MEASURES RELATED TO THE EXPORTATION OF TUNGSTEN & MOLYBDENUM Rare earths MEASURES RELATED TO THE EXPORTATION OF TUNGSTEN & MOLYBDENUM

Background

What are tungsten & molybdenum? Tungsten (W): Unique element, rare metal found in earth. Highest melting and boiling point. Used in light bulb filaments, X-ray tubes, and radiation shielding. Molybdenum (Mo): Unique element, used in structural steel, stainless steel, and other super alloys.

March 13, 2012 Complainants: US, EU and Japan Respondent: China Consultations were requested regarding China's restrictions on exports of various forms of rare earths China is a leading global producer of these materials They are key inputs in hybrid car batteries, wind turbines, automobiles and advanced electronics China's export restrictions have caused a short supply of the materials in international markets.

CHINA’S Position Regarding materials falling under 212 Eight Digit Chinese Customs Commodity Codes and over 30 measures Chinese published and unpublished measures operating separately or collectively that impose and administer export restrictions Restrictions: export duties, export quotas, minimum export price requirements, export licensing requirements, and addition requirements and procedures in connection with the administration of the quantitative restrictions

United States’ Position The US claims China was inconsistent with the following agreements: GATT 1994 Articles: VII – valuation of imports from members for customer purposes in determining liability VIII – fair reflection of cost and not to be used as a means of protection X – all trade measures should be transparent XI – all need trade measures should be in the form of tarrifs XI:1 – no prohibitions or restrictions other than duties, taxes, or other charges shall be instituted or maintained by any contracting party on the importation of any proudct of the territory of any other contracting party on on the exportation or sale for export of any product destined for the territory of any other contract party X:3(a) – requires all WTO members adminster all laws, regulations, rulings and judicial decisions in a unifrom, impartial and reasonable manner

Main issue

What violations occurred? GATT Art. XI, "General Elimination of Quantitative Restrictions" "No prohibitions or restrictions other than duties, taxes or other charges, whether made effective through quotas, import or export licenses or other measures, shall be instituted or maintained by any contracting party on the importation of any product of the territory of any other contracting party or on the exportation or sale for export of any product destined for the territory of any other contracting party."

China Ascension protocol China shall publish on a regular basis the following in the official journal referred to in paragraph 2(C)2 of this Protocol: by product, the list of all organizations, including those organizations delegated such authority by the national authorities, that are responsible for authorizing or approving imports or exports, whether through grant of licence or other approval; procedures and criteria for obtaining such import or export licenses or other approvals, and the conditions for deciding whether they should be granted; a list of all products, by tariff number, that are subject to tendering requirements, including information on products subject to such tendering requirements and any changes, pursuant to the Agreement on Import Licensing Procedures; a list of all goods and technologies whose import or export are restricted or prohibited; these goods shall also be notified to the Committee on Import Licensing; (b) China shall notify the WTO of all licensing and quota requirements remaining in effect after accession, listed separately by HS tariff line and with the quantities associated with the restriction, if any, and the justification for maintaining the restriction or its scheduled date of termination.

What violations occurred? 2010: China pushed global rare-earth prices sharply higher, when it slashed its export quota on the 17 elements by 40% from the preceding year. China's restriction of rare earths was claimed to have the intention of protecting natural resources and achieving sustainable economic development China has said it was an effort to clean up a highly polluting domestic rare-earth mining industry. The Obama administration described the move as a “wake-up call.” Complainants claimed that that the restrictions were designed to provide Chinese industries that produce goods with protected access to the rare earths China's export restraint gave China the ability to significantly affect global supply and pricing The export of these rare earths violated China's Accession Protocol

Decision

August 29, 2014 Dispute Settlement Body ruled in favor of the US, EU, and Japan Export quotas were not justified under the exception GATT Art. XX(g) “relating to the conservation of exhaustible natural resources” The panel found that China’s export quotas were designed to achieve industrial policy goals, not conservation China had restricted the export of various rare earths Export restrictions were done through export duties, export quotas, and limitations on the enterprise permitted to export rare earths.

The panel findings appealed by china China contends that the panel did not interpret GATT Article GATT Art. XX(g) correctly China says the panel acted inconsistently with Article 11 of the DSU - “in finding that China’s export quotas do not relate to conservation with the Article XX(g)” Under Article 11 China raises three allegations: The panel’s treatment of the evidence Allegations of a “double standard” in the panels application of Article XX(g) to the facts of the case Allegations of incoherent reasoning

Findings and conclusion by the appellate body Appellate body finds that the panel did not interpret Article XX(g) correctly Appellate body finds that those interpretation do not rise to the level of committing a legal error in the application of Article XX(g) Appellate body finds that the panel did comply with it’s duty under Article 11 of the DSU Appellate body upholds panel’s finding that China’s export quotas were designed to achieve industrial policy goals, not conservation

China’s response On 20 may 2015, China informed the DSB of the removal of all restrictions that were inconsistent with WTO rules. DSB found that China had fully implemented the DSB recommendations and rulings The United States says that China did not implemented the DSB recommendations and rulings

How to resolve

Monitoring The mining and refining of rare earths should be monitored for manipulation At the Bali Ministerial Conference in 2013: WTO developed a Monitoring Mechanism on special and differential treatment (S&D) provisions which give developing countries special rights in multilateral trading rules. Proposal of the Monitoring Mechanism was submitted by the African Group in 2002 Until recent years China produced about 93% of the world’s rare earths. China’s share of global rare-earth output has fallen to around 86% as other producers increased up supply. China’s exports now frequently are under the maximum level of the quotas

Transparency This particular case deals with the Chinese government’s lack of transparency For China to be a player in global trade, it has to play by the rules No one is exempt

observations The words: vague, broad, in general were used a lot The WTO needs to revise or review it’s rules to not fall on technical issues The WTO has to close all provisions that are up to different interpretations