Document: WT/DS379/R Page D-1 ANNEX D ORAL STATEMENTS OF THE PARTIES, FIRST AND SECOND PANEL MEETINGS Contents Page Annex D-1 Executive Summary of the Oral Statement of China – First Meeting D-2 Annex D-2 Executive Summary of the Open ing Statement of the United States
Document codes: WT/DS379/R
Complainant: China
Respondent: U.S.
Third parties: Argentina, Australia, Bahrain, Brazil, Canada, EU, India, Japan, Kuwait, the State of, Mexico, Norway, Saudi Arabia, Taiwan, Turkey
Dispute stage: Appellate Body
Agreements cited: Art. I, VI  GATT 1994Art. 1, 2, 10, 12, 13, 14, 19, 32  Subsidies and Countervailing Measures (SCM)Art. 1, 2, 6, 9, 18, Annex II  Anti-dumpingArt. 15  Protocol of Accession

ANNEX D

ORAL STATEMENTS OF THE PARTIES, FIRST AND
SECOND PANEL MEETINGS

Contents Page
Annex D-1 Executive Summary of the Oral Statement of China – First Meeting D-2
Annex D-2 Executive Summary of the Open ing Statement of the United States
– First Meeting D-7
Annex D-3 Oral Statement of the United States regarding the U.S. Preliminary
Ruling Request – First Meeting D-12
Annex D-4 Closing Statement of the United States – First Meeting D-16
Annex D-5 Executive Summary of the Oral Statement of China – Second
Meeting D-18
Annex D-6 Executive Summary of the Open ing Statement of the United States
– Second Meeting D-23
Annex D-7 Closing Statement of China – Second Meeting D-28

ANNEX D-1

EXECUTIVE SUMMARY OF THE ORAL STATEMENT
OF CHINA – FIRST MEETING

(20 July 2009)

Introduction

1. In its first written submission, the United St ates vacillates between two extremes. For the
most part, it chooses to repeat the rationales set forth in Commerce's final determinations without
amplification. Alternatively, in a number of critical areas, the U.S. abandons entirely the rationales
Commerce adopted in its final determinations, o ffering up wholly new ones in their place. For
example, while Commerce clearly did not apply a per-se rule of majority ownership in finding that
state-owned commercial banks are "public bodies", the United States now claims that it did. And
while the predicate of Commerce's "policy lending" s ubsidy was the provision of loans at preferential,
non-commercial interest rates, the U.S. now disavows that characterization entir ely, and claims that
the real "subsidy" was the "allocation" of credit at ordinary commercial interest rates. These abrupt
shifts in the U.S. position reflect the basic lack of coherence in Commerce's determinations, and the
inability of the United States to defend these determinations based on their stated rationales.

2. It is well-established that a panel's "critical and searching" examina tion of an investigating
authority's conclusions must "be based on the information contained in the record and the
explanations given by the authority in its published report", not on ex post rationalizations. In light of
the large number of ex post rationalizations contained in the U. S. submission, we will have to be
vigilant in holding the United States to the rational es that Commerce actually set forth in its published
determinations.

3. I will now turn to the four key issues that I would like to address in this opening statement.
These are: (1) the interpretation of the term "pub lic body"; (2) Commerce's benefit calculations and
the use of non-Chinese benchmarks; (3) Commerce's sp ecificity determinations in respect of "policy
lending" and land; and (4) the issue of double remedies.

Financial Contribution / Public Body

4. I would first like to turn to the proper interpre tation of the term "public body" in Article 1.1 of
the SCM Agreement. As the panel is aware, the ove rwhelming majority of the financial contributions
that Commerce found in the CVD investigations at issue were provided by State Owned Enterprises
(SOEs) and State Owned Commercial Banks (SOCBs ). In every instance, Commerce found that
SOEs were public bodies, applying wh at the United States concedes is a per se rule of majority
government ownership. It now offers the same per se rationale to defend Commerce's treatment of
SOCBs as public bodies, even though Commerce offered a different justification in the determinations
at issue.

5. The United States' exclusive focus on government ownership finds no support in the text or
context of Article 1.1. Article 1.1 exp licitly defines "government" and "public body" collectively
under the single heading of "government". The only reasonable inference to draw from this is that the
drafters considered that a public body must possess characteristics similar to those that define a
government. In Canada Dairy, the Appellate Body explained that the "essence of government" flows

from the functions it performs and the authority it possesses to perform them. This led it to conclude
that a "government agency" is an "entity which ex ercises powers vested in it by a 'government' for the
purpose of performing functions of a 'governmental' character".

6. I would like to emphasize that the term for "government agency" in the Spanish text of the
Agreement on Agriculture – "organismo público" – is identical to the term used for "public body" in
Article 1.1 of the SCM Agreement. The French versions of the two Agreements likewise use
essentially identical language for the phrases "govern ment or any public body" and "governments or
their agencies". In light of the obligation of th e treaty interpreter "to seek the meaning that gives
effect, simultaneously, to all the terms of the treat y, as they are used in each authentic language", the
English terms "public body" and "government agency " should be treated as functional equivalents,
just as the comparable terms in the Spanish and Fr ench texts are. The interpretation of the term
"public body" that China advocates is consistent with all three authentic texts of the SCM Agreement;
the U.S. interpretation is directly in conflict.

7. As China has shown, the ILC Articles on State Responsibility are relevant rules of
international law that have frequently have been relied upon by panels and the Appellate Body when
interpreting the covered agreements. They make clear that mere government ownership is legally
insufficient to attribute the conduct of a state-owned entity to a State. Rema rkably, the United States
asks the panel to disregard this internationally accepte d principle, stating that the Appellate Body in
US – DRAMS only cited the ILC Articles when addressing Article 1 of the SCM Agreement for the
"unremarkable proposition that the conduct of private parties is presumptively not attributable to the
State", a proposition that the United States "does not dispute".

8. As the language from the Appellate Body determination makes clear, the "unremarkable
proposition" the Appellate Body endorsed, and that the United States now "does not dispute", is that
the "private bodies" whose conduct presumptively is not attributable to the State include
 "corporate
entities ... owned by and in that sense subject to the control of the State ". What the United States
apparently fails to appreciate is that SOEs are precisely the type of state-owned corporate entities
whose conduct the Appellate Body recognized is presumptively not attributable to the State " unless
they are exercising elements of governmental authority ". Commerce's per se rule is irreconcilably in
conflict with the international law rule the United States now concedes it "does not dispute".

Benefit / Article 14

9. China notes that the United States' entire de fence of Commerce's resort to out-of-country
benchmarks relies on its assertion that "the Appe llate Body has found that Article 14 of the SCM
Agreement affords Members a great deal of flexibility in the calculation of benefit". This is a gross
mischaracterization of the relevant Appellate Body decisions.

10. The chapeau of Article 14 provides that "any method used by the investigating authority to
calculate the benefit to the recipient ... shall be consistent with the following guidelines". The
Appellate Body has said that use of "the term 'shall ' in the last sentence of the chapeau" together with
the term "guidelines" establish " mandatory parameters within which the benefit must be calculated".
The mandatory parameters for determining whether the provision of goods has conferred a benefit are
set forth in Article 14(d). It provides that "the adequacy of remuneration shall be determined in
relation to prevailing market conditions for the good … in question in the country of provision …
(including price, quality, availability, marketability, transportation and other conditions of purchase or
sale)".

11. All parties agree that the Appellate Body's decision in US – Softwood Lumber IV is the
touchstone for evaluating compliance with th is provision. However, the Appellate Body did not
provide the unqualified endorsement of out-of-country benchmarks that the U.S. repeatedly attributes

to it in its first submission. To the contrary, the Appellate Body said that the "possibility" of resorting
to a benchmark other than private prices is "very limited".

12. According to the Appellate Body, resorting to an out-of-country benchmark is permissible
only "when it has been established that those private prices have b een distorted by the predominant
role of the government in the market as a provider of the same or similar goods". That determination
cannot be presumed, and "must be made on a case-by-case basis, according to the underlying facts of
each countervailing duty investigation". The fact th at the government is the predominant supplier of
goods for a particular market " does not, in itself, establish that all prices for the good are distorted" so
as to justify rejection of private prices.

13. In each of the CWP, LWR, and LWS investig ations, Commerce rejected private prices on the
grounds that they were distorted merely by virtue of the extent of state-ownership in the relevant
markets. By employing a per se rule of distortion based on nothing more than the extent of SOE
involvement in the input markets, Commerce did precisely what the Appellate Body said it could not
do, under any circumstance: it presumed distortion.

14. Turning next to land, Commerce again found that prices were distorted based largely on the
mere fact that the government w as a significant supplier in the mark et. But Commerce went further,
and cited a number of factors wholly unrelated to the government's role as a provider of the financial
contribution at issue, that, in its view, justified resort to an external benchmark because "property
rights remain poorly defined and weakly enforced" in China. With respect, Commerce's subjective
characterization of the legal status of property rights in China is no basis for rejecting Chinese land
prices as a benchmark under Article 14(d).

15. The practical problems the Appellate Body identified in Softwood Lumber IV are so severe in
the context of land-use rights as to preclude resort to an external benchmark in any circumstance. But
whether the Panel agrees or disagrees with this point, there can be no dispute that the Thailand
benchmark Commerce chose in this case does not be gin to meet the standards the Appellate Body
established in Softwood Lumber IV.

16. Commerce's use of out-of-country benchmarks for loans raises equally alarming implications
for the proper operation of Article 14. Under Artic le 14(b), the benchmark for determining whether a
government-provided loan confers a benefit is a "c omparable commercial loan which the firm could
actually obtain on the market". Yet Commerce's benc hmark for loans was an "interest rate" it derived
from a 33-country regression model. It barely needs mention that no borrower in China could
"actually obtain" a loan at this fictitious interest rate. But China's principal objection to Commerce's
application of Article 14(b) is the premise that led Commerce to undertake its search for an interest
rate outside of China. Namely, that because of the purported predominant role of the Chinese
government in the banking sector, there are no "fully market-determined" interest rates in China.

17. Commerce's rationale is based on the false premise that interest rates ordinarily are
determined in the absence of significant government inte rvention, but they are not. Not in China, not
in the United States, nor anywhere else in the world. As explained by an expert on monetary
economics, "[g]overnment intervention in the credit market to affect th e level of interest rates is …
observed in almost all economies, being the central tool of monetary control by central banks around
the world".

Specificity

18. In OTR, Commerce found that "policy lending" – which it defined as the provision of loans
by SOCBs on a "preferential, non-commercial basis" – was de jure specific to producers in the tyre
industry. Under Article 2.1(a), a subsidy is de jure specific if "the granting authority, or the

legislation pursuant to which th e granting authority operates, exp licitly limits access to a subsidy to
certain enterprises …". The United States previously has recognized that a finding of de jure
specificity must be based on "the actual words of th e law" pursuant to which the subsidy is provided.
China agrees.

19. In this case, the "legislation" that Commerce relied upon for its finding of de jure specificity
was a series of national and provincial econo mic planning documents. The question under
Article 2.1(a) is whether the "actual word s" of these measures "explicitly limit access" to
"preferential, non-commercial" loans by SOCBs to co mpanies in the tyre industry, or at least to a
"group of enterprises or industries" that includes the tyre industry.

20. However, the United States now concedes that producers in the tyre industry did not obtain
loans from SOCBs at "preferential, non-commercial" rates of interest. The United States instead
appears to contend that the mere fact that an industry is mentioned somewhere in an economic
planning document gives it access to credit that it could not otherwise obtain, and that this alone is a
"subsidy", even when the borrower pays the same interest rate as other borrowers. Even more
remarkably, the United States now alleges that the hundr eds of different industries referred to in the
planning documents collectively constitute "certain enterprises" w ithin the meaning of Article 2.1(a),
and that the alleged subsidy (whatever it might be) is "explicitly limited" to these industries.

21. The United States has argued in DS353, the Boeing subsidies dispute, that programs available
to "diverse industry sectors that cover a significant portion of the ... economy" are not de jure specific
under Article 2.1(a). In light of this argument, it is hard to see how the United States can maintain in
the present dispute that the "diverse industry sector s" referred to in China's economic planning
documents, which likewise cover "a significant por tion" of the Chinese economy, can collectively
constitute "certain enterprises". Moreover, the ex post rationale advanced by the United States in
support of a finding of de jure specificity no longer bears any relationship to the subsidy benefit that
Commerce purported to measure, which was clearly prem ised on the notion that borrowers in the tyre
industry received loans from SOCBs at preferential, non-commercial rates of interest.

22. Turning to land, I'll make two brief points about Commerce's finding in LWS that the alleged
provision of land-use rights for less than adequa te remuneration was "regionally specific" to the
New Century Industrial Park in Huantai County, Shandong Province.

23. First, the United States maintains that, unde r Article 2.2, Commerce was not actually required
to find that the alleged subsidy was limited to the "designated geographical region". Rather, it was
sufficient for Commerce to find only that the financial contribution was limited to the designated
geographical region. The United States blatantly disregards the text of Article 2.2, which clearly
requires the subsidy to be limited to certain enterprises lo cated within the designated geographical
region. It is not adequate under Article 2.2 to find that something other than a "subsidy", as defined
in Article 1, is limited to certain enterprises located within a designated geographical region.

24. Secondly, the United States does not dispute that companies paid the same amounts for land-
use rights in Huantai County whether they were located inside or outside of the industrial park.
However, the U.S. still seeks to defend Commerce's finding that the alleged subsidy was "limited to
certain enterprises" within the industrial park. It would stand the notion of regional specificity on its
head to conclude that a subsidy is regionally speci fic even though it is provided to enterprises located
outside of the "designated geographical region".

Double Remedies

25. Contrary to what the United States claims in its first submission, China does not contend that
the United States must "choose" between the use of countervailing duties and the use of an NME

methodology. Rather, China's contention is that when Commerce chooses to apply the two remedies
simultaneously, it must do so in a manner that tak es into account the fact that it offsets the same
alleged subsidies through the manner in which it calculates anti-dumping duties.

26. Once this mischaracterization of China's argument is corrected, the United States has
remarkably little to say on what China considers to be the fundamental issues in dispute. These issues
are: (1) Whether the double remedy problem exists; (2) If so, what are the circumstances in which a
double remedy would arise; (3) Whether the United States has a legal obligation under the covered
agreements to avoid the imposition of double remedi es in these circumstances; and (4) Whether
Commerce has authority under U.S. law to avoid the imposition of a double remedy where one arises.

27. As to the existence of double remedies, ther e can be little room for disagreement. Commerce
has explicitly acknowledged that "a possibilit y of double counting results from simultaneous
antidumping and CVD investigations " of imports from NME countries,
 and it proclaimed that it was
"determined to prevent any double remedies from ar ising". Moreover, the double remedy problem
has been the subject of extensive considerati on by the U.S. Congress, the U.S. Government
Accountability Office, and by Commerce itself.

28. With respect to the circumstances in whic h a double remedy would arise, the United States
does not appear to dispute that subsidies are among the distortions that the use of an NME
methodology is meant to address. The essence of the U.S. response is that the use of an NME
methodology may "not constitute a complete
 remedy" for the subsidies, and that it will "not
necessarily capture the full amount " of any subsidies. If it is solely a matter of degree, as the
United States now seems to suggest, then it should explain what steps Commerce takes to determine
the extent of the double remedy, and why it did not take these steps in the inv estigations at issue,
where the problem of double remedies unquestionably arose.

29. This leads to the third question, namely, whet her it is consistent with the covered agreements
to offset the same subsidies through the applicati on of two different duties. Article VI:3 of the
GATT 1994 says, countervailing duties are "levied for the purpose of offsetting … any subsidy
bestowed … upon the manufacture, production or export of … merchandise". In light of this purpose,
it is hard to see what legal justification there coul d be for offsetting the same alleged subsidy twice.
However, the United States does not take a positi on on whether it would have a legal obligation to
prevent the imposition of a double remedy were one to occur in the case of NME imports.

30. The final question is whether Commerce has au thority under U.S. law to avoid the imposition
of a double remedy where one arises. Commerce h as proclaimed that it lacks legal authority to
address the problem of double remedies, and it is reas onable to infer that it is this absence of legal
authority that explains Commerce's failure to avoid the imposition of double remedies in the
investigations at issue in this dispute. But it is up to the United States to explain to the Panel whether
Commerce possesses authority to avoid double remedies in NME investigations, what the nature of
this authority is, and why Commerce did not apply this authority in the investigations at issue.

ANNEX D-2

EXECUTIVE SUMMARY OF THE OPENING STATEMENT
OF THE UNITED STATES – FIRST MEETING

(7 July 2009)

1. Instead of addressing all of the issues raised by China in its First Written Submission, we will
focus this morning on China's arguments relating to Commerce's subsidy determinations and conclude
with China's challenge to a Member's right to make full use of both the anti-dumping and
countervailing duty remedies available under WTO rules.

2. At the outset, it is important to have a clear understanding of exactly what China is asking the
Panel to do in this dispute. Unhappy with the rules it accepted when it acced ed to the WTO in 2001,
China now advances interpretations of those rules th at have little connection with how those rules are
properly understood in light of the customary rules of interpretation of public international law. The
only solution for China's complaint, if it wants to avoid anti-dumping and coun tervailing duties, is to
cease the dumping and subsidization that gave rise to the duties in the first place.

3. Financial Contribution: Commerce based its "public body" determinations in the
challenged CVD investigations on a proper interpretation of the SCM Agreement. Instead of properly
applying the rules of interpretation reflected in th e Vienna Convention to interpret the term "public
body", China seeks to graft onto the SCM Agreement certain provisions of the ILC Draft Articles,
which are not covered agreements, not context, nor ot herwise relevant to the interpretation of the term
"public body". China ignores commitments it made in the Working Party Report on its accession to
the WTO that confirm that Chinese state-owned en terprises, including banks, are public bodies. The
Panel should reject China's effort to avoid the or dinary meaning of the term "public body", import
provisions of the ILC Draft Articles into the SCM Agreement, and evade commitments it made as part
of its accession to the WTO.

4. The Panel should find that the ordinary meaning of the term "public body", read in its context
and in light of the object and purpose of the SCM Agre ement, indicates that a public body is an entity
that is owned or otherwise controlled by the governme nt, but not necessarily one that is authorized to
exercise, or is in fact exercising, government f unctions. There is no need to look to the Spanish
version of the Agriculture Agreement to determin e the meaning of the term "public body" in the
SCM Agreement.

5. The adopted panel report in the Korea – Commercial Vessels dispute supports the U.S.
interpretation and weighs against China's interpreta tion. The panel there concluded that "an entity
will constitute a 'public body' if it is controlled by the government (or other public bodies)". Majority
government ownership can demonstrate control.

6. No entrustment or direction analysis, which is relevant only when an investigating authority
seeks to determine if a financial contribution has been provided by a private body, was required,
including for transactions involving trading companies.

7. Benchmark: With respect to benchmarks, Commerce de termined that interest rates for loans
and domestic prices in China were distorted b ecause of the predominate role of the Chinese
government in these markets, rendering these inter est rates and domestic prices unsuitable as

benchmarks. China nonetheless argues that only in-c ounty benchmarks may be used. If this position
were accepted, Members would never be able to me asure the benefit of these financial contributions
because, as the Appellate Body has previously expl ained, the government price for the loan or land
would be compared to itself.
1 Such an outcome would be inconsistent with the flexible nature of
Article 14 of the SCM Agreement, which China ignores.

8. China also ignores paragraph 15(b) of its Accession Protocol and paragraph 150 of the
Working Party Report which confirm the permissib ility of using out-of-country benchmarks to
measure any benefit in CVD investigations c oncerning imports from China. Paragraph 15(b)
expressly recognizes that "prevailing terms and conditi ons in China may not always be available as
appropriate benchmarks". China argues that th e United States may not make reference to its
Accession Protocol and Working Party Report in this dispute, claiming that doing so constitutes an ex
post rationalization. This contention is utterly without support.

9. In determining to use external benchmarks, Commerce did not apply a " per se rule" that only
considered the degree of state ownership of the industries. Where the facts demonstrated that Chinese
prices and interest rates were distorted by the government's predominant role in a market and
unsuitable as commercial benchmarks, Commerce used market-derived prices from outside China.
Commerce relied on benchmarks for inputs and land-use rights that reasonably reflected "prevailing
market conditions" in China, and benchmarks fo r loans tailored to approximate a "comparable
commercial loan which the firm could actually ob tain on the market". China's assertion that
Commerce did not "make any effort whatsoever to en sure that these benchmarks related to prevailing
market conditions in China" is simply without foundation.

10. Providing Credits in Benefit Calculations: Commerce was not required to provide a credit
in the subsidy benefit calculation for those instan ces in which China provided rubber to tire producers
for adequate remuneration, that is, when China did not provide a subsidy. China does not suggest that
its invented obligation to provide a credit can be lo cated in Article 14, but instead argues that the use
of the term "product" in other provisions of the SCM Agreement and the GATT 1994 requires a
credit. Accepting China's argument would mean that the mere use of the term "product" in these other
provisions overrides the "latitude" and "leeway" that pa nels and the Appellate Body have found in the
guidelines set forth in Article 14 of the SCM Agreement, and would elevate context above the text.

11. China's argument cannot be reconciled with th e definition of a subsidy in Article 1 of the
SCM Agreement. Any time a government provides a financial contribution a nd a benefit is thereby
conferred, a subsidy is "deemed to exist". Instan ces of "non-subsidies" cannot eliminate or diminish
the benefits conferred when a government provides a financial contribution that confers a benefit.

12. The calculation of a subsidy benefit under Ar ticle 14 of the SCM Agreement is in no way
related to "zeroing", and the invocation of the term " zeroing" in this dispute is merely a distraction.
The Appellate Body's findings in the "zeroing" di sputes are of no assistance to this Panel, as they
concern a different type of calculation under a differe nt agreement. There is no analytical connection
between the calculation of a subsidy benefit and the calculation of margins of dumping that would
justify extending the Appellate Body's reasoning.

13. If China's interpretation were accepted, it would necessarily apply to all of Article 14 and
would require that credit be provided whenever an investigating authority found that a financial
contribution did not provide a benefit. Thus, Me mbers would be required to provide credit across
different types of input products and even different types of subsidies. China's interpretation would
result in a benefit calculation that is artificially low, or even zero, preventing the United States from

1 US – Softwood Lumber CVD Final (AB), para. 93.

fully offsetting the effect of subsidies found to exist. It therefore fails to read Article 14 in light of the
object and purpose of the SCM Agreement.

14. Benefit Where Inputs Purchased from Trading Companies: With respect to China's
argument that, where production inputs were purchased from trading companies, Commerce was
required to measure the benefit c onferred upon trading companies in addition to the benefit conferred
upon respondent producers, China has not identifie d any provision of the SCM Agreement or the
GATT 1994 with which Commerce's bene fit determinations are purportedl y inconsistent. It was not
necessary to measure any benefit that may have b een received by the trading companies. The amount
or portion of any benefit receive d by the trading companies is irrelevant for the purpose of
determining the benefit conferred upon the subject merchandise producers.

15. Specificity: Contrary to China's claims, Commer ce's specificity determinations were
consistent with the SCM Agreement. China misreads the agreement. With r espect to the specificity
of policy lending, China asks the Panel to apply an approach not set forth in Article 2.1(a) of the SCM
Agreement. Article 2.1(a) of the SCM Agreement requires an investigating authority to determine
whether: (i) the granting authority explicitly limits ac cess to a subsidy to "certain enterprises"; or (ii)
the legislation pursuant to which the granting authority operates explicitly limits access to a subsidy to
"certain enterprises". Nothing in Article 2.1(a) re quires Members to identify legislation that defines
the "elements of a subsidy". The elements of a subsidy are the financial contribution and benefit,
which are analyzed separately from specificity.

16. Central, provincial, and m unicipal policy documents clearly substantiate that the various
levels of government in China guided lending to a group of industries, which included the OTR tire
industry. Article 2.1 of the SCM Agreement defi nes "certain enterprises" to include a group of
industries.

17. China's challenge of Commerce's land-use rights specificity determination relies on a
misreading of Article 2.2 of the SCM Agreement. Purs uant to Article 2.2, a subsidy is specific if it is
limited to certain enterprises located within a designated geographical region within the jurisdiction of
the granting authority. China argues that if a subsidy is available to all enterprises within a designated
geographical region, it is not specific pursuant to Article 2.2 of the SCM Agreement. China's
interpretation would render Article 2.2 redundant, contrary to the rules of treaty interpretation.
China's interpretation of Article 2.2 is also cont rary to Articles 8.1(b) and 8.2(b) of the SCM
Agreement. China's argument cannot be accepted.

18. Commerce properly determined in the LWS CVD investigation that New Century Industry
Park fits the ordinary meaning of a designated geogr aphical region. As demonstrated in the record,
the land-use rights subsidy at issue was used as an incentive to relocate producers to the industrial
park and was tied to the level of investment within the park. Therefore, the subsidy is unique and
only available to enterprises investing within the in dustrial park. The fact that Huantai County may
have granted other types of land-use rights to othe r leaseholders outside of the industrial park is
irrelevant. Article 2.2 does not require an inves tigating authority to dete rmine that a benefit was
unavailable to all enterprises outside of the desi gnated geographical region before finding a subsidy
geographically specific. China's interpretation could lead to circumvention of the subsidy disciplines,
which is both illogical and inconsistent with the object and purpose of the SCM Agreement.

19. Concurrent Application of CVD and AD Measures: We turn now to China's claim that a
Member is not permitted to avail itself of bot h anti-dumping and countervailing duty remedies in
respect of imports from China when the anti-dumping duty is calculated on the basis of a non-market
economy methodology.

20. In its Oral Statement, China said that it "do es not contend that the United States must 'choose'
between the use of countervailing duties and the use of an NME methodology", only that when
applying both, "it must do so in a manner that ta kes into account the fact that it offsets the same
alleged subsidies through the manner in which it calculates antidumping duties".
2 This is simply a
distinction without a difference. The logic of China's theory, under which the so-called double
remedy inheres in the concurrent application of NME anti-dumping duties and countervailing duties,
necessarily suggests that the United States must choose between the use of countervailing duties and
the use of an NME methodology.

21. That Members have long recognized the right to apply anti-dumping duties and
countervailing duties concurrently to imports that are both dumped and subsidized is reflected in
GATT Article VI:5, which provides the only limitation on that right, solely in the context of export
subsidies. This right is confirmed by the fact that the Tokyo Round Subsidies Code required an
express provision in order to impose a choice upon Code signatories between the anti-dumping and
countervailing duty remedy in respect of imports from non-market economies. When drafting the
SCM Agreement, however, Members chose not to maintain this limitation.

22. China's Accession Protocol was negotiated agai nst this backdrop of the well-established right
to apply both anti-dumping and countervailing duties concurrently. The Protocol affirms Members'
right to apply NME anti-dumping duties to imports from China, and their right to apply countervailing
duties to imports from China. Nowhere in the Protocol is there any limitation on the resort to either of
these remedies.

23. Without textual support for its view that Me mbers do not have this right, China resorts to
quasi-economic theories, unsubstantiated by any facts, arguing that an NME anti-dumping margin
captures domestic subsidies in their entirety, renderi ng any application of a countervailing duty a so-
called "double remedy". Whatever the merits of China's quasi-economic theories – with which we
have strong disagreements, as explained in the U.S. First Written Submission
3 – the text of the
covered agreements, which is the only legally bind ing evidence of Members' intent, does not reflect
those theories.

24. Even a cursory examination of China's three narrow claims reveals that China has failed to
establish any violation. China's claims under Articles 19.3 and 19.4 of the SCM Agreement –
provisions that limit the amount of countervailing duties that may be imposed – are premised on the
most fundamental of errors, namely, that a portion of the NME anti-dumping duty should be
understood to be a "countervailing duty" under the SCM Agreement. An NME anti-dumping duty,
however, is not imposed "for the purpose of offsetting any subsidy".
4 In addition, the alleged
discrimination underlying China's MFN claim stems from the fact that imports from China, unlike
those form market economies, are subject to an NME methodology. This differential treatment,
however, is necessitated by the nature of China's economy itself, as recognized in the explicit
authority given under China's Protocol to employ such a methodology.

25. We continue to wonder exactly what Chin a proposes that a Member do when faced with
dumped and subsidized imports from China. Is a Me mber expected to forego the countervailing duty
remedy, specifically provided for in China's Protocol , in favour of the exclusive application of an
anti-dumping duty calculated under the non-market economy methodology? Or is a Member expected

3 U.S. First Submission, paras. 445-462.
4 Footnote 36 of the SCM Agreement.

to forego the non-market economy methodology, also specifically provided for in China's Protocol, in
favour of the exclusive application of a countervailing duty? These questions go to the heart of what
rights, under China's argument, Members retain in respect of their trade remedy disciplines.

ANNEX D-3

ORAL STATEMENT OF THE UNITED STATES REGARDING
THE U.S. PRELIMINARY RULING REQUEST – FIRST MEETING

(7 July 2009)

1. We begin this morning with an examination of China's "as such" challenge. The purpose of
the WTO dispute settlement system, in the words of the DSU, is "to secure a positive solution to a
dispute". To this end, the DSU contemplates a series of events that generally must occur for a dispute
to be properly brought to a WTO panel. This in cludes a Member (i) ascertaining what measure taken
by another Member is impairing its benefits under the WTO agreements
1; (ii) consulting on that
measure with the responding Member, with a view to reaching an agreed solution; and (iii) absent
such a solution, then requesting a panel to examine the complaint on that measure.

2. Rather than follow the proper path leading to the establishment of a panel, China has decided
that it can chart its own course by neglecting the general requirement to consult on a measure before it
can become the subject of a panel request and presenti ng for the first time in its panel request an "as
such" challenge that identifies something that is not even a "measure" for purposes of WTO dispute
settlement.

A. ALLEGED "FAILURE ... TO PROVIDE LEGAL AUTHORITY" IS NOT A "MEASURE"

3. The DSU recognizes the importance of the "p rompt settlement of situations" in which a
Member considers that its benefits under the covered agreements "are being impaired by
measures taken by another Member".
2 China submits that the "failure of the United States to provide
legal authority" is a "measure" for purposes of WTO dispute settlement by virtue of being an
"omission".3 China characterizes the "omission" in this di spute as "[t]he failure of a Member to enact
legislation that would permit its investigating authority to avoid acting inconsistently with the covered
agreements".4

4. Not every "failure ... to enact legislation", how ever, is subject to challenge as an "omission".
Unlike a measure "taken" by a Member 5, an "omission" or "failure" presents a special case for
purposes of WTO dispute settlement. An "omission" in its ordinary meaning would not be a "measure
taken". Rather, an omission can only be considered a "measure taken" if there is an affirmative
obligation on a Member to take the action that the Member is accused of not having taken. In order
for an "omission" to be a "measure" subject to WTO dispute settlement proceedings, a complaining
party must connect such "omission" to the relevant legal obligation that requires the particular action
that the responding party is alleged to have failed to take.

5. In this light, China has not established that th e "failure ... to provide legal authority" is an
"omission" that constitutes a "measure". At no poi nt in its consultations request, panel request, or

1 See, e.g., DSU Article 3.3.
2 Article 3.3 of the DSU. (Emphasis added)
3 See Panel Request, WT/DS379/2, p. 3; China's Response to Request for Preliminary Rulings,
para. 20.
4 China's Response to Request for Preliminary Rulings, para. 20.
5 See e.g., DSU Article 3.3 and 4.2.

even its First Written Submission, has China point ed to any WTO rule requiring the enactment of
legislation to provide Commerce with particular au thority. Indeed, it cannot do so because no such
rule exists. None of the provisions cited by Chin a as the legal basis of its claims provide support for
the existence of the separate and distinct obliga tion that the United States was required to enact
particular legislation. In the absence of such provisions, the assertion that the United States did not
enact that legislation, even if true, does not cons titute an "omission" subject to challenge in WTO
dispute settlement proceedings.

B. LACK OF CONSULTATIONS ON THE ALLEGED "FAILURE ... TO PROVIDE LEGAL
AUTHORITY"

6. In the U.S. First Written Submission, the Un ited States noted that China had identified the
alleged "failure ... to provide le gal authority" as an entirely new measure in its panel request,
notwithstanding its failure to do so in its consulta tions request. China does not dispute this fact.
Rather, China seeks to excuse its actions on the gro und that the new "measure" in the panel request
"relate[s] to essentially the same dispute", seeking to find support in the Appellate Body report in
US – Continued Zeroing.
6

7. Unfortunately for China, that Appellate B ody report does not take China where it would like
to go. The Appellate Body noted several speci fic features of the additional measures in the US –
Continued Zeroing dispute that led it to conclude that the additional measures did not expand the
scope of the dispute. First, the Appellate Body re lied on the fact that the periodic reviews and sunset
reviews added by the EC in its panel request in th at dispute concerned the same antidumping duties at
issue in the proceedings identified in the consultati ons request. The Appellate Body further relied on
the fact that the proceedings listed in the panel request were "successive stages subsequent to the
issuance of the same anti-dumping duty orders" as the proceedings listed in the consultations request.
7
Furthermore, the Appellate Body stated that all of the measures in US – Continued Zeroing "derive
from the same underlying legal basis", namely th e anti-dumping duty order established following the
respective original investigation.8

8. In contrast, the measures listed in the consu ltations request and the new "measure" alleged by
China are distinct and have fundamentally different legal bases. The first is a group of affirmative
determinations by the Department of Commerce, an agency of the executive br anch, in furtherance of
its delegated regulatory authority. The second, however , is styled as an "omission", that is, an alleged
failure of the Congress to exercise its legislative functi on to enact a statute. The latter is clearly not a
"successive stage" of the former.

9. Moreover, the measures in US – Continued Zeroing all involved "as applied" challenges
based on the same legal claims. China suggests th at the fact that it is introducing an "as such"
challenge for the first time in its panel request is "not relevant".
9 This ignores the plain effect of such
a challenge on a dispute that, until that moment, wa s based purely on "as applied" claims. As the
United States observed in its First Written Submissi on, the Appellate Body has clearly recognized the
effect of "as such" challenges, noting that "the implications of such challenges are obviously more far-

6 China's Response to Request for Preliminary Rulings, para. 30 (quoting Appellate Body Report, US –
Continued Existence and Application of Zeroing Methodology ("US – Continued Zeroing "), WT/DS350/AB/R,
adopted 19 February 2009, para. 235).
7 US – Continued Zeroing, para. 228.
8 US – Continued Zeroing, para. 231.
9 China's Response to Request for Preliminary Rulings, para. 36.

reaching than 'as applied' claims".
10 Given these "far-reaching" implications – which, in all
likelihood, are precisely what motivated China to a dd its "as such" challenge in the panel request in
the first place – China's attempts to downplay this sudden addition lack credibility.

10. Finally, and perhaps most significantly, China in this dispute completely ignores the
importance of consultations. As discusse d in the U.S. First Written Submission
11, consultations serve
a critical role not only in providing the responding party with notice of the scope of the dispute, but
also in allowing for the exchange of views on areas of disagreemen t or misunderstanding with a view
to resolving the dispute, which is, after all, the objective of the dispute settlement system.

11. China has alleged that the "failure ... to provi de legal authority" was "evident on the face of
the determinations" it identified in the consultations request.
12 We disagree. As is evident from a
closer reading of these determinations, Commerc e did not make any broad pronouncement as to
whether it had legal authority to adjust anti-dumping duties to avoid any so-called double remedy.
Indeed, it is precisely because the Government of China and Chinese respondents made absolutely no
attempt to offer any evidence of how a double remedy might occur in any of the investigations at
issue that the Department has not yet been presen ted with a situation in which it must determine
whether such legal authority exists.

12. In any event, if China finds this "failure ... to provide legal authority" to be "evident on the
face of the determinations", it follows that the alle ged existence of this "measure" was as evident to
China at the time it read those determinations as China claims it should be to the Panel today. In other
words, China appears to acknowledge that it was we ll aware of such a "failure ... to provide legal
authority", and any consequent impairment of benef its, long before it requested consultations in this
dispute. China neglected to include this "measure " in its consultations request but appears to have
realized at some point that it wanted to include the "measure" within the scope of this dispute.

13. Under these circumstances, rather th an simply add the new measure to its panel request, the
correct response would have been for Chin a to have filed a new or supplemental consultations
request. Filing a new or supplemental consultations request is something with which China has first-
hand knowledge. The United States has previously filed supplemental consultations requests in
disputes with China.
13 In refusing to do so, notwithstanding these very concerns raised by the
United States during two DSB meetings 14, China appears to have concluded that it would not devote

10 U.S. First Submission, para. 85 (quoting Appellate Body Report, United States – Sunset Reviews of
Anti-Dumping Measures on Oil Country Tubular Goods from Argentina (" US – OCTG from Argentina "),
WT/DS268/AB/R, adopted 17 December 2004, para. 172). (Emphasis added)
11 U.S. First Submission, paras. 82-83.
12 China's Response to Request for Preliminary Rulings, footnote 28.
13 See China – Measures Affecting Trading Rights and Distribution Services for Certain Publications
and Audiovisual Entertainment Products , WT/DS363/1/Add.1; China – Certain Measures Granting Refunds,
Reductions or Exemptions from Taxes and Other Payments, WT/DS358/1/Add.1.
14 WT/DSB/M/261, p. 11 (minutes of 22 Decembe r 2008 DSB meeting); WT/DSB/M/263, p. 15
(minutes of 20 January 2009 DSB meeting).

time to consulting on the measure to seek a solution, but rather preferred to skip the consultations
phase. China, however, is not free to choose the course it deems most convenient – the DSU requires
Members to consult first before proceeding to a panel.

ANNEX D-4

CLOSING STATEMENT OF THE UNITED STATES –
FIRST MEETING

(8 July 2009)

1. The United States has only a few brief closing comments. This dispute, like all WTO
disputes, is about the meaning of the covered agreem ents and the content of the obligations that WTO
Members have accepted by joining the WTO. Ch ina seeks to alter the meaning of the covered
agreements by departing from the accepted rules of treaty interpretation and by inventing obligations
found nowhere in the text of any covered agreement. At the same time, China seeks to avoid its own
obligations to engage in consulta tions prior to initiating panel pro ceedings, and to have its exports
subjected to the rules-based trade remedy disciplines of the AD and SCM Agreements.

2. In short, having agreed to join the WTO and submit itself to the rules and obligations of the
covered agreements, subject to the terms and c onditions of its Accession Protocol, China now asks
this Panel to change the rules and obligations, and void the terms and conditions.

3. This Panel's charge, however, is to make an objective assessment of the matter before it and
to clarify the existing provisions of the covered agreements in accordance with customary rules of
interpretation of public international law. At the beginning and at the end of the panel's analysis is the
text of the covered agreements. The question before the Panel is: Is there an obligation in the text
that requires what China contends the United States is obligated to do? For each claim China has
made, the answer is no. China has failed to estab lish that the United States has acted inconsistently
with any provision of any covered agreement. In numerous cases, as we have explained, China has
failed on the most basic level to even identify the prov isions of the covered agr eements that it alleges
the United States has violated. In other cases, when it has cited to various provisions, China has not
explained how the United States has contravened them.

4. Indeed, rather than engage the Panel on the mo st relevant issues of substance with respect to
each of its claims, China has presented nothing but dist ractions in an attempt to mask its failure to
establish any WTO violations. A few examples from the past two days will suffice to make this point:

- Measure not consulted upon
: In response to the direct question posed yesterday by Ms. Brown,
China talked about everything other than why it refused to include in the consultations request
its "as such" challenge, despite knowing full well when it requested consultations that this was
an issue about which it had concerns. Nothing in the DSU authorizes such disregard for the
prerequisites to initiating a dispute.

- Ex post rationalization
: China has asserted several times th at the United States is introducing
ex post rationales in its arguments in this dispute. That is not the case. The United States
stands by the findings and determinations made by Commerce, all of which were based on
record evidence. Our discussion of those findings and determinations in re lation to the text of
the WTO agreements may involve different terminology but that does not change the
underlying rationales on which the determinati ons were based. Additionally, China has
introduced arguments based on WTO rules that were not raised during the administrative
proceedings below, and the United States must now respond to these arguments for the first
time.

- Subsidy Offsets: China exerts tremendous energy arguing about "zeroing", which we all know
to be a concept related to the calculation of a dumping margin, and citing to Appellate Body
decisions under the Anti-Dumping Agreement. China's claim in this dispute, of course, is about
countervailing duty investigations under the SCM Agreement.

- Concurrent application of AD and CVD measures : China insists on seeking a definitive
statement of Commerce's domestic legal authorit y, which we have already explained is not
possible. This is simply a transparent attempt to shift the focus away from China's failure to
substantiate its grand qua si-economic theories with any facts, either before Commerce or this
Panel. We would imagine that if Commerce had made a downward adjustment to export price
based solely on theories put forward by the U.S. industry, China would be here complaining of
such an improper adjustment.

5. These and the other attempts by China to distr act the Panel away from the real issues in this
dispute naturally reflect the fact that, when the focus is properly placed on those real issues, the
shortcomings of China's claims become readily a pparent. The text of the covered agreements, from
which China flees, is determinative of the issues in this dispute, and damning to China's case.

6. But, the United States recognizes that the Panel is only at the beginning of its work. We hope
that our First Written Submission and our presentation over these past two days have been helpful for
the Panel. We look forward to receiving the Pa nel's written questions and we will endeavour to
provide responses that bring clarity and understanding to the myriad complex issues in this dispute.
Ultimately, we seek to aid the Panel in arri ving at the correct conclusions, based on proper
interpretations of the covered agreements. We are c onfident that, if we are su ccessful in that effort,
the Panel will find in our favour and dismiss China's claims.

7. Once again, the United States thanks the Pane l members for their time and attention to this
matter.

ANNEX D-5

EXECUTIVE SUMMARY OF THE ORAL STATEMENT
OF CHINA – SECOND MEETING

(23 November 2009)

Introduction

1. There are many different issues before the Pane l at this stage of the proceedings. I will not
review all of those issues here, but instead make a number of key points with respect to financial
contribution, benefit, specificity, and the issue of double remedies.

Financial Contribution / Public Body

2. I do not intend to recount this morning all of the reasons why the United States' per se rule of
majority government ownership cannot be reconciled with a proper interpretation of the term "public
body" in Article 1.1 of the SCM Agreement. Instead, I would like to focus on one aspect of the
"ordinary meaning" analysis, then turn to the re levance of the ILC Draft Articles and the Appellate
Body's reliance on them in US – DRAMS. Finally, I will conclude with some observations concerning
the systemic implications of the U.S. interpretation.

3. With respect to ordinary meaning, the Un ited States myopically focuses on the English term
"public body", without confronting the meaning of the French term "organisme public" and the
Spanish term "organismo público". Yet all thr ee of these terms are presumed to have the same
meaning under Article 33(3) of the Vi enna Convention. The official OECD Economics Glossary
equates "organisme public" with the English te rm "government agency". The Spanish term
"organismo público" is expressly equated to the En glish term "government agency" in the Agreement
on Agriculture. Indeed, paragraph 97 of the Appellate Body's decision in Canada – Dairy establishes
unequivocally that the Spanish and French terms at issue in Article 1.1 of the SCM Agreement have
the same meaning as the English term "government agency".

4. A straightforward application of Article 33 re quires the Panel to interpret the English terms
"public body" and "government agency" as functional equivalents, just as they are treated in the
French and Spanish languages. A government agency, as the Appellate Body has said, is not defined
by its ownership structure, but rather by the functions it performs and the authority it possesses to
perform them. Under Article 33, the same must therefore be true of a public body.

5. The U.S. Second Submission fares no better when trying to convince the Panel that "neither
the [ILC] Draft Articles Nor the Appellate Body's Footnote Reference to Them in US – DRAMS Is
Relevant to this Dispute". The U.S. has argued th at the cases cited by China that refer to the Draft
Articles are distinguishable on the grounds that they did not involve the interpretation of the term
"public body". China, of course, cited these cases not for their interpretative guidance on the meaning
of the term "public body", but for the general proposition that prior panels and the Appellate Body
have considered the Draft Articles "relevant rules of international law" when interpreting the covered
agreements. The United States' unwillingness to cha llenge that basic proposition means that it is now
common ground that the Draft Articles may be rele vant to the interpretation of the covered
agreements, depending on the circumstances.

6. The question, then, is whether those circumstan ces include the interpretation of Article 1.1 of
the SCM Agreement. We know that the Appellate Body certainly thought so when it cited to the
Draft Articles in US – DRAMS, twice no less, in the section of its report entitled "The Meaning of the
Terms 'Entrusts' and 'Directs'" unde r "Article 1.1(a)(1)(iv) of the SC M Agreement". If it was lawful
for the Appellate Body to consider the Draft Artic les relevant to the interpretation of one phrase
within Article 1.1(a)(1) – and the United States is not prepared to claim otherwise – there is no
obstacle to this Panel considering the Draft Articl es relevant to the interpretation of another phrase
within the very same provision of the SCM Agreement.

7. I'd like to turn now to some of the sy stemic implications of the United States' per se test.
Recall that, under subparagraph (iv) of Article 1.1, "government ownership in and of itself , is not
sufficient to establish entrustment or direction". Yet under the United States' interpretation of "public
body", mere majority government ownership, by itself, would be sufficient to find the actions of
government-owned entities to be financial contributions in all cases . There simply is no textual or
contextual basis for the anomalous results that the U.S. interpretation would produce – that the same
per se government ownership test could be legally im permissible under one provision of Article 1.1,
but determinative under another. If the U.S. positi on is accepted, subparagraph (iv) henceforth will
become a dead letter for entities with majority government ownership – a category of entities to which
subparagraph (iv) was previously considered applicable by both panels and WTO Members alike.

Benefit / Article 14

8. The United States applies the same cavalier inte rpretative approach to the standards set forth
in the SCM Agreement in its effort to justify Co mmerce's benefit determinations with respect to
inputs, land, and loans under Article 14. The United States' defence of Commerce's adequate
remuneration determinations is predicated on a direct challenge to the Appellate Body's interpretation
of Article 14(d) in US – Softwood Lumber IV.

9. First, the U.S. asserts that "there is no obligation in Article 14 of the SCM Agreement for
Members to perform a 'price distortion' analysis be fore resorting to an out-of-country benchmark"
because price distortion exists, per se, whenever "the Department fi nds that the government provides
the majority or a substantial portion of the market for a good or service". But this per se test was
squarely rejected in US – Softwood Lumber IV . There, the Appellate Body stated "the fact that the
government is a significant supplier of goods does not, in itself , establish that all prices for the goods
are distorted" so as to justify rejection of private prices.

10. Second, with respect to land-use rights, Commerce not only relied upon its unlawful per se
rule in rejecting private prices in China, but also its conclusion that "property rights remain poorly
defined and weakly enforced" in China as a basis for doing so. The Appellate Body in US – Softwood
Lumber IV emphasized that the term "prevailing market conditions in the country of provision" does
not "refer to a 'pure' market" or "a market 'undistorted by government intervention'". The
Appellate Body identified a single situation where private prices might be rejected: when the
"government's role in providing the financial contribution is so predominant that it effectively
determines the price at which private suppliers sell the same or similar goods".

11. The United States asks you to jettison this reasoning as well, and allow investigating
authorities to decide for themselves, unbound by any objective standards, that private prices are
"unsuitable" because prevailing market conditi ons do not comport with their own subjective
characterization of how any given market should operate. This is precisely the kind of second-
guessing of the "purity" of market conditions in the country of provision that the Appellate Body
expressly concluded was inconsistent with Article 14(d).

12. Third, the United States has conceded that Commerce did not make a single adjustment to the
purported land "price" in Thailand that it used as a benchmark for measuring the adequacy of
remuneration for land-use rights in China despite the fact that in US – Softwood Lumber IV , the
Appellate Body made clear that investigating authorities had an obligation "to ensure" that " all
necessary adjustments are made to prices in one country in order to develop a benchmark that relates
or refers to, or is connected with, prevailing market conditions in another country".

13. With respect to loans, there is little more that China need say about the fictitious interest rate
benchmark that Commerce derived from its multi-c ountry regression model. The benefit standard
under Article 14(b) requires investigating authoriti es to measure the difference between the interest
rate on a government-provided loan, and the inter est rate on a "comparable commercial loan which
the firm could actually obtain on the market". The benchmark that Commerce concocted in these
cases does not meet these criteria, and the United States ' strained efforts to cl aim otherwise border on
the frivolous.

14. Ironically, while ignoring the Appellate Body's reasoning in Softwood Lumber IV in the very
instance where it applies – Article 14(d) – the Unit ed States simultaneously seeks to graft it onto
Article 14(b), where it has no application whatsoever. As China has demonstrated, the predicate that
the Appellate Body identified for rejecting privat e prices for goods as "distorted" simply does not
apply in the case of interest rates.

15. At bottom, the United States finds it too inco nvenient to comply with the requirements of
Article 14 as written, and would prefer that the Pane l do it the favour of sweeping these requirements
away. The Panel should reject this attempt to rewrite Article 14.

Specificity

16. The parties' respective positions on the issue of specificity are now clearly defined. In China's
view, it comes down to this: either the words of Article 2 matter, or they don't.

17. Article 2 requires the investigating authority to determine that a "subsidy" is specific. The
term "subsidy" is defined in Article 1 as a fina ncial contribution that confers a benefit. The
United States, however, believes that it is sufficien t for an investigating authority to find that a
financial contribution is specific, without considering whether the subsidy is specific. The U.S.
position is based entirely on its belief that it would be "cumbersome" for investigating authorities to
have to determine that a "subsidy" is specific, and that this would make it "more difficult to … impose
countervailing duties". Needless to say, there is no basis in the Vienna Convention for this results-
oriented approach to treaty interpretation.

18. For this reason alone, the Panel must reject the U.S. defence of Commerce's specificity
determinations concerning the alleged land-use rights and "policy lending" subsidies. With respect to
land-use rights in the LWS investigation, it is undi sputed that Commerce made no determination that
the alleged provision of land-use rights for less th an adequate remuneration – the "subsidy" that
Commerce identified – was regionally specific under Ar ticle 2.2. Moreover, the U.S. defence of
Commerce's specificity determination is based entirely on the notion that Commerce was free to
disregard the undisputed evidence that Huantai County provided the same "subsidy" to companies
located outside of the New Century Industrial Park.

19. As for "policy lending" in the OTR investiga tion, the United States has effectively conceded
that borrowers obtained loans from SOCBs at "prefe rential, non-commercial" ra tes of interest – the
"subsidy" that Commerce identified under its policy lending programme – without regard to whether
the borrower was a beneficiary of that programme. Ag ain, the U.S. argues that it is irrelevant that
borrowers in other industries obtained the same alle ged subsidy. But it is not irrelevant. It is

fundamental to whether Commerce clearly substantia ted, on the basis of posit ive evidence, that the
alleged subsidy was "explicitly limited" to "certain enterprises".

20. Finally, China considers that there is little left to be said about the U.S. "access to credit"
theory. Even setting aside its ex post nature, the U.S. argument is based entirely on the notion that
the 539 "encouraged" industries in 26 different i ndustry sectors constitute "certain enterprises" within
the meaning of Article 2. This argument is implausible on its face.

Double Remedy

21. Much has already been said and written on the topic of double remedies, but I want to focus
this morning on two key areas: (1) the recent decision of the U.S. Court of International Trade (CIT)
in GPX International Tire v. United States, which held that Commerce is obligated to avoid offsetting
the same subsidies twice; and (2 ) the fundamental issue in this di spute – whether the U.S. has an
obligation under the covered agreements to avoid these double remedies.

22. On 18 September, the Chief Judge of the CIT issued a decision in the GPX case holding that
Commerce is legally obligated to avoid the impos ition of double remedies when it uses its NME
methodology in conjunction with countervailing duties. The CIT gave Commerce until 17 December
to issue a new determination in which it "adopt[s] additional policies and procedures" to avoid double
remedies. In the GPX litigation, the U.S. advanced all of the same arguments that it has made in these
proceedings, and the CIT considered and rejected all of them.

23. The CIT recognized, correctly, that Comme rce addresses subsidization of NME producers
"through the NME AD methodology", that it is fundamentally incompatible with the purpose of the
countervailing duty laws to offset the sa me subsidies twice, and that it is Commerce's obligation to
investigate and avoid these double remedies. With th e CIT's decision, all three branches of the U.S.
Government have now recognized what Commerce itself recognized at the time of CFS Paper – that
"a possibility of double counting results from simu ltaneous antidumping and CVD investigations" of
imports from NME countries.

24. Which brings us to the matter at hand: whether the United States has the same obligation
under the covered agreements that it has under U.S. la w – namely, to ensure that it does not offset the
same subsidies twice. The U.S. asserts, unequivo cally, that the "WTO rules do not contemplate the
existence of, or an adjustment for double remedies in the context of domestic subsidies". Under the
U.S. position, an investigating authority can knowingly
 and deliberately offset the same subsidies
twice, as long as they aren't export subsidies. Clearly, this is wrong.

25. As China has explained, the obligation of Members to avoid offsetting the same subsidies
twice is evident in the key operative provisions of Pa rt V of the SCM Agreement. It is evident in
Article 19.4, which prohibits Members from impos ing countervailing duties in excess of the amount
of the total subsidy accruing to the imported product. It is evident in Article 19.3, which requires
Members to impose countervailing duties in the "appropr iate amounts". It is evident in Article 10 and
in the very definition of a "countervailing duty".

26. The extreme U.S. position on the issue of dou ble remedies is based on nothing less than a
complete disregard for the object and purpose of the SCM Agreement. The Appellate Body has
repeatedly observed that the object and purpose of the SCM Agreement is "to strengthen and improve
GATT disciplines relating to the use of both subsidi es and countervailing measures". It is hard to
conceive of anything more antithetical to the object and purpose of the SCM Agreement than to offset
the same subsidies twice. Part V of the SCM Agreement is meant to impose disciplines
 on the use of
countervailing measures. For a Member to obtain twice the remedy to which it is entitled is no
discipline at all. If this is true in the case of prohibited export subsidies, which are considered the

most trade-distorting subsidies, then surely it must be true in the case of subsidies that are merely
actionable.

27. For these reasons, the last bastion of the U. S. defence – that it has no legal obligation to
address a problem that Commerce, the U.S. Congress, and the U.S. courts have all acknowledged – is
entirely untenable. Commerce must ensure that it does not offset the same subsidies twice.

28. I'd like to address two final points on the issue of double remedies, both of which have been
elucidated by the CIT's decision in GPX. The first is the U.S. contention that China is trying to force
the United States to "choose" between its use of an NME methodology in AD proceedings and its
application of countervailing duties to imports from China.

29. Let me be perfectly clear on this point: China has never maintained that the United States is
prohibited from applying its NME anti-dumping me thodology concurrently with the imposition of
countervailing duties on the same products. Of cour se, the United States is free to return to its
previous policy of applying countervailing duties onl y to industries that it designates as market-
oriented industries, but the U.S. also has the opti on to apply the two remedies simultaneously to the
same products if it ensures that its methodologies do not offset the same subsidies twice. This is
exactly
 what the CIT held in GPX: Commerce may choose either to "forego the imposition of CVDs"
on products to which it applies its NME methodology, or " adopt additional policies and procedures
to adapt its NME AD and CVD methodologies to account for the imposition of CVD remedies on
merchandise from the PRC". This is not a choice between applying the NME methodology or
foregoing its use altogether.

30. Finally, we come to the question of whethe r Commerce has authority u nder U.S. law to take
the necessary steps to avoid double remedies. The CIT expressly withheld judgment on this issue, but
on 17 December Commerce will finally be forced to take a definitive position on whether it has
authority under U.S. law to avoid the imposition of double remedies in NME investigations and, if so,
what the nature of that authority is. In light of this impending deadline, the United States should
simply identify to the Panel the legal authority, if any, that Commerce has to avoid double remedies in
NME investigations. If the United States is able to identify any such authority , it can then explain to
the Panel why Commerce did not apply that authority in the investigations at issue in this dispute.

31. That concludes China's opening statement. We look forward to answering the Panel's
questions over the next two days.

ANNEX D-6

EXECUTIVE SUMMARY OF THE OPENING STATEMENT
OF THE UNITED STATES – SECOND MEETING

(23 November 2009)

1. China has largely failed to articulate how the U.S. actions it challenges are inconsistent with
any express obligations contained in the covere d agreements. China has not provided a proper
interpretive analysis of the provisions it has refe renced. China's arguments do not provide a basis on
which the Panel can sustain China's allegations that the United States has acted inconsistently with its
WTO obligations, and China's claims must be rejected.

2. Financial Contribution: An analysis of the ordinary meaning of the term "any public body",
in its context and in light of the object and purpose of the SCM Agreement, demonstrates that
Commerce's financial contribution de terminations were consistent with the SCM Agreement. The
ordinary meaning of the term "public" includes th e notion of belonging to the government or the
nation. In addition, the term "public body" is m odified by the term "any". Thus, there might be
different kinds of public bodies. To interpret the term " public body" to refer to entities that "possess
characteristics similar to those that define a govern ment", as China does, would be to reduce the term
"public body" to redundancy or inutility.

3. The use of the term "government" in place of "a government or any public body" in the SCM
Agreement is merely a shorthand drafting technique used for convenience. China erroneously finds
significance in the use of this technique and attempts to impart a meaning that is simply not supported
by the text.

4. Contrary to China's argument an entrus tment or direction analysis involves the actions of a
government or public body and the actions of a private body or bodies. A public body analysis, on
the other hand, involves an analysis of the nature of the entity or entities at issue.

5. The Korea – Commercial Vessels panel rejected the arguments China makes here with respect
to the ILC Draft Articles and the GATS Annex on Fina ncial Services. As that panel reasoned, "[i]n
all cases, ... public body status can be determined on the basis of government (or other public body)
control".
1 This Panel should follow a similar approach.

6. China's arguments related to the Spanish a nd French texts of the Agreement on Agriculture
are unavailing. The issue here is the interpretati on of the SCM Agreement. There is no discrepancy
between the English, Spanish, and French texts of the SCM Agreement, and there is no need to look
to the Agreement on Agriculture to determine the m eaning of the term "public body". Additionally,
the text of the Agriculture Agreement does not suppor t China's arguments as the relevant text in the
Agriculture Agreement is different than in the SCM Agreement.

7. An interpretation of Article 1 of the SCM Agreement that treats the government-owned entity
as a public body ensures that governments will not be ab le to hide behind their ownership interests to
escape the disciplines of the SCM Agreement, which is consistent with the object and purpose of the
SCM Agreement.

1 Korea – Commercial Vessels, para. 7.55.

8. Whether or not China now concedes that it made a commitment in paragraph 172 of the
Working Party Report that allows Members to tr eat China's state-owned enterprises and banks as
government actors for purposes of Article 1.1(a) of the SCM Agreement, at the very least, China
indicated in that paragraph its own recognition that its SOEs and SOCBs are "public bodies".

9. China incorrectly argues that the ILC Draft Artic les are relevant rules of international law that
should be used to interpret the term "public body". The Draft Articles are not relevant and not
applicable within the meaning of Article 31(3)(c ) of the Vienna Convention, and the Panel is not
permitted to take them into account in interpreting the relevant SCM Agreement text. The scope of
the Draft Articles is limited to secondary rules of international law and explicitly excludes primary
rules of international law. Moreover, the detailed di stinctions in those articles are not "applicable in
the relations between the parties", as there is no c onsensus that the ILC provisions have attained the
status of customary international law.

10. With respect to sales through trading co mpanies, Commerce properly applied the SCM
Agreement. No entrustment or direction analysis was required, and China has not substantiated its
claim that Commerce's analysis was improper.

11. Benchmarks: Commerce based its determinations to use benchmarks other than prices or
interest rates available in China on findings that the predominant role of the Chinese government in
various markets distorted prices and interest rates in China. Commerce made each benchmark
determination on a case-by-case basis, based on th e facts of each investigation. Commerce's
determinations were cons istent with Article 14 of the SCM Agreement, as interpreted by the
Appellate Body in US – Softwood Lumber CVD Final.

12. Contrary to China's argument, neither the text of Article 14 nor the Appellate Body report in
US – Softwood Lumber CVD Final requires a separate price distortion analysis before a Member may
rely upon an out-of-country benchmark. The Appella te Body's analysis reflects the economic theory
commonly referred to as the "Dominant Firm Model" . The Appellate Body concluded that where an
investigating authority has determined that a government plays such a predominant role, the
investigating authority does not act inconsistently with Article 14(d) of the SCM Agreement by using
an out-of-country benchmark.

13. In the investigations China challenges, Co mmerce applied the Appella te Body's reasoning in
US – Softwood Lumber CVD Final to the facts before it. In the case of the markets for hot-rolled steel
and BOPP, Commerce determined that, based on record evidence, "pri ces stemming from private
transactions within China cannot give rise to a price that is sufficiently free from the effects of the
GOC's distortions, and therefore cannot be cons idered to meet the statutory and regulatory
requirement for the use of market-determined pri ces to measure the adequacy of remuneration".
Likewise, for lending and for land-use rights, based on the evidence on the administrative record,
Commerce determined that, due to the government's predominant role, it was necessary to use out-of-
country benchmarks to measure the benefit.

14. In the markets for lending and land-use rights, in addition to the market distortion inherent in
the fact that the government was the predominant supplier of loans and land, Commerce also found
evidence of direct government intervention in th ose markets that would further impact prices,
rendering those prices inappropriate for determining th e amount of the benefit. Contrary to China's
argument, the Appellate Body in US – Softwood Lumber CVD Final did not address and,
consequently, did not exclude the possibility that ot her types of government intervention would also
distort the market and render prices unreliable.

15. Providing Credits in Benefit Calculations: China has not shown that Commerce was
required to provide a credit in the subsidy calculation for non-subsidized transactions. China has

entirely changed its argument and now asks this Pane l to find that the use of the term "good" in
Article 14(d) establishes several obligations on WTO Members and limits the application of those
obligations to situations under Article 14(d). China's argument is not credible.

16. The context of the SCM Agreement supports analyzing the benefit to the recipient on a
disaggregated basis. Article 1 of the SCM Ag reement defines a subsid y in the singular form,
supporting the conclusion that investigating authorities have the option of analyzing each subsidy on a
transaction by transaction basis. When a Member analyzes multiple subsidies, there is no obligation
to provide a credit in that analysis for non-subsidized transactions.

17. The Appellate Body's zeroi ng reports examine the calculati on of margins of dumping under
the AD Agreement and certain provisions of the GATT 1994 that relate solely to AD proceedings, and
there is simply no analytical connection betw een the calculation of margins of dumping and the
calculation of a subsidy benefit that would justif y extending the Appellate Body's reasoning in the
zeroing reports to this dispute.

18. Because China has failed to establish any viol ation of Article 14(d), it is not necessary for the
Panel to address China's other consequential cl aims under Article VI:3 of the GATT 1994, and
Articles 10, 19.1, 19.4, and 32.1 of the SCM Agreement.

19. Specificity: Commerce's specificity determinations for the policy lending subsidy and land-
use rights subsidy were substantiated by positiv e evidence and otherwise in accordance with the
covered agreements. Contrary to China's arguments, neither Article 2.1(a) nor Article 2.2 requires an
investigating authority to revisit the benefit determination to determine specificity.

20. Article 2.1(a) of the SCM Agreement requires an investigating authority to determine whether
legislation explicitly limits access to the subsidy to certain enterprises. Here, national, provincial, and
municipal legislation and policy documents, viewed as a whole, explicitly limited access to the policy
lending subsidy to a group of industries, including the tire industry.

21. China's interpretation of Article 2.2 of the SCM Agreement would require that, in order for a
subsidy to be specific under Article 2.2, it would also have to be specific under Article 2.1, that is, it
would have to be limited to certain enterprises. China's interpretation renders Article 2.2 redundant
with Article 2.1, contrary to customary rules of treaty interpretation.

22. Concurrent Application of CVD and AD Measures: The import of China's argument
before this panel, although China denies it, is that Members may not apply CVDs and NME AD
duties concurrently to the same merchandise, under any circumstances, because doing so
automatically results in a so-called double remedy. Indeed, China is unable to identify any concrete
circumstances, under China's theory , when the concurrent application of AD duties and CVDs would
be permitted. In this respect, Chin a's reliance on the court's opinion in GPX v. United States is
unavailing.

23. The covered agreements fully reflect Members' consideration of what limits, if any, should be
placed on concurrent application of AD duties a nd CVDs. GATT Contracting Parties identified one
instance in which the AD and CVD regimes intersect – in the limited circumstance of export
subsidization set out in GATT Article VI:5. Furthermore, China's Protocol explicitly reflects the right
of Members to apply the NME AD methodology as well as the right to apply CVDs, with no
conditions placed on concurrent app lication. Finally, China cannot avoid the significance of the fact
that, during the Uruguay Round, Members decided not to carry Article 15 of the Tokyo Round
Subsidies Code forward into the SCM Agreement. The agreements, therefore, are not silent, or, in
other words, contain no gap that can be filled by r eading a prohibition on concurrent application into
WTO provisions addressing other specific issues.

24. Turning to China's claims under Article 19.3 and 19.4 of the SCM Agreement, the
United States notes, first, that both provis ions impose obligations in respect of the levying of CVDs,
yet it is undisputed that the CVDs in the investiga tions at issue were not levied at the time of panel
establishment. In respect of Article 19.3, China does not allege, much less demonstrate, that the
CVDs levied exceed the subsidization rate calcula ted for each "source[] found to be subsidized and
causing injury". Similarly, in respect of Article 19.4, China does not allege, much less demonstrate,
that the CVDs levied exceed the amounts of the s ubsidies actually found by Commerce. Therefore,
China has not established any inconsistency with Article 19.3 or 19.4.

25. Turning to China's claims under Article 12.1 and 12.8 of the SCM Agreement, the
United States notes that, even if a double remedy could be shown to exist (a premise the United States
strongly contests), Commerce's actions were not inconsis tent with either provision. First, contrary to
China's suggestion, at no point h as Commerce ever agreed that a double remedy would likely arise
from the concurrent application of CVDs and NME AD duties. Rather, Commerce signalled that it
would keep an open mind to allow parties with a conc rete interest to present their views supported by
facts from particular investigations. Commerce itself saw no basis ex ante to believe that double
remedies would be a problem. Under these circumstan ces, it was for interested parties who sought an
adjustment from the normal application of CVDs and AD duties to explain, with supporting evidence,
why their proposed course of action was appropriate. Neither Chinese respondents nor the
Government of China did so.

26. China has failed to demonstrate the existe nce of a "double remedy", much less where that
"double remedy" is found in Commerce's separate calcu lations of dumping margins and subsidy rates.
First, China advances its argument as to the existence of a double remedy solely by reference to the
normal value obtained under the NME methodology and its al leged relationship to subsidization.
However, examination of only one of the elements of the AD remedy without the other (i.e., export
price) does not inform the inquiry as to the existence of a double remedy.

27. Second, China's theory – premised on the extraordinary proposition that an NME anti-
dumping methodology, by its very nature, offsets subsidization – reflects an understanding of the
NME methodology that has no basis in, and is contradi cted by, the text of the covered agreements and
the operation of the NME methodology under U.S. law. China has not cited, and indeed cannot cite,
any provision of the GATT 1994, Anti-Dumping Agreement or SCM Agreement that would support
its proposition. Furthermore, accepting the view that the NME methodology is designed to offset
subsidization would render any AD duty calcula ted under that methodology a CVD within the
meaning of footnote 36 to the SCM Agreement. As a result, that AD duty, as required by Article 10
of the SCM Agreement, could "only be imposed pursuant to [an] investigation[] initiated and
conducted in accordance with [the SCM Agreement]". In the absence of such an investigation, any
NME AD duty, under China's theory, would appear to be inconsistent with Article 10 of the SCM
Agreement.

28. China's view that the NME methodology counteracts subsidization also finds no support in
the text of the U.S. law governing the NME methodology. U.S. law identifies an exporting country as
an "NME" based on an examination of multiple statutory factors, none of which references
subsidization. U.S. legislative history also confirms the exclusive focus of the NME methodology on
making a price comparison for the purpose of calculating the dumping margin. There is thus no basis
to contend, as China does, that subsidization is one of the "'distortions' in the market that the NME
construct was designed to address" when it is not ev en a factor examined when considering whether a
country constitutes an NME.

29. With respect to China's challenge based on a so-called "absence of legal authority", the
United States recalls that Commerce has not been presented with the concrete factual circumstances in
which it was required to make a determination as to the scope of its legal authority. This follows

directly from the failure of Chinese respondents and the Government of China to adduce any evidence
relating to double remedy in the investigations at issue. China's statement this morning about the
relevance of the GPX opinion to the issue of Commerce' s legal authority reflects China's
misunderstanding of the implications under U.S. law of that decision.

30. Finally, the United States submits that the GPX opinion should have no bearing on the Panel's
consideration of this dispute for four reasons: (1) the GPX opinion is not instructive for this dispute
because it is an opinion of a U.S. court interpreti ng U.S. law, whereas this dispute concerns the
interpretation of the WTO agreements; (2) the GPX opinion is not the final judgment of the
U.S. courts; (3) the GPX opinion is in error; and (4) even on its own terms, the decision does not
support the position taken by China here – that , where a WTO Member is applying AD duties
determined under a NME methodology to Chinese g oods, it may not apply any CVDs to those same
imports.

31. Requests for Information Following the Original Questionnaire: With respect to China's
claim under Article 12.1.1 of the SCM Agreement, the United States notes that China now appears to
agree with the proper interpretation of that pr ovision as set out by the United States in these
proceedings. In the context of an ongoing CVD i nvestigation on Grain-Oriented Electrical Steel
(GOES) from the United States, China has issued one new subsidy allegati on questionnaire and five
supplemental questionnaires for the U.S. Government. For none of these six questionnaires did China
provide an initial period of 30 days to respond, as it would have done if acting consistently with the
understanding of Article 12.1.1 it urges upon this Panel.

ANNEX D-7

CLOSING STATEMENT OF CHINA –
SECOND MEETING

(12 November 2009)

 On behalf of the delegation of China, I would li ke to thank you for your service on this Panel.
I would also like to thank the Secretariat for its hard work assisting in these proceedings.

 All of the issues that have been raised by the parties during these proceedings deserve your
careful consideration. This dispute concerns th e first group of anti-dumping and countervailing duty
investigations conducted by the United States on impo rts from China, but there have been dozens of
subsequent anti-dumping and count ervailing duty investigations on Chinese imports following those
at issue here. The same issues th at China has identified with respect to the challenged investigations
have arisen in many of the subsequent investigations as well. There is a large amount of trade at stake
– I understand more than US$6 billion. The resolution of these issues is of great importance to China.

 What is equally, or perhaps more significant than the trade interests at stake in this dispute, is
the impact that the Panel's findings will have on the subsidy disciplines set forth in the
SCM Agreement. The aim of the dispute settlement system is to ensure a positive resolution of
disputes between Members. China believes it has de monstrated that the measures at issue in this
dispute are inconsistent in many respects with the SCM Agreement and othe r covered agreements.
China asks the Panel to examine the issues in this dispute very caref ully to ensure that the rules
negotiated by the Members are upheld. The prope r interpretation of these rules is essential to
upholding the security and predictability of the mu ltilateral trading system. In the present economic
environment, it is more important than ever to ensure that the disciplines on trade remedies are
correctly interpreted and applied by Members.

 In closing, China would like to thank the Panel again for its hard work during these
proceedings, and China looks forward to responding to the Panel's written questions.