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2. The conditions for the application of PSSMs are not well clarified and defined. According to Article XVI of the Accession Protocol, the preconditions for the application of PSSMs are the occurrence of an absolute or relative increase of the import of products originating in China, which has brought about market disruption or threat of market disruption or significant diversion of trade. Market disruption is constituted if the import of a Chinese product increases, either absolutely or relatively, to constitute a significant cause of a material injury or a threat of material injury to the domestic industry of the importing country that produces like or directly competitive products.The problem is that there is no clear-cut definition or clarification of what may constitute significant diversion of trade, material injury or threat of material injury in the Accession Protocol. Furthermore, the standards set for the application of PSSMs and the determination of material injury or threat of material injury are much lower that those set for serious injury or threat of serious injury to the domestic industry in the case of investigations for safeguards. Additionally, that the material injury or threat of material injury is a significant cause rather than a major cause of injury to the domestic industry has in fact lowered the baselines for the application of PSSMs as the importing country only has to prove that a product from China has increased in large numbers to apply PSSMs.
3. China is given limited power to remedy the adoption of PSSMs. Article XVI of the Accession Protocol provides that China has the right to suspend the application of substantially equivalent concessions or obligations under the GATT 1994 under two circumstances: when a measure is taken as a result of a relative increase in the level of imports that remains in effect more than two years and when a measure is taken as a result of an absolute increase in imports that remains in effect more than three years. According to the Agreement on Safeguards, the WTO member can adopt measures for retaliation at any time after the safeguard measures come into effect. Therefore the provision of PSSMs has in fact limited the right of China to adopt retaliation.
4. The term of application is limited. In contrast with the unlimited term of the application of the Agreement on Safeguards, the application of PSSMs clause expires 12 years after the date of China’s accession to the WTO. So the application of PSSMs is transitional.
III. The Application Procedure of PSSMs
According to the provisions of Article XVI of the Accession Protocol and Paragraph 246 of the Working Party Report, the application of PSSMs must observe the formulated procedure.
1. Investigation. Investigation is the base and main way of truth finding. An action to address market disruption would be taken only after an investigation by the importing WTO Member pursuant to procedures previously established and made available to the public. Investigation will be conducted on the import volume and market share of Chinese products and the effects of the imports on prices and the domestic industry of the importing country as well as the existence of causal link between the imports and market disruption.
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