China will likely launch a challenge "very, very soon" in the World Trade Organization of a provision in the recently completed 2009 omnibus appropriations act that keeps in place a U.S. ban on processed Chinese chicken exports, a senior Chinese trade official said yesterday (March 18).
But Deputy Permanent Representative to the WTO Zhang Xiangchen said China will refrain from similarly cutting off access of U.S. farm exports to China despite a rising sentiment in the country favoring retaliation. He said trade officials and Chinese chicken producers had been led to believe that a similar provision in the 2008 appropriations bill would expire and not be renewed.
In an interview with Inside US-China Trade, Zhang said he was making the "strong recommendation" that no unilateral retaliation be implemented by Beijing in conjunction with a WTO case.
"You can imagine how emotional some Chinese people are, especially the chicken producers in China," he said. "But we have to persuade them and indicate to them that we could not conduct unilateral retaliation against any country, including the U.S., if the U.S. or other trading partners fail to follow WTO rules."
The ban affects a program aimed at exporting U.S. chicken to China for processing and then re-imported to the U.S., which was started under the Bush administration as a concession to China. It also prevents Chinese-raised chicken that is cooked and processed from being sent to the U.S.
It is particularly important "at this difficult time in the world economy" that major trading partners such as the U.S., European Union, and China not pursue unilateral measures restricting trade, said Zhang.
Zhang last week delivered a "verbal note" to the U.S. delegation in Geneva protesting the chicken ban in the omnibus bill and raised it in the WTO agriculture committee meeting on March 12. According to the note, the ban "violates the basic rules of the WTO seriously and affects the normal trade of poultry meat between China and U.S. negatively and damages the rights of the Chinese poultry industries."
At the March 12 committee meeting, Zhang blasted the ban as discriminating against China and therefore violating the most favored nation obligations of the United States, according to which the U.S. must extend the same treatment to all WTO members.
At the March 12 session, the Chinese delegate expressed strong disagreement with the U.S. view that section 727 is in conformity with the WTO's agreement on sanitary and phytosanitary measures (SPS). He charged that the issue is "irrelevant" to the SPS pact because it is targeted to China, and does not deal with the safety of imported poultry in general.
"Perhaps we could send to the Institute of Training and Technical Cooperation of the WTO Secretariat a copy of this section, which would serve as a perfect example for their training courses," he told WTO members, according to his prepared statement. "I believe that any trainee with a preliminary knowledge of the WTO disciplines will tell that this section violates the basic rules of the WTO including the MFN."
Chinese trade officials and experts had debated the ban when it was first included in the 2007 appropriations bill, and there has been a consensus for some time that it violated the MFN clause in Article 1 of the General Agreement on Tariffs and Trade, Zhang said this week.
The only internal debate, he said, was over whether it was worth the money it would cost in attorney fees to bring a WTO case, given that WTO dispute settlement takes two years to provide an outcome whereas the provision itself was expected to only stay in effect for one year. He implied that the fact that the ban has been renewed has swayed that debate in favor of a WTO case.
Meanwhile, U.S. poultry producers are gearing up to raise awareness about the negative implications of maintaining the ban, though they know how hard it would be to alter it in the short term given that it is enshrined in law. They are coordinating with other agriculture groups to seek out potential congressional allies, such as Democrats on the House Ways and Means Committee with agricultural export interests in their districts, according to one informed source.
An early effort to organize against the ban will at least show Chinese officials and producers that major economic interests in the United States are coordinating to prevent a further extension of the ban in 2010, the source said.
"They have direct leverage with the U.S. poultry industry, and we've communicated that we're on their side on this issue," he said. He expressed the hope that such an effort will help China decide to forgo retaliation against U.S. farm exports to its market.
U.S. poultry industry sources have sharply criticized the U.S. import ban as not being scientifically based and only aimed at China. They have raised the possibility that the ban could be found in violation of WTO rules on technical barriers to trade and also GATT MFN provision.
Additionally, China has used the language championed by Rep. Rosa DeLauro (D-CT), the chairwoman of the subcommittee on agriculture, rural development, Food and Drug Administration, and related agencies, to counter U.S. industry pleas for expanded market access in China, industry sources said this week.
Taken together, China and Hong Kong form the largest export market for U.S. poultry exports, said a poultry industry official. Last year, the U.S. shipped 939,268 metric tons of chicken products valued at more than $862 million. From 2007 to 2008 the Chinese market grew 21 percent in quantity and 31 percent in value, the source added.
One source argued it is surprising that DeLauro, as a Democrat, does not trust the Obama administration to ensure the safety of the re-imports from China for U.S. consumers. "To some extent, one could understand the congresswoman's concern with a Republican White House," he said. "But now she's got friends in both places, and she can't trust her friends."
At issue is language in the omnibus bill that blocks the use of funds by the U.S. Department of Agriculture (USDA) funds for developing a rule that would allow the importation of cooked poultry from China to the United States, according to the language in the accompanying report. Uncooked chicken is not approved for sale into the U.S. because of worry over the potential spread of avian flu.
The language in omnibus section 727 is similar to a previous ban DeLauro inserted into section 733 of the appropriations bill last year as well as in earlier appropriations legislation.
In the current bill, USDA is "urged" to report within a year on how changes in Chinese food safety laws affect the safety of chicken, which was not part of the appropriations process last year. Also new this year, the USDA is "directed" to submit a plan of action on how to guarantee the safety of such imports, according to the report language.
"Such plan should include the systematic audit of inspection systems, and audits of all poultry and slaughter facilities that China would certify to export to the U.S. . . . the systematic audit of laboratories and other control operations, expanded port-of-entry inspection, and creation of an information sharing program with other major countries importing poultry products from China that have conducted audits and plant inspections among other actions," according to the report. --Inside US-China Trade
