A couple years ago, I wrote about the possibility of challenging China's export credit practices under WTO rules. In that post, I noted the skepticism of others about such a challenge, and concluded with this:
I have more hope for a systemic case against China's export credit practices than the lawyers quoted in the piece do. The claim would be that the practices constitute a prohibited export subsidy under Article 3.1(a), and any attempt by China to invoke Item (k) of the Illustrative List of Export subsidies would fail because the terms of the OECD Arrangement are not met. The article provides, in parts not quoted above, some evidence of China's practices, and I think that a complainant could gather more evidence on its own. It could also request that the panel ask China for information under DSU Article 13.1. If China didn't supply it, the panel could draw adverse inferences.
I don't see this issue come up very often, but at a European Parliament hearing last week, Eoin O'Malley, Deputy Head of Unit at DG Trade, had this to say (at 10:06:02):
A bigger challenge perhaps is that emerging economies are not members, are not participants to this OECD arrangement. So this includes China obviously. They are in theory disciplined by more limited rules on this that exists at the WTO, but in practice the transactions that China supports, and others support, are not excessively transparent. So the ability to hold them to account in terms of WTO rules is limited.
This statement triggered a bit of additional thought about these issues for me. The second Brazil - Aircraft, Article 21.5 panel had the following to say about the burden of proof under the second paragraph of Item (k) of the SCM Agreement Illustrative List:
5.60 The Panel recalls that the text of the second paragraph of item (k) reads as follows:
Provided, however, that if a Member is a party to an international undertaking on official export credits to which at least twelve original Members to this Agreement are parties as of 1 January 1979 (or a successor undertaking which has been adopted by those original Members), or if in practice a Member applies the interest rates provisions of the relevant undertaking, an export credit practice which is in conformity with those provisions shall not be considered an export subsidy prohibited by this Agreement. (emphasis added)
5.61 On a reading which gives meaning to all of the terms used, the second paragraph suggests that export credit practices which are in conformity with the interest rates provisions of the relevant international undertaking are export subsidies -- and, as such, would normally be prohibited under the provisions of Article 3 of the SCM Agreement --, but that they are nevertheless not prohibited under the SCM Agreement.
5.62 This interpretation leads us to the conclusion that the second paragraph of item (k) provides for an exception from any prohibition on export subsidies laid down elsewhere in the SCM Agreement. The fact that the second paragraph does not, itself, impose obligations supports that conclusion.
5.63 Consistently with our view that the second paragraph of item (k) makes available an exception, it must be possible to invoke it as an affirmative defence to a claim of violation. As is clear from relevant WTO jurisprudence, the burden of establishing an affirmative defence rests with the party raising it.
(footnote omitted)
It seems to me that what a complainant could do here is claim that China's export credit practices, either as such or as applied in particular instances, constitute export subsidies and therefore violate SCM Agreement Article 3.1(a). This should be a fairly easy claim to win because that's kind of the nature of these programs, and I would think you could at least gather enough evidence for this part of the case. Obviously the "as such" claim would be more difficult to win than the "as applied" one, but again, I would think the nature of these programs gives the complainant a good chance here.
Then China would invoke the second paragraph of item (k), and would have the burden of proving it satisfied this exception. To do so, it would have to submit evidence. Either that evidence would be insufficient to satisfy the exception, or it would constitute proof that China is complying with the exception. Either way, we would have made some good progress in assessing the compliance of one particular form of Chinese subsidies with WTO obligations.
