China Programme • Volume 13 • Number 38 • 4th November 2009

EU, US, Mexico Request WTO Panel on Chinese Export Restrictions

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After months, if not years, of complaining that China’s quotas, export taxes, and minimum export prices violated its international legal commitments and created an unfair advantage for local industry, the US and the EU took the first step towards launching a WTO dispute in June, when they formally requested consultations on the matter with Beijing (see BRIDGES Weekly, 24 June 2009, http://ictsd.net/i/news/bridgesweekly/49477/). Mexico followed suit in August.

The consultations failed to resolve the matter, leading to the requests for a panel on 4 November.

“China’s restrictions on raw materials continue to distort competition and increase global prices, making conditions for our companies even more difficult in this economic climate,” said EU Trade Commissioner Catherine Ashton. “I regret that the formal consultation process and significant EU engagement on this issue has not led to an amicable solution which would have been our preferred course of action.”

Debbie Mesloh, a spokesperson for the US trade representative’s office, expressed similar sentiments, claiming that China’s measures “provide preferential conditions for Chinese industries that use these raw materials.” She stressed that Washington “remain[ed] open to working with China to find a mutually agreeable solution to our concerns.”

Specifically, Brussels is targeting Beijing’s export duties of varying levels on bauxite, coke, fluorspar, magnesium, manganese, silicon, and zinc. It is also challenging the legality of various rules for companies seeking to export raw materials. To take three examples: exporters are required to pay fees and meet minimum export prices, domestic companies are subject to different criteria from foreign-invested enterprises, and the right to export is contingent on having done so previously. The US’ case is substantively identical.

WTO rules prohibit export quotas, except temporarily under certain circumstances. But they place few limits on the use of export taxes, so long as they apply equally for all export markets (GATT Article XI). However, when China joined the global trade body in December 2001, it promised to do away with “all taxes and charges applied to exports” on all but 84 products (defined at the 8-digit HS level). According to the US and the EU, the products they are targeting are not among those 84 exceptions, which are outlined in China’s accession agreements. The far-reaching commitments countries make when they join the WTO are enforceable under the global trade body’s dispute settlement system.

The US trade representative’s office also noted on Wednesday that other WTO rules specify that trade-related regulations must be administered in a non-discriminatory manner (GATT Article X), and that associated fees - distinct from export tariffs - should simply offset the cost of services rendered (GATT Article VIII).

At time of writing, Chinese officials could not be contacted to respond to the panel requests. In June, however, the Chinese commerce ministry defended the export restrictions, saying that they were WTO-compliant and necessary to protect China’s environment and natural resources.

The WTO Dispute Settlement Body is scheduled to consider the panel requests on 19 November.

ICTSD reporting.