WTO grants Hong Kong request to escalate dispute with US over ‘Made in China’ labelling
- Establishment of a dispute panel is the next step in Hong Kong’s challenge against a Trump-era order that forces the city’s locally made goods to be labelled ‘Made in China’
- The panel must now be formed within a matter of weeks, with the US set to launch a defence on grounds of national security
Hong Kong’s dispute with the United States over a “Made in China” labelling demand has taken an important step forward, after the city’s request to establish a disputes panel at the World Trade Organization (WTO) was granted.
It is common for recipients of complaints to reject panel formation requests at the WTO in the first instance, when they must pass by consensus, with defendants effectively holding veto power.
But in the second instance, the requirement is flipped, with unanimity against the panel’s formation required to block it.
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At Monday’s meeting, Hong Kong representatives said that the labelling rule “is inconsistent with the WTO’s fundamental obligation to provide most favoured nation treatment to all members as well as various provisions” under WTO rules.
Hong Kong described the requirements as “arbitrary, unilateral, unnecessary and unjustifiable”, the Geneva source said.
In response, the US said it regretted Hong Kong moving forward with its second request for a panel, adding that Washington’s actions had been based on an executive order determining that the Hong Kong situation “constitutes a threat to the national security of the United States”.
US representatives added that national security exceptions “are not subject to review through WTO dispute settlement” mechanisms.
In a note filed with the WTO on January 14, the Hong Kong government laid out seven rules of the global trading architecture that it accuses the US of flouting.
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“I questioned the timing of the initial request given that the US had a new incoming administration and still remains somewhat puzzled that Hong Kong has decided to push the matter and request a panel,” said Bryan Mercurio, a trade law professor at the Chinese University of Hong Kong.
“The Biden administration has recently allowed for the appointment of a new [WTO] director general and one would have thought that further negotiation with the new administration would be the prudent course of action for Hong Kong.
“Hong Kong is such a small jurisdiction and even if it wins the case – and it’s not an open and shut case – we lack the ability or economic incentive to effectively make use of retaliatory measures against the United States.”
“Even if the panel renders a ruling in favour of Hong Kong, the US will be able to make the case a pending one just by making an appeal to the dispute settlement body [DSB] given the de facto non-existence of the Appellate Body,” said Kong Qingjiang, a law professor at the China University of Political Science and Law in Beijing.
“Nevertheless, bringing the US to the DSB itself is a clear illustration of [Hong Kong’s] stance against the US sanctions.”
Now begins the process of composing a three-person dispute panel, with the rules allowing 20 days for each party to agree on three names, one of which will be chair.
If there is no agreement, then either party can request that the director general, in consultation with the chair of the disputes body, pick the panel members. That has to be done no later than 10 days after the request for panel composition is received.
Canada, Brazil, China, Ukraine, Norway, Korea, India, Singapore, Turkey, Russia, Japan, Switzerland, and the European Union reserved their rights to participate as third parties in the proceedings.
Henry Gao, an associate professor of law at Singapore Management University, was sceptical as to whether the panel would progress to completion, saying that “the whole business is messy on both sides, especially that of Hong Kong”.
“For Hong Kong, engaging in detailed arguments on this would be like a public inquiry on Hong Kong’s autonomy. I think at one point, Beijing might call it off for strategic reasons,” Gao said.
The Hong Kong government, however, has repeatedly vowed to resist the designation. Secretary for Commerce and Economic Development Edward Yau Tang-wah in January described the US move as a “unilateral and irresponsible attempt to weaken Hong Kong’s status as a separate customs territory, which is conferred by the Basic Law”.
“Such a move also confuses the market and undermines the rules-based multilateral trading system,” Yau added.
Additional reporting by Su-Lin Tan