U.S. vs China Export of Raw Materials DS394

1. U.S. vs China Export of Raw MaterialsDS394 Kate Brown Umair Alam Patricia Acosta ITRN 603 Prof. Stuart S. Malawer, J.D., Ph.D

2. Outline • Background • Export Restrictions • Raw Materials & China • Main Issue • Specific Provisions • Panel Decision • Appellate Body Decision • Implementation • Current Issues • Conclusion

3. Main Issue • United States brought a case to the WTO concerning China's imposition of export restraints on various raw materials. • export duties   • export quotas  • minimum export price requirements • export licensing requirements • Raw materials: • Bauxite   • Coke • Fluorspar • Magnesium • Manganese • Silicon carbide • Silicon metal • Yellow phosphorus • Zinc

4. Export Restrictions • According to the OECD the effects of export restrictions are: • Distort trade flows and have a negative impact on the trade partners’ welfare • Can produce a negative effect on investment, reducing the long-term supply of raw materials • When importers turn to other sources, it motivates other countries to impose these restrictions • They are used for social, economic and political purposes • Environmental protection • Promotion of downstream industries • Revenue maximization • Preservation of reserves

5. Raw Materials and China • Raw materials are • Vital for the production of goods • Commodities • Factors of production • China is a leading mine producer and consumer: Leading producer of 38 out of 73 minerals listed in the British Geological Survey (fluorspar, magnesium, manganese, and zinc) (2011). • Current policies: • Increase of control on natural resources • Discourage exports • Focus on environmental pollution Along with strong domestic demand lead to rising prices and unpredictability in supply

6. Raw Materials • Bauxite • Fluorspar

7. Raw Materials • Magnesium • Manganese

8. Raw Materials • Silicon Carbide • Silicon Metal

9. Raw Materials • Coke • Yellow Phosphorus

10. Raw Materials Zinc

11. The Main WTO Issue • The contested issue of U.S. or foreign law or practice involved. • The U.S contests that China imposes quantitative restrictions, export duties, additional requirements and procedures in connection with the export of these raw materials • U.S. contests that China maintains a minimum export price system • The complaints challenged the certain export licensing restraints imposed by China • To note, The EU, Canada, Turkey and Mexico expressed their desire to join the consultation requested by the U.S.

12. The Specific WTO Agreement and Specific Provisions GATT 1994 Article VIII: Fees and Formalities connected with Importation and Exportation Article X: Publication and Administration of Trade Regulations Article XI*: General Elimination of Quantitative Restrictions Article XX: General Exceptions Protocol Accession of the People’s Republic of China Paragraphs 5.1, 5.2, 8.2

13. Panel Decision • The export duties imposed by China were violations of the WTO commitments China had agreed to in paragraph 11.3 of the Protocol of Accession. • China used the general exceptions of the GATT 1994 (Article XX) to impose the export duties • It was found the Accession Protocol did not permit China to implement restrictions, quotas or regulations • China attempted to justify the export duties and quotas by stating it is for the goal of pollution reduction and environmental safety China. This was found to be erroneous. • The DSB recommended China conform the export duty and export quota measures to meet their WTO obligation

14. Appellate Decision • In regards to the imposed export duties, or export quotas, by China, the Appellate Body upheld the DSB decision. • The Appellate Body did not find err in the recommendations by the DSB and therefore recommended China to meet its requirements under the WTO. • (Note- the Panel “observed” that while provisions of Article XX had been cross-referenced in other WTO agreements, this language was not found in China’s Accession Protocol and therefore could not be applied.) • China believed they had the inherent right to regulate trade, however this was found to have been exercised in negotiating and ratifying the WTO and therefore could not be acted on later.

15. Implementation • At the DSB meeting on 23 March 2012, China informed the DSB of its intention to implement the DSB recommendations and rulings but that it would need a reasonable period of time to do so. • On 24 May 2012, China and the US notified the DSB that they had agreed that the reasonable period of time for China to implement the DSB recommendations and rulings shall be 10 months and 9 days.  • On 17 January 2013, China and the United States informed the DSB of Agreed Procedures under Articles 21 and 22 of the DSU. • At the DSB meeting on 28 January 2013, China reported that on 28 December 2012, • The General Administration of Customs of China had implemented the 2013 Tariff Implementation Program. • The Ministry of Commerce of China and the General Administration of Customs of China had jointly implemented the 2013 Catalogue of Goods Subject to Export Licensing Administration. • The application of export duties and export quotas to certain raw materials had been removed. Through those measures, China had fully implemented the DSB's recommendations and rulings in these disputes.

16. Current Issues • DS433 US, EU, Japan vs China on Measures Related to the Exportation of Rare Earths, Tungsten and Molybdenum Status: Panel composed • Anti-dumping duty of 339.60% on pure magnesium imports from China

17. Conclusion • Negative effects of export restrictions • Export restrictions have negative consequences for international trading partners and producer countries. • These restrictions raise prices for foreign consumers and importers •  Export restrictions discourage investment in extracting and producing raw materials • And Most Importantly, export restrictions by a producer country may lead to restrictions by other countries, which would mean further trade distortion .