WTO Decision on China's Export Quota

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August 12, 2014

    China has confirmed that it will comply with the World Trade Organization’s (WTO) August 7, 2014 Appellate ruling that the country cannot place quotas on the exportation of rare earth materials, tungsten, and molybdenum.  These “rare earth metals” are used in manufacturing hybrid automobiles and cell phones.  This decision affirmed the previous ruling that is now forcing China to repeal the restrictions.  

    Based on the General Agreement on Tariffs and Trade (GATT), China argued that they could place limitations on the exportation of goods for conservational purposes if the restriction applied domestically as well.  The initial panel proceedings ruled that China placed significant exportation restrictions on their metals, while not limiting their own consumption to the same extremity.  According to GATT, the Appellate Court stated that China did not have to maintain equivalent restrictions domestically.  However, the Appellate Court found this irrelevant because they ruled that China did not need the restrictions to protect their resources.
 
    The United States, European Union, and Japan have seen this as a victory.  These countries believe that the quota placed an unfair advantage in favor of the Chinese market and would harm their own industry by increasing domestic production costs.  This follows a similar 2012 complaint won by the United States regarding China’s exportation quotas on steel, aluminum, and other materials used in chemical manufacturing.

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