Document: WT/DS399/R Page F-1 ANNEX F ORAL STATEMENTS OF THE PARTIES AT THE SECOND SUBSTANTIVE MEETING OF THE PANEL OR EXECUTIVE SUMMARIES THEREOF Contents Page
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 F

ORAL STATEMENTS OF THE PARTIES AT THE SECOND
SUBSTANTIVE MEETING OF THE PANEL OR
EXECUTIVE SUMMARIES THEREOF

Contents Page
Annex F-1 Executive Summary of the Oral Statement of China at the
Second Meeting of the Panel
F-2
Annex F-2 Executive Summary of the Oral Statement of the United States at
the Second Meeting of the Panel
F-11
Annex F-3 Closing Statement of China at the Second Meeting of the Panel F-20

ANNEX F-1

EXECUTIVE SUMMARY OF THE ORAL STATEMENT OF
CHINA AT THE SECOND MEETING OF THE PANEL

I. INTRODUCTION AND INTERPRETATIVE ISSUES

1. This dispute is not an abstract exercise. It has real-world implications, as the imposition of
tariffs continues to block market ac cess and impose costs. This is not due to any unfair trade, but
rather to the application of a country-specific safeguard measure that has no grounding in the Protocol
of Accession or the facts. The facts at issue – what the USITC majority actually stated in its report, as
opposed to arguments raised by the United States – are important, and a proper resolution cannot be
undertaken without examining them thoroughly. A Panel must "review whether the competent
authorities' explanation fully addresses the nature, and especially, the complexities of the data and
responds to other plausible interpretations of the data."

2. The United States tries to hide the shortc omings of the USITC determination behind
arguments for broad deference. It argues that investigating authorities are free to make any
determination – and apply any st andards – that they wish so long as the determination passes only
minimal scrutiny. In attempting to isolate the Prot ocol and limit the Panel's review, it is unclear what
standards, if any, the United States believes shoul d be applied. The United States is adamant that
Article 16 "contains different, and in so me cases fewer, prescriptions" than the Agreement on
Safeguards, yet it fails to articulate what these alleged lower standards are.

3. The United States accuses China of confusing the standard of review with substantive
obligations. China is arguing for the same standard of review that applies in all WTO cases – the
careful and searching "objective assessment." A review must take shape based on the underlying
obligations at hand. If the underlying obligations make it explicit that the panel must consider
whether an increase is "rapid" or a causal relationship is "significant," then the standard of review –
and the review itself – must allow for an "objective assessment" of these key concepts.

4. The United States seems finally to acknowledge th at Article 16 must be read in the context of
the Agreement on Safeguards . The United States has downplayed this context because the relevant
WTO jurisprudence on analogous issu es reveals the inadequacies of th e USITC determination. This
context provides important guidance. Both text ual additions and deletio ns have interpretative
relevance, but on balance these differences support the interpretation that Article 16 imposes more
demanding standards – with respect to increasing imports and causal link – than those under the
Agreement on Safeguards . The United States argues that it did not have to undertake any of the
analyses that it has stated it in fact did undertake. But the United States has repeatedly affirmed that
the USITC engaged in analyses of conditions of co mpetition, coincidence, and alternative causes –
thus it must apply that methodology adequately.

II. INCREASING IMPORTS

A. THE SPECIFIC STANDARD FOR "INCREASING RAPIDLY"

5. Under Article 16, investigating authorities mu st find both that imports from China "are being
imported … in such increased quantities" and that they are "increasing rapidly." A finding of a simple
increase in imports over the period of investigation, therefore, is not enough. The United States,
however, has relied heavily on such a finding. The US confusion on this issue can be seen in its

statement that: "The issue for this Panel is whet her the ITC reasonably found that the data showed
that the subject imports increased rapidly over the period, especially at the end."

6. This formulation – stressing a past-tense
 increase that has taken place over the entire period –
is at odds with the standard in Article 16 for findi ng that imports have been "increasing rapidly." The
use of "increasing " instead of "increased " creates the need to find recent and ongoing increases, not
past increases. Both Article 16.1 and 16.4 use the present continuous tense formulation. This specific
language requires investigating authorities to focu s on the most recent period and determine properly
that imports from China are still "increasing rapidly" at the end of it. The Panel must give meaning to
the term "rapidly." Because "rapidly " has been used in the text of Article 16, but not in other trade
remedies addressing the issue of increasing imports, it must be given meaning. The use of this
distinctive term modifies the basic idea of increasing imports under other trade remedies. It demands
something more.

7. Quantitatively, the ordinary meaning of "rap idly" suggests a surge in imports, intrinsically
linked to the rate at which imports are increasing. "Rapidly" requires for imports to be "increasing
rapidly
," they must be distinguished from imports that are merely "increasing." US attempts to limit
"rapidly" to a temporal sense ignore the ordinary mean ing of the term and are internally inconsistent.
The US attempt to equate the lack of an express qua ntitative standard for "rapidly" in Article 16 to the
lack of any standard whatsoever is impermissible and reads "rapidly" out of the text.

8. Qualitatively, China suggests that three elem ents should be considered. At a minimum,
investigating authorities should: focus on the most recent full year of data and any available interim
data; consider and give the most weight to the mo st recent import trends; and analyze the most recent
year in more detail when initial analyses show that imports are slowing. In the absence of an explicit
quantitative standard, these three qualitative factor s allow the Panel to evaluate the USITC
determination and give meaning to the term "rapidly."

9. The fact that Article 16 requires a showing of "material injury" and not "serious injury" does
not lower the standard for finding that imports ar e "increasingly rapidly." The "increasing rapidly"
standard is a distinct requirement. As the first requirement in Article 16, "increasing rapidly" is the
threshold consideration. Only after a proper finding of "increasing rapidly" may an authority then
begin properly to determine whether such imports were a "significant cause" of "material injury."
Contrary to the US assertion, the words "so as to be" do not change this analytic process. The US
attempt to conflate the two discrete issues is improper.

B. THE USITC'S ANALYSIS OF "INCREASING RAPIDLY"

10. Investigating authorities should consider at least three qualitative factors when assessing
whether imports are increasing rapidly. The USIT C, however, did not. The failure to use these
certain analytic approaches does not necessarily cr eate WTO-inconsistency. There may be other
approaches, but the USITC neither developed nor applied a methodology that would explain how
imports from China were "increasing" (not just having "increased") and how those "increasing"
imports were still doing so "rapidly." These analy tic approaches, when applied, demonstrate that
imports were not still "increasingly ra pidly," thus they call into question the approach of the USITC.
The USITC should have explained why, even though the trends in 2008 showed substantial declines
from the earlier trends, the USITC still found impor ts from China to be "increasingly rapidly." The
USITC did not do so. Essentially, the USITC simply applied its traditional approach without any
effort to consider the requirements of this different
 standard or to interpret the meaning of "rapidly."

11. The USITC relied too heavily on a finding of a simple increase in imports over the entire
investigation via its typical "end-point-to-end-point" analysis. Such an approach, however, has been
rejected by the Appellate Body and is inconsistent with the need under Article 16 to focus on the most
recent period of time when determining whether imports are in fact still "increasing rapidly." The fact

that the USITC may not have relied exclusively on such an approach is irrelevant. The considerable
weight the USITC attached to the overall increase skewed its analysis.

12. US efforts to limit the Appellate Body's guidance on this issue are unpersuasive. The
United States cites US – Lamb , which deals with future threat of injury and states that in such cases
there is a need to consider injury factors, not
 increasing imports, over a longer period of time. This is
inapplicable to an analysis of whether imports are "increasingly rapidly." Cases involving threat of
injury require predictions of future injury, thus the most recent period must be put in context with the
rest of the period to show why, although there is no present injury, there is still likely to be future
injury. In contrast, cases of current injury can be evaluated based on existing facts. Here, the key is
the most recent period and whether or not imports are still "increasing rapidly" at the end of it. The
earlier period can be context for evaluating whether imports are in fact still "increasing rapidly," but
past increases cannot lead to a conclusion that imports are still "increasing rapidly."

13. The more recent period in the context of the overall period highlights the fact that any
continuing increase dropped dramatically. At most , the USITC has shown that imports from China
were still "increasing" in 2008. That is not enough. The USITC has not
 shown, and cannot show, that
imports from China were "increasingly rapidly " in 2008 and beyond. The USITC's finding that
increases had not abated in 2008 ignores recent trends and misinterprets the data. The USITC
sidestepped the data concerning 2008 in favour of analyzing 2007 and 2008 as a single unit. This was
improper. That the United States continues do so re veals its efforts to mask the most recent period
and its recognition that 2008 considered alone ca nnot support a finding that imports from China were
still "increasingly rapidly" as required by Article 16.

14. Likewise, the United States wrongly suggests that the increase in 2008 was "rapid" because
China "conceded the Chinese imports were growing rapidly" in 2007, from which 2008 saw an 11 per
cent increase. The United States dist orts China's argument. China acknowledged that the increase in
2007 might possibly be interpreted as "increasing rapidly" in the past because it was a 50 per cent

increase over the prior year. In contrast, the increase in 2007 highlights the very different situation in
2008, which saw just an 11 per cent increase . This stark difference underscores that the modest
increase in 2008 was simply not sufficient.

15. The US claim that a comparison of changes in "successive quarters" is inappropriate is
incorrect. If an authority is to determine properly that imports are "increasing rapidly," it must do so
looking at the data over the entire period, with emphasis on the most recent period. If imports are
declining from quarter-to-quarter in the most recent year, as they were here, such declines counsel
against a finding of "increasing rapidly." Even when one compares quarterly imports as posited by
the United States, imports from China are still not "increasing rapidly." The United States claims
successive comparison increases of 23 per cent to 14 pe r cent to 9 per cent to zero show that imports
are "increasing rapidly." The pattern is not one of rapidly
 increasing imports, but rather one of
slowing and abating imports. Because the increases abated, the USITC could not find that imports
were "increasing rapidly."

16. The USITC should have obtained and analyzed data for the first quarter of 2009. The US
claims that such a collection would have been too burdensome and that the USITC makes its
decisions on a case-by-case basis are unpersuasive.

III. CAUSATION – AS SUCH

17. The US statute wrongly redefines "significant cause," stating that a "significant cause" can be
a cause that merely "contributes significantly" and "need not be greater than or equal to any other
cause." Contrary to the US assertion, China's clai m on this issue is not "premised on the mistaken
notion" that imports must be the "sole" cause of injury. China has never made such an argument.

18. When WTO members redefine legal standards, they bear the responsibility of ensuring the
standards remain WTO-consistent. The United States argues that it defined "significant cause" so as
to somehow provide "guidance" but the redefinition does not provide guidance. Rather, the definition
impermissibly redefines and lowers the standard for "significant cause." "Cause" does not mean
"contributes," and "significant" does not mean "need not be greater than or equal to any other cause."
WTO members do not have discretion to adopt whatever "standard" they wish. The standard in this
case is "significant cause," and that standard has been set by the text of Article 16. The United States
has no discretion to change it. Nor can the legislative history of Section 406 justify the redefinition of
"significant cause." The legislative history of the US statute is not the negotiating history of
Article 16, and no negotiating history can justify changing the standard set forth in the treaty text.

19. Article 16 adds the term "significant" to the causation standard. The unilateral US decision to
set forth a lower
 causation standard when defining this term and its added m odifier is wholly
impermissible. Whatever the need under US law to distinguish global safeguards from China-specific
remedies with respect to whether imports need to be the most important cause, the US explanation of
this need does not apply to the redefinition of "significant cause" as a cause that only "contributes
significantly," and is irrelevant to determining th e nature of the US obligations under Article 16 and
the WTO Agreement. The causal connotations of "contri bute" are less than those of "cause." This is
reinforced by the instruction that the necessary causal contribution "need not be equal to or greater
than any other cause." The Panel should reject the US claim that the statute really means "a direct and
significant causal link." That is not the language used in the statute itself. The noncommittal way in
which the USITC references this quote from Sec tion 406's legislative history does not justify
overriding the "contributes significantly" language used in Section 421.

20. In an "as such" claim, the in quiry must focus on the text of the statute itself. US assertions
that the USITC interpreted the statute in a way that is consistent with the Protocol, and that this
interpretation somehow trumps the statute, are misl eading. The US argument that in an "as such"
claim "it is necessary to refer both to the language of the statute and
 to evidence of how that language
has been applied" is incorrect. Appellate Body jurisprudence makes clear that a proper "as such"
assessment may focus solely on the text of the st atute. It is not necessary to look to domestic
application of the statute, but when the WTO-consiste ncy of text of the statute by itself is unclear, the
evidence of the text "may be supported, as appropriate" by the "consistent application" of the statute.
In this case, such a step is unnecessary as the words of the statute reveal the WTO-inconsistency.

21. US - Wheat Gluten cannot support the claim that Section 421's definition of "significant
cause" is in accordance with the Prot ocol's causation standard. The fact that the Appellate Body used
the word "contribute" in part of its definition of "causal link" does not make "contributes
significantly" the equivalent of "significant cause." Additionally, the Appellate Body went on to state
that "causal link" requires "a genuine and substantia l relationship" whereas the US statute states that
"contributes significantly" merely "need not be equal to or greater than any other cause."

IV. CAUSATION – AS APPLIED

A. AN IN-DEPTH ANALYSIS IS REQUIRED FOR "SIGNIFICANT CAUSE"

22. The USITC's causation finding was WTO-inconsis tent and failed to link the condition of the
industry to imports from China. The overall thrust of Article 16 is to establish a clear nexus between
imports from China and the condition of the industr y. A remedy cannot be imposed against fairly
traded imports from China when the conditions of the industry are not caused by those imports.
Despite this, the USITC failed to conduct a reasone d and adequate conditions of competition analysis;
failed to establish a temporal "coincidence" be tween rapidly increasing imports from China and
various alleged injury factors; and failed to address adequately a lternative causes that undermine any
suggestion that imports from China are causing "m aterial injury." The United States has not
explained what analysis it believes was necessary and has tried to avoid all responsibility for the

analysis the USITC did conduct, arguing that the USITC was not required to engage in any of the
above analyses. Regardless of the methodology th e USITC chose, it must apply that methodology
reasonably and adequately. Because the USITC did e ngage in analyses of co nditions of competition,
coincidence, and alternative causes, it was required to do so adequately.

B. THE USITC'S ANALYSIS

23. The US claim that there is "overall coinciden ce" is misplaced. This claim rests on two broad
generalizations: imports from China increased ove r the period and domestic industry injury factors
generally declined. The United States views these tw o overarching trends as proof that the increases
in imports caused injury to the domestic industry. This is incorrect as a factual matter – there is no
"overall coincidence." This claim is simply part of the US attempt to focus on the overall period to
obscure any assessment of the more specific year-to-year changes and the magnitude of those changes
that would answer the question whether a causal link actually exists betw een rapidly increasing
imports and alleged injury. The purpose of the causal analyses developed over time by WTO
jurisprudence is to assess whether increases in imports actually caused injury. Although these
analytic tools were developed under other trade remedies, they apply with equal force here.

1. The USITC failed to assess adequa tely conditions of competition

24. An analysis of the conditions of competition is required under Article 16. Going against the
jurisprudence of the Appellate Body, the US argument hinges on the use of the word "or" in "or under
such conditions of competition" in the English vers ion of Article 16.1. The French and Spanish texts
of Article 16.1, however, use the terms "et" and "y." This conjunctive use is also consistent with
Article 2.1 of the Agreement on Safeguards, which uses "and" in all three languages. The best way to
reconcile the texts is to apply the conjunctive interp retation of the term "or" in the English text of
Article 16. The United States has completely reinvent ed its argument on this issue. In the US First
Written Submission, the United States wholly relied on the language of Article 16.1 when arguing that
a conditions of competition analysis was not require d. Faced with the linguistic differences in the
different texts, however, the United States has ab andoned this argument entirely, and now tries to
relegate Article 16.1 to an irrelevant status, dealing only with "consultations."

25. The United States attacks the attenuated natu re of competition between imports from China
and domestic tyres. Its arguments are misplaced. The bulk of the US efforts are spent on criticizing
China's claim that subject imports are absent in a pproximately 74 per cent of the US tyre market.
China stands by this figure, especially in light of the weak evidence offered by the United States to
rebut it. The United States claims that the data is "belied by the very article China cites" – yet China
cited no article for this data, but rather relied on the reporting on US producers discussed in the
USITC Determination. The point of the estimate was to convey the order of magnitude to which
competition was attenuated. Even based on the numbers offered by the United States and the article it
now relies upon, there is still no competition in roughly half of the US market. Attenuated
competition for about half of the market dramatically reduces the likelihood of imports from China
being a "significant cause" of material injury to the domestic industry. If it is important to understand
precisely how much overlap actually occurred based on the data before the USITC, the Panel should
ask the United States for this information.

26. The USITC made unsupported inferential leaps in finding competition and equating this with
a significant causal relationship. The USITC stated there was competition in the OEM market despite
the fact that in 2008 imports from China made up just 5 per cent of the market, US tyres made up over
50 per cent, and imports other than China made up the remaining 45 per cent of the market. The
United States continues to maintain that such a finding is "consistent with the record." Even if these
facts are consistent with the record, the Protoc ol requires investigating authorities to provide a
reasoned and adequate explanation of why subject im ports are a "significant cause" of injury. When
imports occupy such a negligible portion of a market – such as the 5 per cent here – the authority must

then explain adequately how the imports could none theless be a "significant cause" of injury, or how
they could be having a significant competitive effect. This USITC did not do so.

27. The US argument on the significance of the "i nterchangeability" of imports from China and
domestic tyres is incorrect. There was highly attenu ated competition in this case, driven by market
segmentation. The bulk of US tyres were in tie r 1 of the replacement market, while the bulk of
imports from China were in tier 3. The fact that , in response to a generic question, some market
participants reported that imports from China and domestic tyres were "interchangeable," presumably
within a segment, does not mean that they were "interchangeable" across
 segments. Indeed, as US
Exhibit-29 itself states, "Most of the flag ship brands held their own because they don't compete
against low-cost radials." Market divisions remain an important condition of competition and
competition remains attenuated.

2. The USITC failed to assess adequately whet her there was temporal coincidence between
imports and injury

28. When examined properly, the ten factors assessed by the USITC demonstrate the lack of
coincidence between rapidly increasing imports and injury. The US assertion that the "evidence
established a clear overall coincidence" is inco rrect. The Appellate Body has explained that
"coincidence" analysis plays a "central" role in determining whether or not a causal link exists
between imports and injury. The United States claims that such a requirement is linked solely to the
specific text of the Agreement on Safeguards . This attempt to ignore the logic that motivated the
Appellate Body's findings ultimately fails. The Appe llate Body stated such an analysis was necessary
because movements in imports should correspond
 with movements in injury factors when assessing
whether imports caused injury. This logic applies whether imports are required to be "increased" or
"increasing." Whether or not such an analysis is ultimately required under the Protocol, it is the
analysis that the USITC conducted. The United Stat es claims the USITC made a "finding" of "clear
overall ‘coincidence.'" This finding must be reasoned and adequate. It is not.

29. An adequate coincidence analysis would comp are year-over-year changes in injury factors to
year-over-year changes in subject import levels to assess whether coincidence in fact exists. In
contrast, the US argument focuses on two simple facts. The fact that imports from China increased in
"every year of the period" and the fact that several of the injury factors ha d "overall declines" for the
five-year period. The United States treats this combination as somehow establishing coincidence.
This is not
 a coincidence analysis but rather a simplistic juxtaposition of two sets of data. A proper
coincidence analysis requires an assessment of the "relationship between the movements " of imports
and the movements of injury factors. The fact th at, in general, imports increased over the period and
that, in general, injury factors declined over the fi ve-year period is not a coincidence analysis, much
less an adequate one.

30. The United States stresses that imports increased "in every year of the period" and certain
injury factors "declined in every year of the pe riod." The only way for these statements to be
significant in a proper coincidence analysis, however, is for the degree
 of the respective annual
increases to correspond generally with the degree of the respective declines in injury factors. The
orders of magnitude are key. If correlation exists between imports and injury, the varying degrees in
annual import increases should be reflected in varying degrees of annual declining injury indicators.
Yet the US coincidence analysis never addresses the relationship between the magnitude of import
increases and the magnitude of injury indicator d ecreases. This failure renders its coincidence
analysis inadequate.

31. Because of this failure, China offered an ove rall assessment of factors for the critical 2006 to
2007 and 2007 to 2 008 periods. The analysis presented allows the Panel to test the US theory over
the most recent period. These results demonstrate a complete lack of coincidence over the critical

2006 to 2008 period. An assessment of the ten injury factors over that period clearly reveals this lack
of coincidence:

• Prices: Prices rose significantly across the period, and indeed rose at their highest rate during
the 2006-2007 period when imports from China grew at their fastest rate of the period.

• Production: Production fell by its lowest rate of the period when imports grew at their fastest
rate in 2006-2007, and subsequently fell by its highest rate of the period when imports grew at
their lowest rate in 2007-2008.

• Net Sales: Net sales in volume decreased during the large increase in imports in 2006-2007
but this decrease more than doubled, at its f astest rate of the period, when imports only
slightly increased in 2007-2008.

• Market Share : Market share in value decreased by less than 2 per cent during the large
increase in imports in 2006-2007 but then decr eased by over 2 per cent when imports only
slightly increased in 2007-2008.

• Operating Profits : Operating profits increased by the highest rate of the period during the
large increase in imports in 2006-2007 whereas they decreased by the highest rate of the
period when imports only slightly increased in 2007-2008.

• Productivity: Productivity saw an increase during the large increase in imports in 2006-2007,
but experienced a decrease when imports only slightly increased in 2007-2008.

• Capacity Utilization: Capacity utilization significantly increased during the large increase in
imports in 2006-2007, yet significantly decreased when imports only slightly increased in
2007-2008.

• Employment: Employment experienced a modest decrease during the large increase in
imports in 2006-2007, yet decreased much more so when imports only slightly increased in
2007-2008.

• Capital Expenditures: Capital expenditures rose across the period, experiencing an increase
both during the large increase in imports in 2006-2007 and when imports only slightly
increased in 2007-2008.

• Research and Development : Research and development trended upward over the entire
period, and increased strongly during the large increase in imports in 2006-2007 but
decreased when imports only slightly increased in 2007-2008.

32. These ten factors reveal a complete lack of coincidence. The largest increases in imports
from China occurred from 2006 to 2007. Therefore, under the US theory – and a proper coincidence
analysis – one would expect the largest adverse impa ct on injury factors. Yet the record shows that
many factors, such as prices, net sales values, and operating profits, went up. Subsequently, because
there was only a small increase in imports from Ch ina from 2007 to 2008, one would expect there to
be the smallest adverse impact on injury factors. Again, the opposite of the US theory is true.
Production fell by more than four times the rate from the prior year, and net sales dropped by over
double. Thus, over both of these periods, the record strongly contradicts the USITC finding and US
argument of "overall coincidence." There is no meaningful correlation in this case.

3. The USITC failed to consider adequately al ternative causes or engage in a weighing of
causes to determine whether increasing imports were a "significant cause"

33. Due to the conditions of competition in the US tyre market and the lack of correlation, it was
particularly important for the USITC to assess the alte rnative causes in this c ase. It did not do so
adequately. The US argument that the Protocol does not require a "non-attribution" analysis is
inconsistent with the repeated US a ttempts to isolate Article 16 from the Agreement on Safeguards .
Declines in demand and a shift in business strategy had a considerable effect on the US tyre industry
over the period investigated. Yet the USITC chos e to dismiss these factors, invoking the low US
statutory standard that it need not engage in any "weighing of causes." The USITC cannot determine
whether or not imports from China were a "significant" cause of injury without seriously assessing
other causes.

34. The United States asserts that the "ITC did inv estigate, consider, and analyze all of the factors
that could reasonably be considered significant e nough to break the causal link between imports and
material injury." There are two problems with this statement. First, the USITC never made a finding
that other causes did not "break the causal link be tween imports and material injury." Second,
whether or not alternative causes "break the causal link" is not the only issue. Even if other factors do
not completely sever the causal link, the issue rema ins whether – in light of the degree of impact of
other causes – subject imports can still be considered a "significant
 cause" of material injury. The US
argument reads "significant" out of Article 16.

35. The analysis employed by the USITC regardi ng alternative causes is inadequate. In assessing
changing demand, the United States claims the USIT C "found that demand trends did not break the
causal link." Such a finding was never made expr essly. The USITC gave only passing attention to
changes in demand and failed to account for the essen tially 1:1 correlation between declining demand
in 2008 and the fall in US shipments. There was a broader trend of declin ing consumption over the
entire period. US production was logically hurt more by declines in demand than imports from China
due to contractions in the OEM market.

36. In assessing US producers' new business strategy, the US failure to note that imports from
China were increasing before plant closures, or th at US producers imported nearly one out of every
four of the tyres from China, renders this assessmen t incomplete. This strategy was a positive factor
for domestic manufacturers. In the face of testimony and evidence concerning industry restructuring
which predated the arrival of imports from China, curs ory treatment of this issue is insufficient. The
defects of the USITC analyses of conditions of competition, coincidence, and alternative causes
reinforce each other. The defects in one of these analyses might be less problematic if the USITC had
provided a very compelling analysis of the other two analytic tools but the USITC provided
insufficient analyses under all three.

V. THE WTO-INCONSISTENT US TARIFF REMEDIES

37. The requirements for applying a transitional product-specific safeguard under Article 16 have
not been met in this case and thus no remedy was appropriate. Even if the United States had complied
with the other requirements of Article 16, the tari ffs imposed were still overbroad and 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. Imports cannot be held responsible for the entire
 downturn experienced by the domestic
industry, and the remedy cannot seek to address that entire downturn.

38. The United States never took into account what "extent" was necessary to remedy the alleged
market disruption. Without determining the amount of injury that imports from China allegedly
caused, the remedy could not be tailored to address only that harm being caused by those imports.
After China's prima facie showing of this, the US defence has be en insufficient. The Panel has asked

the United States how it determined the calculate d reduction in imports from China "would address
the market disruption found to exist." The US response avoids the question and simply provides
quotations from the USITC remedy recommendation. This does not explain
 how reductions address
the extent of the market disrupti on. The only elaboration provided in the Presidential Determination,
now cited by the United States, is that: "The President's determination is a response to a surge of tire
imports from China that has disrupted the domestic market." It is odd that now the United States
opposes references to "surges" and insists that the u se of "rapidly" does not imply one. Stating that
there is a reduction is not an explanation of why the reduction is taking place, much less why the tariff
rates were imposed. Quotes from the USITC determ ination and copies of staff economic models are
not adequate. Overbroad and une xplained remedies are not perm issible under Article 16 of the
Protocol.

VI. CONCLUSION

39. The circumstances of this dispute are unique as it does not involve allegations of unfair trade.
Article 16 provides a limited fair trade remedy to safeguard the interests of the "domestic producers"
in the face of import surges. Yet here, the USITC Determination applied a remedy where the
domestic producers did not support the petition, stated that they were not injured by Chinese imports,
and said that they had no plans to change their operations if a remedy was imposed. The
United States gave the domestic producers a remedy not justified in Article 16, which they never
asked for and did not need.

ANNEX F-2

EXECUTIVE SUMMARY OF THE ORAL STATEMENT
OF THE UNITED STATES AT THE SECOND
MEETING OF THE PANEL

I. PANEL MUST REJECT CHINA'S INTERPRETIVE APPROACHES

1. China accuses the United States of "hiding" be hind an "extreme interp retation" of paragraph
16 so as to "forestall" any evaluation of the ITC's determination. However, our interpretation is
simply one that asks the Panel to interpret the plai n meaning of the Protocol in a manner consistent
with the customary rules of treaty interpretation, as required by DSU Article 3.2. There is nothing
extreme or extraordinary about this approach.

2. Rather than focusing on the text, China seek s to convince the Panel that the transitional
mechanism can only be understood in relation to th e Safeguards Agreement and that the Panel must
exercise a higher level of scrutiny. China's ba sic theory seems to be that anything called a
"safeguard" measure must by necessity have the Sa feguards Agreement as the "default mode." China
argues that anything that is not expressly set out in the Protocol must by necessity be "filled in" by
reference to the disciplines of the Safeguards Agreem ent. Nothing in the text of the Protocol, the
DSU, or the customary rules of treaty interpretation support this approach.

3. China argues that the Safeguards Agreement is the "parent" of a transitional measure under
the Protocol, because the Safeguards Agreement is the only other place in the WTO agreements where
the term "safeguard" is used. However, other WT O agreements contain safeguard provisions. There
may well be a general concept of "safeguards" in th e framework of internationa l trade rules, but this
does not mean that there is a necessary link between the Safeguards Agreement and the transitional
mechanism of the Protocol. Such a link would have had to be established in the text of the Protocol
itself. It was not. References in the Protocol to the Committee on Safegua rds and the fact that
paragraph 16.1 of the Protocol sets out that China and the affected WTO Member may discuss
whether the affected Member should pursue application of a measure under the Safeguards
Agreement do not support China's theory either.

4. China argues that our position regarding the Sa feguards Agreement is in ternally inconsistent
because we reference panel and Appella te Body reports regarding that Agreement. It should be clear
that China's own argumentation has led us down this path. While it is axiomatic that panel and
Appellate Body reports create legitimate expect ations among WTO Members, those reports are not
binding, except with respect to resolving the particular dispute between the parties to that dispute .
While the reasoning contained in reports may create legitimate expectations, it does not create binding
interpretations even with respect to the agreement at issue in the par ticular dispute. There is nothing
that requires the Panel to cons ider panel and Appellate Body re ports regarding the Safeguards
Agreement.

5. According to China, the negotiating history of the Protocol provides no meaningful
interpretive guidance, but confirms the relati onship between the Safeguards Agreement and the
transitional mechanism. On the contrary, a quick review of the documents in the
WT/ACC/SPEC/CHN series confirms our reading of the Protocol. China alleges that these
documents only demonstrate that the result was a "hybrid" or compromise. Those documents show

China sought, but failed, to have the Safeguards Agr eement apply to the Protocol, except as otherwise
provided in the Draft Protocol. To achieve what China hoped for, the negotiators would have had to
include language to that effect in the Protocol, as they did with respect to other WTO disciplines, for
example, in paragraph 15 of the Protocol. Th e lack of any similar language in paragraph 16
demonstrates China did not prevail.

II. THE PANEL SHOULD APPLY THE STANDARDS CONTAINED IN THE
PROTOCOL

6. Unlike China's attempt to unilaterally create standards unsupported by the plain text of the
Protocol, the standards are clear from the plain meaning of the text at issue. Paragraph 16.1 sets forth
the general conditions under which a Member is aut horized to seek consultations with China. The
obligations regarding the ITC's market disruption determination are found in paragraph 16.4. While
paragraph 16.1 provides context for interpreti ng paragraph 16.4, it does not set out a general
obligation with respect to the market disruption dete rmination. Since China is not arguing that the
United States acted inconsistently with respect to consultations, there is no basis to find any
inconsistency with paragraph 16.1.

7. Paragraph 16.5 of the Protocol provides im portant context for interpreting the substantive
obligations. Paragraph 16.5 pr ovides that the Member imposing a measure must provide written
notice of the decision, "including the reasons for su ch measure." This can be properly interpreted to
mean that a Member must provide a reasoned explanation for its market disruption findings. China
did not raise a claim under paragraph 16.5, so an y specific findings under paragraph 16.5 would be
beyond the Panel's terms of reference. However, it would be equally improper to impose a higher
procedural standard than is provi ded in paragraph 16.5. This is precisely what China has tried to
persuade the Panel to do by arguing that the sam e "standard of review" used in the Safeguards
Agreement must be used here.

8. Paragraph 16.4 sets out the standards that must be satisfied to make a finding that market
disruption exists. The first sentence of paragraph 16. 4 explains that the Member must find: (1) that
imports are increasing rapidly, either absolutely or re latively; (2) so as to be a significant cause; (3) of
material injury or threat thereof. The Panel is expected to assess whether the ITC reasonably found
that imports from China were "increasing rapidly, either absolutely or relatively" over the period of
investigation. "Rapid" is defined as "progressing quickly; developed or co mpleted within a short
time." Thus, the Panel should assess whether the ITC reasonably concluded that the growth in
Chinese imports had "progressed quickly" over the period of investigation." The ITC's finding was
fully consistent with this standard.

9. The Protocol also requires the ITC to determ ine that Chinese imports are "a significant cause"
of material injury to the industry. Since the word "significant" is defined as meaning something that
is "important," "notable" or "consequential," the Panel should assess whether the ITC reasonably
concluded that imports from China were a "notable " or "important" cause of material injury. Since
the ITC has consistently stated that it must asse ss whether there is a "direct and significant causal
link" between the Chinese imports and material injury, the ITC's analysis is again consistent with the
requirements of the Protocol.

10. The second sentence of paragraph 16.4 direct s a Member to evaluate "objective factors,
including the volume of such imports, the effect of imports on prices for like or directly competitive
articles, and the effect of imports on the domestic industry producing like or directly competitive
products." The Protocol does not otherwise pr ovide specific guidance on how the Member should
conduct this analysis. Accordingly, a Member has the discretion to a dopt and utilize reasonable
analytical approaches to perform its analysis . Thus, the Panel should assess whether the ITC's
analytical approach in its investigation is consistent with the Protocol and whether the ITC reasonably

addressed the three factors specified in paragraph 16. 4. The ITC's analytical approach in this
investigation satisfies this standard.

11. The charts in our submissions make it a bundantly clear that imports of tyres from China
increased rapidly on both an absolute and
 a relative basis. The increases were rapid and sustained,
and occurred in every year of the ITC's five-year period of investigation. Moreover, the largest
increases, in relative terms, occurred in the last two years of the period.

12. China contends that imports showed the "smallest rate [of increase]
 of the period" in 2008.
This is incorrect. Measured relative to consumpti on or to production, the increase in imports in 2008
was the second highest annual increase of the period. China attempts to obscure this fact by
comparing the increase in 2008 to the average a nnual increase for the preceding four years, which
includes the large increase in 2007. Of course, the average increases cite d by China are skewed
significantly upwards by the enormous increase in imports that occurred in 2007.

13. China's argument that the Protocol contains a stricter "increased imports" standard than the
Safeguards Agreement is untenable. Among other things , the language of the Protocol links the issue
of rapidly increasing imports to material injury, whic h is a lower standard of injury than the serious
injury standard under the Safeguards Agreement. Paragraph 16.4 provides the increase in imports
must be rapid enough "so as to be a significant cause of material injury, or threat of material injury" to
the industry. The Appellate Body's report in US – Steel Safeguards provides support for recognizing
this linkage. A lesser injury standard means that a smaller increase in imports may be sufficient to
cause material injury than to cause serious injury.

14. China attempts to deny this linkage. It claims that, in US – Steel Safeguards , the Appellate
Body was linking increased imports only to causati on and not to serious injury. However, the
Appellate Body explained that "whether an increase in imports is recent, sudden, sharp and significant
enough to cause or threaten to cause serious injury are questions that are answered as the competent
authorities proceed with the remainder of their analys is (i.e., the consideration of serious injury/threat
and causation)." China, citing only to paragraph 16. 1, also claims that "the Protocol does not link
"increasingly rapidly" to "material injury," but rather to "market disruption." China overlooks the fact
that the linkage between increasing imports and injury is clear in paragraph 16.4, which states that
imports must be rapid enough "so as to be
 a significant cause of material injury."

15. China argues that the "increasing rapidly" sta ndard in paragraph 16.4 is distinct from the "in
such increased quantities" standard in paragraph 16.1 and that paragraph 16.4 imposes an additional
and different requirement. The "increased imports " language of paragraph 16.1 and the "rapidly
increasing" imports language of para graph 16.4 relate to the very same issue, that is, the issue of
whether increased imports from China have caused ma rket disruption. The only reasonable way to
interpret the two phrases is to do so in a manner that reconciles their meaning.

16. The need to seek interim period data de pends on the nature and complexities of an
investigation, including the length of time between the filing of the petition and the end of the interim
quarter, and the number of parties from whom data must be sought. In this case, only 20 days had
elapsed since the end of that quarter when the pe tition was filed, and information would have had to
have been collected from approximately 80 US produ cers, importers and foreign producers. The ITC
reasonably concluded that "a relatively complete da ta series for that period would not have been
available in time for use in this investigation."

17. China continues to portray the ITC's decision not to collect interim data as inconsistent with
its practice. Aside from the fact that the issue here is consistency with a Member's obligations under
paragraph 16 rather than consistency with a Memb er's domestic practice, we have shown that there
was no merit to China's argument. In almost all of the cases cited by China in which interim data was

collected, the period of time that elapsed since the end of the quarter was longer than 20 days. China
also claims that seeking interim data cannot be burdensome on responding firms because businesses
commonly collect quarterly data. While this may be true, the question is how soon after the close of a
quarter all of this data has been compiled by all of the firms involved. Nothing in paragraph 16
imposes the standard that China seeks, and we wonder if the obligation China would like to read into
the Protocol is one that could be met by all Members.

III. CHINA HAS NOT CARRIED ITS BURDEN ON ITS "AS SUCH" CLAIM

18. China remains unable to explain exactly why the ordinary meaning of the words "cause" and
"contribute" show that the US statute's causation standard supposedly "weakens" the "significant
cause" standard of the Protocol. China has failed to address the language in the Protocol providing
that Chinese imports may be " a
 significant cause" of material injury, which is language establishing
that Chinese imports can be one of several factors "contributing significantly" to material injury.
Finally, China has not seriously explained why the Appellate Body's statement in US – Wheat Gluten
that a factor can be a "cause" of injury if it "contribute[s] to "bringing about, "producing," or
"inducing" that degree of injury does not provide he lpful guidance here. China has failed to carry its
burden on this issue.

19. China claims the US arguments "rest fundame ntally on the assertion that, because Article 16
of the Protocol does not define [the phrase 'significant cause,'] the United States may adopt its own
'methodologies or standards' to determine whether imports from China are a significant cause of
material injury." However, the US "fundamental" point is that the terms "a significant cause" and
"contribute significantly," as used in the Protocol and the US statute, have the same meaning and
scope.

20. China asserts that the United States has argued th at the "significant cause" standard is clearly
lower than the "genuine and substantial" standa rd under the Safeguards Agreement and the causation
standard of the Antidumping and Subsidies Agreem ents. However, the United States has taken no
position with respect to the relationship of the "si gnificant cause" standard of the Protocol to the
"causal link" standard of the Antidumping and Subsidies Agreements. The United States has
consistently explained that it would not be useful for the Panel to try to determine whether the
"significant cause" standard of the Protocol is the same as, or lower than, the "genuine and
substantial" standard under the Safeguards Agreement.

21. Finally, China continues to argue that th e United States believes a Member may find Chinese
imports to be a cause of material injury if they make a "mere" or "minimal" contribution to injury.
The United States has never indicated this. Instead , the US statute specifically requires the ITC to
determine that Chinese imports "contribute significantly " to the material injury being suffered by the
industry. The ITC itself has consistently stated th e US statute requires a "direct and significant causal
link" between Chinese imports and material injury, and that a "minimal" or "unimportant"
contribution to injury does not satisfy the "signi ficant cause" standard of the statute. China's
arguments are unfounded.

22. China also continues to argue that the language of the US statute which provides that Chinese
imports "need not be equal to or greater than any other cause" "allows an investigating authority to
determine that even a minimal cause .. could still be considered as a 'significant cause.'" This is not

the meaning of this statutory phrase. This language makes clear that imports from China need not be
the most important cause, or equal in effect to th e most important cause, of material injury to the
industry. This is consistent with the Protocol , which does not require that imports be the sole,
primary, or most important cause of injury.

23. China also asserts that the legislative hi story of section 406 – which was the model for the
causation standards included in the Protocol and section 421 – indicates that the US statute weakens
the causation standard of the Protocol, because it states that the "term 'significant cause' is intended to
be an easier standard to satisfy than that of th e 'substantial cause,'" standard of section 201, the US
global safeguards statute. China has neglected to mention that the "substantial cause" standard of
section 201 contains an additional element that necessarily makes it higher than section 406's
"significant cause" standard. In section 201, th e 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 consistently explained in its global safeguards determinations, this standard means that, under
section 201, "increased imports must be both an important cause of the serious injury or threat and a
cause that is equal to or greater than any other cause ." Under section 201, the ITC must determine
that imports are both an important cause of injury to the industry and are a cause of serious injury
greater than, or equal to, any other single factor injuring the industry in an important way.

24. Section 406's "significant cause" standard is not considered lower than the section 201
standard because the term "significant cause" somehow has an inherent meaning that connotes a lower
causal link standard than "substantial cause." Sect ion 406's standard is lower than section 201's
standard because section 406 does not
 require the ITC to conclude that the injury caused by the
subject imports is greater than or equal to the in jury caused by any other factor injuring the industry .
Instead, section 406 requires the ITC to find only that the subject imports ar e a significant cause of
material injury or threat to the industry. It should be very clear now why China would now like to
disavow its statement at the first Panel meeti ng that the causation standard of section 421 was
"derived from" the standard contained in section 406.

25. Finally, China now asserts that it "strongly doubts" that, in US – Wheat Gluten, "the Appellate
Body was focused [in that statement] on the particul ar meaning of the word "contribute" and how this
might relate to other formulations in relation to causation." In that report, of course, the Appellate
Body stated that the word s "cause" and "causal link" indicate that a factor can be a "cause" of the
requisite level of injury if it "contribute[s ] to "bringing about, "producing," or "inducing
" that degree
of injury. China's reading of this language is mistaken. The Appellate Body's analysis focused
precisely on whether the word "cause" meant that a factor could "contribute" to the requisite level of
injury under the Safeguards Agreement.

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

26. China continues to challenge the ITC's findi ng that Chinese and US tyres were competing
significantly in the market. China contends the re placement market consisted of three separate tyre
categories where there was little competition between the US and Chinese tyres, claiming that imports
from China were allegedly absent from 74 per cent of the market.

27. The record showed that, while most market participants agree the replacement market could
be divided into three general categories, there was no
 consensus among producers, importers, and
purchasers on how to define the three categories or on the tyre brands that were included in the three
categories. The record showed there was compe tition between the Chinese and US tyres within the
three tiers of the US tyres market. In 2008, at least 18.6 per cent of the US industry's shipments of
tyres were made in category 3 of the replacement market, the category where the largest percentage of
the Chinese tyres were sold. Moreover, in category 2, the quantity of Chinese shipments was 64.3 per
cent of the quantity of China's shipments in category 3. The record also showed Chinese imports held
five per cent of the OEM segment by the end of the period and were sold in category 1 of the market
as well. There clearly was competition between US a nd Chinese tyres in all segments of the market.
The dissenting Commissioners agreed w ith the majority that there w as significant competition within

the tier 2 and 3 categories of the market. The reco rd showed that the large majority of market
participants reported that Chinese imports and US tyres were always
 or frequently interchangeable.

28. China continues to make the claim that there was no
 coincidence whatsoever between
increasing Chinese import volumes and declines in th e industry's condition. However, the record
shows a direct correlation between the consistent growth in Chinese imports over the period and
significant declines in the industry's market share, capacity, production, shipment quantities, net sales
quantities, profitability, capacity utilization, productivity, and employment levels.

29. It is possible that China continues to believ e there was no coincidence in trends because of its
mistaken understanding of the record. China continu es to make the incorrect claim that "the various
injury factors typically showed a substantial improvement in 2006-2007, when imports from China
were at their highest level of the period ....". China's argument is incorrect. First, and perhaps most
important, Chinese imports were not at their highest level in 2007 . They were at their highest level in
2008, which is when the US industry experienced very significant declines in its condition. Second, it
is not true that the industry's overall condition improved substantially in 2007. The industry may have
experienced improvements in its profitability and capac ity utilization levels in that year, but it also
experienced significant declines in its market sh are, capacity, production, sales, shipments, and
employment levels in that year as well.

30. China also claims incorrectly that there was no coincidence in trends between increasing
import volumes and industry declines in 2008
, because "industry conditions were at their worst while
the rate of increase in imports was the lowest of the period." Again, this claim is mistaken. First, the
increase in Chinese imports in 2008 was not the lowest of the period. The increase in Chinese imports
in 2008 was actually the second highest of the period in relative terms, and was only lower than the
increase in 2007, which is when Chinese imports gr ew at a very rapid rate. Moreover, Chinese
imports were at their absolute highest levels of the entire period in 2008, and were 10 per cent higher
than 2007. The increase in 2008 was, indeed, signifi cant in that year. Second, in 2008, as subject
imports increased by more than 10 per cent over the already high levels of 2007, virtually every injury
indicator for the industry fell.

31. China argues that the United States is require d to use a "coincidence of trends" analysis to
establish the necessary causal link between imports a nd material injury. A "coincidence of trends"
analysis is not required by the specific text of the Protocol. It is also not the only causation approach
permitted under the Safeguards Agreem ent, the source of China's reasoning. Under the Safeguards
Agreement, even if there is no "coincidence of tr ends" between imports and declines in the industry's
condition, a Member can establish that there is a cau sal link between imports and injury by providing
a compelling explanation of why a causal link exists.

32. China has failed to carry its burden of establis hing that several of the other factors allegedly
causing injury actually caused such injury during the period of investigation. China has offered no
evidence to establish its claim that factors lik e "automation for increased productivity," "higher
gasoline prices resulting in less driving," "strikes an d labor actions," "U.S. tire producers' high legacy
costs," or "equipment restraints" actually injured the industry .

33. China's assertions that the ITC failed to adequately address the impact of demand on the
industry's condition in 2008, or the impact of de mand changes during the rest of the period do not
withstand scrutiny. Specifically, the ITC considered whether declines in the industry's condition in
2008 were caused by the demand declines that occurred in the second half of 2008 due to the
economic recession in that period. The ITC acknowledged that apparent US consumption fell in 2008
but also pointed out that the shipments of Chinese c ontinued to grow during that market contraction.
In contrast, non-subject imports declined in 2008 by 6.1 per cent, roughly equivalent to the decline in
apparent consumption, and that the industry's produc tion levels fell by 11 per cent in that year. This

meant that the industry "absorbed virtually all the dec line in US apparent consumption in that year."
It was not reasonable for the industry to absorb all of the demand decline in that year while China's
imports continued to grow.

34. China also claims demand d eclines caused the declines in the industry's production, shipment
and sales volumes in other years of the period. Ag ain, China misstates the record. Between 2006 and
2007, for example, the industry's production, shipment and sales quantities all declined
 significantly,
even though apparent consumption increased by 1.6 per cent in that year. Similarly, when demand
declined in 2005 and 2006, the declines in apparent consumption were consid erably smaller than the
overall declines in the industry's production, shipment s and sales quantities in each of those years.
Thus, the record shows that, throughout the pe riod, Chinese imports entered the market in
increasingly significant volumes and took market share from the industry, causing significant declines
in the industry's production, shipment and sales le vels, whether or not demand was increasing or
declining.

35. China asserts that the declines in the industry's market share, production, shipment, and sales
quantities over the period had nothing to do with th e growing influence of Chinese imports but were
the result of the industry's decision to voluntarily abandon the lower-end tyre market. The ITC
addressed this issue in detail in its determination and concluded this theory was not particularly
persuasive. The record showed that Chin ese imports were increasing considerably before

Bridgestone, Continental, and Goodyear announced th e significant plant closings in 2006 and 2008.
By 2006, Chinese imports had increased their market share by 4.6 percentage points over the market
share levels seen in 2004, and occupied 9.3 per cent of the market by the end of 2006. Indeed, in
March 2006, an industry publication reported that "the overall effect [of Chinese imports] on domestic
supply [had been] 'profound '" and predicted that the impact of China on the market was "likely to
remain so as imports increase."

36. China points to the Appellate Body's statements in US – Cotton to claim that the ITC is
required to address in detail the injurious effects of other factors. We would like to make several
points. First, in US – Cotton , both the Appellate Body and the Panel acknowledged that the "serious
prejudice" provisions of the Subsidies Agreement, do not "'contain the more elaborate and precise
'causation' and non-attribution language' found in the trade remedy provisions of the [Subsidies]
Agreement," the Antidumping Agreement and the Safe guards Agreement. As the Panel indicated, the
"absence of such detailed language, which exists el sewhere in the covered agreements, ... may be
taken as a demonstration that the drafters knew how to craft a precise causation standard when they
deemed it appropriate." Moreover, the Appellate Body stated, the absence of non-attribution language
"suggests that a panel has a certain degree of discr etion in selecting an appropriate methodology for
determining whether the 'effect of a subsidy is si gnificant price suppression under Article 6.3(c)" of
the Subsidies Agreement. This is exactly what the United States has argued here. The Protocol does
not contain the same non-attribution language as that set forth in the Subsidies Agreement, the
Antidumping Agreement, or the Safeguards Agreement. As a result, a Member is not required to
perform the specific and detailed "non-attribution" an alysis the Appellate Body has found under those
Agreements. Instead, a Member has discretion to adopt an appropriate and reasonable analysis to
assess the effects of other factors, which will depend on the facts and circumstances of the particular
case. The US – Cotton findings are not inconsistent with the US position on this issue.

37. Second, we would note the Appellate Body affirmed the Panel's consideration of four
significant other injury factors in US – Cotton . In its analysis, the Panel addressed each of four
factors and concluded that none of the factors "attenu ate the genuine and substantial link that we have
found between" the US subsidies and significant pri ce suppression. On review, the Appellate Body
confirmed that the Panel adequately addressed th e possible effects of these factors and reasonably
concluded that they did not sever the causal link between the subsidies and price suppression. The
ITC's analysis of demand and alleged business strategy was at least as detailed as the Panel's

consideration of other factors in US – Cotton . China has little basis for claiming that the ITC's
analysis of these issues was inadequate under the Protocol.

V. CHINA'S REMEDY CLAIMS ARE UNFOUNDED

38. Aside from China's argument that the remedy imposed is inconsistent with paragraphs 16.3
and 16.6 because the United States did not have th e right to impose a measure in the first place,
China's main argument seems to be that the United States did not explain or justify how it met the
requirements of paragraphs 16.3 and 16.6 at th e time the measure was imposed. China's first
arguments fails once the United States demonstrates that its market disruption determination meets the
requirements of the Protocol. China has not made a prima facie case of why the US measure is
inconsistent with paragr aphs 16.3 and 16.6. China's alternative argument is nothing more than an
improper attempt to shift the burden of proof and must be rejected.

39. Neither paragraph 16.3 nor para graph 16.6 require that the Memb er provide a justification at
the time the measure is imposed. Paragraph 16.5 pr ovides context confirming that no such obligation
to explain exists. According to paragraph 16.5, a Member has to provide written notice, including the
reasons for the measure and the measure's scope and duration. Paragraph 16.5 does not require that
the Member explain how the scope and duration meet the requirements of paragraphs 16.3 and 16.6 at
the time the measure is imposed. Even, if it did, China did not raise a claim under paragraph 16.5.
Therefore, to the extent that China's claims unde r paragraphs 16.3 and 16.6 are that the ITC did not
sufficiently explain, China's claims must fail. For the same reason, China's arguments that the
United States is limited in its explanations to what is in the ITC report, is without basis.

40. China has conceded that paragraph 16.3 do es not require the investigating authority to
"separate and distinguish causes" and that there "is no specific obligation to quantify" injury. The
United States agrees. Given China's acknowledg ment that paragraph 16.3 does not require a
quantification of injury, it is puzzling that it argues that the obligation "limits the extent of any such
safeguard measures to 'such' market disruption, whic h is limited to that disruption properly attributed
as having been significantly caused by rapidly increasing imports from China." It appears that China
is arguing that the word "such" implies some form of quantification. However, the plain meaning is
that "such market disruption" merely refers to the fact that an investigating authority must have found
there to be market disruption. Nor can a quantif ication requirement be found in the phrase "to the
extent necessary." We note that the word "necessary" is linked to "pre vent or remedy". The need for
relief is what makes the measure necessary. A measure under the transitional mechanism is
permissible if it remedies the material injury caused by rapidly increasing imports from China.

41. A Member that has determined there is mark et disruption will seek to determine the range of
effects from various remedy options. The Member will want to know at which level relief would be
ineffective because it would not limit imports enough to remedy the market disruption found to exist.
On the other hand, to the extent that there may ha ve been other causes at play, the remedy should not
aim to prohibit all imports from China. A Member is likely to end up with a range of remedy options.

42. China has not argued - because it can not - that the additional tariffs are prohibitive. The ITC,
in its remedy analysis and recommendation, reject ed petitioner's proposed remedy because its effect
would be higher than necessary to remedy the mark et disruption. In addition, the measure actually
imposed by the United States was 20 percentage points lower than the ITC's recommended measure
for the first year, to be reduced by five percentage points on the second and third years. Therefore,
the expected effect should be less and lessen over th e duration of the remedy. China has not provided
any evidence of how the measure is inconsistent with paragraph 16.3. To the extent China's argument
is that the United States did not explain how its measure met the requirements of paragraph 16.3, there
is no such requirement. Therefore, China's claim under paragraph 16.3 must fail.

43. China argues that because the ITC did not quan tify the effect Chinese imports were having it
is "virtually impossible for a remedy to comply w ith Article 16.6's requirement." China has conceded
that there is no requirement to quantify with resp ect to paragraph 16.3, and we understand this to
apply with respect to paragraph 16.6 as well. Theref ore, it is not clear why a failure to quantify could
mean there has been a violation of paragraph 16.6.

44. The first sentence of paragraph 16.6 is draf ted in terms of how long a Member "shall apply a
measure." This confirms an interpretation that th is first sentence is not intended to require precision
at the time the measure is imposed, but that there has to be a limit and that at such time as the measure
may no longer be necessary, it will be removed. This is further reinforced by the next two sentences
of paragraph 16.6. These sentences allow China to suspend concessions substantially equivalent to
any safeguard measure two years after its applicati on if there was a relative increase in imports and
three years after application if there was an absolu te increase. These indicate that the negotiators of
the Protocol envisaged safeguard measures remaining in place for at least three years if there was an
absolute increase in Chinese imports, as was the case with regard to tyr es. Indeed, they could remain
in place even longer, except that the Member imposi ng the measure would be subject to retaliation by
China. China has tried to dismiss these provi sions as "rights that China has under certain
circumstances," but that does not diminish th eir utility as context for the first sentence of
paragraph 16.6 or as an indication of the expectations of the negotiators of the Protocol.

45. China has not made any arguments or provide d any evidence that the measure has been in
place for longer than necessary. Therefore, China's claim under paragraph 16.6 must be rejected.

ANNEX F-3

CLOSING STATEMENT OF CHINA AT THE SECOND
MEETING OF THE PANEL

1. Good afternoon. The People's Republic of China would like to express its continued
appreciation to the Panelists and the Secretariat for their insightful questions and comments at the
hearing, and for their careful attention to the facts and issues throughout this dispute.

2. Amid the numerous submissions and argument addu ced in this case, one thing is clear: there
is no basis in the Protocol or the factual reco rd for the United States' decision to impose punitive
tariffs on imports from China. The USITC Determ ination was a results-oriented exercise, taken
within a distinctive political and economic context. The USITC process yielded a determination and
remedy that none of the "domestic producers" sought or supported.

3. Much has been said in this case about the interpretation of Article 16. However, in
conducting its interpretation, the Panel will not be wr iting on a blank slate. At the end of the day,
both sides agree that the language of Article 16 is dispositive, but that the Panel can and should draw
where appropriate on guidance from other provisions of the WTO Agreement – in particular, the
Agreement on Safeguards – and jurisprudence interpreting and ap plying those provisions. If one cuts
through all of the bluster and rhetoric from the US side concerning how Article 16 is "outside and
apart from" the Agreement on Safeguards
1, the United States has conceded this key point 2, rendering
this entire discussion moot.

4. A key textual addition in Article 16 is the te rm "increasing rapidly" – which sets a standard
that is indisputably more demanding than the "inc reased quantities" standard in the global safeguards
context. Here, when one looks at the most recent pe riod, it is clear that imports from China were not
"increasing rapidly," absolutely or relatively. A dr op of 39 percentage points in the rate of increase
between 2006 to 2007 and 2007 to 2008 confirms that growth in imports was slowing and abating, as
does the significant drop in the rate of increase in ma rket share in the same period. These trends are
further confirmed by analysis of quarterly data (including interim comparisons) and data from the first
quarter of 2009, which show substa ntial declines in growth rates turning to absolute declines in
volume. Far from demonstrating a "rapid" increase, this data indicates a rapid deceleration in imports.
Suffice it to say, the USITC addressed none of this in its report, relying heavily on endpoint-to-
endpoint statistics that WTO jurisprudence confirms is inadequate.

5. The USITC's causation finding was equally deficien t. Both in terms of what it did and did not
say, the USITC Determination was inadequate, and on multiple levels. With respect to conditions of
competition, the USITC majority attempted to c obble together a causation finding by glossing over
the segmentation of the tyre market, which show ed that domestic tyres and Chinese imports were
largely operating in different segments. Alt hough the United States now attempts to invoke the
USITC dissent in support of its arguments, the dissent observed that " U.S. production is focused on
the higher-value, premium branded products and th e OEM market, segments in which the subject

1 US Oral Statement at the Second Panel Meeting, para. 9.
2 See, e.g., US Oral Statement at the Second Panel Meeting, para. 11.

imports are not competing in any meaningful manner."3 The presence of imports in tiers 2 and 3 in no
way creates a meaningful competitive overlap.

6. The USITC's coincidence anal ysis was even more inadequate. The USITC majority devoted
only a few sentences to this issue, and improperl y relied on the mere juxtaposition of endpoint-to-
endpoint data. Critically, the USITC majority co mpletely failed to address (even implicitly) the
absence of coincidence for the second half of the peri od. For this crucial period, the USITC did not
address the fact that changes in th e rate of Chinese imports did not coincide with changes in the ten
injury factors under examination. This omission is particularly remarkable when one considers that
the absence of coincidence in this period was em phasized by both the dissent and respondents, and
compels a finding of WTO inconsistency. Simply put, there can be no "overall coincidence" on this
record, and the USITC's finding was neither reasoned or adequate.

7. The USITC also dismissed important causal factors, such as declining demand and changing
business strategy, that were plainly driving indus try conditions and performance. At a minimum,
these and other causal factors were "alternative expl anations" of the data that warranted reasoned and
adequate analysis by the USITC.
4 It is disappointing that the USITC chose to scapegoat Chinese
imports amid these conditions and causal factors, which it essentially dismissed with little or no
discussion.

8. Taken either separately or together, the pr eceding errors rendered the USITC's Determination
inconsistent with both Article 16 and the WTO Ag reement. The fact that imports were not
"increasing rapidly" at the end of the period is itself fatal to the USITC majority's determination.
Indeed, past increases in imports cannot establish that imports are either "increasing rapidly" or
causing injury in the recent period. Moreover, there was no link between rapidly increasing Chinese
imports and the condition of the domestic industry. Ag ain, when imports rose at their highest rate in
the period (i.e., 2006 to 2007), the domestic industry had its best performance in the period. When
imports rose at their slowest rate and saw a signi ficant decline from the preceding year (i.e., 2007 to
2008), the industry had its worst performance of the pe riod. All of this is at odds with the USITC
majority's theory, and none of it was addressed in its report.

9. Accordingly, we respectfully request that the Panel find that the US tariff measures are
inconsistent with Article 16 of the Protocol, as we ll as Articles I:1 and II:1(b) of GATT 1994. Thank
you for your time and attention.

3 USITC Determination, p. 52 (dissenting Commissioners) (emphasis supplied).
4 Appellate Body Report, US – Lamb, para. 106.