I'm puzzling over certain aspects of the consideration of "unforeseen developments" in the Photovoltaic Cells Section 201 case. Here's a brief rundown of the issue.
On November 13, 2017, the ITC sent to the President its report in the case. I had been wondering what the report would say about unforeseen developments, and in particular how much effort the ITC would make to comply with Appellate Body jurisprudence in this area.
The basic issue here is the WTO obligation that requires an investigating authority to determine whether increased imports/injury result from unforeseen developments. GATT Article XIX includes this requirement, but the Safeguards Agreement does not. The Appellate Body ruled a while back that the GATT Article XIX requirement still applies, despite the failure to carry it over explicitly into the Safeguards Agreement. This creates difficulty for U.S. safeguards law, which does not call for the ITC to take this factor into account. So how would the ITC deal with this issue?
Before the ITC's report was made public (I think it was before -- it was before I read the report anyway), on November 27 the U.S. Trade Representative requested additional information from the ITC on this issue. The request states: "I have determined that it would be appropriate, under the authority delegated to me by the President, to request additional information from the Commission, pursuant to section 203(a)(5) of the Trade Act, in the form of a supplemental report to assist the President in determining the appropriate and feasible action to take that will facilitate efforts by the domestic industry to make a positive adjustment to import competition and provide greater economic and social benefits than costs. Accordingly, I respectfully request that for the affirmative determination under section 202(b)(l) of the Trade Act, the Commission identify any unforeseen developments that led to the articles at issue being imported into the United States in such increased quantities as to be a substantial cause of serious injury."
That request suggested to many (including me) that perhaps USTR was worried that the ITC had not done enough with the unforeseen developments issue, and the USTR request was designed to shore up the reasoning on this point.
In the "supplemental report" submitted by the ITC in response (only available on Inside US Trade as far as I can tell) to this request, the ITC noted that, "to assist the President in determining the appropriate and feasible action to take that will facilitate efforts by the domestic industry to make a positive adjustment to import competition and provide greater economic and social benefits than costs," the U.S. Trade Representative had requested that the ITC "identify any unforeseen developments that led to the articles at issue being imported into the United States in such increased quantities as to be a substantial cause of serious injury." The ITC addressed this issue in the supplemental report as follows.
Early on, the ITC says:
Based on the data and other information we evaluated at the time that we reached our affirmative injury determination in this case, we found and confirmed the existence of unforeseen developments that led to the articles at issue being imported into the United States in such increased quantities as to be a substantial cause of serious injury.
The use of the past tense here is interesting. Are they saying they "found and confirmed the existence of unforeseen developments" as part of the original investigation? Or was it only after USTR made its request that they found and confirmed this?
Moving on to the actual unforeseen developments analysis, the supplemental report says the following:
As part of its WTO accession, the government of China made a series of commitments concerning a variety of topics, including non-discrimination; transparency; investment; state-owned and state-invested enterprises; pricing policies; and fiscal, financial, and budgetary activities by the central government and sub-national levels of government.11 For example, the government of China agreed to implement market-oriented economic reforms and to abide by WTO rules and principles, including to “allow prices for traded goods and services in every sector to be determined by market forces,” to “eliminate all subsid{ies}” contingent on export performance or the use of domestic goods, and to “not influence, directly or indirectly, commercial decisions on the part of state-owned or state-invested enterprises.”12
In direct contradiction of these commitments – and unforeseen by the U.S. negotiators at the time that the United States acceded to GATT 1947, at the time that the United States acceded to the WTO, or at the time that the United States agreed to China’s accession to the WTO – the government of China implemented a series of industrial policies, five-year plans, and other government support programs favoring renewable energy product manufacturing, including CSPV products. The government of China’s industrial policies, plans, and support programs took advantage of the existence of programs implemented by the U.S. government to encourage renewable energy consumption that, consistent with U.S. WTO obligations, did not favor U.S. manufacturers but instead were directed at owners of renewable energy systems.13 These industrial policies, plans, and government support took a variety of forms and led to vast overcapacity in China and subsequently in other countries as Chinese producers built facilities elsewhere, which in turn ultimately resulted in the increased imports of CSPV products causing serious injury to the domestic industry in the United States.
...
U.S. negotiators could not have foreseen at the time that the United States acceded to GATT 1947, at the time that the United States acceded to the WTO, or at the time that the United States agreed to China’s accession to the WTO that the government of China would implement the industrial policies, plans, and government support programs such as those described above that directly contradicted the obligations that China committed to undertake as part of its WTO accession. U.S. negotiators also could not have foreseen that such industrial policies, plans, and support programs would lead to the development and expansion of capacity to manufacture CSPV products in China to levels that substantially exceeded the level of internal consumption. They could not have foreseen that this capacity would largely be directed to export markets such as the United States. U.S. negotiators also could not have foreseen that the U.S. government’s use of authorized tools, such as antidumping and countervailing duty measures on imports from China, would have limited effectiveness and instead lead to rapid changes in the global supply chains and manufacturing processes in order to facilitate U.S. imports of non-covered products from China and Taiwan and later U.S. imports from Chinese producers’ affiliates in other countries.32 These unforeseen developments led to CSPV products being imported into the United States in such increased quantities as to be a substantial cause of serious injury to the domestic industry producing an article like or directly competitive with the imported article.
At first glance, this reasoning seems sound to me.
However, I wonder what a WTO panel and the AB will think of the fact that none of this showed up in the original ITC report, and, relatedly, what they will make of the USTR request that generated this reasoning in a subsequent report. My guess is that as long as they find the reasoning acceptable, they will forgive its omission from the original report, but it's certainly an issue that could be raised by the complainants.
