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China's Export Restrictions and the Limits of WTO Law

  • MARK WU (a1)

In recent years, China has enacted export restrictions on a range of minerals and other raw materials. They include export quotas, export duties, export licenses, and other administrative actions. Although such export restrictions have already been found to be inconsistent with China's WTO obligations, the practice persists. This article advances an explanation for why this is the case. It argues that the problem lies with the lack of retrospective remedies in WTO dispute settlement. Consequently, China is able to breach its WTO obligations temporarily with minimal consequence. Although such restrictions may have negative consequences for upstream extraction firms, China is able to implement the restrictions because several upstream firms are state-owned enterprises. As a result, China is able to utilize export restrictions on minerals and other raw materials effectively to foster the development of strategic emerging industries downstream. Given existing negotiating standoffs and domestic political constraints, this article suggests that it is unlikely that any potential WTO legal reforms will be enacted any time soon to address this problem.

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1 Press Release, White House, Presidential Executive Order Regarding the Omnibus Report on Significant Trade Deficits, 31 March 2017.

2 Jeremy Diamond, ‘Trump: “We Can't Continue to Allow China to Rape Our Country”’, CNN, 2 May 2016,

3 Nicholas Megaw, ‘EU Trade Deficit with Chia Hits €180bn’, Financial Times, 12 July 2016.

4 European Union Chamber of Commerce in China, ‘European Business in China Position Paper 2016/2017’; AmCham China, ‘China Business Climate Survey Report 2017’.

5 Wu Mark, ‘The “China, Inc.” Challenge to Global Trade Governance’, 57(2) Harvard International Law Journal (2016), 261324 .

6 Ibid. at 269–284.

7 Ibid. at 288–294.

8 Ibid., at 295–300.

9 Panel Report, China – Measures Related to the Exportation of Various Raw Materials, WT/DS394/R, WT/DS395/R, WT/DS398/R, 5 July 2011, at para. 2.1.

10 See supra n. 5, Wu, at 264–265.

11 World Bank, Overview of State Ownership in the Global Minerals Industry, May 2011, at 22–24.

12 Ibid. at 23. Other policies included seeking industry consolidation among SOEs, injecting private capital to strengthen competitiveness, and encouraging larger firms to diversify. See also Pui-Kwan Tse, ‘The Minerals Industry of China’, 2013 USGS Minerals Yearbook at 9.3.

13 Request for Consultations by the United States, China – Measures Related to the Exportation of Various Raw Materials, WT/DS394/1, 25 June 2009; Request for Consultations by the European Union, China – Measures Related to the Exportation of Various Raw Materials, WT/DS395/1, 25 June 2009; Request for Consultations by Mexico, China – Measures Related to the Exportation of Various Raw Materials, WT/DS398/1, 21 August 2009.

14 Only yellow phosphorous was found on the list. Bronckers Marco & Maskus Keith, ‘ China – Raw Materials: A Controversial Step Towards Even-Handed Exploitation of Natural Resources’, 13(2) World Trade Review (2014), 393408 , at 396–397 and n. 16.

15 These are non-ferrous metal scrap of zinc, magnesium metal, manganese metal, and coke. See supra n. 8, Panel Report, China–Raw Materials, WT/DS395/R, WT/DS398/R, at para. 7.108.

16 Ibid. at paras. 8.2–8.6.

17 Appellate Body Report, China – Measures Related to the Exportation of Various Raw Materials, WT/DS394/AB/R, WT/DS395/AB/R, WT/DS398/AB/R, 30 January 2012, at para. 362. Specifically, the Appellate Body found that the Panel erred under Article 6.2 of the Dispute Settlement Understanding (DSU) in making findings regarding certain complainant claims and also erred in its interpretation of the phrase ‘made effective in conjunction with’ as found in GATT Article XX(g).

18 Ibid. at paras. 362(b)–(d) and 363. For further discussion on the case, see Bronckers and Maskus, supra note 12; Qin Julia Ya, ‘The Predicament of China's “WTO-Plus” Obligation to Eliminate Export Duties: A Commentary on the China – Raw Materials Case’, 11(2) Chinese Journal of International Law (2012) 237246 .

19 See, for example, Keith Bradsher, ‘In Victory for the West, W.T.O. Orders China to Stop Export Taxes on Minerals’, New York Times, 30 January 2012.

20 Keith Bradsher, ‘Amid Tension, China Blocks Vital Exports to Japan’, New York Times, 22 September 2010.

21 Martin Fackler and Ian Johnson, ‘Japan Retreats with Release of Chinese Boat Captain’, New York Times, 24 September 2010.

22 Wayne Morrison and Rachel Tang, ‘China's Rare Earth Industry and Export Regime: Economic and Trade Implications for the United States’, Congressional Research Service Report R42510, 30 April 2012, at 3.

23 Ibid. at 4.

24 In 2006, 47 Chinese domestic companies and 12 joint-venture companies received export licenses; by 2011, those figures had shrunk to 22 domestic and 9 joint-venture companies. See ibid. at 16.

25 Ibid. at 6.

26 For example, the quota level fell by more than half in the late 2000s, from 65,580 metric tons in 2005 to 30,259 metric tons in 2010. Ibid. at 17.

27 Request for Consultations by the United States, China – Measures Related to the Exportation of Rare Earths, Tungsten and Molybdenum, WT/DS431/1, 13 March 2012; Request for Consultations by the European Union, China – Measures Related to the Exportation of Rare Earths, Tungsten and Molybdenum, WT/DS432/1, 13 March 2012; Request for Consultations by Japan, China – Measures Related to the Exportation of Rare Earths, Tungsten and Molybdenum, WT/DS433/1, 13 March 2012.

28 Panel Report, China – Measures Related to the Exportation of Rare Earths, Tungsten, and Molybdenum, WT/DS431/R, WT/DS432/R, WT/DS435/R, 26 March 2014, at paras. 8.1–8.13.

29 Appellate Body Report, China – Measures Related to the Exportation of Rare Earths, Tungsten, and Molybdenum, WT/DS431/AB/R, WT/DS432/AB/R, WT/DS435/AB/R, 7 August 2014, at para. 6.2.

30 Ibid. at paras. 6.1–6.3. For further discussion of the case, see Bond Eric and Trachtman Joel, ‘ China – Rare Earths: Export Restrictions and the Limits of Textual Interpretation’, 15(2) World Trade Review (2014) 189209 ; Qin Julia Ya, ‘Judicial Authority in WTO Law: A Commentary on the Appellate Body's Decision in China – Rare Earths ’, 13(4) Chinese Journal of International Law (2014) 639651 .

31 See, for example, Dionne Searcey and Keith Bradsher, ‘China Curbs on Metals are Again Found to Violate Trade Law’, New York Times, 7 August 2014.

32 Request for Consultations by the United States, China – Export Duties on Certain Raw Materials, WT/DS508/1, 14 July 2016; Request for Consultations by the European Union, China – Duties and Other Measures Concerning the Exportation of Certain Raw Materials, WT/DS509/1, 25 July 2016.

33 Ibid.

34 These include various forms of antimony, indium, magnesium, talc, and tin. Besides violating GATT Article XI, the European Union also alleges that the export quantitative restrictions also violate Paragraph 1.2 of Part I of China's Protocol of Accession, which incorporates several paragraphs of the Working Party Report. See ibid. at 2–5.

35 Webster Timothy, ‘Paper Compliance: How China Implements WTO Decisions’, 35 Michigan Journal of International Law (2014) 525578 .

36 Ibid. at 533–534.

37 Ibid. at 534.

38 Mitt Romney, Op-ed, ‘China Must Respect the Free-Trade System’, Washington Post, 13 October 2011.

39 Congressman David Camp, Opening Statement: Hearing on China's Exchange Rate Policy, 15 September 2010.

40 Navarro Peter and Autry Greg, Death By China (Upper Saddle River, NJ: Pearson Educational Inc., 2011) at 2.

41 Brewster Rachel, ‘The Remedy Gap: Institutional Design, Retaliation, and Trade Law Enforcement’, 80 George Washington Law Review (2011) 102158 ; Mavroidis Petros, ‘Remedies in the WTO Legal System: Between a Rock and a Hard Place’, 11 European Journal of International Law (2010) 763813 ; Wu Mark, ‘Rethinking the Temporary Breach Puzzle: A Window on the Future of International Trade Conflicts’, 40 Yale Journal of International Law (2015) 95155 .

42 See supra n. 39, Brewster, at 119.

43 See supra n. 39, Wu, at 124–137.

44 See supra n. 20, Morrison and Tang, at 20.

45 Keith Bradsher, ‘Taking a Risk for Rare Earths’, New York Times, 8 March 2011; Hongqiao Liu, Rare Earths: Shades of Grey, China Water Risk Report (June 2016), at 33–48.

46 Keith Bradsher, ‘Challenging China in Rare Earth Mining’, New York Times, 21 April 2010. Note that the mine later re-opened following the imposition of Chinese export restrictions but was shut again in 2015 due to commercial reasons. John Miller, ‘Molycorp to Suspend Production at California Mine’, Wall Street Journal, 26 August 2015.

47 Maggie Koerth-Baker, ‘4 Rare Earth Elements That Will Only Get More Important’, Popular Mechanics, 21 May 2010.

48 Ibid.

49 Ibid.

50 Nancy Stauffer, ‘A Battery Made of Molten Metals’, MIT News, 12 January 2016.

51 For a discussion of how this dynamic has played out in technology industries, see Michael E. Porter, ‘Clusters and the New Economics of Competition’, Harvard Business Review, November–December 1998.

52 World Trade Organization, Trade Policy Review – China, WT/TPR/S/230, 26 April 2010, at 44.

53 Ibid.

54 Wu Mark and Salzman James, ‘The Next Generation of Trade and Environment Conflicts: The Rise of Green Industrial Policy’, 108(2) Northwestern University Law Review (2014) 401474, at 427–430.

55 See supra n. 20, Morrison and Tang, at 18–19.

56 Yuko Inoue and Julie Gordon, ‘Analysis: Japanese Rare Earth Consumers Set Up Shop in China’, Reuters, 12 August 2011.

57 Tim Treadgold, ‘Chinese Rare Earth Glut Triggers a Price Collapse and Environmental Crisis’, Forbes, 15 May 2015.

58 Keith Bradsher, ‘China Looks to Capitalize on Clean Energy as US Retreats’, New York Times, 5 June 2017.

59 Keith Bradsher and Paul Mozur, ‘China's Plans to Build Its Own High-Tech Industries Worries Western Businesses’, New York Times, 7 March 2017.

60 Mark Wu, ‘A Free Pass for China’, New York Times, 2 April 2014.

61 A handful of past GATT panels, all in trade remedies disputes, have deviated from standard practice and authorized retrospective remedies requiring the illegal duty collected be refunded. However, the major powers have consistently opposed extending the scope of available remedies and blocked the adoption of such panel reports in the GATT era. See supra n. 39, Wu, at 102–103. For a discussion of a proposal to create retrospective and unconditional retaliation, see supra n. 39, Brewster, at 143–150.

62 See ibid. at 150–156.

63 See Schropp Simon A. B., Trade Policy Flexibility and Enforcement at the WTO: A Law and Economics Analysis (Cambridge: Cambridge University Press, 2009), at 304; Note, (In)efficient Breach of International Trade Law: The State of the “Free Pass” After China's Rare Earths Export Embargo, 125 Harvard Law Review (2011) 602625 , at 620.

64 World Trade Organization, Ministerial Declaration, WT/MIN(01)/DEC/1, 20 November 2001, at para. 30.

65 Note that the Ministerial Declaration from the Tenth Ministerial Conference in Nairobi, Kenya did not include an explicit endorsement for continuing the Doha Development Agenda and its mandates, but instead stressed the differences in viewpoints across WTO members. See World Trade Organization, Ministerial Declaration, WT/MIN(15)/DEC, 19 December 2015, at para. 30.

66 For a discussion of this long line of cases, see, for example, Ahn Dukgeun and Messerlin Patrick, ‘ United States – Anti-Dumping Measures on Certain Shrimp and Diamond Sawblades from China: Never Ending Zeroing in the WTO?’, 13(2) World Trade Review (2014) 267279 ; Saggi Kamal and Wu Mark, ‘Yet Another Nail in the Coffin of Zeroing: United States – Anti-Dumping Administrative Reviews and Other Measures Related to Imports of Certain Orange Juice from Brazil ’, 12(2) World Trade Review (2013) 377408 ; Prusa Thomas and Rubini Luca, ‘ United States – Use of Zeroing in Anti-Dumping Measures Involving Products from Korea: It's Déjà Vu All Over Again’, 12(2) World Trade Review (2013) 409425 .

67 For an overview of this controversy, see Manfred Elsig, Mark Pollack, and Gregory Shaffer, ‘The US is Causing a Major Controversy in the World Trade Organization. Here's What's Happening’, Washington Post, 6 June 2016.

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