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Joint Press Release with the Ministry of Foreign AffairsRelease of WTO Panel Report on the Export Restrictions by China-The panel made a decision that the export restrictions by China on three raw materials, including rare earths, is inconsistent with the WTO Agreement-

On March 26 (Geneva time), 2014, the World Trade Organization (WTO) released a panel report on the export restrictions imposed by the People’s Republic of China on three raw materials, i.e. , rare earths, tungsten, and molybdenum, an issue that has been examined by the WTO at the request of Japan, the U.S. and the EU.

The report presents a decision that fully approves Japan’s claim that, inter alia, China’s export quotas are inconsistent with Article XI:1 (General Elimination of Quantitative Restrictions) of the General Agreement on Tariffs and Trade (GATT) and China’s export duties are inconsistent with Paragraph 11.3 (Taxes and Charges Levied on Imports and Exports) of the WTO Protocol on the Accession of China (hereinafter referred to as the “Accession Protocol”).

1. Background

China has introduced export quotas on rare earths, tungsten, and molybdenum, which are strategically significant resources, step by step since 1999, and has also imposed export duties on those mineral resources since 2006. China has gradually reduced the amount of export quotas since 2006, and in particular, drastically cut its amount in the latter half of 2010, which disrupted the market. In response, Japan requested consultation with China under the WTO Agreement in March 2012, claiming that China’s export restrictions, including export quotas and export duties on those materials, are inconsistent with the WTO Agreement.

Reference: METI News Release (March 13, 2012):

However, as Japan and China could not reach a mutually satisfactory solution at the consultation phase, Japan requested the WTO, to establish a panel under the WTO Agreement, a quasi-judicial body, in May 2012 jointly with the U.S. and the EU. Accordingly, the panel was established in June 2012.

Reference: METI News Release (June 27, 2012):

The panel held meetings (oral hearings) in February and June 2013, and the WTO finally released a panel report on this matter.

2. Details of the decision

The report fully supported Japan’s claims and recommended the WTO to request China to rectify the restrictions in conformity with the WTO Agreement. Following is the major part of the panel’s ruling:

  • China’s export quotas are inconsistent with the Article XI:1 of the GATT, which generally prohibits quantitative restrictions of imports and exports. China’s export quotas are not justified under Article XX(g) of the GATT, as they are not relating to the conservation of exhaustible natural resources and they are not put in place in conjunction with domestic restrictions.
  • China’s export duties are inconsistent with the Paragraph 11.3 of the Accession Protocol, which prohibits certain taxes and charges applied to exports. China may not seek to justify the export duties pursuant to Article XX(b) of the GATT. Even assuming arguendo that China could seek to justify the export duties under Article XX(b), China’s export duties are not justified, as they are not necessary to protect human, animal or plant life or health.
  • China’s imposition of the minimum capital requirement and export performance requirement concerning export quota administration is inconsistent Paragraph 5.1 of the Accession Protocol and Paragraphs 83 and 84 of the China’s Working Party Report, as incorporated into the Accession Protocol. They are not justified under Article XX(g) of the GATT, as they are not relating to the conservation of exhaustible natural resources.

In response, METI Minister Motegi delivered a statement, as shown in the Appendix.

3. Future schedule

Parties concerned may appeal to the WTO Appellate Body within sixty days from the release of the report. If no appeal is filed, the panel’s decision in the report will become WTO’s final decision.

Reference:

WTO Panel under the WTO Agreement
If consultations between the governments concerned fail to settle a dispute, based on the request from the complaining party, the WTO panel, a quasi-judicial body, examines the matter and gives rulings regarding the consistency with the WTO Agreement, and recommends the WTO to request the responding party to rectify the matter if the panel has found that the measures at issue is inconsistent with the WTO Agreement. A party that is not satisfied with the panel rulings may appeal to the WTO Appellate Body.

Release Date

March 26, 2014

Division in Charge

Information on dealing with general WTO disputes

  • Office for WTO Compliance and Dispute Settlement & Multilateral Trade System Department, Trade Policy Bureau

Information on rare earths

  • Critical Material Industry Office, Manufacturing Industries Bureau
  • Mineral and Natural Resources Division, Agency for Natural Resources and Energy

Information on the Japan-China economic relationship

  • Northeast Asia Division, Trade Policy Bureau

Related Information

WTO

Regional Affairs / China

Ministry of Economy, Trade and Industry
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