TWN Info Service on WTO and Trade Issues (Nov16/11)
14 November 2016
Third World Network

Panel set over China's export duties on raw materials
Published in SUNS #8352 dated 10 November 2016

Geneva, 9 Nov (Kanaga Raja) -- The Dispute Settlement Body (DSB) of the World Trade Organisation (WTO) on Tuesday agreed to establish a panel, at the request of the United States, to examine China's export restrictions on certain raw materials.

This was a second-time request and panel establishment was automatic.

The European Union, Mexico, Chinese Taipei, Singapore, Vietnam, Brazil, Kazakhstan, Korea, India, Canada, Japan, the Russian Federation and Norway reserved their third party rights to the dispute.

Also at the meeting, China blocked a first-time panel request by the European Union over the same issue (see below).

US-CHINA DISPUTE OVER RAW MATERIALS

The dispute raised by the US against China is over its restrictions on the export of various forms of antimony, chromium, cobalt, copper, graphite, indium, lead, magnesia, talc, tantalum, and tin.

In its communication to the DSB, the US said that China imposes export duties on various forms of antimony, chromium, cobalt, copper, graphite, lead, magnesia, talc, tantalum, and tin.

According to the US, these materials subject to China's export duties are not listed in Annex 6 of the Accession Protocol of the People's Republic of China (WT/L/432).

The US considered that these measures are inconsistent with Paragraph 11.3 of Part I of the Accession Protocol because these measures constitute taxes and charges applied to exports.

The US also complained that China imposes restrictions, such as quotas, on the export of various forms of antimony, indium, magnesia, talc, and tin.

The US considered these are inconsistent with Article XI: 1 of the GATT 1994 and China's obligations under the provisions of Paragraph 1.2 of Part I of the Accession Protocol, which incorporates commitments in Paragraphs 162 and 165 of the Working Party Report on the Accession of China (WT/MIN(01)/3) (Working Party Report), because these measures constitute export restrictions other than duties, taxes, or other charges.

With respect to the administration and the allocation of the export quotas on various forms of indium, magnesia, talc, and tin, the US said that China imposes restrictions on the trading rights of enterprises seeking to export various forms of indium, magnesia, talc, and tin, such as prior export performance requirements.

The US considered that these measures are inconsistent with Paragraph 5.1 of Part I of the 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 and 84 of the Working Party Report, because these measures limit the right to trade. (See SUNS #8343 dated 28 October 2016).

In its statement at the DSB, the US reiterated its concern that China continues to impose export restraints on raw materials - antimony, chromium, cobalt, copper, graphite, indium, lead, magnesia, talc, tantalum and tin - that are important inputs to industries in the United States and in other Members.

It said that China's restrictions on the exports of these materials are similar to the restrictions which the DSB has found in two prior disputes to be inconsistent with WTO rules.

The export restraints at issue include China's export duties, export quotas, and restrictions on the rights of enterprises seeking to export, it added.

In its statement, China expressed disappointment with the decision by the US to again request the establishment of a panel.

It said that after the US filed the Request for Consultations and Supplementary Request for Consultations, China had sincere consultations and tried to find an appropriate solution to resolve the dispute with the US.

China said that it has reiterated its steadfast stance on respecting the WTO rules and abiding by its commitments made for accession to the WTO.

It said that given the increasing pressure from protection of exhaustible natural resources and the environment, China's policies concerning the products at issue are an integral part of the comprehensive measures taken to promote the scientific management of natural resources products and strengthen ecological environment protection with the purpose of achieving sustainable development.

It further said that on 31 October, it published its Total Export Quotas of Industrial Products and Agricultural Products of 2017.

Regrettably, it said, the US did not carefully review the new measures and decided to move this dispute into a panel proceeding.

EU-CHINA DISPUTE OVER RAW MATERIALS

Also at the meeting, China blocked a first-time panel request by the EU over duties and other measures imposed by China on the exportation of certain raw materials.

Panel establishment will be automatic when the request comes up again before the DSB.

The dispute raised by the EU against China is with respect to China's restrictions on the exportation from China of various forms of antimony, chromium, cobalt, copper, graphite, indium, lead, magnesia, talc, tantalum and tin.

In its communication to the DSB, the EU complained that China imposes export duties on various forms of antimony, chromium, cobalt, copper, ferronickel, graphite, lead, magnesia, talc, tantalum and tin.

These materials are not listed in Annex 6 of the Protocol on the Accession of the People's Republic of China (WT/L/432) (Accession Protocol), it said.

China also imposes quantitative restrictions, such as quotas, on the export of various forms of antimony, indium, magnesia, talc and tin.

The EU considers these measures are inconsistent with Article XI: 1 of the GATT 1994 and China's obligations under the provisions of Paragraph 1.2 of Part I of the Accession Protocol, which incorporates commitments in Paragraphs 162 and 165 of the Working Party Report on the Accession of China (WT/MIN(01)/3) (Working Party Report), because these measures constitute export restrictions other than duties, taxes or other charges.

The EU further complained that China imposes additional requirements and procedures with respect to the administration and the allocation of the quantitative export restrictions on various forms of indium, magnesia, talc and tin, including restrictions on the trading rights of enterprises seeking to export those products, such as prior export experience requirements, and other conditions that appear to treat foreign and foreign invested entities differently from domestic entities.

The EU considers that these measures are inconsistent with paragraphs 5.1 and 5.2 of Part I of the Accession Protocol, as well as China's obligations under the provisions of paragraph 1.2 and 1.3 of Part I of the Accession Protocol, which incorporates commitments in paragraphs 83 and 84 of the Working Party Report, because these measures limit the right to trade.

In its statement at the DSB, the EU regretted the fact that it has to request the establishment of a panel in this dispute.

It maintained that the WTO dispute settlement bodies have already dealt twice in the past with the same type of export restrictions imposed by China on different raw materials.

Both times, the WTO dispute settlement system confirmed that such restrictions are inconsistent with China's obligations under the covered agreements and has asked China to bring its measures into compliance with its obligations, it said.

The EU expressed disappointment about the fact that China continues to impose such export restrictions on a number of raw materials, despite the DSB's clear recommendations and rulings on this point.

The EU said that it regrets China's unwillingness to bring its legislation concerning the export of raw materials in line with its WTO commitments.

This forces the EU to once again bring China's export regime before the WTO dispute settlement system.

The EU considers that China's export restrictions on raw materials undermine core principles of the multilateral trading system, as they discriminate against foreign users of these materials and provide substantial and unfair advantages to Chinese firms.

According to the EU, China's position as a leading global producer of these raw materials means that its export restrictions affect global supply and pricing. These measures can provide important advantages to Chinese firms that use the raw materials, to the detriment of the EU and other foreign counterparts.

These measures can also create substantial pressure on foreign producers to move their operations, jobs and technologies to China, it said.

In its statement, China expressed disappointment with the EU's decision to request the establishment of a panel to examine the subject matter of the present dispute at this meeting.

China reiterated that it had sincere consultations and tried to find an appropriate solution to resolve the dispute with the EU.

China again said that given the increasing pressure from protection of exhaustible natural resources and the environment, China's policies concerning the products at issue are an integral part of the comprehensive measures taken to promote the scientific management of natural resources products and strengthen ecological environment protection with the purpose of achieving sustainable development.

It also said that on 31 October it published its Total Export Quotas of Industrial Products and Agricultural Products of 2017.

China underlined that it is not in a position to accept the establishment of a panel at the present meeting.

In a statement on this issue, the US said it shares the concerns of the EU that China's export duties, export quotas and restrictions on the rights of enterprises seeking to export are inconsistent with WTO rules.

The US said that it recognised that China has exercised its right under the DSU to block the establishment of a panel to consider the EU's complaint.

Nonetheless, it would have been more efficient for China and the DSB had China accepted establishment of a single panel today, as has happened in a number of previous disputes, such as in China - HP-SSST, it added. +