Contributing Lawyers

Canada

Cyndee Todgham Cherniak

United States

Susan Kohn Ross

Australia

Andrew Hudson



Canadian Manufacturers May Have An Opportunity To Gain Market Share From Chinese Importers

Canadian manufacturers have a increasingly small window of opportunity to restrict Chinese imports into Canada for a period of 3-6 years. Read on if you are a Canadian manufacturer or advisor to a Canadian manufacturer and compete for Canadian market share with imports from China.

When China joined the World Trade Organization in 2001, they agreed to a dispute settlement process called a Transitional Safeguard Mechanism contained in Article 16 of China's Protocol of Accession. It is important to note that the Transitional Safeguard Mechanism in Article 16 of China's Protocol of Accession ends on December 10, 2013.

This means that manufacturers have less than 2 years to bring cases (in Canada, the cases are filed with the Canadian International Trade Tribunal) and receive decisions which contain merely recommendations (the Canadian International Trade Tribunal issues its recommendations 90 days after the case is initiated and initiates an inquiry 21 days after receipt of a properly documented complaint) and convince the government (in Canada's case, the Minister of Finance) to act on the recommendations. Based on the WTO deadline and Canada's statutorily imposed deadlines, starting sooner is better. In my view, a start of the litigation process in 2011 is necessary. THE TIME IS NOW TO ACT.

When Canadian manufacturers consider this opportunity, they should ask whether they would like additional market share between 2011-2017 and how much additional profits they could make by restricting Chinese competition.

The downside is that it costs money to pursue the opportunity and there is no guarantee of success. Canada's only China-specific safeguard case against outdoor barbeques successfully resulted in recommendations by the Canadian International Trade Tribunal to the Minister of Finance for additional duties to be imposed to protect the Canadian barbeque manufacturers from the market disruption caused by Chinese imports. However, the Minister of Finance did not implement the recommendations (and made the correct decision at the time based on the specific facts of that case). I am not going to hide the reality that it is possible to win the case and not receive any benefits for the money spent of the litigation.

That being said, and on a more positive note, in December 2010, a significant development occurred at the World Trade Organization. On December 13, 2010, the WTO DSB circulated its report in DS 399 "United States — Measures Affecting Imports of Certain Passenger Vehicle and Light Truck Tyres from China". The DSB Panel determined that the United States transitional safeguard measures against tires from China was valid and the United States did not breach any WTO rules. For a copy of the WTO decision, please go to the following link - http://www.wto.org/english/tratop_e/dispu_e/cases_e/ds399_e.htm

The DSB Panel was not persuaded by China's arguments that the case took place during a global economic recession. The DSB Panel was not persuaded by any of China's arguments against the implementation of the transitional safeguard measures against Chinese imported tires into the United States.

This WTO Panel decision may be appealed to the WTO Appellate Body. Until that happens, it will be used as a road map by investigatory authorities like the Canadian International Trade Tribunal. Until the decision is overturned (if it is overturned), manufacturers should be more optimistic about this trade correcting mechanism.

The China Specific safeguard mechanism or Transitional Safeguard mechanism may be the single best opportunity open to Canadian manufacturers to improve market share in Canada. There is a limited time to take advantage of the opportunity. Ask one question - how much money are you willing to spend to develop a 6 year market opportunity? Then talk to Cyndee Todgham Cherniak at 416-307-4168 to see if the CITT proceedings and post-recommendation consultations with the Minister of Finance (and Minister of International Trade) are within that budget.

I should mention that McMillan LLP's International Trade Group is formed by merger on a number of Canadian international trade lawyers with experience in transitional safeguard measures.  Some in the group acted for the Complainant in the Outdoor Barbeques case.  I acted for the Government of China and a number of importers and exporters of Chinese barbeques.  We have experience in the only Canadian transitional safeguard case to date from both sides of the issue. 

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