China rare earth - U.S., EU and Japan knock at the WTO

In three identical requests for consultations the U.S,  EU and Japan have set the stage for consultations at the WTO with China on China's export restrictions on rare earths. I had blogged about the dispute here.

The gist of the request for consultations is as follows:

" China imposes export duties on various forms of rare earths, tungsten and molybdenum.  

 China imposes quantitative restrictions such as quotas on the export of various forms of rare earths, tungsten and molybdenum.   

 China imposes additional requirements and procedures in connection with the administration of the quantitative restrictions on various forms of rare earths, tungsten and molybdenum, including but not limited to fees and formalities, restrictions on the right to export such as prior export experience requirements and minimum capital requirements, and other conditions that appear to treat foreign-invested entities differently from domestic entities. 

 China imposes other restrictions such as licensing requirements on the export of various forms of rare earths, tungsten and molybdenum, including in connection with the administration of the quantitative restrictions that China imposes on the export of various forms of rare earths, tungsten and molybdenum.  

 China maintains a minimum export price system for the export of various forms of rare earths, tungsten and molybdenum and also requires the examination and approval of export contracts and export prices, including in connection with the administration and collection of the export duties for various forms of rare earths, tungsten and molybdenum.    

 China administers all these export restrictions on various forms of rare earths, tungsten and molybdenum and the requirements and procedures in connection with these export restrictions through,  inter alia, its ministries and other organizations under the State Council and various chambers of commerce and industry associations. Furthermore, it appears that China administers these export restrictions on various forms of rare earths, tungsten and molybdenum and the requirements and procedures in connection with these export restrictions in a manner that is not uniform, impartial, reasonable, or transparent. 

 It appears that China imposes and administers these restrictions on exports of various forms of rare earths, tungsten and molybdenum also through measures that are not published."

Invoking the provisions of the GATT as well as the commitments in China's Accession Protocol the request for consultation argues that the export restrictions are in violation of China's international obligations:

" China's measures appear to be inconsistent with the following provisions: 

 Articles VII, VIII, X, and XI of the GATT 1994, and, 

 Paragraphs 2(A)2, 2(C)1, 5.1, 5.2, 7.2, 8.2 and 11.3 of Part I of the Protocol on the Accession of the People's Republic of China (WT/L/432)(“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, 84, 162, and 165 of the Report of the Working Party on the Accession of China)(WT/MIN(01)/3).

 China's measures also appear to nullify or impair the benefits accruing to the European Union directly or indirectly under the cited agreements. "

China is yet to provide it's response to the request for consultations. It would be interesting to see how China justifies these measures in the context of the GATT, its Accession Protocol as well as the decision of the WTO panel in the China Raw Materials case. 

There are several other implications that this case could bring to the fore:

1. What is the nature of export restrictions and under what circumstances can they be imposed by a member country in the context of the WTO Agreements?

2. What is the impact of the Accession Protocol for China vis a vis its international obligations?

3. What are the permissible exceptions and defences available to China to impose export restrictions as challenged in the request for consultations?

4. What implication does this have on the domestic policy space of China in particular and other developing countries in general to regulate the exploitation of and trade in exhaustible natural mineral resources?

5. What implication does the case have on control of one's national resources for development and growth in the context of a deeply interconnected world?

The Chinese response would perhaps have some of the answers! As the WTO website says "Consultations Coming soon..."