must have been recent, sudden, sharp and significant enough to cause the requisite injury. 
 
7. The United States tries to sidestep the impor tance of finding "rapidly increasing" imports by 
conflating two distinct issues.  Increased imports and material injury are two discrete issues, both of 
which must be satisfied under Article 16.  First, the authority must find that imports are "rapidly 
increasing."  Second, this increase must be a significant  cause of "material injury."  The fact that the 
injury standard is lower does not mean that the ot her requirement – the "rapidly increasing" imports – 
is any lower.  Rather the authority must first sa tisfy the "rapidly increasing" imports standard.  The 
United States improperly conflates these two discrete steps.  8. The United States also misinterprets the need  to focus on the most recent period and claims 
"there is no meaningful distinction" in the langua ge of Article 16 compared to global safeguards, 
focusing only on Article 16.1.  Yet as China has no ted, Article 16.4 uses the phrase "are increasing 
rapidly" whereas Article 4.2 of the Agreement on Safeguards  uses the phrase "increased imports."  
The Appellate Body has noted the difference between "increasing
" and "increased " in the global 
safeguards context under the Agreement on Safeguards , and stressed their different meanings.  The 
United States ignores this application to Article 16.   China, however, believes this is a meaningful 
distinction that requires the analysis under Article 16 to focus on an even more recent  period to 
determine whether imports are "increasing ." 
 B. USITC APPLICATION OF THE STANDARD   9. The United States did not respect the requirements of the Protocol for finding rapidly 
increasing imports.  The USITC devoted just a single pa ge of its determination to this issue and failed 
to address adequately the most recent period of time or the trends within the period in any meaningful 
way.  Nor did the USITC find an increase in im ports qualitatively and quan titatively sufficient as 
required.    10. The United States confuses what the USITC said and what the USITC did.  The USITC 
generally articulated the correct standard – the need  to focus on the recent period, and the need to find 
"rapidly increasing" imports.  But the USITC did not apply the correct standard.  Mouthing the correct 
standard does not save a fundamentally defective app lication of the standard to a particular set of 
facts.  The USITC neither explained how imports were increasing "rapidly" in this case, nor even 
bothered to explain what it interpreted "rapidly" to  mean.  Because the words of  the text control, the 
addition of "rapidly" to the safeguards framework for the Protocol must be given meaning.  An 
adequate explanation must detail how imports are increasing "rapidly" over the most recent period.  
The USITC's failure to do so renders its explanati on of increased imports inadequate and inconsistent 
with its WTO obligations.  Furthermore, the USIT C relied too heavily on an "end-point-to-end-point" 
analysis and, in doing so, ignored trends, and particul arly recent trends – despite the fact that such an 
approach has been rejected by the Appellate Body.   WT/DS399/R 
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 11. Had the USITC analyzed properly the most recent trends at the end of the period of 
investigation, it would have found a sharp differen ce between trends over the earlier periods and the 
more recent 2007 to 2008 period.  In 2008, both the increase in quantity and the percentage of increase in imports fell sharply as the increases in im ports from China were at their smallest of the 
period.  The largest increase was from 2006 to 2007 – hardly the most recent period.  By employing a 
simple end-point-to-end-point analysis, the USITC masked the fact that imports from China were 
dramatically slowing during the end of the period.  Such an approach is inconsistent with the 
Appellate Body's guidance on these analyses and ignores Article 16's requirement that imports be "increasing rapidly " if measures are to be imposed.  The USITC also failed to explain why the import 
trends from 2007 to 2008 were sudden enough, sh arp enough, or significant enough to qualify as 
"increasing rapidly."  Over this period, the increases were consistent and stable for three out of four 
comparison periods.  The increase from 2007 to 2008 w as the smallest of the overall period, and was 
down sharply from the prior year.  
12. Imports from China were not  "sudden enough" because the modest increase over the period 
was steady, not sudden.  Nor were they "sharp enoug h," as increases in market share were consistently 
in the 2 to 3 percentage point range during the peri od.  Finally, imports were clearly not "significant 
enough" as the rate of increase declined sharply in 2008.  The USITC's analysis of increased imports 
is insufficient under both global safeguard standa rds and the distinct standard created by the 
requirement of "increasing rapidly" under the Protoc ol.  Instead of properly focusing its analysis on 
the more recent period of time, the USITC obscured the more recent period of time.  The USITC 
deviated from existing practice and improperly refused to gather data on the first quarter of 2009 that 
showed declining imports from China.    13. The USITC masked clear downward trends within 2008 by considering only the full-year 
data.  Looking at quarterly trends of imports, the trend is down, whether one considers only 2008 data 
or both 2008 and the first quarter of 2009.  The firs t quarter of 2009 simply confirms and significantly 
reinforces a trend that had already begun early in  2008 – imports from China were declining.  The 
annual data for 2008 as a whole, in contrast , masks this important change in trends. 
 
IV. CAUSATION – AS SUCH 
 14. Imports from China were neither "in such increased quantities" nor "increasing rapidly" as 
required by Article 16.  The fact that the USITC nonetheless found such increases to be a significant 
cause of material injury rests in large part on th e WTO-inconsistent causation standard in the U.S. 
implementing statute.  Article 16 expressly requires that imports from China be a "significant cause" 
of the material injury being alleged.  The U.S. st atute defines "a significant cause" to mean merely "a 
cause that contributes significantly" to the material  injury, and provides that the significant cause 
"need not be greater than or equal to any other cause."  This language, however, has no basis in Article 16 and impermissibly lowers the standard.   
 15. The addition of "significant" to the Protoc ol's causation standard must be given meaning 
when interpreting the obligations for Article 16.  "Significant" is commonly understood to mean 
"important, notable, consequential."  Thus, the or dinary meaning of the language requires a strong 
causal connection if rapidly increasing imports are to be deemed a " significant  cause" of injury.  Just 
as was the case with the addition of "rapidly" to the increasing imports standard, this addition of 
"significant" results in a more demanding standard th an for global safeguards.  This interpretation is 
supported by the Working Party Report on the Protocol  of Accession, which confirms that Article 16 
requires a "causal link" between imports and injury.  "Causal link," from Article 4.2(b) of the Agreement on Safeguards , has been interpreted by the Appella te Body to require "a genuine and 
substantial relationship of cau se and effect" between the imports and the alleged injury.   
  WT/DS399/R 
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16. The United States argues that the "significan t cause" standard is somehow lower than for 
global safeguards and unfair trade remedies, poin ting to the absence of specific language on non-
attribution in Article 16.  This argument ignores th e interpretative significance of adding the word 
"significant."  It would be truly bizarre for a fair  trade remedy, such as Article 16, to employ a lower 
standard than an unfair  trade remedy such as antidumping. 
 
17. The U.S. implementing statute departs dramat ically from the text of the Protocol in two 
respects.  First, the statute defines "a significant cause" to mean merely "a cause that contributes 
significantly."  This attempt to weaken the st andard for causation is impermissible because the 
ordinary meaning of "contributes significantly" conveys a meaning that is weaker than both 
"significant cause" as well as the requirement in global safeguards that there be "a genuine and 
substantial relationship of cause and effect."  The statute also adds the language that a significant 
cause "need not be equal to or greater than an y other cause."  This language allows the U.S. 
investigating authority to determine that even a minimal cause, which can be less than any other 
cause, could still be "a significant cause."  The co re meaning of "significant" – important, notable, 
consequential – makes sense when one cause is consider ed relative to other causes.  It is hard to see 
how a minor cause could still be considered properly to  be "significant."  The U.S. legislation reduces 
"a significant cause" to nothing more than "a cause."  18. In response, the United States attempts to cut s hort the Panel's inquiry by stating that the U.S. 
statute cannot be inconsistent as such unless it "specifically mandates
 that the ITC take action in a 
manner that is inconsistent with the Protocol."  Yet that is what this U.S. statute does.  This statute 
requires  the USITC to apply a fundamentally flawed definition.  The United States has not argued – 
and cannot argue – that the USITC was free to disregard this statutory definition at its discretion.    19. Rather than defend the language of the statut e, the United States chooses instead to defend the 
language of the USITC determination – language that is different than the statute itself.  The USITC's 
gloss on the statute, however, does not change the stat utory language, which must  stand on its own.  If 
the U.S. statute said "direct and significant causal lin k," as does the USITC determination, this dispute 
would be very different.  But the U.S. statute instead says "contribute significantly" and "need not be equal to or greater than any other cause," both of which have very different meanings than either 
"significant cause" in the language of Article 16 or "direct and significant causal link" in the words of 
the USITC. 
 
V. CAUSATION – AS APPLIED 
 
A. MEANING OF "SIGNIFICANT CAUSE"  
20. Unlike global safeguards and trade remedies th at require imports to be simply a "cause," 
Article 16 adds the key modifier "significant."  The ordinary meaning of this modifier strengthens the 
nature of the causal link that must be found.  Ex tensive WTO jurisprudence on the meaning of "cause" 
in the context of trade remedies provides cont extual guidance for understanding the meaning of 
"significant cause." 
 
21. The United States never grapples with the add ition of the word "significant."  Instead, the 
United States notes the absence of any specific analytic methodologies, the possibility of there being 
other causes, and the need for the imports under inv estigation only to play some part in causing the 
injury.  All of these points, however, are equally tr ue of the causation standard for global safeguards 
and other trade remedies.  Yet none of these fa ctors have prevented the Appellate Body from 
interpreting "cause" and "causal link" to mean a "genuine and substantial relationship of cause and 
effect."  Furthermore, the United States stresses the discretion for investigating authorities to use 
whatever methods they wish.  China does not di sagree that authorities have some discretion in how 
they make this showing.  But as China has demons trated, the USITC has not made that showing in 
this case. WT/DS399/R 
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 B. USITC APPLICATION OF STANDARD  22. Article 16 imposes the specific standard that "rapidly" increasing imports from China must be 
a "significant cause" of any alleged material inju ry.  The USITC's causation analysis, however, used 
the WTO-inconsistent definition of "significant cau se" from the U.S. statute.  The context of the 
requirement for imports to be a "significant cause" requires much more than some de minimis  
connection.  The USITC's statutory obligation to a pply a faulty standard resulted in its causation 
analysis being inconsistent as applied.  The USITC de termination is also incons istent with Article 16 
as applied because in the USITC faile d to evaluate properly whether imports from China were in fact 
a "significant cause" of material injury. 
 
1. Conditions of competition  
 
23. Panels and the Appellate B ody have repeatedly affirmed the importance of examining the 
conditions of competition for any proper causation anal ysis.  Contrary to the U.S. suggestion, this 
analysis of the conditions of competition is not optio nal – it is required.  The U.S. improperly relies on 
the use of the term "or" in Article 16.1 (i.e., "or
 under such conditions" in the English text).  China 
observes that both the French and Spanish texts use th e term "et" and "y" (which translate into English 
as "and "), and confirm that this analysis is required.   The USITC recognized such an analysis was 
necessary by engaging in a conditions of competition analysis, but misinterpreted and distorted the 
conditions of competition in the domestic tyre market .  Notably, the USITC's failed to recognize and 
consider objectively the attenuated nature of comp etition between Chinese and domestic tyres in the 
U.S. market.    24. The record confirms that tyres from China were not competing significantly with U.S.-made 
tyres.  The record shows that Chinese imports are vi rtually absent in approximately 74 per cent of the 
U.S. tyre market.  With respect to the OEM ma rket, while U.S. producers made many of their 
shipments to the OEM market for new vehicles, im ports from China consistently accounted for less 
than 5 per cent of all OEM shipments in the U.S. market.  Competition in this segment, if any even 
existed, was negligible.  U.S. production in the repl acement market is predominantly in the higher-end 
segment, whereas imports from China focused predominat ely in the lower-end segment.  It is hard to 
believe that imported tyres in a different segment of  the market could be a si gnificant cause of injury 
to producers of tyres in another segment.  The US ITC offered no reasoned explanation as to why this 
was, allegedly, the case.  China is not arguing that there was no competition at all between subject imports and domestic tyres – rather, such compe tition was highly attenuated and thus the likelihood of 
subject imports being a "significant cause" of material injury is low.   
 
25. If imports from China were having such a dir ect competitive impact, then why did the largest 
increase in imports from China in 2007 have so little impact on the market?  In the same year U.S. 
producers' operating income rose to the level of 4.5  per cent and their gross profit increased by 58 per 
cent compared with 2006.  The Unite d States claims that "the record  showed that tyres from China 
and tyres from the United States compete in all segme nts of the market."  This statement does not 
withstand scrutiny.  The U.S. producers and non-Chinese imports consistently and completely 
dominate the OEM segment.  Yet the USITC asserts that even the trivial Chinese market share was 
somehow meaningful competition in this segment.  As regards the replacement market, China also 
notes that there was significant attenuation.  Instead of addressing this attenuation, the United States 
simply relies on the fact that  there was some
 competition between U.S.-p roduced tyres and China-
produced tyres.  Yet the question for this Panel regarding competition is not whether any competition 
exists, but rather what is the extent and  impact of  that competition.  And that impact, due to the high 
degree of attenuation, is minimal at best.  26. China would like to emphasi ze that each of these conditions of competition – declining 
demand, an industry strategy to globalize produc tion, and attenuated co mpetition between imports  WT/DS399/R 
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from China and domestic tyres – are capable of individually disproving the requisite causal link.  These conditions, however, do not stand alone.  Rath er, they each work together to create the overall 
conditions of competition in the market place and,  when assessed cumulatively, confirm the absence 
of the requisite causal link.  2. No correlation exists between imports and injury  
27. The USITC failed to establish any temporal correlation, or "coincidence," between rapidly 
increasing imports from China and injury.  In the co ntext of global safeguard s, the Appellate Body 
has explained that "coincidence" analysis plays a "cen tral" role in determining whether or not a causal 
link exists.  China notes that coincidence analys is is equally important when evaluating the 
application of a product-specific safeguard under the Pr otocol.  Under Article 16.4 of the Protocol, the 
correlation must exist during the period of time when  imports were increasing rapidly, correlate with 
the adverse trends at issue, and constitute a "significant" causal link.  
28. The U.S. assertion that a "coincidence" an alysis is not required under Article 16 of the 
Protocol is incorrect.  It is based on two strained readings – one of the Prot ocol and one of Appellate 
Body and Panel decisions.  The United States asserts th at no such analysis is required because the text 
of Article 16 does not explicitly state that a Member  must conduct a "coincidence" analysis.  Yet in 
the global safeguards context, even though the text of the Agreement on Safeguards  nowhere 
mentions "coincidence," the Appellate Body s till found such analysis to be required.   
 
29. The United States also argues that the "coincid ence" requirement is derived solely from the 
words "rate and amount" and "changes" in Article 4.2(a) of the Agreement on Safeguards .  Both the 
Panel and Appellate Body decisions in Argentina – Footwear  revolved around whether increased 
imports caused injury.  They were interpreting both the language "to cause" in Article 2 and the 
language "have caused" in Article 4.2(a).  The illustrativ e list of factors to consider in Article 4.2(a) 
does not change the meaning of "cause."  Accordi ngly, the Panel noted that the "trends" regarding 
"rate and amount" and their "changes" "matter as mu ch as their absolute levels."  Adopting this 
common sense notion, the Appellate Body stated , "in an analysis of causation, ‘it is the relationship  
between the movements  in imports (volume and market share) and the movements  in injury factors 
that must be central to a causation analysis and determination.'"  Similarly, the term "rapidly" from 
Article 16 is a reflection of the "rate and amount" factor.   
 30. The "coincidence" analysis requirement, theref ore, is not "specifically linked" to specific 
words from the Agreement on Safeguards  as the United States claims.  Rather, it is intrinsically linked 
to the causation analysis that investig ating authorities must conduct under the Agreement on 
Safeguards  – namely whether increased imports are caus ing injury.  Likewise, Article 16 of the 
Protocol involves the same causal analysis of whet her rapidly increasing imports are causing injury.  
A "coincidence" analysis is logically required under the Protocol.  In fact, we find the U.S. argument 
rather curious, since the USITC (as the United States  itself notes) "did, in fact, use a ‘coincidence of 
trends' analysis."  
31. When properly examined, the ten factors the USITC discussed relating to the condition of the 
domestic industry show the lack of any correlati on between imports from China and alleged injury.  
The U.S. claim that China is only able to point to "one or two variations in trends" is false.  To 
highlight this fundamental lack of correlation, th e periods 2006 to 2007 and 2007 to 2008 should be 
considered.  The year over year changes demonstrate a clear lack of correlation.  Domestic shipment 
quantities do not correlate with rapidly increasing Ch inese imports.  The large change in imports from 
China from 2006 to 2007 corresponds with the smalle st decline in domestic shipments.  In the 
preceding period and the following period, the opposite is true – with modest changes in imports from 
China corresponding to much larger decreases in domestic shipments.   
 WT/DS399/R 
Page C-8  
 
32. The same disconnect is true for average unit values.  The increases in average unit value were 
greatest when the increases in imports from China were greatest. Even as the cumulative level of 
imports from China grew over the period, the aver age unit value continued to climb – U.S. producers 
were earning more and more for every tyre they so ld.  Operating profits – which combines both the 
volume effects and price effects into a single measu re show no correlation. The 2006 to 2007 period 
shows the opposite of the 2007 to 2008 period.  When  imports increased the most, operating profits 
surged.  When imports increased the least, the domestic industry experienced record losses.  
Furthermore, China's analysis considers more than  just the volume of domestic shipments.  China 
considers the trends in the value associated with eac h tyre being sold and the net effect of both price 
and volume – namely, operating profits.  This more  complete picture demonstrates dramatically the 
lack of overall correlation. 
 33. In response, the United States tries to dimi nish these examples by claiming that the 2006-
2007 period was an "anomaly."  Imports from China we re increasing in 2006-2007 at the highest rate 
in the entire period.  If correlation between increased imports and injury truly exists, it should be most 
obvious during the year when imports increased the most.  The fact that correlation is completely 
absent during 2007 speaks volumes.  Such absence of correlation is repeated across virtually every 
correlation factor examined.  The same absence of co rrelation is true for the 2007-2008 period.  Given 
that there are four year-to-year data points in the period of investigation, that means that two of these 
four – 50 per cent - show an absence of correlation.  Putting aside any ex post  rationalizations that the 
United States attempts to offer, the USITC faile d to provide any compelling explanation in this 
respect. 
 34. Even considering actual prices, there still is no temporal correlation between rapidly 
increasing imports and domestic prices.  In an atte mpt to get around this absence of correlation, the 
USITC posited a "cost-price squeeze" hypothesis.  This theory, however, does not match up with 
reality, nor does it correlate with movements in the COGS/sales ratio, wh ich plunged in 2007 (when 
Chinese imports grew at their fastest rate), and rose in 2008 to its highest rate in the period when the 
rate of increase in imports was at the lowest leve l of the period.  The United States ignores that, for a 
"cost-price squeeze," it is not about the cost in isolatio n, or the price in isolation; it is the relationship 
between the two over time.  Thus, no "cost-price squeeze" can be attributed to imports from China 
based on the evidence before the USITC.  And for other factors, such as capital expenditures and 
R&D expenditures, the USITC acknowledged that bot h "trended upwards" – which therefore cannot 
support a finding of causation.    35. Finally, China is puzzled by the U.S. claim that  our analysis of each factor in "isolation" is 
"not the appropriate analysis."  Any proper correlati on analysis must first examine individual factors 
and then assess them cumulatively to determine th eir overall impact.  China has done just this. 
 
3. The USITC offered no "compelling analysis" of causation 
 
36. Despite this absence of any meaningful corre lation between industry pe rformance and imports 
from China, the USITC failed to offer a "very compelling" account of why causation is nonetheless 
present.  The USITC principally focused on end- point-to-end-point compar isons of performance 
indicators over the period and made no attempt to explain the absence of correlation between imports 
and various injury factors in this year-to-year data .  The U.S. claim that it did not need to offer a 
"compelling analysis" impermissibly disregards the guidance and analysis of the Appellate Body.  
Such guidance should not be cast aside.  The failure to provide a compelling explanation was 
inconsistent with the United States' WTO obligations. 
 
4. The USITC failed to assess fully other causes of injury 
 
37. The absence of correlation between trends in  imports from China and the condition of the 
domestic industry strongly suggests that other factor s are in fact responsible for the condition of the  WT/DS399/R 
 Page C-9 
 
 
domestic industry.  Yet the USITC  dismissed the ar ray of alternative causes noted by respondents and 
simply claimed that, under the U.S. statute, it did not  need to engage in a "weighing of causes."  This 
approach is inconsistent with Article 16's require ment that a Member demonstrate a "causal link" 
between imports and injury, and that rapidly increasi ng imports – not other factors – are a "significant 
cause" of material injury.  It is impossible to dete rmine adequately whether imports are a "significant" 
cause of injury without considering the role play ed by other causes.  An "assumption" that other 
factors are not causing the alleged injury cannot be made consistent with the obligation to find a 
"causal link."    38. The USITC's decision to forgo any analysis of other causal factors meant that it largely 
ignored the U.S. tyre markets' prolonged contraction in demand.  This contrac tion resulted in apparent 
consumption of all passenger vehi cle and light truck tyres by volume falling by 10.3 percentage points 
during the 2004-2008 period.  From 2007-2008, th ere was an almost one-to-one correspondence 
between the decline in the overall U.S. market and the decline in U.S. domestic shipments.  Without 
even acknowledging these changes in demand, the US ITC could not offer a reasoned and adequate 
explanation of why, in light of these changes, im ports from China were still a "significant cause" of 
material injury.  39. Unlike the changes in imports from China, the changes in dema nd correlate very closely with 
the changes in key domestic indicators. The improvement in 2007 and the decline in 2008 both correspond closely with the improvement in demand in 2007, and the sharp drop in demand in 2008.  
The improving and worsening trends correspond directly with the changes in demand.  The 
United States nonetheless claims that the USITC "concluded that declining demand did not sever the causal link."  Nowhere in the USITC Determination, however, is a meaningful analysis of declining 
demand to be found.    
40. The United States tries to equate overall dec lining demand with the fallout of the recession, 
and claims that the USITC's conclusory statemen ts regarding the effects of the recession should be 
deemed as sufficient analysis for both.  The USIT C's acknowledgement in passing of the existence of 
the recession does not adequately address this im portant phenomenon, which is fundamental to 
understanding data for 2008.  The USITC failed ad equately to address and explain the broader, 
structural shift – i.e., the contraction in demand (b oth worldwide and in the U.S.) that was apparent 
across the entire period of investigation.  These om issions fatally undermine the USITC's conclusions. 
 41. The USITC also attributed plant closings to imports from China but the record does not 
support such a conclusion.  The record demonstrat es that domestic producers were engaged in a long-
term strategy that shifted production in the Unite d States towards the higher-end segments of the 
market.  For the U.S. producers, imports from China were, and are, a  positive factor.  U.S. producers 
were responsible for manufacturing and importing in China many of these tyres.  The producers stated that they would not reverse this strategy and increase lower-end manufacturing in the United States,  
even if  the President imposed tariffs or took other action against imports from China.  Remarkably, 
the USITC rejected the testimony of the U.S. producers concerning their own business strategy.    VI. OVERBROAD U.S. TARIFF REMEDIES  
42. The requirements for applying a transitional product-specific safeguard under Article 16 have 
not been met in this case, thus no remedy is appropri ate.  Even if the United States had complied with 
the requirements of Article 16 and thus had the ri ght to apply safeguard measures, the remedies 
imposed were inconsistent with the requirements of Article 16.3 and 16.6.  The remedies imposed are 
beyond the "extent necessary" to "remedy" the alleged market disruption and the three-year period for which they were imposed is beyond "such period of time" that is "necessary."   
 43. The U.S. refusal to make any comparison of  different causes, or assess the effect of different 
causes on the condition of the domestic industry, necess arily renders the imposed tariffs overbroad.  WT/DS399/R 
Page C-10  
 
Without determining the amount of injury that impor ts from China were allege dly responsible for, any 
imposed remedy cannot be tailored – as required – to  address only the market disruption at issue.  
Although the U.S. states that "the authority to impo se a measure is circumscribed by the extent of the 
injury caused by the relevant imports," the U.S. atte mpts to go further, and st ates that "where imports 
have a broad, injurious effect, the authority would be correspondingly broad."
  Even if this were the 
correct approach, it is inapplicable to the case at  hand.  The United States  never established what 
effect imports from China were having – much less that  they were having a "broad, injurious effect."  
The U.S. states that an evaluation of a safeguard's  permissibility "cannot be a matter of scientific 
precision."  This does not excuse the USITC's comp lete failure to establish anything remotely 
approximating the extent of the injury allegedly cau sed by imports from China, resulting in a remedy 
(35 per cent tariffs) that is both arbitrary and overbroad. 
  WT/DS399/R 
 Page C-11 
 
 
  ANNEX C-2 
 
 
EXECUTIVE SUMMARY OF THE ORAL STATEMENT  
OF THE UNITED STATES AT THE FIRST  
MEETING OF THE PANEL 
 
 
 
I. INTRODUCTION 
 
1. The Tires  investigation presents the very situation that was intended to be covered by the 
transitional mechanism contained in China's Prot ocol of Accession.  Between 2004 and 2008, the 
Chinese tyre industry grew at an extremely rapid rate, more than doubling in size.  Chinese tyre 
exports increased as a percentage of their total ty re production, growing to  59.5 per cent of total 
shipments in 2008.  Exports to the United States,  China's single largest export market throughout the 
period, increased significantly as a result.    
2. Between 2004 and 2008, imports from China mo re than tripled, growing from a level of 
14.6 million tyres in 2004 to 46 million tyres in 2008.  Due to this tremendous growth in their import 
volumes, Chinese imports were able to increase thei r share of the U.S. market by 12.0 percentage 
points between 2004 and 2008, and had a 16.7 per cent share of the market in  2008.  They achieved 
this increase in market share by consistently and significantly underselling U.S. tyres during the 
period of investigation. 
 3. Because of this extraordinary growth in the volume and market share of the low-priced 
Chinese imports, there was a decline in nearly all of  the economic indicators for the U.S. tyre industry 
between 2004 and 2008.  The U.S. industry lost 13.7
 percentage points of market share, almost all of 
which was taken by the Chinese imports over the period.  As a result, the industry's production 
quantities fell by 26.6  per cent, its capacity utilization rates fell by 10.3  percentage points, its U.S. 
shipments fell by 29.7  per cent, and its net sales quantities dropped by 28.3  per cent.  The industry 
experienced a decline of 11.5  per cent in its productivity levels and was forced to reduce its work 
force by 14.2  per cent. 
 
4. Finally, the industry's profitability fell cons iderably between 2004 and 2008.  Its gross profits 
declined by 33.6 per cent, and its operating income  margins fell by 4.8 percentage points during this 
period.  The record of the ITC's investigation established that imports of tyres from China were 
increasing rapidly so as to be a significant cause of ma terial injury to the U.S. tyre industry.  The 
ITC's findings on this issue were reasoned and supported by the record evidence.  
 
5. The question for this Panel is whether, as Chin a claims, the U.S. measure is inconsistent with 
U.S. obligations under Section 16 of the Protocol.  The Protocol requires a Member to determine that 
imports of an article from China are "increasing rapidly,  either absolutely or relatively, so as to be a 
significant cause of material injury, or threat of mate rial injury to the domestic industry."  In addition, 
it requires a Member to "consider objective factors, including the volume of imports, the effect of 
imports on prices for like or directly competitive ar ticles, and the effect of such imports on the 
domestic industry . . . ".  Contrary to China's argum ents, the ITC performed an analysis that was fully 
consistent with the Protocol requirements.  6. China's arguments that the U.S. measure does not comply with the Protocol rest on a 
fundamentally flawed reading of Section 16.  China not only seeks to import the standards of GATT WT/DS399/R 
Page C-12  
 
  Article XIX and the Safeguards Agreement into the te xt of the transitional mechanism,  China also 
claims that the standards for applying a m easure under the transitional mechanism are more 
demanding than the ones for applying a global safegua rd measure.  Nothing in China's Protocol of 
Accession, or the Safeguards Agreement, for that matter, supports these notions.      
7. It is evident that the Protocol contains no cr oss-reference to the disciplines of Article XIX or 
the Safeguards Agreement.  This stands in sharp co ntrast with the Safeguards Agreement itself, which 
contains explicit references to Article XIX of the GATT 1994.  This context shows that if the 
negotiators of the transitional mechanism had sought to import the requirements of  Article XIX or the 
Safeguards Agreement, they would have  done so through explicit references. 
 
II. IMPORTS FROM CHINA DID, INDEED, INCREASE RAPIDLY OVER THE 
PERIOD OF INVESTIGATION 
 
8. Imports from China increased rapidly on an absolute and
 a relative basis.  These increases 
were sustained and consistent, as they increased in every year  of the ITC's five-year period of 
investigation, with the largest increases occurri ng over the last two years of the period.   
 9. For example, the record showed that:   - The quantity of the subject imports increased by 215 per cent between 2004 and 
2008, and their market share more than tripled between 2004 and 2008. 
  - 60 per cent of the growth in the volume of imports during the period of investigation 
occurred in 2007 and 2008, the final two years of the period. 
 
 - 62 per cent of the growth in the market share of the imports occurred in 2007 and 
2008, again the final two years of the period.  
  - Imports from China were at their highest levels, in absolute and relative terms, in 
2008, and China was the single largest import source for tyres in that year. 
 
Quite clearly, these trends establish a rapid and recent increase. 
 A. ITC'S FINDING THAT IMPORTS WERE INCREASING RAPIDLY IS FULLY 
CONSISTENT WITH THE STANDARD SET FORTH IN THE PROTOCOL  
 
10. China's theory that the Protocol of Accessi on imposes a more stringent standard for finding 
increasing imports than the Safeguard s Agreement is unpersuasive.   
 11. China ignores the critical fact that paragraph 16.4 of the Protocol makes clear that the increase in imports must be rapid enough "to be a significant cause of material injury, or threat of material injury" to the industry.  The Appellate Bo dy has made clear that the standard of "material 
injury" is lower than that of "serious injury" used  in the Safeguards Agreement.  Thus, the Protocol's 
language linking "rapid increases" of imports to ma terial injury suggests that the import increases 
required by the Protocol are linked to a different and lower standard of injury than the increases 
required by the Safeguards Agreement.  In claimi ng the Protocol has a higher standard for increasing 
imports than the Safeguards Agreement, China comple tely ignores this crucial distinction between the 
Agreement and the Protocol. 
  WT/DS399/R 
 Page C-13 
 
 
  B. THE ITC REASONABLY FOUND THAT  IMPORT INCREASES HAD NOT ABATED 
IN 2008 
 12. China also argues that the ITC supposedly  failed to recognize that import increases had 
"abated" in 2008.  The ITC addressed this argument a nd correctly rejected it.  It pointed out that the 
subject imports increased "by significant amounts" in  each year of the period, and that the subject 
imports were at their highest levels in 2008.  On an absolute and a relative basis, the increase in 2008 
alone was a "large, rapid, and continuing" incr ease over the increase seen in 2007.  The subject 
imports did not "abate" in 2008; instead, the subjec t imports were larger and were continuing to 
increase over the levels seen in 2007.     
 
13. The Protocol does not require that imports be growing at an accelerating rate at the end of the 
period.  Rather, it requires that the volumes of the subject imports be "increasing rapidly", which is 
exactly what happened in this case.  Moreover, Chin a's argument that imports  had "abated" in 2008 
ignores the fact that imports in that year were 10 pe r cent higher than the level seen in 2007, which is 
when imports rose by a stunning 53 per cent on an absolute basis. 
 C. CHINA'S ALTERNATIVE QUARTERLY ANALYSIS IS FLAWED  14. China also asks the Panel to disregard the IT C's analysis and focus instead on only the last 
two years of data, examining it on a quarterly basi s.  China's proposed alternative methodology is 
flawed for a number of reasons. 
 15. China's approach ignores all import data befo re 2007, thus making it impossible to place the 
increases that occurred in 2007 and 2008 in contex t.  The Appellate Body has explained that 
competent authorities should not consider data from the most recent past in isolation from the data 
pertaining to the entire period of investigation b ecause doing so limits the ability of the authority to 
place that data within an adequate context for analys is.  Yet that is exactly what China is advocating 
here.     16. China's comparison of succeeding quarters h as the potential to introduce distortions.  
Variations in production schedules, weather cond itions and seasonal demand can affect how much 
producers sell during any particular quarter.  It is for this reason that the ITC typically compares 
quarterly data at comparable times of year, rather than for succeeding quarterly periods.  As we have 
pointed out, there were significan t increases in the quarterly volumes of the subject imports between 
comparable periods in three of four quarters in 2008.  
D. THE DECISION NOT TO SEEK DATA FOR THE FIRST QUARTER OF 2009 WAS 
REASONABLE 
 17. China maintains that the ITC should have obt ained or analyzed import data for the first 
quarter of 2009.  Contrary to China's assertions, the ITC was not required to collect and obtain data 
for that period.  The Protocol does not require that the ITC obtain and analyze data for any specific 
period.  As WTO panels have indicated in the trad e remedies context, the ITC need only use a period 
of investigation that "allows it to focus on the recen t imports" and that is "sufficiently long to allow 
conclusions to be drawn regarding the existence of increased imports."  The ITC's use of a five year 
period of investigation, which ended less than four months before the institution of the investigation, 
certainly satisfies this standard.  
  
18. The ITC's decision not to collect data for th e first quarter of 2009 was consistent with its 
handling of other investigations.  When the ITC co llects interim quarterly data in its trade remedy 
investigations, the time that elapses between the end of the interim quarter an d the institution of the WT/DS399/R 
Page C-14  
 
  investigation is typically longer than the 20 days  between the end of the interim quarter and the 
beginning of the investigation in this case.  19. There is also no merit to China's argument th at the ITC should just have used the available 
official import statistics for the first quarter of 2009, even though it had not collected any other data 
for that quarter.  Information on absolute imports  would have been quite useless without data on 
relative import levels, given that the ITC needed  to ascertain whether imports were increasingly 
rapidly, either absolutely or relatively
.  As the ITC correctly said in its decision, analyzing the 
absolute  volume data for the first quarter of 2009 woul d not have had "probative value" because the 
ITC would not have been able to assess whether "the subject imports [were] increasing in relative 
terms in the absence of a data series that includ es first quarter 2009 data on U.S. production and U.S. 
apparent consumption."    
III. ITC'S CAUSATION ANALYSIS WAS CONSISTENT WITH THE REQUIREMENTS 
OF THE PROTOCOL 
 
A. U.S. STATUTE'S CAUSATION STANDARD IS  CONSISTENT WITH THE PROTOCOL  
 20. We are puzzled by China's claim that th e causation provisions of the U.S. statute are 
inconsistent with the requirements of the Protocol.  Why?  Because the U.S. statute incorporates all of the specific requirements of the Protocol, and does so on an almost verbatim basis. 
 
21. China focuses on the fact that the U.S. statut e defines a factor as being a "significant cause" of 
material injury or threat if it "contributes significantly" to material injury or the threat of material injury.  China claims that this definition of "significant cause" somehow weakens or reduces the 
causal link requirement of the Protocol. 
 
22. This definition clearly does not
 weaken the causal link requirement  of the Protocol.  The text 
of the Protocol makes clear that this is the case.  It provides that "market disruption" exists whenever 
imports from China are "a  significant cause of material injury, or  threat of material injury" to the 
domestic industry.  By stating that imports from China can be "a  significant cause" of material injury 
to the industry, the text of the Protocol establish es that there may be more than one significant cause 
of material injury.  The Protocol does not require a ra nking of causes.  It is clear, therefore, that when 
imports from China are contributing significantly to material injury they can be "a significant cause" 
of such injury.  23. The U.S. statute's definition of "significant cause"  is also consistent with the way in which the 
Appellate Body has defined the terms "cause" and "causal link" under the Safeguards Agreement.  
The Appellate Body has stated that an authority may find increased imports to be a "cause" of serious injury if there is "a relationship of cause and effect  such that increased imports contribute to 'bringing 
about,' 'producing,' or 'inducing ' the serious injury."  Given this line of reasoning, it is entirely clear 
that the Protocol's requirement of a significant " causal link" between imports and material injury 
would be satisfied by a finding that imports from China are "contributing significantly" to the 
industry's injury, which is what the U.S. statute requires.   
 24. Finally, China has no textual or analytic basis for claiming the Protocol contains a more rigorous or demanding causation standard than the Sa feguards Agreement.  Nothing in the text of the 
Protocol indicates this.  Unlike the Safeguards Agreement, the Protocol does not
 contain specific 
language stating that the transitiona l mechanism is to be used as an "extraordinary remedy," or that 
increases in imports must result from "unforeseen developments."  25. Similarly, the Protocol does not require that the increasing imports be the cause of "serious 
injury ," as does the Safeguards Agreement.  Instead, the Protocol simply requires only that imports be  WT/DS399/R 
 Page C-15 
 
 
  a significant cause of "material injury ," a standard the Appellate Body  has stated is lower than the 
"serious injury" standard set forth in the Safe guards Agreement.  Indeed, the absence of these 
requirements from the Protocol indicates that the tran sitional mechanism was actually intended to be 
subject to less rigorous standards than those of the Safeguards Agreement.   
 
B. ITC'S CAUSATION ANALYSIS, AS APPLIED, WAS IN ACCORDANCE WITH THE 
PROTOCOL 
 
1. ITC Reasonably Analyzed The Conditions of Competition  
 26. China claims that the ITC misinterpreted a nd distorted the conditions of competition in the 
U.S. market.  The ITC did nothing of the sort.  Instead, the ITC provided a detailed and reasoned explanation of the pertinent conditions of co mpetition affecting the U.S. tyre market.  
 27. China's challenges to the IT C's findings do not withstand scrutiny.  For example, China 
claims that the ITC did not recognize that the indus try was impacted by declining demand for tyres, 
particularly in 2008.  China is mistaken in this re gard.  In its analysis, the ITC specifically explained 
that demand for replacement tyres and for OEM tyres was falling throughout the period, and fell in 2008 when the economy weakened.  28. But, even in the face of declining demand, th e subject imports increased rapidly in every year 
of the period.  Moreover, the subject imports c ontinued to grow even in 2008, when the global 
economic recession occurred.  The fact that the vol umes of low-priced subject imports continued to 
increase  throughout the period, even during the decline in demand in 2008, shows the industry's injury 
was not simply caused by demand declines, as China now contends.     
29. China is also mistaken when  it claims the ITC failed to consider the industry's purported 
"business strategy" of shifting U.S. production from low-end to high-end tyres.  The ITC addressed this issue and rejected China's contentions.  The IT C pointed out that imports were already increasing 
before the announced plant closings, and that U.S.  producers confirmed at the time of these closings 
that low-priced imports played an important part  in the closings.  In short, the ITC reasonably 
concluded that domestic producers did not voluntarily  abandon the low-end part of the U.S. tyre 
market, as China alleges.  
 30. Finally, the ITC also considered and reject ed the argument that competition between Chinese 
and U.S. tyres was attenuated.  As the ITC pointed  out, most market participants found that the 
subject and U.S. tyres were at least frequently inte rchangeable.  The Chinese and U.S. tyres were sold 
in all market sectors, and there was significant co mpetition between the Chinese and U.S. tyres in the 
low-end sector of the market, the sector that was alle gedly a focus for the subject imports.  As the ITC 
correctly found, the record showed that comp etition between the subject and U.S. tyres was 
significant, not attenuated, during the period.  
2. ITC Reasonably Considered Volume, Price Effects, and Effect on the Industry and 
Reasonably Concluded There Was A Causal Link  
 
31. After considering conditions of competition in  the market, the ITC th en analyzed the volume 
of imports, the effect of imports on prices, and the ef fect of such imports on the domestic industry.  It 
provided a reasoned explanation why increasing imports of the subject tyres were a significant cause 
of material injury to the industry.    
 32. The ITC's analysis was entirely consistent with the Protocol.  The record showed that: 
 WT/DS399/R 
Page C-16  
 
   - The volumes and market share of the subj ect imports increased in each year of the 
period and were at their highest levels of the period in 2008.   
  - Subject imports increased by 215.5 per cent over the period, with the largest part of 
this increase occurring in 2007 and 2008.   
 
 - The subject imports increased their share of the U.S. market more than three-fold 
over the period of investigation, growing from 4.7 per cent in 2004 to 16.7 per cent in 2008.  More than half of this increase occurred in 2007 and 2008. 
 
33. The ITC reasonably found that these increasing volumes of subject imports affected domestic 
producers' market share, shipment levels, and pri ces.  The consistent underselling by the large and 
rapidly increasing volume of subject tyres displaced domestic shipments by U.S. producers and eroded the domestic industry's market share, lead ing to a substantial reduction in domestic capacity, 
production, shipments, and employment during the period examined.  
  
34. At the same time that subject import volumes increased rapidly in every year of the period, 
the record showed that:   - The domestic industry's market share fell in every year of the period, declining by 
13.7 percentage points over the period of investigation; 
 
 - The domestic industry's production declined in every year of the period, resulting in 
an overall decline of 26.6 per cent;  
  - The domestic industry's capacity declined in  every year of the period, for an overall 
decline of 17.8 per cent;  
  - The domestic industry's U.S. shipments dec lined in every year of the period, for an 
overall decline of 29.7 per cent; 
  - The domestic industry's net sales quantities d eclined in every year of the period, for 
an overall decline of 28.3 per cent; and  
  - The domestic industry's employment-related factors fell significantly over the period 
of investigation, with the number of pr oduction-related workers falling by 14.2 per 
cent, the number of hours worked falling by 17.0 per cent, and wages paid falling by 
12.5 per cent over the period. 
 All of these factors were at their lowest levels in 2008, while Chinese tyre imports were at their 
highest in 2008.  35. The ITC also reasonably found that the subject imports affected prices for the domestic like 
product.  After a thorough evaluation of pricing in th e tyres market during the period of investigation, 
the ITC found that subject imports undersold the domestic product throughout the period.  Specifically, the subject imports undersold U.S. ty res in 119 out of 120 comparisons.  Moreover, the 
average margins of underselling were at their high est in 2007 and 2008, which was also when the 
volumes of subject imports were at their highest. 
  
36. The ITC also reasonably concluded that this  continued underselling by the subject imports 
prevented domestic producers from raising prices suffi ciently to offset higher production costs.  
Domestic producers' ratio of cost of goods sold to net sales increased from 84.7 per cent in 2004 to 
90.1 per cent in 2008, an increase of 5.4 percentage points over the period.  The sharp increase in this  WT/DS399/R 
 Page C-17 
 
 
  ratio in 2008 – which occurred when the volume of subject imports was highest and the margins of 
underselling were high – indicated that U.S. prod ucers were experiencing a cost-price squeeze and 
were unable to pass increasing raw material costs on to  their customers.  In other words, this case 
presented a classic case of price suppression for the industry.  
37. Finally, the ITC also reasonably found that the subject imports significantly affected other 
aspects of the domestic industry's condition during th e period of investigation.  The industry suffered 
significant declines in its operating income, operati ng margins, capacity utilization, and productivity 
in three out of four years of the period.  Moreover,  all of these factors, except for capacity utilization, 
were at their lowest levels for the period in 2008, which is precisely when the volumes and market 
share of the subject imports were at their greatest. 
 
3. China's Arguments to Rebut the Causation Finding Are Unavailing 
 
38. China's argument that changes in demand cau sed the declines in the industry's condition 
ignores the fact that the declines in the industr y's production, capacity, shipments and net sales 
quantities far exceeded, on a percentage  basis, the declines in apparent consumption in every year of 
the period.  China's argument overlooks the fact that the volumes of the subject imports from China increased more than three-fold during the period,  despite the overall decline in demand during the 
period of investigation.  This c onsistent and rapid increase stands in stark contrast to the volume-
related declines exhibited by the domestic industry and by non-subject imports over the period.  In 
fact, even in 2008, when apparent consumption d eclined by almost 7 per cent, subject imports 
increased by more than 10 per cent over the levels seen in 2007.  39. China has no basis for its claim that there was a lack of coincidence between import volume 
trends and injury factors in 2007.  There is no support in the text of the Protocol for China's apparent 
belief that there must be a perfect coincidence between import volume movements and every single 
injury factor during each year of the period of inv estigation.  Even in the context of the stricter 
causation requirements under the Safeguards Agreement, panels have recognized that an authority is 
not required to establish a coincidence in trends for every factor and for all years of the period 
examined.  Rather, in cases such as US – Wheat Gluten and  US – Steel Safeguards , panels have 
recognized that an overall coincidence in tr ends is sufficient to satisfy causation. 
  
40. The record did show that there was an overall coincidence in import volume and industry condition trends, which we describe in our first writte n submission.  Even though a few factors, such 
as profitability and productivity, improved somewhat in one year – 2007 – numerous other injury 
factors (including the industry's capacity, ship ments, net sales quantities, market share, and 
employment-related factors) declined in that year.  And the improvements in profitability and 
productivity that were seen in 2007 were short-lived.  Both of these factors declined to their lowest 
levels in 2008, which was when the volume and mark et share of the subject imports were at their 
highest levels.  
4. ITC Reasonably Considered Other Factors 
 
41. Finally, China claims that the ITC failed to cons ider the injurious impact of other factors in its 
causation analysis.  China argues that the text of th e Protocol specifically requires the ITC to address 
the injurious effect of these other factors in detail.    
42. First, China's argument is legally flawed.  Unlike the Safeguards Agreement, the Protocol 
does not
 specifically require a competent authority to perform a detailed "non-attribution" analysis of 
the possible effects of other factors causing materi al injury in its causati on analysis.  Instead, the 
Protocol directs a competent authority to assess only whether increasing imports are a significant cause of material injury to the industry by taking in to account the "volume of imports," their "effect . . WT/DS399/R 
Page C-18  
 
  . on prices for like or directly competitive articles,  and the effect of such imports on the domestic 
industry . . . ".  Given that the Protocol does not require the competent authority to address the effects of other factors in its analysis, China has no textua l basis for claiming that the ITC should perform the 
same type of non-attribution analysis that ma y be expected under the Safeguards Agreement. 
 
43. Second, China's argument is factually flawed.  The ITC did not "refuse to investigate 
alternative causes" or " barely acknowledge" them in  its analysis.  Even though the Protocol does not 
so require, the ITC investigated, considered, and anal yzed all of the factors that could reasonably be 
considered significant enough to potentially break  the causal link between imports and material 
injury. 
 
44. For example, as we discussed earlier, the ITC specifically considered and addressed the claim 
that the industry had adopted a "business strategy " of shifting their U.S. production away from low-
end tyres to high-end products and the declines in demand in the U.S. tyres market over the period.  
Similarly, the ITC also consider ed the impact of demand declines on the industry's condition over the 
period.  It concluded, based on the evidence, that  the decision to shut down certain facilities was 
related to the subject imports.  The ITC also  found that demand declines did not explain the 
deteriorating condition of the industry, because the subject imports continued to grow throughout the 
period of investigation despite the demand declines.   45. The ITC also specifically considered the othe r alleged causes of injury cited by China in its 
submission.  It considered such factors as the indus try's raw material costs, changes in its productivity 
levels, changes in the levels of non-subject imports , and the impact of rising gas prices on demand.  
For example, the ITC specifically discussed the effe ct that increases in raw materials pricing had on 
the industry, finding that the industry's ratio of cost  of goods sold to net sales increased considerably 
over the period.  The ITC concluded that the presen ce of the growing levels of lower-priced subject 
imports prevented the U.S. producers from passing these "increasing raw materials costs on to their 
customers," thus leading to a decline in the industry's operating margins over the period of 
investigation.  46. Similarly, the ITC also considered the im pact that higher gasoline prices had on driving 
habits.  In its analysis, the ITC expressly noted th at "demand for replacement tyres fell in 2008 as the 
number of miles driven decreased, consumers tried to get more miles from current tyres, and the 
economy weakened."  As the ITC concluded, the de mand declines resulting fro m these factors did not 
sever the causal link between imports and injury , given that the subject imports were actually 
increasing during periods of declining demand, including 2008.   
47. The U.S. first written submission details the ITC's consideration of other factors cited by 
China, but we do not need to repeat the ITC's analys is here.  The point remains a simple one:  the ITC 
considered the significant factors allegedly causing inju ry to the industry, addr essed any impact in an 
appropriate manner, and reasonabl y explained, why these factors failed to sever the causal link 
between the subject imports and material injury.  In sum, the ITC's analysis was fully consistent with 
the text of the Protocol and reflects a reasoned approach to the consideration of these issues. 
 
IV. THE UNITED STATES APPLIED A REMEDY CONSISTENT WITH 
PARAGRAPHS 16.3 AND 16.6 
 
A. U.S. ADDITIONAL DUTIES WERE ONLY TO THE EXTENT NECESSARY 
 
48. The United States agrees that any measure a pplied under the transitional mechanism may only 
remedy the material injury that results from the ra pidly increasing imports from China.  This is what 
the United States has done.  The ITC rejected the remedy recommended by the petitioner because it 
would have been "higher than necessary to remedy th e market disruption [. . .] found."  In addition,  WT/DS399/R 
 Page C-19 
 
 
  the ITC used economic modeling to assess the likel y impact of various options and proposed an 
additional tariff of 55 per cent in the first year, wh ich was estimated to reduce shipments of Chinese 
tyres by 38.2 to 58.4 per cent.  This was clearly a remedy aimed at the disruptive increase, and not at 
Chinese imports as a whole.  The ITC explained why the limitation on Chinese imports would reduce shipments and therefore have an effect on domestic  and non-subject imports, on their prices, and on 
the domestic industry's revenue.  In other wo rds, how the limitation on Chinese imports would 
remedy the market disruption.  49. China is wrong as a matter of fact when it asserts that the ITC improperly focused on the benefits to the domestic industry instead of the "spe cific market disruption found to exist."  As a legal 
matter, China's argument simply makes no sense.  Th e Protocol defines market disruption in terms of 
material injury to the domestic industry of which rapidly increasing imports from China are a significant cause.  It requires Members to examine objective factors, including the volume of imports, 
the effect of imports on prices for like products, and th e effect of imports on the domestic industry.  It 
is hard to imagine how any Member could proper ly address the specific market disruption found to 
exist without examining the benefits to the industr y of the limitation on Chinese imports.  Indeed, the 
Protocol seems to require such an examination.    50. China has failed to meet its burden of pr oof to demonstrate that the ITC's recommended 
remedy is inconsistent with paragraph 16.3.  Of course, the remedy ultimately imposed by the 
United States is 20 percentage points less in the firs t year than the remedy recommended by the ITC.  
In addition, although not required by the Protocol, the remedy impo sed reduced the additional duties 
by five percentage points for the second and third years.  This demonstrates that the focus was on 
remedying the market disruption cau sed by increased Chinese imports.  
  B. ADDITIONAL DUTIES ARE  ONLY FOR SUCH PERIOD OF TIME AS MAY BE 
NECESSARY  
 51. With respect to the obligation under paragra ph 16.6, we agree that a measure taken under the 
transitional mechanism must be limited to the period of time necessary to remedy the market disruption.  However, we disagree with China's efforts to seek an impossible level of exactitude and 
with China's attempt to read out of the text the remaining elements of paragraph 16.6, which provide 
key context for interpreting the first sentence.   
 52. China argues that a remedy measure may rema in in place "only for the exact amount of time" 
or "for that period of time specifically found" to addr ess the market disruption.  That level of precision 
is neither possible nor required.   
 
53. The first sentence of paragraph 16.6 must be read in context with the second and third 
sentences of that paragraph, which indicate the negotiators' expectation about how long a measure 
may last depending on whether the increase in import s was absolute or relative.  China attempts to 
dismiss these two sentences as defining only rights that  China has, and not the flexibility available to 
the Members using the transitional mechanism.  However, the context of these two sentences of 
paragraph 16.6 does provide guidance as to the perm issible length of a measure under the transitional 
mechanism.    54. In the Tires  investigation, the ITC found that imports from China had increased in both 
absolute and relative terms.  The United States applied a three-year measure. 
 WT/DS399/R 
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  V. CHINA'S CLAIMS UNDER ARTICLES I:1 AND II:1(B) OF THE GATT 1994 MUST 
ALSO FAIL 
 
55. Finally, as China has failed to demonstrate that  the United States has acted inconsistently with 
its obligations under the transitiona l mechanism, China's claims under Articles I:1 and II:1(b) of the 
GATT 1994 must also fail.