Document: WT/DS399/R Page E-1 ANNEX E EXECUTIVE SUMMARIES OF THE SECOND WRITTEN SUBMISSIONS OF THE PARTIES Contents Page Annex E-1 Executive Summary of the Second Written Submission of China E-2
Document codes: WT/DS399/R
Complainant: China
Respondent: U.S.
Third parties: EU, Japan, Taiwan, Turkey, Vietnam
Dispute stage: Appellate Body
Agreements cited: Art. 16.1, 16.3, 16.4, 16.6  Protocol of AccessionArt. I:1, II, XIX  GATT 1994  Safeguards

ANNEX E

EXECUTIVE SUMMARIES OF THE SECOND WRITTEN
SUBMISSIONS OF THE PARTIES

Contents Page
Annex E-1 Executive Summary of the Second Written Submission of China E-2
Annex E-2 Executive Summary of th e Second Written Submission of the
United States
E-11

ANNEX E-1

EXECUTIVE SUMMARY OF THE SECOND
WRITTEN SUBMISSION OF CHINA

I. THE FACTUAL BACKGROUND OF THE MEASURES IN THIS DISPUTE
PROVIDES RELEVANT CONTEXT FO R THIS PANEL AND SHOULD BE
CONSIDERED

1. The factual background surrounding the measures in this dispute is highly relevant to this
dispute, yet the United States attempts to shift the focus away from these determinations. The
United States highlights the size of the Chinese capacity and other factors relating to threat of future
injury, even though the USITC based its decision so lely on present injury. This is inappropriate
because the condition of the Chinese tyre industry is wholly irrelevant to this dispute as it is a
consideration only for issues of "threat." While focu sing on such irrelevant facts, the United States
ignores that the USITC investigation was initiated sole ly by a labour union, the USW, and lacked the
support of the U.S. tyre industry. The USITC's failure to collect critical information about recent
trends in imports, which showed that they were in decline, rendered the U.S. injury and remedy
findings further incomplete. The USITC determinati on is also incomplete without consideration of
the views of the dissenting Commissioners, thus the U.S. attempt to limit the Panel's inquiry to solely
the majority determination is inappropriate. The United States ignores the unique and highly
politicized process in which the quasi-judicial d ecision-making of the USITC actually took place in
this specific case. Properly understood, however, the factual background of these measures supports
China's contention that they are inconsistent with U.S. obligations under the WTO.

II. THE PROPER ANALYTIC FRAMEWORK SHIFTS THE BURDEN OF PROOF TO
THE UNITED STATES AND REQUIRES THE PANEL TO CONDUCT A
SEARCHING, "OBJECTIVE" ASSESSMENT

2. China has met its burden of establishing a prima facie case that the U.S. measures are
inconsistent with Article 16 by demonstrating that the United States neither evaluated all relevant
factors nor provided a reasoned and adequate expl anation for its decision consistent with the
requirements for imposing measures under Ar ticle 16. Because China has made a prima facie case,
the burden of proof has shifted to the United States to establish the elements of its defense of its
actions in imposing measures under Article 16.

3. Both parties agree that the relevant standard of review is the standard provided in Article 11
DSU, that a panel should make an "objective assessm ent of the facts of the case and the applicability
of and conformity with the relevant covered agreem ents." The jurisprudence on this standard, as it
has been developed under the Agreement on Safeguards , is applicable. The "objective assessment"
required under DSU Article 11 is a searching inquiry in which it is inappropriate to simply defer to
the findings of an investigating authority. In conducting a proper "objective assessment" a panel
should inquire whether the investigating authority examined all the relevant facts before it and
explained how the facts supported the determin ation made, as well as inquire whether the
determination was consistent with the Member's obligations under the WTO.

4. The U.S. attempt to strip away the applicab le WTO jurisprudence is untenable. Article 16,
alone, does not govern the type of "objective assess ment" required. There is no legitimate basis by
which the United States can assert that the requirement s, and related jurisprudence, for an "objective
assessment" of measures under the Agreement on Safeguards should be ignored in the case of an

"objective assessment" under Article 16. Measures under both Article 16 and the Agreement on
Safeguards involve reviews of determinations of increased imports and causation, albeit based on
sometimes differing substantive standards. Appe llate Body jurisprudence – across various WTO
agreements – makes clear that investigating authorities must examine and address alternative
explanations of the evidence for that determination to be deemed reasoned or adequate.

5. The U.S. attempt to ignore striking parallels between the Agreement on Safeguards and
Article 16 is impermissible. The parallel language in the Agreement on Safeguards provides highly
relevant context for understanding Ar ticle 16, namely the necessity of demonstrating that imports are
increasing and that the increasing imports are causing injury to an industry in the importing country.
Although there are differences, the b asic concepts are the same. Both the similarities and differences
between the texts serve to inform the Panel of the me aning of these terms. The U.S. attempt to isolate
the Protocol from the rest of the WTO Agreement is misplaced, and similar attempts have been
rejected by panels in the past. The certain parentage of Article 16 from the Agreement on Safeguards,
including references to the Committee on Safeguard s, cannot be ignored. The Protocol must be
interpreted in context. U.S. arguments that it should not be, are incorrect and inconsistent.

III. IMPORTS FROM CHINA WERE NOT "INCREASING RAPIDLY" WITHIN THE
MEANING OF ARTICLE 16 OF THE PROTOCOL

A. THE PROTOCOL IMPOSES A SPECIFIC AND STRICT STANDARD THAT MUST BE
MET TO FIND PROPERLY THAT IMPORTS ARE "INCREASING RAPIDLY"

6. The text of Article 16 sets forth a speci fic and narrow set of circumstances under which
imports from China that are "increasing rapidly" may permissibly be subject to transitional product-
specific safeguards. Investigating authorities must make an adequate finding that imports from China
"are being imported…in such increased quan tities" as well "increasing rapidly." These two
requirements, found in Article 16.1 and 16.4 respectiv ely, ensure that a finding of a simple increase
over the entire period of investigation cannot meet th e standard required for measures to be imposed.
Article 16 demands much more.

7. The use of the present continuous tense – "are being imported" and "increasing" – in
Articles 16.1 and 16.4 requires inv estigating authorities to focus on the more recent period of time
when assessing increasing imports. The Appellate Bo dy has recognized the distinction between the
use of "increasing
" and "increased " and how "increasing" is a requirement for imports at the time of
the determination, i.e. in the most recent past. C ontrary to the U.S. argument, reviewing this standard
in the context of the Agreement on Safeguards confirms this interpretation. The use of the word
"rapidly," which is intrinsically linked to "steep," raises the standard and is used to distinguish imports
which are "increasing rapidly" from imports which ar e merely "increasing." The U.S. attempt to limit
"rapidly" to strictly a temporal interpretation is unavailing under its ordinary meaning and internally
inconsistent.

8. The U.S. attempt to equate the lack of an explicit quantitative standard in the text of
Article 16 with the lack of any standard at all is in appropriate. Rather, the text and applicable context
of Article 16 require investigating authorities to consider three qualitative factors in determining
adequately whether imports from China are "increasing rapidly." Authorities should focus on the
most recent full year of data and any available inte rim data, consider and give the most weight to the
most recent import trends, and analyze the most recen t year in more detail when initial analyses show
that imports are slowing. The USITC, however, failed to comply with any of these factors.
Additionally, the fact that Article 16 requires a show ing of "material injury" and not "serious injury"
does not lower the causation standard. The "increasing rapidly" standard is discrete from the
"material injury" standard. "Increasing rapidly" is the first element listed in Article 16 and thus the
threshold consideration. Only after a proper findi ng of "increasing rapidly" may an investigating
authority independently begin to determine whet her such imports were a "significant cause" of

"material injury." The U.S. attempt to conflate the two discrete issues through a quick glossing over
of the full context of Article 16 and false analogies to Appellate Body jurisprudence is improper.
Furthermore, the "increasing rapidly" standard is also discrete from the "increased quantities"
standard, making a finding of imports to be "increasing rapidly" all the more exacting.

B. THE USITC IMPROPERLY FOUND IMPO RTS FROM CHINA TO BE "INCREASING
RAPIDLY"

9. The USITC's analysis of increasing imports fails to comply with specific and strict standard
of Article 16. Aware of this, the United States atte mpts to establish that the USITC had near blanket
discretion to assess increasing imports and that the Pa nel should defer to this discretion. Yet such
discretion as the USITC has is limited to the extent that its analysis must still comply with the
standards of the Protocol. The USITC had no di scretion to focus on an end-point-to-end-point
increase over the period because this does not comply with the "increasing rapidly" requirement of
Article 16.4. The USITC's over-reliance on this appr oach rendered its analysis inconsistent with
Article 16. It must have explained adequately why imports were found to be "increasing rapidly"
during the more recent part of the period. In contrast, the USITC never even stated what it understood
"rapidly" to mean. The U.S. attempt to equate wh at the USITC said with what the USITC did cannot
be accepted.

10. The USITC's finding that increases had not abated in 2008 impermissibly ignores recent
trends, misinterprets the data, and is premised on the improper approach of combining and analyzing
2007 and 2008 together. The largest increase in impor ts was from 2006 to 2007, which can hardly be
considered the most recent period. But by employ ing 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. Imports could not properly be determined to be still "increasingly rapidly" at the end of the
period when the increase from 2007 to 2008 was only 10.8 per cent, a fraction of any of the prior
years' increases. Despite these essential facts, th e USITC did not focus on the difference between the
increase in 2008 and 2007, or the difference betw een the increase in 2008 compared to the overall
2004 to 2007 period. Instead of properly focusing analysis on the more recent period, the USITC
obscured it.

11. China's alternative quarterly analysis, presente d in its First Written Submission, is directly
applicable and relevant. Due to the dramatic sl owing of imports from China, it was highly probative
on whether imports were still "increasing rapidly" a nd consistent with the requirement of analyzing
the most recent period and the trends within that period. The analysis revealed that the largest
increase in imports from China o ccurred in Q2 2007 – more than two years prior to the USITC
determination. Imports peaked in Q2 2008 and then proceeded to decline, with the quarter-to-quarter
comparisons showing a mixture of increases and decreas es. The U.S. response that this analysis is
flawed because it does not assess 2004 to 2006 demonstr ates the U.S. failure to understand that the
point of the quarterly analysis was to highlight the trends over the most recent period.

12. Similarly, the USITC should have – but refused to – collect and analyze import data for the
first quarter of 2009. Although the USITC acknowledged that imports from China declined during
the first quarter of 2009, it failed to gather or asse ss this data and its impact on the USITC's overall
analysis. The excuses offered for not collecting th e full data for this interim period are unavailing.
There is no reason the data "would not have been available" if the USITC had asked for it. The
USITC has a well-settled practice of gathering such data, and in many cases has gathered interim data
for a first quarter during a tighter time frame. The U.S. claims that such a collection would have been
too burdensome and that the USITC makes its deci sions on a case-by-case basis are unpersuasive and
dangerous.

IV. THE U.S. DEFINITION OF "SIGNIFICANT CAUSE" IS INCONSISTENT AS SUCH
WITH THE REQUIREMENTS OF ARTICLE 16 OF THE PROTOCOL

13. The U.S. statutory definition of "signifi cant cause" that was applied by the USITC is
inconsistent "as such" with the requirements of the Pr otocol. The text of the Protocol adds the word
"significant" to the causation analysis under Article 16. The ordinary meaning embedded in
"significant cause" is one that requires subject impor ts to "produce" or "bring about" the injury in a
significant way. The rapidly increasing imports need not "produce" or "bring about" the injury in and
of themselves, but the ordinary meaning of the wo rds used in the Protocol requires something much
more than a mere contribution. In contrast, S ection 421 defines "significant cause" as merely a cause
that "contributes significantly" and "need not be gr eater than or equal to any other cause." This
binding definition impermissibly lowers the require d causation standard of Article 16 and is thus
inconsistent as such with the Protocol. It is simply untenable, and contrary to the ordinary meaning of
the language, to argue that the use of "significant cause" in Article 16 of the Protocol can actually
lower the corresponding standard in global safeguards that does not contain the modifier "significant."

14. The U.S. responses to this claim lack force. The United States argues that it is free to adopt
whatever "methodologies or standards" that it wish es to determine whether imports are a significant
cause of material injury. WTO members, howev er, do not have discretion to adopt whatever
"standard" they wish – the standard is "significant cause," and that standard has been set by the text of
Article 16. The U.S. argument that the definition si mply serves to provide "guidance" is unpersuasive
as no guidance is provided and the definition serves exp licitly – in light of both the plain meaning of
the words used as well as their history and applicat ion – to lower the causal standard and reduce the
meaning of "significant." The U.S. claim that the statute really means "a direct and significant causal
link" is irrelevant because that is not the language used by the statute itself. The statute redefines
"significant cause" as a "cause that contributes signi ficantly," not as a "direct and significant causal
link."

15. The United States cannot shift focus away from the words of the statute itself to the
legislative history of Section 406, a different statute. The legislative history of a different statute
cannot trump the actual language of Section 421, esp ecially in the noncommittal way in which it has
been cited by the USITC. U.S. arguments misper ceive the potential relevance of these materials as
this dispute arose due to the USITC's faulty app lication of Section 421 – not Section 406. The U.S.
claims that the USITC understood its obligations unde r Section 421 in light of the legislative history
of Section 406, or that China should have been "wel l aware" – due to prior Section 406 investigations
– that "significant cause" in Article 16 actually meant "contributes significantly" demonstrate a
fundamental misunderstanding of the situation. Th e legislative history of Section 406 cannot justify
the impermissible redefinition of "significant cause" in the U.S. implementing statute. It is not the
negotiating history of Article 16 and thus it cannot justify a low causation standard.

16. The additional language of "need not be equal to or greater than any other cause" in the U.S.
statute impermissibly allows an investigating author ity to determine that even a minimal cause, which
can be less than any other cause, could still be co nsidered as "a significant cause." This is not a
reasonable interpretation of the words "a significan t cause." The U.S. argument that the USITC has
interpreted the statute in a way consistent with the Protocol is improper. The United States must
defend the statute itself in an "as such" claim, not the language of the USITC determination which
differs from the statute.

17. The United States claims that, even if this definition does impermissibly lower the causal
standard, the statute is still not inconsistent "as such" unless it "mandates" WTO-inconsistent action.
Panels, however, have repeatedly noted that the ma ndatory/discretionary distinction is not an issue
that needs to be decided as a threshold matter by a panel in an "as such" claim. Rather, the issue is
simply whether the legislation on its face is inc onsistent with the relevant WTO provision. The
"contributes significantly" redefinition has been dem onstrated to be precisely that. Regarding the

mandatory/discretionary distinction, however, as in previous disputes, the U.S. agency in this case
lacks the necessary discretion. Furthermore, the U.S. statute does require the USITC to apply a
fundamentally flawed definition which the USITC had no discretion to disregard.

V. IMPORTS FROM CHINA WERE NOT A "SIGNIFICANT CAUSE" OF INJURY
WITHIN THE MEANING OF ARTICLE 16 OF THE PROTOCOL

18. Imports from China were not a "significant cause " of material injury within the meaning of
Article 16. The USITC failed to conduct a reasone d and adequate analysis of the conditions of
competition, failed to establish any temporal "c oincidence" between rapidly increasing Chinese
imports and various alleged injury factors, and fa iled to address adequately alternative causes that
undermine any suggestion that imports from China we re causing "material injury." These failures
render the USITC's causation analysis wholly incomp lete and inconsistent w ith the requirements of
the Protocol.

19. To fill this analytical void, the United Stat es claims that the Pane l should grant it extreme
deference and discretion regarding causation. Th e United States argues that it is unnecessary to
conduct a conditions of competition analysis, a coinci dence analysis, or a weighing of alternative
causes. The United States seeks to ignore all prior e fforts to provide meaning to the core concept of
"cause" in the context of WTO trade remedies. This would render all prior WTO jurisprudence on
these issues meaningless. But the Protocol was not drafted – and does not exist – in a vacuum. It
cannot be interpreted in isolation from other WTO agreements. The Panel should reject these U.S.
arguments. Likewise, the Panel should also reject the U.S. claim that the limited analysis it did
undertake was somehow sufficient to meet the demandi ng causation standard imposed by Article 16.
This is an untenable attempt to have it both ways . If the USITC did engage in analysis of the
conditions of competition, coincidence, and alternative causes – then it must have done so adequately.
The cursory causation analysis provided by the USITC, however, falls well short of that standard.

A. THE USITC FAILED TO ASSESS ADEQUATELY CONDITIONS OF COMPETITION

20. An analysis of the conditions of competition is required under the Protocol. The U.S. claim
that Article 16 "does not require the investigating authority to examine conditions of competition" is
incorrect. This claim hinges on the use of the phrase "or under such conditions of competition" in the
English text of Article 16.1. Yet the French and Spanish texts of Article 16.1 use the terms "et" and
"y" respectively. This conjunctive use is also consistent with Article 2.1 of the Agreement on
Safeguards, which uses "and
 under such conditions of competition" in all three languages. The only
way to reconcile the equally authentic texts, as is required, is to apply the conjunctive interpretation of
the term "or" in the English text of Article 16. The U.S. argument that Article 16.1 does nothing but
define the conditions under which c onsultation may be requested is an impermissibly strained reading
of the text. In contrast, China's reading reconcil es the texts and puts forth the logical claim that any
reasonable analysis of causation must assess the cond ition of competition in which that analysis takes
place. The competitive relationship cannot be viewed in isolation.

21. The USITC's failure to assess adequately co nditions of competition is not affected by the
finding that products are "like" products because this does not preclude finding attenuated competition
based on market segmentation. The segmentation of the tyre market in this case led to attenuated
competition. Despite the fact that the USITC consider ed all tyres to be the same "like" product, this
condition of competition – attenuated competition – continues to exist. The concept "like or directly
competitive product" serves simply to delineate wh ich domestic producers make the product and are
to be included in the domestic industry. This has been confirmed by the Appellate Body and is
consistent with the approach of the USITC in th is case and in general as the USITC routinely finds
that there is a single "like" product, but then assesses market segments under a conditions of
competition analysis.

22. Regardless, the USITC purported to analy ze the conditions of competition in its report –
implicitly acknowledging that such an analysis wa s required and that faili ng to do so would produce
an incomplete and invalid analysis of causation. Despite having undertaken such an analysis, the
USITC failed to do so in a reasoned and adequate manner. The USITC equated minimal competition
between subject imports and domestic tyres as signifi cant competition and ignored the implications of
attenuated competition and its impact on causation. In doing so, the USITC relied too heavily on
subjective questionnaires, and too little on the actua l evidence of a highly segmented market. The
USITC tried to dismiss the highly segmented market by finding isolated portions of competitive
overlap, rather than the substantive degree of overl ap that would establish and support its findings.
Such an approach is impermissible.

23. There was attenuated competition in this case as imports from China were virtually absent
from an estimated 74 per cent of the U.S. market. Despite this, the USITC asserted that there was
"significant competition" between imports and domestic tyres. To critique China's data on this issue,
the United States claims that the data is "belied by the very article China cites" – yet China cited no
article for this data, just the USITC Determination's reporting on U.S. producers. Furthermore, the
point of the data estimate was to convey the orde r of magnitude to which competition was attenuated
and critique the USITC's improper willingness to equate any competition with "significant"
competition. If China's estimate is inhibited by the limited public record, China urges the Panel to ask
the United States to provide the actual inform ation necessary for the Panel to make its own
assessment.

24. The unsupported and unexplained inferential leaps made by the USITC in finding competition
can be seen in the OEM market, where the USITC states there was competition despite imports from
China making up 4.8 per cent of the market and U.S. tyres making up 51.6 per cent of the market in
2008. With imports from China ranging from just 0.2 per cent to 4.8 per cent of the OEM market, and
non-subject imports being nine times the quantity of subject tyres in the OEM segment, it is simply
fanciful that subject tyres could be in significant competition with U.S. tyres in this market or a
significant cause of injury. The U.S. claim that the Protocol does not require the USITC "to ignore
the impact" of subject imports when they are just 5 per cent of the market improperly avoids the thrust
of the requirement. Where imports occupy a neglig ible proportion of the market in question, the
investigating authority must provide a reasoned and adequate explanation of why there is significant
competition between imports and domestic tyres, mu ch less a significant causal relationship between
those imports and injury.

25. Similarly, there was no basis for inferring significant competition between tyres from China
and domestic tyres in the replacement market. The U. S. claim that "the record showed that tyres from
China and tyres from the United States compete in all segments of the market" ignores impermissibly
the fact that the USITC majority itself conceded that sales in the aftermarket could be placed in three
tiers of which "the largest share of U.S. producers' shipments fall into category 1, and that the largest
share of subject import shipments fall into category three." The U.S. attempt to blur the lines between
tiers to support its finding of significant competition belies the record and is indicative of bias. The
fact that the distinction between tiers may not be absolute does not mean that the distinction does not
exist at all, or that the distinction does not produce highly attenuated competition.

B. THE USITC FAILED TO ASSESS ADEQUATELY WHETHER THERE WAS
TEMPORAL COINCIDENCE BETWEEN IMPORTS FROM CHINA AND THE
ALLEGED INJURY

26. The USITC failed to establish any meaningful temporal coincidence between imports and
injury. When the ten factors asses sed by the USITC are examined pr operly, the lack of coincidence
between rapidly increasing imports and injury to th e domestic industry is certain. During the most
recent period of time, the domestic industry experienced it best year of the entire period of
investigation when imports from China increased at the highest rate. The United States argues that

such an obvious lack of correlation is but an "anomaly" and does not speak to "overall correlation." A
proper analysis of "overall correlation," however, reveals that that this "anomaly" is in fact consistent
with all the data. There is no meaningful correlati on for the more recent half of the period and many
of the factors show purely positive correlation thr oughout the period. In short, during the period of
time most relevant for drawing the link to imports from China that are "increasing rapidly," the
USITC has demonstrated no temporal coincidence.

27. The United States fails to rebut China's show ing of a lack of coincidence. Instead, the
United States asserts, incorrectly, that a coincidence analysis was not required. The U.S. attempt to
justify what little coincidence analysis the USIT C actually undertook is improper as it adds new, ex
post arguments in support of a coincidence finding. A ll of this is unpersuasive and inadequate. Just
as "coincidence" analysis plays a "central" role in determining whether or not a causal link exists in
the context of global safeguards, such an analysis is equally important when evaluating the application
of a product-specific safeguard under the Protocol. Under Article 16.4, the correlation must exist
during the period of time when imports were increasi ng rapidly, and correlate with the adverse trends
at issue. Moreover, this correlation must also be sufficient to constitute a "significant" causal link.

28. It is not true that, absent express direction, the investigating authority is "free to choose and
use any appropriate methodology it wishes." Guidance must be taken from the Agreement on
Safeguards jurisprudence, and such guidance was created in the absence of any "express" correlation
language requirement. The U.S. attempt to limit the guidance to the specific text of the Agreement on
Safeguards also fails as the correlation requirement is intrinsically linked to the causation analysis that
investigating authorities must conduct – namely whether increased imports are causing injury.
Because Article 16 of the Protocol involves the sam e causal analysis of whether rapidly increasing
imports are causing injury, the same embedded analysis is necessary. In any event, the United States
asserts that the USITC "did, in fact, use a ‘coincid ence of trends' analysis." Accordingly, having
engaged in such an analysis, the USITC was obliged to do so properly.

29. In the face of such a requirement, the USITC' s coincidence analysis is wholly inadequate.
The USITC's report devotes little attention to coincidence analysis, relying primarily on sweeping
generalizations. The USITC majority failed to compare year-to-year movements in imports and
injury factors, or assess in any serious way whethe r those movements reveal meaningful coincidence
or correlation. This failure is particularly appa rent with respect to the more recent period (i.e.,
changes in 2006-2007 and 2007-2008). The USITC ignores that imports from China grew at their
fastest rate in 2006-2007, but grew at their slowest rate (10.8 per cent) in the period from 2007-2008.
Likewise, the USITC ignores the fact that various in jury factors showed a substantial improvement in
2006-2007, when imports from China were at their hi ghest level in the period, and experienced their
greatest declines of the period in 2008, when Chinese imports grew at the slowest rate in the period.
And finally, the USITC ignores that certain the inju ry factors, such as price, R&D expenditures, and
capital improvements, show positive trends throughout the period.

30. Regarding the U.S. theory of causation, two concrete tests present themselves in the more
recent period. Given the U.S. argument that imports from China were fungible, that the product is
price sensitive, and that different market segments do not matter, one would expect the large increase
in imports over the 2006-2007 period to have the largest adverse impact on injury indicators and one
would expect that the small increase in imports over the 2007-2008 period would have the smallest
adverse impact on injury indicators. That the fact s in the record completely belie the U.S. theory
strongly points to a lack of correlation.

31. To refute this, the United States posits new, ex post rationales for this absence of correlation,
such as dismissing 2006-2007 as an "anomaly" and sp eculating that there may have been a temporal
lag between imports and injury. Both arguments are inadmissible, as the USITC never made findings
on either point in its report and ex post assertions cannot substitute for findings in the USITC's report.
The U.S. attempt to bolster the theory of "underselling" is also unavailing as these comparisons do not

take into account the differences in brands nor do they account for the significant degree to which
U.S. prices rose and outpaced prices for subject imports. The U.S. claim that industry profits in 2007
were "small" is a strained reading of the record as operating profits were $507 million. On several
factors, such as production and net sales, the Unite d States chose to avoid addressing their bearing on
correlation, further reinforcing the fact that not much can be said to buttress the USITC
Determination's analysis of coincidence.

32. U.S. claims that the lack of correlation between the individual injury factors does not speak to
"overall coincidence" should be dismissed. There ca n be no "overall correlation" in this case because
there is essentially no correlation for 50 per cent of the period, and several factors (sales value, price,
R&D, and capital investments) showed purely positi ve correlation throughout the period. There was
essentially a complete lack of coincidence across the factors during the most recent – most relevant –
period. The lack of correlation was not just "one or two variations in trends" as posited by the
United States. Rather there was a complete temporal lack of "overall coincidence" when the data is
viewed on an individual factor basis or as a whole. Despite this, the USITC has provided no " very
compelling" explanation to rebut this lack of coin cidence as in necessary if causation is still to be
found.

C. THE USITC FAILED TO CONSIDER ADEQUATELY ALTERNATIVE CAUSES

33. The USITC also failed to consider adequately alternative causes. Causal factors such as
changing demand and business strategy were put aside as the USITC invoked the low U.S. statutory
standard that it need not engage in any "weighi ng of causes." This failure renders the USITC's
analysis incomplete and makes it nearly impossible for the USITC to determine whether or not subject
imports were actually a "significant" cause of in jury. Declines in demand and a shift in business
strategy had a considerable effect on the U.S. ty re industry, yet the USITC chose to ignore these
implications. These failures reveal the striking de gree to which the USITC's causation analysis was
inconsistent with the requirements of Article 16.

34. The U.S. argument that the USITC was under no obligation to examine alternative causes is
misplaced, relying too heavily on the absence of express non-attribution language in the text of
Article 16. Although there is no formal non-attrib ution requirement expressly provided in Article 16
of the Protocol, such an assessment was still necessary. The fact th at the USITC stated that it did
consider alternative factors reinforces this re quirement and, as the United States acknowledges, a
proper analysis of a causal link requires the aut hority to "consider such other factors." Such
consideration is necessary if a causation analysis is to be conducted in good faith and in accordance
with the Protocol.

35. The U.S. attempt to isolate Article 16 from any applicable WTO jurisprudence by claiming
the relevant Appellate Body jurisprudence on the nature of the causation analysis is limited strictly to
the text of the Agreement on Safeguards is unfounded. An "assumption" that other factors are not
causing the alleged injury cannot be made consistently with the obligation to find a "causal link" – a
"genuine and substantial" relationship of cause and effect. Appe llate Body jurisprudence teaches that
an authority cannot properly conclude that a "causal link" exists without having first assessed whether
other factors were actually responsible. This is true whether there is an express non-attribution
requirement or not. Likewise, the U.S. argument focuses exclusively on the omission of an express
non-attribution clause while ignoring impermissibly th e key addition of the modifier "significant" to
the causation standard. Because "significant" is best understood in relation to other causes, the
addition reinforces the need for a consideration of other causes.

36. Thus the USITC's failure to consider adequately other causes rendered its analysis
inconsistent with the Protocol. The mere mentioni ng of such factors, without any real analysis, is
insufficient and cannot constitute a reasoned explanation. The U.S. assertion that the USITC
adequately considered declining demand is unsupported by the record. The USITC gave only passing

attention to changes in demand, failing to account for the essentially 1:1 correlation between declining
demand in 2008 and the fall in U.S. shipments. The juxtaposition of statis tics upon which the U.S.
argument rests is inadequate. For the analysis to be complete, an explanation was required for the
prolonged decline in demand. The U.S. claim that the USITC "examined in detail and rejected" the
role of producers' changing business strategy is misleading as the USITC devoted one paragraph to
that issue. In the face of t estimony and evidence concerning the long-standing industry restructuring
– which predated the arrival of imports from Chin a – cursory treatment is inadequate. Viewed
cumulatively, these causes and other causes, have an even greater impact which should have been
considered. The U.S. failure to do so by claiming that it is not "always" necessary is insufficient as
the "specific factual circumstances" of this case should have been addressed.

VI. THE UNITED STATES APPLIED A REMEDY THAT WAS INCONSISTENT WITH
THE REQUIREMENTS OF ARTICLE 16 OF THE PROTOCOL

37. Despite the fact that the basic requireme nts for applying a transitional product-specific
safeguard under Article 16 had not been met, th e United States imposed a remedy. Because the
USITC failed to establish that rapidly increasing im ports from China were a "significant cause" of
market disruption, no remedy was appropriate. Even if the United States had complied with the
requirements of Article 16 and thus had the theore tical right to apply measures, the remedy applied
was inconsistent with the Protocol. Articles 16.3 and 16.6 require that any remedies imposed must be
"only to the extent necessary" and only for "such period of time" as may be necessary to prevent or
remedy market disruption. Despite this, however, the United States chose to impose a blanket remedy
– never taking into account what "extent" was nec essary to remedy the alleged market disruption.
This failure by the USITC to properly limit the remedy rendered it excessive in extent and duration.

38. Asserting broad discretion, the U.S. argument claims that the imposition of remedies cannot
be a matter of "scientific precision." The United States makes this claim because the USITC never
determined to what extent imports from Chin a were allegedly causing market disruption – and
without knowing this, no remedy coul d be limited properly. The Pa nel inquired as to how the USITC
determined that its calculated reduction of subject imports addressed the alleged market disruption,
but the United States avoided answering this questi on and instead simply quoted the output of its
economic modeling. These quotations in no way addr ess why the results calculated were in fact
determined to be necessary to address the extent of the market disruption. Article 16.3 requires an
explicit and reasoned explan ation of how the remedy imposed addresses, and is limited to, the extent
of the market disruption caused by imports from China. And Article 16.6 requires the remedies
imposed to be only "for such period of time" as necessary. The U.S. failure to provide any such
explanation renders its actions inconsistent with its obligations under the Protocol.

39. The U.S. deficiencies in explaining why th e remedy has been set for three years are even
more glaring. The economic modeling was done for only one year, not for all three years. Neither the
USITC nor President Obama provided any meaningful explanation of why the three years duration
was necessary. The focus of a permissible remedy must be on the effect of the allegedly injurious
imports. The remedy imposed by the United States, however, is not limited to the effect of these
imports. Imports cannot be held responsible for the entire downturn, and the remedy cannot seek to
address that entire downturn.

VII. THE ADDITIONAL DUTIES IMPOSED BY THE UNITED STATES ARE ALSO
INCONSISTENT WITH OBLIGATIONS UNDER GATT 1994

40. Because the imposed tariffs were not justifie d as emergency action under relevant WTO rules,
they are inconsistent with both Article I:1 and Ar ticle II:1(b) of the GATT 1994. The United States
does not accord the same treatment that it grants to passenger and light truck tyres originating in other
countries to like products originating in China a nd has imposed higher tariffs, which are unjustified
modifications of U.S. concessions on passenge r and light truck tyres under the GATT 1994.

ANNEX E-2

EXECUTIVE SUMMARY OF THE SECOND WRITTEN
SUBMISSION OF THE UNITED STATES

I. INTRODUCTION

1. The United States has demonstrated, in its first written submission, oral statement, and
answers to the Panel's questions, that China's basi c thesis – that the standards of the transitional
mechanism are so high and the anal ysis by the ITC so deficient – is completely unfounded and based
on mischaracterizations of the text of the Protocol and the very detailed analysis conducted by the
ITC. A few new issues raised by China at the panel meeting – the language difference in
paragraph 16.1 and the relations hip between section 421 and section 406, as examples – are
distractions that do nothing to support China's ar guments. Even while Ch ina conceded that the
obligations of the Safeguards Agreement have not been incorporated into the Protocol, it continues its
attempt to draw the Panel to a comparison with th e Safeguards Agreement text. This temptation must
be resisted.

II. INTERPRETIVE ISSUES

A. TRANSITIONAL MECHANISM AND SAFEGUARDS AGREEMENT

2. The question of what, if any, relationshi p there is between the transitional mechanism
contained in paragraph 16 of China's Protocol of Accession and the Safeguards Agreement has been a
focus of attention in this dispute. As the Un ited States has noted before, this is not a useful
framework for analysis.

3. The United States recalls that during the first meeting of the Panel with the parties, China
clarified that it was not arguing that the pr ovisions of the Safeguards Agreement had been
incorporated into the Protocol. Therefore, we seem to have agreement on this issue.

4. With respect to whether the Protocol is lex specialis, in its answers to the Panel's questions,
China states that paragraph 16 "provide[s] a more specific set of rules to address the application of
safeguard measures to import from China under certa in particular circumstances" and that the
Safeguards Agreement provides "the more general principles." This is simply wrong. The
Safeguards Agreement and the transitional mechanism apply in different circumstances. They are
separate remedies available to a WTO Member under different circumstances. Indeed, China's own
answer acknowledges that the Protocol and the Safeguards Agreement apply in different
circumstances. Therefore, China seems to conced e – as it must – that the transitional mechanism is
distinct from the Safeguards Agreement - that is, it exists separate and apart from the Safeguards
Agreement, as the United States has explained.

5. The United States simply disagrees with China's assertion that there is "substantial overlap in
structure and language" between the transitional me chanism and the Safeguards Agreement. Even a
quick reading of both reveals that there are subs tantial portions and con cepts from the Safeguards
Agreement that are simply not present in the trans itional mechanism. Any analysis that starts from
the premise that terms have been "added" to the Safeguards Agreement text is flawed.

6. Under the interpretive approach required by Ar ticle 3.2 of the DSU, the Panel must consider
the text of the Protocol, in its context and in light of the object and purpose of the agreement. China
appears to advance a different approach, under which the Panel should examine the Safeguards
Agreement instead, and then add the Protocol to that agreement. Nothing in the text of the Protocol,
or in the customary rules of treaty interpretation, countenance that approach. Furthermore, the most
relevant context for the Panel's consideration is th e context provided by the other provisions of the
transitional mechanism and the context provided by the relevant passages of the Working Party
Report. To the extent that there is a need to seek broader contextual guidance, the Panel may also
look to prior interpretations of si milar terms or provisions of the Sa feguards Agreement or any of the
other WTO agreements as appropriate. Where releva nt, the Panel may also consider the reasoning of
other panels and the Appellate Body interpreting such provisions. However, care must be exercised to
avoid importing words or obligations from one agreement that are not found in the other.

B. THE UNITED STATES IS NOT ARGUING THAT THERE ARE NO STANDARDS TO
BE APPLIED

7. The United States has not argued that "there is no standard and that the authorities are always
correct." A Member invoking the transitional mechan ism must meet the standards contained in the
text of paragraph 16 of the Protocol, read in c onjunction with the context provided by the Working
Party Report. It is evident that the text of the transitional mechanism contains different, and in some
cases fewer, prescriptions than the text of the Sa feguards Agreement. This is not an "extreme
interpretation," but an interpretati on consistent with the customary rules of interpretation of public
international law, as required by DSU Article 3.2.

C. LANGUAGE DIFFERENCES IN PARAGRAP H 16.1 HAVE NO IMPACT ON ANALYSIS

8. The textual difference identifie d by China has no bearing on the analysis of China's argument
on the ITC's analysis of the conditions of comp etition. China argues that the conditions of
competition analysis that the ITC did conduct as part of its causation analysis is flawed. An analysis
of that issue requires the Panel to look at paragra ph 16.4, not paragraph 16.1. Paragraph 16.1 sets out
the conditions under which a Member may seek c onsultations with China under the Protocol.
Whether or not the basis for consultations is th e same as the standard for a finding of market
disruption set out in paragraph 16.4 need not be ad dressed by this Panel. In any event, it does not
affect the analysis of the requirements of paragr aph 16.4, which is where "market disruption" is
defined, and paragraph 16.4 does not require a "conditions of competition" analysis. (Nor, for that
matter, does paragraph 16.1.)

D. STANDARD OF REVIEW

9. China's answers regarding this issue (to questi ons 9 and 18), do not address the issue of what
is the proper standard of review which the Panel must use to evaluate whether the United States met
its obligations. China instead confu ses the standard of review with what is required by the particular
obligation. In discussing what it views as the differe nces in "application" of the standard of review,
China merely restates particular terms from the provisions of the Safeguards Agreement and the
Protocol, but the terms of these provisions are not a "standard of review."

10. Throughout its submission and statements, China has tried to argue that the ITC did not
conduct a thorough analysis of the facts and did not provide sufficient and ade quate explanations for
its market disruption determination. The ITC Report is before this Panel, and the Panel should review
it to determine whether the ITC has provided reasone d explanations as to how the evidence before it
supported its conclusion that there wa s market disruption. For the reasons we have given, the answer
is yes. It should be clear from reading the Report, that the issues raised by China in this dispute are
the very issues that the ITC had before it, that the ITC evaluated the evidence appropriately, and

provided reasoned conclusions. With respect to the remedy, we note that China's arguments are
likewise centered on criticizing the ITC analysis. We have explained why China's arguments are
likewise invalid.

III. IMPORTS OF TYRES FROM CHINA INCREASED RAPIDLY OVER THE PERIOD

11. As the ITC found, the record showed clear ly that imports of tyres from China increased
rapidly. Imports increased by significant amounts in each year of the period of investigation, growing
by 42.7 per cent in 2004, 29.9 per cent in 2005, 53.7 per cent in 2007, and 10.8 per cent in 2008, the
final year of the period of investigation. On a relative basis, Chinese imports gained approximately
12 percentage points of market share during the peri od of investigation, which correlated with similar
declines in the U.S. industry's market share. The largest portion of these increases occurred during
the final two years of the period. As the ITC conc luded, the record showed that import "increases
were large, rapid, and continuing at the end of the period – and from an increasingly large base."

12. China's challenges to this finding are flawed. First, China's assertion that imports "abated" is
misleading. It is only through use of a chart that is limited to changes in the rate of growth
of import
increases that China can provide any support for its claim that there was a "declining" or "lessening"
trend in import volumes during 2008. The Protocol provides that competent authorities should
establish that imports were "increasing rapidly", on an absolute or relative basis – it does not
require that subject imports be growing at an increasingly rapid rate at the end of the period, or
that imports be increasing at a rate that is higher than the rate of growth of imports in any
earlier point of the period. Even if the rate of growth in abso lute terms lessened somewhat in 2008
when compared to the extremely rapid rate of gr owth seen in 2007, the quantities of Chinese imports
continued to grow rapidly in 2008.

13. Moreover, China's use of quarterly data also is misleading. China's comparison of changes in
the quarterly volumes of Chinese imports in 2008 involves a comparison of quarterly data for
successive quarters. This type of comparison can be inherently distortive, however, because changes
in import shipment data between quarters can be affected by variations in production schedules,
seasonal demand, and weather developments.

14. Further, China's increasing imports arguments ignore the textual link in the Protocol between
increased imports and material injury. The United States did not "conflate two distinct issues," as
China claims. The concept of increased imports does not stand alone. The language of the Protocol
links the issue of rapidly increasing imports to mate rial injury. Accordingly, when considering the
meaning and scope of the term "rapidly," the Panel must take into account the "context" in which that
term is used. The Protocol's langua ge, which links "rapid increases" of imports to material injury or
threat of material injury, estab lishes that the import increases required by the Protocol are less
significant than those required in the context of the Safeguards Agreement.

15. Finally, China's assertion that the Appellate Body requires a competent authority to obtain
data only for the "most recent past" is unsupported by the relevant Appellate Body reports. In
Argentina – Footwear and US – Lamb Meat the Appellate Body found that the examination of data
for at least two years was appropriate. Moreover, the Appellate Body has stated that "in
conducting their evaluation under Article 4.2(a) , competent authorities cannot rely exclusively
on data from the most recent past, but must assess that data in the context of the data for the
entire investigative period."

IV. THE U.S. STATUTE IS CONSISTENT, AS SUCH, WITH THE PROTOCOL

16. China has failed to carry its burden of establis hing that the U.S. statute is inconsistent, as
such, with the Protocol. Despite China's claims, section 421's defi nition of a "significant cause" of

material injury as a cause that "contributes signifi cantly to the material injury of the domestic
industry" is consistent with the language of the Protocol itself, the ordinary meaning of the words
"cause" and "contribute," and the Appellate Body's own definitions of the words "cause" and "causal
link" under the Safeguards Agreement. Simply put, section 421 does not "impermissibly lower" the
causation standard of the Protocol, as China claims.

17. China's claims on this score appears to be pr emised on the mistaken notion that the Protocol
requires that imports from China be the sole
 cause of material injury to an industry. This concept is
not consistent with the Protocol. The Protocol provides that "market disruption shall exist" if Chinese
imports constitute "a significant cause of material injury" to the industry. By providing that Chinese
imports may constitute "a significant cause" of injury , the Protocol explicitly contemplates that there
may be multiple significant causes of material injury or th reat to an industry, a point which China
ignores.

18. China's argument is also not consistent with the ordinary meaning of the word "cause."
While the Shorter Oxford English Dictionary defi nes the word "cause" as meaning a factor that
"produces an effect or consequence" or "that brings about an effect or result," there is no question that
the word "cause" can be used to describe a situation where more than one factor brings about or
produces a particular effect or result. Given this, it is clear that "cause" can be used with respect to
situations where multiple factors contribute to "bringing about" or "producing" an effect or result.

19. Finally, China's argument is inconsistent w ith the Appellate Body's explanation of the terms
"cause" and "causal link" in the Safeguards Agreement context. In US – Wheat Gluten, the Appellate
Body explained that "the term ‘causal link' denot es, in our view, a relationship of cause and effect
such that increased imports contribute to "bringing about, "producing," or "inducing
" the serious
injury." Given this reasoning, the ITC can r easonably conclude that imports that significantly
"contribute" to the industry's injury are a significant cause of that injury.

20. China is also mistaken in claiming that th e U.S. statute "allows the U.S. investigating
authority to determine that even a minimal cause, which can be less than any other cause, could still
be considered as ‘a significant cause.'" Under the U.S. statute, rapidly increasing imports from China
must "contribute significantly
" to material injury to be consider ed a significant cause of injury to the
industry. Moreover, the ITC has consistently stat ed that the statute requires a finding that Chinese
imports have a "direct and significant causal link" to the industry's material injury. Indeed, the ITC
has rejected the idea that imports from China can be a "significant cause" of material injury if they
constitute a "minimal" or "unimportant" cause of such injury. The statute does not allow the ITC to
find imports to be a significant cause of injury if they contribute minimally to that injury.

21. Furthermore, China has now raised, for the firs t time, the claim that the legislative history of
section 406, the U.S. statute on which the Protocol was modeled, indicates that the "significant cause"
standard of section 406 "was intended to be an easier standard to satisfy than" the "substantial cause"
standard of section 201, the U.S. global safeguards st atute. China's statements seriously misconstrue
the legislative history of section 406 and the rela tionship of the causation standards set forth in
sections 406 and 201.

22. In making this claim, China fails to point out to the Panel that the "substantial cause" standard
of section 201 contains an additional element that makes the statutory "substantial cause" standard a
higher one than section 406's "significant cause" standard. In section 201, the Congress defines
"substantial cause" to mean "a cause which is important and not less than any other cause
" of serious
injury to an industry. As the ITC has consistent ly explained in its global safeguards determinations,
section 201 therefore requires that "increased imports must be both an important cause of the serious
injury or threat and a cause that is e qual to or greater than any other cause ." In contrast, section 406
does not require the ITC to conclude that the injury cau sed by the subject imports is greater than or

equal to the injury caused by any other factor injuring the industry . Thus, the standard of section 201
is higher because it requires a finding that global imports be as important as any other cause of serious
injury to the domestic industry during the period of i nvestigation. In its argument, China has entirely
failed to point out this important distinction between the two statutes to the Panel.

23. Accordingly, it should be clear, then, why Ch ina is mistaken when it asserts that section 421
permits the ITC to find that imports are a significan t cause of material injury even if they are a
minimal cause of such injury, simply because se ction 421 provides that those imports "need not be
equal to or greater than any other cause" of injury to the industry. This phrase does not
 mean that
imports can be considered a "significant cause" if they are "less than any other cause," including a
minimal cause of injury, as China asserts. Instead, this language establishes imports from China need
not be the most important cause, or equal in effect to the most important cause, of material injury to
the industry, a concept that is consistent with the requirements of the Protocol.

V. THE ITC'S CAUSATION ANALYSIS, AS APPLIED, WAS CONSISTENT WITH
THE PROTOCOL

A. THE ITC REASONABLY FOUND THERE WAS A CAUSAL LINK BETWEEN
CHINESE IMPORTS AND INJURY

24. As the United States has established, the IT C's analysis of the causal link between
rapidly increasing imports from China and the indus try's declining condition is fully consistent
with paragraph 16.4 of the Protocol. The ITC objectively and thoroughly analyzed the record
evidence on these issues and established, clearl y and unambiguously, that rapidly increasing
imports from China were a significant cause of material injury to the domestic industry.

25. In its oral statement, China continues to cl aim that the ITC misinterpreted and distorted the
conditions of competition in the U.S. market. The ITC did nothing of the sort. Rather, the ITC
provided a detailed and reasoned expl anation of the pertinent conditions of competition in the U.S.
tyre market. The ITC reasonably analyzed issues argued by the parties, such as declining demand, the
industry's business strategy and alle gedly attenuated competition, and found that the record evidence
did not establish that these issues broke the requisite causal link under the Protocol.

26. In its oral statement, Chin a also mistakenly claims there was "no correlation between imports
and injury." As detailed in the U.S. first written submission and its oral statement, this statement
shows China's fundamental misunderstanding of the ex tensive record that was before the ITC in the
Tires investigation. That evidence established a cl ear overall coincidence between rapidly increasing
subject imports volumes and the deterioration in th e condition of the domestic industry. China's bold
claim of no
 correlation in light of this record, calls into doubt the validity of China's other arguments
in this proceeding.

27. At the outset, China continues to claim that a coincidence analysis is required under the
Protocol by referring to the requirements under the Safeguards Agreement. As a legal matter, China
is seeking to impose obligations on the United States not found in the language of the Protocol. China
asserts that Article 16 of the Protocol involves the same causal analysis as in the Safeguards
Agreement, which means that a "‘coincidence' anal ysis is logically required under the Protocol." As
the United States has explained, China's argu ment ignores the fact that there is different
language in the Safeguards Agreement and the Protocol. Moreover, China's argument also
ignores the fact that the Appellate Body and WT O panels had made clear that investigating
authorities are not
 required to perform a correlation an alysis even under the Agreement on
Safeguards.

28. China's arguments on the lack of coincide nce are also misplaced as a factual matter. As the
ITC stated there was a clear overall "coincidence" in trends between the rapidly increasing
imports and their effects on the domestic industry. This finding was reasoned, fully supported by
the record, and met the requirements under the Protocol . As the United States noted in both its first
written submission and in its oral statement, as Chinese import volumes increased rapidly in every
year of the period, the record showed that the la rge majority of the domes tic industry's performance
indicators declined in every year of the period as well. As the ITC explained in its determination,
the underselling by large and rapidly increasing subject Chinese tyres eroded the domestic
industry's market share, leading to a substant ial reduction since 2004 in domestic capacity,
production, shipments, and employment.

29. The evidence showed that all of these indicator s were at their lowest levels in 2008 when
subject imports were at their highest. Even though some factors, such as profitability and
productivity, improved somewhat in a single year - 2007 - when imports continued to increase,
numerous other injury factors including capacity, sh ipments, net sales quantities, market share, and
employment-related factors all continued to decline in that year. Moreover, even the improvement in
profitability and productivity was temporary. The record showed that both factors declined in 2008 to
levels below the start of the period, at the same ti me subject imports rose to their highest levels both
in terms of absolute volume and market share.

30. In sum, the ITC found that the significant increase in the volume of subject imports
throughout the period coincided with significant and pervasive underselling of the domestic like
product by the subject imports. The rising volume of subject imports also coincided with the decline
in the domestic industry's performance indicators as subject imports from China displaced domestic
sales, and this displacement led to declining do mestic production, shipments, capacity utilization,
employment, and profitability. As a result, the re cord clearly supported the ITC's finding that the
subject imports were a significant cause of material injury to the domestic industry.

B. OTHER FACTORS DID NOT SEVER THE CAUSAL LINK

31. China also claims the ITC "ignored" or decided to "forgo any analysis of other causal
factors." Again, this is incorrect. As discussed in the U.S. First Written Submission , the ITC did
investigate, consider, and analyze all of the factors that could reasonably be considered
significant enough to break the causal link betw een imports and material injury. Indeed, the
ITC directly considered and addressed the two oth er factors primarily relied on by China in its
oral statement, i.e., the industry's alleged "business strategy" of shifting its U.S. production
away from low-end tyres to high-end products, and declines in demand in the U.S. tyres market
over the period. The ITC examined these issues and reasonably concluded that they did not
indicate that subject imports were not a significant cause of material injury to the industry.

32. China continues to argue that a Member ca nnot determine whether subject imports are "a
significant cause" of injury as required by the Protocol without examining whether other factors were
responsible. China ignores the fact that the Protocol, unlike the Safeguards Agreement, does not

specifically require a Member to consider the possib le effects of other factors causing material
injury or threat of material injury as part of its causation analysis. Instead, the Protocol
requires a Member, when assessing whether rapi dly increasing imports are a significant cause
of material injury or threat of material inju ry to the industry, to consider the "volume of
imports," their "effect . . . on prices for like or directly competitive articles, and the effect of
such imports on the domestic industry" producing such articles.

33. Contrary to China's argument, the United States is not asking for the Panel to conclude that
the United States has unfettered discretion to make such a determination. Instead, the United States is
simply pointing out that Members are only required to perform the specific obligations that are set

forth in the relevant legal text. Since China h as not, and cannot, demonstrate that the Protocol
imposes on the United States any obligation to address th e injurious effects of other factors as part of
its causation analysis, China's claim in this regard must fail. Moreover, even if such an obligation
were found to exist, the ITC did consider all of th e other factors that could reasonably be claimed to
be injuring the domestic industry in a significant manner.

34. For example, China continues to claim the ITC "largely ignored the U.S. tire market's
prolonged contraction in demand," and failed to acknowledge that changes in demand might have
been a cause of injury to the industry. As discu ssed in the U.S. First Written Submission, however,
the ITC fully addressed demand trends in the mark et, including those in the OEM market, and found
that demand trends did not break the causal link between the subject imports and injury. The ITC
found that, even though apparent U.S. consumption fell in 2008, shipments of low-priced subject
imports not only remained strong but continued to gr ow during the market contraction in that year.
The fact that low-priced subject imports were able to increase both absolute ly and relatively in the
face of a contracting market in 2008, even as the quantities of domestically produced tyres and non-
subject imports both declined, contradicts China's argument that the domestic industry was injured
solely by demand declines in 2008.

35. China also claims the ITC "chose to attribute pl ant closings to imports from China, when the
record does not support such a conclusion." Again, th is is mistaken. As the United States previously
explained, the ITC cited ample record evidence to support its finding. The ITC explained that imports
of tyres from China were rapidly increasing before
 Bridgestone, Continental, and Goodyear
announced the closing of plants in 2006 and 2008. As the producers stated, the decision to close
those facilities was not a voluntary decision that was made independently of imports. It was,
instead, a direct response to the growing presence in the market of low-cost Chinese imports,
that had already had a "profound" effect on the U. S. market at the very beginning of the period
according to contemporaneous press reports. The ITC's analysis had a strong evidentiary
foundation.

VI. CHINA HAS NOT MET ITS BURDEN OF PROOF ON REMEDY

36. In its answers to the Panel questions, China acknowledges that paragraph 16.3 of the Protocol
does not require a Member to "separate and distin guish other causes" and that there "is no specific
obligation to quantify." Despite these admissions, China asserts that "the less compelling the
authorities' explanation of how it distinguished the role of imports from other causes, the greater the
likelihood the authorities improperly imposed a remedy that goes too far." However, China fails to
provide any explanation why an alleged failure to quantify, where quantification is not required,
requires a "compelling explanation", and why the e xplanations provided by the United States are not
adequate.

37. China's argument on remedy seems to be that it is not satisfied with the explanations
provided. In the U.S. First Written Submission a nd in the U.S. reply to Panel question 30, the
United States has pointed to the detailed explanatio ns provided by the ITC in its report in which it
explains how its proposed remedy addresses the mark et disruption of which imports from China are a
significant cause. In addition, the United States has explained that the remedy actually imposed by
the United States is less stringent than the remedy recommended by the ITC. This was as a result of
additional information gathered during the remedy phase and additional fact-finding conducted by the
Office of the U.S. Trade Representative and other agen cies during this phase. An explanation of this
was provided at the time the measure was imposed and was even included by China as one of its
exhibits. Finally, as the United States has also e xplained, the remedy imposed is reduced by five
percentage points in the second and third years. Ch ina has failed to establish how the measure fails to
meet the requirements of paragraphs 16.3 and 16.6.

VII. CONCLUSION

38. For the reasons set forth above, and in our first written submission and answers to questions
from the Panel, the United States requests that the Panel reject China's claims in their entirety.