On August 7, 2014, the World Trade Organization (WTO) Appellate Body upheld a March 2014 Panel decision regarding China's export restrictions on rare earth materials including tungsten, molybdenum, and other rare earth elements. This decision was welcomed by the United States, the European Union and Japan, each of which filed a complaint with the WTO in 2012.
The original Panel found that China's measures were inconsistent with China's obligations under the General Agreement on Tariffs and Trade (GATT) and China's Accession Protocol. In so finding, the Panel rejected China's arguments that their export restraints were covered by the general exceptions under GATT Article XX(g) "because they were applied for conservation reasons and in tandem with domestic restrictions on the production of rare earths." A more detailed discussion of the original Panel report can be found in the May 2014 edition of the Trade & Manufacturing Alert.
China appealed the Panel's decision on limited grounds. First, China appealed the Panel's finding that GATT Article XX did not apply to breaches of Paragraph 11.3 to China's Accession Protocol. Second, China appealed the Panel's interpretation and application of Article XX(g), in connection with its findings with respect to the export quotas at issue. While modifying some of the panel's original reasoning, the Appellate Body affirmed the Panel's overall findings.
On August 11, China's Ministry of Commerce announced—after noting its disappointment with the final ruling—that China will bring its export restrictions into line with the WTO rules.