China — Certain Measures Granting Refunds, Reductions or Exemptions from Taxes and Other Payments

Consultations

Complaint by Mexico. (See also dispute DS358)

On 26 February 2007, Mexico requested consultations with China concerning measures granting refunds, reductions or exemptions from taxes and other payments owed to the Government by enterprises in China.

The request for consultations identifies various measures, including any amendments and any related or implementing measures. Mexico considers the measures in question to be inconsistent with Article 3 of the SCM Agreement in that they provide refunds, reductions or exemptions to enterprises in China on the condition that those enterprises purchase domestic over imported goods, or on the condition that those enterprises meet certain export performance criteria. Further, Mexico claims that, to the extent the measures accord imported products treatment less favourable than that accorded “like” domestic products, they are inconsistent with Article III:4 of the GATT 1994 and Article 2 of the TRIMs Agreement. Mexico also claims that the measures do not comply with China's obligations under paras. 7.2-7.3 and 10.3 of Part I of its Accession Protocol, as well as para. 1.2 (to the extent that it incorporates paras. 167 and 203 of the Report of the Working Party on the Accession of China), which forms part of the terms of accession agreed between China and the WTO and is an integral part of the WTO Agreement.

Australia, the European Communities, Japan and the United States requested to join the consultations. China informed the DSB that it had accepted the requests of Australia, the European Communities, Japan and the United States to join the consultations.

On 4 May 2007, Mexico requested supplemental consultations to take into account China's recently adopted new income tax law. Australia, Canada, the European Communities, Japan and the United States requested to join the supplemental consultations. China informed the DSB that it had accepted the requests of Australia, Canada, the European Communities, Japan and the United States to join the supplemental consultations.

On 12 July 2007, Mexico requested the establishment of a panel. At its meeting on 24 July 2007, the DSB deferred the establishment of a panel.

Panel and Appellate Body proceedings

At its meeting on 31 August 2007, the DSB established a single panel for this dispute and dispute WT/DS358. Australia, Canada, Chile, the European Communities, Japan, Chinese Taipei and Turkey reserved their third-party rights. Subsequently, Argentina, Colombia and Egypt reserved their third-party rights.

Withdrawal/termination