WTO agrees to dispute panel involving HK case against US labeling order
Published: Feb 23, 2021 06:43 PM

Hong Kong Victoria Harbor Photo: VCG

The Hong Kong Special Administrative Region (HKSAR) has taken a new step in its WTO labeling row with the US, with the global trade body agreeing on Monday to create a panel to consider the dispute raised by Hong Kong concerning a US order that requires Hong Kong products to be relabeled as "Made in China."

Experts still pin their dispute settlement hopes on high-level talks between China and the US, but they see the WTO's move as reinforcing the case for Hong Kong to win approval for its demand to withdraw the US requirement.

The WTO Dispute Settlement Body (DSB) agreed at a meeting on Monday to the city's request to set up a dispute resolution panel as regards the US labeling requirement's violation of WTO rules, the HKSAR government said Tuesday in a statement posted on its website. 

Laurie Lo, the HKSAR's permanent representative to the WTO, spoke at the DSB meeting, reiterating the city's "strong objection to the US' unilateral and irresponsible imposition of the new requirement on origin marking for Hong Kong products."

The origin-marking requirement, which is unjustifiable and inconsistent with a raft of WTO rules, damages Hong Kong's interests as a WTO member, Lo said, per the statement. 

This marks the second arbitration request from Hong Kong. The first on January 25 sought a dispute resolution panel, which was rejected by the US. 

Hong Kong's US-bound exports would be re-stamped as "Made in China," US customs announced in August last year, in a move to end the city's special treatment under the Hong Kong Policy Act of 1992. Items failing to comply will reportedly be subject to a punitive 10-percent duty at US ports.

The new rules, which were originally supposed to come into force in September last year, eventually took effect in November due to an extension of 45 days.

"There is a strong chance that the panel will rule in favor of the HKSAR's request, as the US order lacks a legal basis," Huo Jianguo, vice president of the China Society for World Trade Organization Studies, told the Global Times on Tuesday.

Thus far, 13 WTO members have indicated an interest to join meetings of the would-be panel as third parties, an indication of their concern with the issue that implicates the multilateral trading system as well as the equal rights of WTO members, read the Tuesday statement, citing a spokesman for the Commerce and Economic Development Bureau of the HKSAR government.

Unless the US can prove that Hong Kong is not a separate customs territory - essentially a mission impossible, factoring in the city's high degree of autonomy - the US origin-marking order is destined to be overthrown by the dispute settlement panel, Huo said, although it could take several years for a final WTO ruling.

"Hong Kong's economic and trade status is on par with that of other WTO members," the HKSAR government said in the Tuesday statement, noting that the "Made in Hong Kong" marking on locally made products conforms to the city's status as a separate customs territory, complies with WTO rules, and offers consumers clear and accurate information on product origin. 

Still, as Huo put it, the US might opt to not comply with the DSB panel's ultimate decision and instead resort to domestic legislation, thereby rendering it a "moral victory."

It would make more sense for the origin-marking dispute to be included and fixed in future high-level negotiations between China and the US, he suggested.

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