Dispute settlement | Brussels, 26 October 2016
EU files WTO panel request against Chinese export restrictions on raw materials
The European Union has requested that the World Trade Organization (WTO) establish a dispute settlement panel to examine China’s unfair export duties and export quotas on 12 raw materials – antimony, chromium, cobalt, copper, ferronickel, graphite, indium, lead, magnesia, talc, tantalum, and tin.
The export duties and export quotas on the raw materials appear to be part of a continuing troubling industrial policy aimed at providing substantial competitive advantages for Chinese producers at the expense of producers and consumers in the EU and across the world.
China’s position as a leading global producer of these raw materials means its export restraint measures give it the ability to affect global supply and pricing. These measures can provide important advantages to Chinese firms that use the raw materials, to the detriment of the EU and other foreign counterparts. These measures also can create substantial pressure on foreign producers to move their operations, jobs, and technologies to China.
The raw materials in question are key inputs into a wide range of high-value products in vital industrial sectors, including steel, automotive, aerospace, construction, and electronics.
Chromium and ferronickel, for example, are fundamental raw materials for the EU stainless steel sector which has a turnover of about €15 billion and involves about 20,000-25,000 direct jobs and up to 100,000 direct and indirect jobs. The EU tin mill producers of electro-chromium coated sheet (ECCS) using chromium and tin plate generate turnover of about €2.8 billion. There are about 3,900 jobs directly related to EU tin mill production. Magnesia is one of the main materials in the production of refractories, an industry with €3.4 billion sales, involving about 20,000 direct jobs in the EU.
The EU considers that China's export restrictions on raw materials undermine core principles of the multilateral trading system, as they discriminate against foreign users of these materials and provide substantial and unfair advantages to Chinese firms. The WTO adjudicatory bodies already had two opportunities to clarify that these type of restrictions are illegal and do not represent a genuine effort to conserve exhaustible natural resources or to protect the environment and health of China's population. The EU regrets China's unwillingness to bring its legislation concerning the export of raw materials in-line with its WTO-commitments and is therefore once again challenging China's export regime.
The raw materials subject to the case include graphite, cobalt, copper, ferronickel, lead, chromium, magnesia, talcum, tantalum, tin, antimony and indium. Some of them (in bold) are among the twenty raw materials identified in 2013 as critical to Europe’s economy and essential to maintaining and improving our quality of life.
China committed as part of the terms of its WTO accession to eliminate export duties for all products other than those listed in a specific annex. The export duties on antimony, chromium, cobalt, copper, ferronickel, graphite, lead, magnesia, talc, tantalum, and tin the EU is challenging are imposed on products not listed in that annex.
China also imposes export quotas on antimony, indium, magnesia, talc and tin. Article XI:1 of the General Agreement on Tariffs and Trade 1994 (GATT 1994) generally prohibits restrictions on exports other than taxes, duties, and charges. China’s WTO Accession Protocol also includes commitments not to restrict the right to export goods.
In two previous WTO disputes (China – Measures Related to the Exportation of Various Raw Materials and China – Measures Relating to the Exportation of Rare Earths, Tungsten, and Molybdenum), the WTO found that China’s imposition of export duties and export quotas on two different sets of raw materials was inconsistent with China’s WTO commitments. In both cases, the WTO also confirmed that China cannot justify its imposition of export duties not listed in the specific annex under Article XX of the GATT 1994, and rejected China’s attempts to justify its imposition of export quotas as legitimate conservation or environmental protection measures.
Through this new WTO action, the EU expects that China will remove its WTO inconsistent export restrictions not only with regard to the challenged raw materials but also all other raw materials still subject to such restrictions.
The European Union requested consultations with China on 19 July and 19 August 2016. The parties held consultations on 8 and 9 September 2016, but did not resolve the dispute. Requesting a panel is the next step in the WTO dispute settlement process. The WTO Dispute Settlement Body will consider the EU panel request at its meeting on 8 November 2016.
EU takes legal action against export restrictions on Chinese raw materials
WTO dispute settlement in a nutshell
China — Duties and other Measures concerning the Exportation of Certain Raw Materials
China — Measures Related to the Exportation of Rare Earths, Tungsten and Molybdenum
China — Measures Related to the Exportation of Various Raw Materials