WTO Cases explained: China Raw Materials dispute | Lex Animata by Hesham ELrafei

WTO China Raw Materials dispute | Lex Animata by Lucy Wen and Hesham ELrafei
China – Raw Materials (China — Export Duties on Certain Raw Materials)

The General Agreement on Tariffs and Trade , as part of the WTO agreements, prohibits states from limiting the quantity, the value, or the formalities of their exported goods, unless the measure is justified to protect the health, and the conservation of limited natural resources.

The dispute in question concerns restrictions imposed by China , a leading raw materials producer, on the export of magnesium, manganese, silicon metal, and zinc, by imposing a set of legislative measures, from 1994 to 2010.

The complainants, The US, the EU, and Mexico argued that, China caused a shortage in the raw materials supply, and higher prices in global markets, in addition to giving the Chinese companies an unfair advantage.

On the other hand, China argued that it had the right to regulate the export of its natural resources , and that its export taxes and quotas were necessary, to protect the health of its citizens, and to conserve its natural resources.

The panel and Appellate Body , found against China, by saying that, in joining the WTO , China agreed to comply with the Organisation rules, which limits states rights to regulate trade, and that those measures were inconsistent, with the WTO rules, as China failed to show its “critical shortage” in raw materials, and a relationship between the measures , and the conservation of these materials.

In addition , China could not demonstrate that those measures would reduce the pollution , nor to improve the health of its people.

The Panel also found that, China's export licensing regime, violates its commitment to eliminate restrictions, on the “right to trade”, in parallel to market access, and non-discrimination guaranteed under the WTO.

Moreover, when China joined the WTO, it negotiated some exemptions from GAT rules, and agreed to some additional obligations, all contained in an agreement called Accession Protocol.

because the GAT exceptions had deliberately not been incorporated in China’s Accession Protocol provisions, The Panel and Appellate Body, objected to China's reliance on the general exceptions in the GAT 1994, to justify its WTO-inconsistent export taxes.

In conclusion, the China – Raw Materials case, provided guidance on how exceptions to the GAT apply, in the context of international law principles on sovereignty over natural resources, and in relation to Accession Protocols.