This is from Friday's China – GOES WTO panel report:
7.363 In the Panel's view, the United States has not made out its claim under Article 22.3 of the SCM Agreement. The United States argues that MOFCOM did not explain why a price derived from a competitive bidding process would not be equal to the market price. However, in its explanation in the final determination, MOFCOM set forth the factual findings that it considered supported its legal conclusion that the United States Government purchased domestically produced GOES for more than adequate remuneration. In particular, MOFCOM found:
(i) the scope of foreign products competing in the bidding process is restricted. The import volume of excluded foreign products accounts for 15% of steel consumption in the United States;
(ii) although, in accordance with the Government Procurement Agreement, there may be some competition from foreign products, in certain states, including Pennsylvania, foreign products are completely excluded; and
(iii) the North American price for steel is 10% higher than non-North American prices.
7.364 On the basis of the partial or complete exclusion of lower priced foreign products from the "competitive bidding"354 process, MOFCOM concluded that the bidding would not result in a market price. The United States argues that there is a step missing in this logic, namely an explanation of how this exclusion could result in a non-market price, despite the existence of a "competitive bidding process". However, MOFCOM explained that, in its view, the lower prices of the excluded goods would result in a non-market price even despite its conclusion that a "competitive bidding process" of some sort existed. The United States does not agree with this conclusion. It refers to the "flawed logic" and "flawed discussion" proffered by MOFCOM. 355 It also argues that "[t]he fact that one foreign company may have been excluded from what China admitted was a competitive bidding process does not mean that a given transaction was not conducted based on prevailing market conditions".
If I'm reading this correctly, and I confess I've only looked at it quickly, the MOFCOM decision says that purchases under Buy National procurement laws are almost certain to result in a "benefit," because excluding foreign goods leads to an above market price. If they are "specific" as well, this will mean that Buy National purchases constitute subsidies.
The United States only challenged MOFCOM's approach under Article 22.3 of the SCM agreement, which is a procedural provision. It did not make a substantive challenge under Articles 1.1(b) or 14(d). As a result, we are left with a bit of uncertainty as to what a WTO panel would think of this as a "benefit" issue. But if it is accepted that Buy National always leads to "benefit," there could be some WTO cases coming. (Others may have been aware of this issue already; I hadn't heard of it before.)
ADDED:
In the comments, Srikar points out Article 14(d) of the SCM Agreement, which states:
the provision of goods or services or purchase of goods by a government shall not be
considered as conferring a benefit unless the provision is made for less than adequate
remuneration, or the purchase is made for more than adequate remuneration. The adequacy of remuneration shall be determined in relation to prevailing market conditions for the good or service in question in the country of provision or purchase (including price, quality, availability, marketability, transportation and other conditions of purchase or sale).
So, when it comes to government procurement, the relevant legal standard for benefit is "adequate remuneration," and the issue was whether "the United States Government purchased domestically produced GOES for more than adequate remuneration."
AND YET MORE:
This is from the interim review:
6.16 China submits that the first sentence of paragraph 7.365 should be struck from the Report. The sentence in question states: "[a]rguably, if the United States' claim were one of substance, regarding for example the benefit determination under Articles 1.1(b) or 14(d) of the SCM Agreement, we may find certain problems with the reasoning used by MOFCOM".
6.17 The United States does not comment upon China's request.
6.18 The Panel has removed the sentence from the Report, on the basis that it is not strictly necessary to its reasoning. The Panel has also added a new footnote to paragraph 7.365 (footnote 357) to emphasise that the United States' claim was not one of substance and Article 22.3 of the SCM Agreement does not discipline the substantive adequacy of an investigating authority's reasoning.
For whatever reason, the substance was not the focus of the claim, so we didn't get to hear much about it, but the Panel apparently had some doubts about MOFCOM's approach.
