As we described here, on July 15 there were two developments in the U.S.-China WTO dispute related to TRQs on certain agricultural products (DS517): 1) the United States requested authorization from the WTO's Dispute Settlement Body (DSB) to take countermeasures pursuant to Article 22 of the DSU; and 2) China requested a panel pursuant to DSU Article 21.5. Both of these requests were on the agenda of the July 26 DSB meeting. (The U.S. statement at the meeting is here). As described in more detail below, the Article 22 request has now been sent to arbitration and the Article 21.5 request was blocked until the next DSB meeting.

On the issue of the U.S. recourse to Article 22, China requested arbitration, and the item was therefore taken off the agenda of the meeting. An arbitration panel will now be established to evaluate whether the level of suspension of concessions (i.e. countermeasures) proposed by the United States is equivalent to the level of nullification or impairment (economic harm) it suffered. (In its communication on this matter, the United States did not specify this level other than to say it would rely on "a formula that relates to the value of the unfilled portion of any tariff-rate quota (TRQ) for wheat, rice, or corn.")

As to the Article 21.5 panel, the United States blocked the panel from being established, which it can do at the first meeting where the request is on the agenda. If China puts the request on the agenda of the next meeting, the panel will be established. The next regularly scheduled DSB meeting is August 30, although China can request a special meeting before that for the purposes of getting a panel established.

In its statement to the DSB, the United States contested China's declaration that it had come into compliance, arguing that: "Not only is the public process by which China administers its TRQs non-transparent, but China also has refused U.S. requests for additional information that would allow the United States to better understand how these TRQs have been administered in practice."

The way disputes usually proceed at this stage is for the same panelists to be appointed in both the Article 21.5 proceeding and the arbitration proceeding. If the Article 21.5 panel finds that the party complained against in the original dispute (in this case China) has not come into compliance, the arbitration panel then examines whether the proposed suspension is appropriate (that is, whether it is equivalent to the level of nullification or impairment).

Currently, however, with no Appellate Body in place to hear appeals of panel reports, and with the United States not a party to the alternative WTO appellate mechanism known as the Multi-Party Interim Appeal Arbitration Arrangement, it is not clear how this dispute will be resolved.