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China–Raw Materials: a controversial step towards evenhanded exploitation of natural resources


This case sheds light on the question whether WTO members, when exploiting their natural resources, can give priority to the needs of their domestic market as opposed to the needs of other WTO Members. From the ruling of the Appellate Body, and the unappealed part of the panel decision, one can conclude that a WTO Member normally must ensure an evenhanded distribution of the natural resources that it decides to mine or harvest amongst the WTO membership. The only difference arises where a Member's citizens or industries face a crisis because of a temporary shortage of an essential product. For those who share an international outlook on the world, this is an acceptable, and even a desirable outcome. The ruling potentially has far-reaching implications for international trade, not only in minerals and metals, but for agricultural and energy goods as well. However, in reaching this laudable result, circumscribing the use of export restrictions, the Appellate Body also made a highly regrettable finding. It ruled that China, because of the wording of its Accession Protocol, was not allowed to invoke a public policy justification for certain of its export restrictions (notably: its export duties, on which it had assumed additional commitments). The underlying assumption that sovereign states can sign away their rights to pursue public policies, such as environmental protection, which are generally admitted amongst the WTO membership, is deplorable.

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1 The Appellate Body Report is document AB-2011-5 (30 January 2012). It is a combined report containing the Appellate Body's statements regarding individual disputes in documents WT/DS394/AB/R; WT/DS395/AB/R; WT/DS398/AB/R.

2 The General Agreement on Tariffs and Trade (GATT 1994): Article XX: General Exceptions.

3 The General Agreement on Tariffs and Trade (GATT 1994): Article XI: General Elimination of Quantitative Restrictions.

4 See Baris Karapinar, Export Restrictions and the WTO Law: ‘Regulatory Deficiency’ or ‘Unintended Policy Space’, Berne: World Trade Institute; NCCR Trade Regulation Working Paper no. 2010/11, May 2010; Robert Howse and Tim Josling, Agricultural Export Restrictions and International Trade Law: A Way Forward, International Food and Agricultural Trade Policy Council, 2012.

5 Korinek Jane and Kim Jeonghoi, Export Restrictions on Strategic Raw Materials and Their Impact on Trade, Trade Policy Paper no. 95, Paris: OECD, 2010.

6 ‘National Export Bans and Restrictions,’ compilation available at

7 Of course, a considerable part of that volatility stems from import protection in agriculture that is little disciplined by the WTO; see Howse and Josling, Agricultural Export Restrictions and International Trade Law, supra note 4.

8 China – Measures Related to the Exportation of Rare Earths, Tungsten and Molybdenum (DS432).

9 Protocol on the Accession of the People's Republic of China, WT/L/432, 23 November 2001.

10 Government of China, Ministry of Commerce, Announcement number 83 (2008), ‘Total Amount of Export Quotas of Agricultural and Industrial Products’.

11 Government of China, Circular on the Customs Tariff Commission of the State Council on the Tariff Execution Plan of 2010, compiled by Karapinar, Export Restrictions and the WTO Law, supra note 4. Another category called ‘special export tariffs’ applied in a few cases.

12 China–Raw Materials, AB-2011-5, paragraph 8.

13 Ibid.

14 The cases are WT/DS394/R (China – Measures Related to the Exportation of Various Raw Materials (Complainant:United States)); WT/DS395/R (China – Measures Related to the Exportation of Various Raw Materials (Complainant: European Communities)); and WT/DS398/R (China – Measures Related to the Exportation of Various Raw Materials (Complainant: Mexico)), 5 July 2011.

15 China–Raw Materials, AB-2011-5.

16 Article 11.3 of China's Protocol of Accession. In Annex 6 to its Protocol, China was exceptionally allowed to maintain export duties, up to a certain maximum, in respect of 84 listed products (of the disputed raw materials, only yellow phosphorus appeared on this list of exceptions, and the panel found that China had not exceeded the allowed maximum of its export duty; see China–Raw Materials, fn 553).

17 See the findings of the WTO combined Panel Reports, China – Measures Related to the Exportation of Various Raw Materials (5 July 2011).

18 China–Raw Materials, paragraph 233.

19 See China–Raw Materials, paragraph 334. This wording suggests that paragraph 2(a) would not set forth an exception to the prohibition of paragraph 1. In that event, a complainant should be charged with the burden of proving that the conditions of paragraph 1 are met and that the conditions of paragraph 2 are not met, in order to make a prima facie case that the defendant's measure infringes Article XI, or at least Article XI.1.

20 China–Raw Materials, paragraph 331.

21 China–Raw Materials, paragraph 340.

22 See panel ruling, supra note 17, at paragraphs 7.411–7.435.

23 We might add that we see no strong objection either to admitting these public policy exceptions in respect of other WTO commitments regarding trade in goods – though admitting an appeal to Article XX in respect of commitments in the SCM could effectively re-create a category of non-actionable subsidies. This might be seen to create a tension with the WTO membership's explicit engagement that the exceptions for non-actionable subsidies in the SCM would disappear as they did not agree to extend these after 2000 (see Article 31 SCM). But, of course, admitting an appeal to Article XX would not revive the particular exceptions for non-actionable subsidies that were once included in the SCM. Accordingly, there would not be a real conflict between admitting an appeal to Article XX in respect of the SCM, and the drafters’ omission to extend certain specific rules on non-actionable subsidies.

24 Report of the Working Party on the Accession of Ukraine, WT/ACC/UKR/152, 25 January 2008, at paragraph 240.

25 See Tiyagi M., ‘Flesh on a Legal Fiction: Early Practice in the WTO on Accession Protocols’, 15 Journal of International Economic Law 391441 (2012).

26 Appellate Board Report, China – Measures Affecting Trading Rights and Distribution Services for Certain Publications and Audiovisual Entertainment Products (DS363), at paragraphs 216–233 (21 December 2009). Having recognized China's right to invoke GATT Article XX(a) in respect of certain mechanisms to review the content of imported reading materials and audiovisual products, the AB ultimately rejected China's appeal to this public policy exception as unwarranted.

27 Appellate Body Report, European Communities – Measures Affecting Asbestos and Asbestos-Related Products (DS135), at paragraphs 88, 96ff (12 March 2001).

28 See, e.g., paragraph 170 of China's Accession Working Party Report, in which China committed that its laws and regulations relating to, amongst others, ‘taxes levied on imports and exports’, would be ‘in full conformity with its WTO obligations’. The Appellate Body dismissed the relevance of this paragraph, despite its explicit reference to export taxes, as being concerned only with ‘internal policies’. See China–Raw Materials, paragraph 298. The least one can say is that this was not the only possible interpretation of the words. For different textual, contextual, and teleological arguments allowing China to invoke Article XX in this case, see, e.g., Baroncini E., ‘The Applicability of GATT Article XX to China's WTO Accession Protocol in the Appellate Body Report of the China–Raw Materials Case: Suggestions for a Different Interpretative Approach’, 1 China–EU Law Journal 134 (2012); Qin Julia Ya, ‘Editorial Comments – The Predicament of China's “WTO-Plus” Obligation to Eliminate Export Duties: A Commentary on the China–Raw Materials Case’, 11 Chinese Journal of International Law 237246 (2012).

29 The situation in rare earths, currently under dispute, could be quite different as Chinese exports often account for more than 90% of US, EU, and Japanese imports. See Oana Maria Stanculescu, China's Rare Earth Trade Analysis, Babes-Bolyai University, 2011.

30 Karapinar, Export Restrictions and the WTO Law, supra note 4.

31 Karapinar, Export Restrictions and the WTO Law, supra note 4.

32 Karapinar, Export Restrictions and the WTO Law, supra note 4.

33 It is difficult to isolate such impacts on foreign competitors. One of the authors performed a straightforward statistical comparison of Chinese export growth rates in major downstream industries in the United States, Mexico, and the EU-27, finding no significant differences between them. Nor were there any correlations between differences in such export growth rates in affected downstream sectors versus similar products that did not use the restricted inputs in China and similar differences in the other countries. A more systematic study might identify such impacts, however. For further details, contact Keith Markus at .

34 Karapinar, Export Restrictions and the WTO Law, supra note 4.

35 It is to be recalled that some new Members, while accepting a WTO-plus obligation in respect of export duties, did reserve the right to invoke the classic public policy exceptions in this respect too. For an example, see Report of the Working Party on the Accession of Ukraine, supra, note 24.

36 China–Measures Related to the Exportation of Rare Earths, Tungsten and Molybdenum, supra note 8.

37 See Howse and Josling, Agricultural Export Restrictions and International Trade Law, supra note 4.

38 Section 3 of the Natural Gas Act (NGA) (15 U.S.C. § 717b). Implementing regulations issued by the Department of Energy are codified in 10 CFR Part 590.

39 See generally K. Cobb, ‘The Questionable Logic of US Natural Gas Exports’, Resource Insights (24 February 2013) (last viewed 14 August 2013).

40 The difference in the approval process in respect of exports to FTA and non-FTA countries is illustrated in regular surveys of export applications published by the Department of Energy, (status as of 7 August 2013).

41 See AP, Japan's TEPCO Gears up for US Shale Gas Imports (7 February 2013), (last viewed 14 August 2013).

42 See, e.g., Council for Trade in Goods, Decision on Notification Procedures for Quantitative Restrictions, G/L/59/Rev. 1 (22 June 2012) (listing non-automatic licenses). See also parts of the panel report in the present case that dealt with export licenses, which the AB set aside on procedural grounds relating to Article 6.2 of the Dispute Settlement Understanding. This point was discussed above regarding the WTO panel ruling, supra note 17, at paragraphs 7.917–7.918 and 7.957–7.958. Note that the WTO's Import Licensing Agreement would not be applicable to the US regime of export licensing; see

43 See Appellate Body Report, Brazil–Measures Affecting Imports of Retreaded Tyres (DS332), at paragraph 227 (3 December 2007).

44 See Mavroidis P. C., Trade in Goods, 2nd edn (Oxford University Press, 2012), 388.

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