First Canadian Decision Under China Special Safeguard Rules

On October 11, 2005, the Canadian International Trade Tribunal ("CITT") issued a determination that imports of certain outdoor barbeques from China had caused market disruption to Canadian producers of outdoor barbeques. The CITT recommended the imposition of a 15 percent surtax on those imports. This was the first Canadian complaint pursuant to the special safeguard regime that China agreed to when it joined the World Trade Organization ("WTO") in November 2001. China agreed that for a period of 13 years Chinese products could be subject to the imposition of temporary restrictions if they were shown to be causing or threatening to cause market disruption to a WTO Member’s domestic industry. "Market disruption" is defined as a situation where imports increase so rapidly as to be a "significant cause of material injury, or threat of material injury to the domestic industry".

China is the only WTO Member that is subject to this extraordinary trade remedy, in an obvious derogation from the fundamental principle of most-favored-nation treatment that underpins the WTO system. Although the existence of the China special safeguard is clear evidence of the anxiety caused by China’s growth as a trading economy, the fact that it was prepared to accept such overtly discriminatory treatment is itself a sign of the tremendous importance that China attached to WTO membership.

In the Outdoor Barbeque case, the CITT applied a very low threshold of injury relative to its traditional approach in global safeguard cases (i.e., safeguard cases against imports from all countries). Moreover, the CITT dismissed virtually every argument made by importers and exporters, and declined to require the domestic industry to advance a credible restructuring plan to warrant the temporary protection it recommended. The decision may be a sign that the CITT is increasingly leaning in favor of domestic industry complainants. In its Bicycles and Bicycle Frames global safeguard decision issued a month before Outdoor Barbeque decision, the CITT appeared to be equally responsive to domestic industry arguments and dismissive of importer/exporter arguments. In both cases, the CITT adopted a procedural approach to the hearing of the matter that limited the ability of importers and exporters to fully challenge the evidence of the complainant domestic industry.

The CITT’s apparent leaning toward import relief may well attract further applications from Canadian manufacturers seeking protection against more competitive Chinese suppliers. However, before rushing to file such complaints, it is important to note that the Canadian Government has yet to implement the CITT’s recommendations in either the Outdoor Barbeque or Bicycle and Bicycle Frames cases.

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