By: Terence P. Stewart and Ping Gong
Stewart and Stewart
In June 2009, the United States, the European Union, and Mexico brought Dispute Settlement cases at the WTO regarding China's export restraints on nine raw materials. In January 2012, the WTO Appellate Body ("AB") issued its decision, which found that China's obligations under its Protocol of Accession limited the products to which it could apply export duties to the 84 items listed in Annex 6 of that document.
Despite the AB decision, in 2013 China has applied export duties to 352 items, of which 253 items are either not listed in Annex 6 or are subject to export duties exceeding the levels permitted by Annex 6. The hope of WTO trading partners was that when China brought itself into compliance on the nine raw materials involved in the first WTO dispute, all the additional WTO-inconsistent export duties would also be eliminated or brought down to the levels authorized in Annex 6 of the Protocol.
Unfortunately, at the end of 2012 when China implemented the adverse ruling in the first case, it simply revoked the export duties on the nine raw materials. The list it published for 2013 not only failed to address the hundreds of other items that were inconsistent with its Protocol obligations but it actually added new items to the list – resulting in 253 items facing export duties in 2013 in violation of China's WTO commitments.
As China did not move expeditiously to bring its overall policy into compliance with the AB decision, the United States, along with the European Union and Japan, brought a second round of cases before the WTO in March 2012, this time focusing on China's similar export restraints on rare earths, tungsten, and molybdenum.
A decision from the WTO panel reviewing the export restraints, including export duties, on these additional 81 products is due to be released in November 2013. There is little doubt that China will again be found to be acting in violation of its obligations under the WTO. Based on the limited response from China to date, Terence Stewart and Ping Gong argue in a new Trade Flow that it is likely that the United States and other WTO members will need to bring yet additional cases on the other 172 products that remain subject to export duties in China.