## Facts

- China was the leading global supplier of rare earths and imposed export restraints on rare earths, tungsten, and molybdenum in multiple forms and processing stages.
- The European Union, the United States, and Japan challenged China’s measures, alleging they restricted exports and gave Chinese downstream users access to inputs at lower prices than foreign competitors.
- The challenged measures included export duties on listed products, export quotas on listed products, and rules for administering quotas (including licensing, eligibility, allocation procedures, and related formalities).
- The complainants claimed:
  - China’s export duties breached China’s accession commitment to eliminate export duties except where permitted by China’s Accession Protocol (including products listed in the relevant annex) or otherwise allowed.
  - China’s export quotas and related administration operated as quantitative export restrictions inconsistent with GATT 1994 Article XI:1 and also conflicted with transparency and administration disciplines (including GATT Article X and accession-based commitments tied to the administration of trade rules).
- China argued the measures addressed environmental and health harms associated with mining and processing, including pollution and resource depletion, and invoked GATT 1994 Article XX(b) (health) and Article XX(g) (conservation) as defenses.
- China also argued that GATT Article XX defenses should be available to justify any inconsistency with the export-duty obligation in its Accession Protocol.
- A single WTO panel heard the disputes together. China appealed key legal findings to the Appellate Body, and the reports were adopted with the Appellate Body’s findings.

## Issues

1. Whether China’s export duties on the covered products were inconsistent with the export-duty discipline in China’s Accession Protocol (including the requirement to eliminate export duties except as expressly permitted).
2. Whether China could invoke GATT 1994 Article XX to justify a breach of the export-duty obligation in China’s Accession Protocol.
3. Whether China’s export quotas were inconsistent with GATT 1994 Article XI:1 as prohibited export restrictions.
4. Whether China’s export quotas (and related features of the export-restraint regime) were justified under GATT 1994 Article XX(g), including the requirements that the measures relate to conservation and operate together with domestic production or consumption restraints.
5. Whether quota-administration and related procedures (including licensing and publication/administration of rules) were inconsistent with GATT 1994 Article X and relevant accession-related obligations on the administration of trade measures.

## Decision

- The Panel found China’s export duties inconsistent with China’s Accession Protocol because the duties applied to products not covered by the permitted exceptions.
- The Panel found that GATT 1994 Article XX could not be used to excuse a breach of the Accession Protocol export-duty commitment because the Accession Protocol provision did not contain language linking it to Article XX.
- The Panel found China’s export quotas inconsistent with GATT 1994 Article XI:1 as quantitative restrictions on exportation.
- The Panel rejected China’s Article XX defenses for the challenged export-restriction regime, finding that China did not satisfy the legal requirements for Article XX(g) and, to the extent examined, did not establish the elements required under Article XX(b).
- The Panel found additional inconsistencies in quota administration and related requirements under transparency and administration rules (including GATT 1994 Article X) and relevant accession-related commitments governing how China administers and publishes trade rules and licensing/quota procedures.
- The Appellate Body upheld the central findings, including that Article XX is not available to justify a breach of the export-duty obligation in China’s Accession Protocol and that China’s export quotas were inconsistent with Article XI:1 and not justified under Article XX(g).
- The DSB recommended that China bring its measures into conformity with its WTO obligations.

## Legal Principles

- Obligations in an accession protocol can operate as independent WTO commitments; GATT 1994 Article XX exceptions do not apply to an accession-protocol obligation unless the text of that obligation provides a basis to apply Article XX.
- Export quotas and measures that limit export quantities are “prohibitions or restrictions” under GATT 1994 Article XI:1 when they restrict exportation through fixed limits and related administering measures.
- Under GATT 1994 Article XX(g), a respondent must show (i) a sufficient connection between the measure and conservation of an exhaustible natural resource and (ii) that the measure is made effective together with restraints on domestic production or consumption; an export-only restraint that favors domestic downstream users will have difficulty meeting these requirements.
- Under GATT 1994 Article XX(b), a respondent must show the measure is “necessary” to protect human, animal, or plant life or health, including consideration of reasonably available alternatives that are less trade restrictive while achieving the chosen level of protection.
- GATT 1994 Article X requires published, uniform, impartial, and reasonable administration of trade rules; opaque or uneven quota allocation and licensing practices may breach these disciplines, as may failures to publish or administer measures consistently with accession-related commitments.
- A DSU Article 11 claim requires showing a serious failure by the panel to make an objective assessment; disagreement with the panel’s weighing of evidence is not enough.

## Conclusion

In China—Measures Related to the Exportation of Rare Earths, Tungsten, and Molybdenum, the WTO found that China’s export duties breached China’s accession commitment to eliminate export duties except as specifically allowed, and that GATT Article XX could not excuse that breach absent textual support in the Accession Protocol. The WTO also found China’s export quotas and related administration inconsistent with GATT rules on export restrictions and trade-rule administration, and it rejected China’s environmental and health defenses because the measures did not meet the requirements of Article XX, leading to a recommendation that China bring its measures into conformity.


China—Measures Related to the Exportation of Rare Earths, Tungsten, and Molybdenum, WT/DS/421/R, WT/DS/422R, WT/DS/423R (26 March 2014), WT/DS/421/AB/R, WT/DS/422/AB/R, WT/DS/423/AB/R (7 August 2014)