China's Firt Defeat in the WTO

The Panel in the China - Auto Parts case has just issued the interim report. According to several sources, China lost the case. This is rather unsurprising as the legal issues involved in the case are relatively simple. The more interesting question, however, is how China would react to its first defeat. Initially highly reluctant to solve trade disputes using the WTO dispute settlement system, China has gradually overcome such phobia over the past two years (see e.g., Taming the Dragon: China's Experience in the WTO Dispute Settlement System, Legal Issues of Economic Integration 34(4): 369–392, 2007). With immediate relevance to this case, the question is whether China will refuse to implement Panel or AB recommendations? In the long term, the question is whether the loss in this case will push China back to its secretive approach of solving trade disputes through private settlements? My answers to both would be a qualified “no”. I would be very interested in getting the views from fellow contributors and readers of the blog on these questions.