The World Trade Organization’s appeals panel has declared that China’s quotas and export taxes framework for nine commonly used industrial materials must be dismantled.
The Appellate Body, the highest tribunal of the trade organization, declared that as China has a large number of export policies for zinc, bauxite, yellow phosphorus and six more industrial materials, it impacted international trade.
The appeals group stated that the total impact of the export restrictions of China distorted international trade and the policies will have to be removed.
The EU, US and Mexico had filed this case against China in 2009. China was accused of utilizing quotas and export taxes to compel international chemical firms and other companies to shift their manufacturing operations to China in order to use these resources. According to a former chairman and an Appellate Body member, Mr James Bacchus stated that China will follow the ruling of the WTO.
The commerce ministry of China expressed regret at the WTO ruling but seemed that it will follow the same as it was important for their sustainable development.
This case has been closely followed mainly because it may set a model for more critical natural resources. The minerals, which were part of the ruling included zinc, bauxite, yellow phosphorus, magnesium, fluorspar, coke, silicon carbide, manganese and silicon
metal. Rare earth metals were not included in the ruling.
China is responsible for the production of more that 90% of the world’s rare earth metals that are used in cellphones, wind turbines, computers and hybrid cars. In order to defend these rare earth metals, China referred to a legal exception, the general agreement on tariffs and trade called GATT. That exception allows countries to restrict exports and export taxes in case the restrictions were for conservation of a rare natural resource or for protection of the environment.
The appeals group stated that when China became a member of the WTO, it stated that it will remove all export restrictions especially industrial raw materials. The appeals group said that this superseded the provisions of GATT.
A EU Trade official stated that Europe may use the appellate body’s ruling to pressurize China to remove its rare earth metals’ export restrictions.