A report by the World Trade Organization (WTO) issued On 5 July 2011,indicates that China's export restrictions were inconsistent with her WTO accession commitments. The reports are of the panel which examined complaints by the United States, the European Union and Mexico regarding “China — Measures Related to the Exportation of Various Raw Materials”.
On 23 June 2009, the European Communities requested consultations with China over concerns that China is implementing measures that restrictions the export from China of various forms of raw materials. European Union's complaint was that, China's export duties were inconsistent with her WTO accession commitments. The European Union believed that these measures as well as any amendments, replacements, related measures, and implementing measures, are in violation of
• Articles VIII, X, and XI of the GATT 1994, and
• Paragraphs 5.1, 5.2, 8.2 and 11.3 of Part I of the Protocol on the Accession of the People's Republic of China (“Accession Protocol”), as well as China's obligations under the provisions of paragraph 1.2 of Part I of the Accession Protocol (which incorporates commitments in paragraphs 83, 84, 162 and 165 of the Report of the Working Party on the Accession of China) and its commitments referred to in paragraph 342 of the Working Party Report.
The European Communities cites 32 measures through which China allegedly imposes restrictions on the exports in question and noted that there appears to be additional unpublished restrictive measures. The European Communities considered that the measures also appear to nullify or impair the benefits accruing to the European Communities directly or indirectly under the cited agreements. Other countries affected by and believing that China's export duties inconsistent her accession commitments to WTO also joined the European Union which had asked for consultations with China. The countries that joined consultations with China include Canada, Mexico, Turkey and the United States.
On 4 November 2009, the European Communities requested for the establishment of a panel to examine this dispute on WTO accession commitments China's export restraints. The panel was subsequently established on 21st December 2009, pursuant to Article 9.1 of the WTO Dispute Settlement Understanding. The Panel which was fully constitutes on 29 March 2010 was not able to issue its report within six months.On 5 July 2011, WTO issued the reports of the panel that had examined complaints and below is a summary of findings.
This dispute concerns four types of China's export restraints that it imposes on the export of a number of raw materials. The raw materials subject to the export restraints are various forms of bauxite, coke, fluorspar, magnesium, manganese, silicon carbide, silicon metal, yellow phosphorus and zinc. China is a leading producer of each of the raw materials which are used to produce everyday items as well as technology products.
The complainants argued that the China's export restraints create scarcity and cause higher prices of the raw materials in global markets. They also provide Chinese domestic industry with a significant advantage by way of a sufficient supply, and lower and more stable prices for the raw materials.
Upon its accession to the WTO, China undertook to eliminate all export duties (taxes) except for a number of products listed in an Annex to its Protocol of Accession. In this Protocol, China also committed not to apply export quotas (restrictions on the amount that can be exported).
In one of its key findings, the Panel found that China's export restraints specifically duties were inconsistent with the commitments that China had agreed to in its Protocol of Accession. The Panel also found that export quotas imposed by China on some of the raw materials were inconsistent with WTO rules.
The Panel found that the wording of China's Accession Commitments did not allow China to use the general exceptions in Article XX of the GATT 1994 to justify its WTO inconsistent export duties. The Panel also considered that even if China were able to rely on certain exceptions available in the WTO rules to justify its export duties, it had not complied with the requirements of those exceptions.
In particular, China had argued in its defense that some of its export duties and quotas were justified because they related to the conservation of exhaustible natural resources for some of the raw materials. But China was not able to demonstrate that it imposed these restrictions in conjunction with restrictions on domestic production or consumption of the raw materials so as to conserve the raw materials. The Panel acknowledged, however, that China appears to be heading in the right direction in adopting a framework to justify its quotas under WTO rules, but that the framework is not yet WTO consistent as it still has to be put into effect for domestic producers.
As for other of the raw materials, China had claimed that its export quotas and duties were necessary for the protection of the health of its citizens. China was unable to demonstrate that its export duties and quotas would lead to a reduction of pollution in the short- or long-term and therefore contribute towards improving the health of its people.
China also committed to eliminate all restrictions on the “right to trade” — rights given to enterprises by China in parallel to market access and non-discrimination provisions guaranteed under the WTO. The complainants were successful in most of their trading rights claims.
Regarding the administration and allocation of its export quotas, China successfully defended its practices in claims brought by the United States and Mexico whereas the European Union succeeded in its separate claim that it brought against China.
The Panel also found that certain aspects of China's export restraints regarding licensing regime, applicable to several of the products at issue, restrict the export of the raw materials and so are inconsistent with WTO rules and her WTO accession commitments.
