(ds432) european union's opening oral statement at the...

World Trade Organisation

Panel Proceedings

CHINA – MEASURES RELATED TO THE EXPORTATION OF RARE

EARTHS, TUNGSTEN AND MOLYBDENUM

(DS432)

European Union's Opening Oral Statement

at the Second Meeting with the Panel

As delivered

Geneva, 20 June 2013

China-Measures Related to the Exportation of European Union's Opening Oral Statement

Rare Earths, Tungsten and Molybdenum (DS432) at the Second Meeting with the Panel

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TABLE OF CONTENTS

1 INTRODUCTION ........................................................................................................ 1

2 ARTICLE XX OF THE GATT 1994 ........................................................................... 2

3 CHINA'S READING OF "CONSERVATION" UNDER ARTICLE XX(G) OF THE GATT

IS ERRONEOUS .......................................................................................................... 4

3.1 China's proposed interpretation reads protectionism into conservation ..... 5

3.2 Relevance of United Nations General Assembly Resolution 1831 (XXVI) ... 8

3.3 China failed to demonstrate that the export quotas at issue in this dispute

are related to conservation ........................................................................... 9

4 CHINA'S EXPORT QUOTAS DO NOT SATISFY THE REQUIREMENTS OF THE SECOND

CLAUSE OF ARTICLE XX(G) .................................................................................. 11

4.1 What constitutes a restriction within the meaning of Article XX(g) ........... 12

4.2 "restrictions on domestic production or consumption" must be effective .. 13

4.3 The Chinese measures create a systemic imbalance which cannot be

reconciled with the even-handedness requirement..................................... 16

5 CHINA'S EXPORT QUOTAS ARE APPLIED IN A MANNER WHICH CONSTITUTES

ARBITRARY AND UNJUSTIFIABLE DISCRIMINATION, AS WELL AS REPRESENTING A

DISGUISED RESTRICTION ON INTERNATIONAL TRADE .......................................... 19

5.1 The Chinese measures in their design, structure and application

discriminate between China and third countries........................................ 21

5.2 Chinese export quotas are applied in a manner which constitutes arbitrary

and unjustifiable Discrimination and a disguised restriction to trade ...... 24

6 CONCLUDING REMARKS ........................................................................................ 26



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TABLE OF CASES CITED

Short Title Full Case Title and Citation

Argentina – Hides and

Leather

Panel Report, Argentina – Measures Affecting the Export of

Bovine Hides and Import of Finished Leather, WT/DS155/R

and Corr.1, adopted 16 February 2001, DSR 2001:V, p. 1779

China – Raw Materials Panel Reports, China – Measures Related to the Exportation

of Various Raw Materials, WT/DS394/R / WT/DS395/R /

WT/DS398/R / and Corr.1, adopted 22 February 2012, as

modified by Appellate Body Reports WT/DS394/AB/R /

WT/DS395/AB/R / WT/DS398/AB/R

Colombia – Ports of

Entry

Panel Report, Colombia – Indicative Prices and Restrictions

on Ports of Entry, WT/DS366/R and Corr.1, adopted 20 May

2009, DSR 2009:VI, p. 2535

Japan – Agricultural

Products I

GATT Panel Report, Japan – Restrictions on Imports of

Certain Agricultural Products, L/6253, adopted

2 March 1988, BISD 35S/163

Japan – Leather (US) GATT Panel Report, Japanese Measures on Imports of

Leather, L/4789, adopted 6 November 1979, BISD 26S/320

US – Gasoline Appellate Body Report, United States – Standards for

Reformulated and Conventional Gasoline, WT/DS2/AB/R,

adopted 20 May 1996, DSR 1996:I, p. 3

US – Superfund GATT Panel Report, United States – Taxes on Petroleum and

Certain Imported Substances, L/6175, adopted 17 June 1987,

BISD 34S/136



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TABLE OF EXHIBITS

Exhibit No. Title

JE-163

David Humphreys: “Transatlantic Mining Corporations in the Age

of Resource Nationalism”, Transatlantic Academy Paper Series,

May 2012.

JE-164

Statement by Professor Gene M. Grossman: Export Restrictions:

Possible Effects of Under‐Filled Quotas on Prices and

Consumption

JE-165 Lower valuations spark investor interest in rare earths assets,

China Metals Weekly (2 November 2012)

JE-166 Statement by Professor Mark W. Watson: Evaluation of Chen

Jiazuo’s “The Status of Development of the Rare Earth Industry”

JE-167

Baotou Steel Rare-earth halts production to stabilize prices,

Xinhua (24 October 2012)

(http://news.xinhuanet.com/english/china/2012-

10/24/c_131927023.htm)

JE-168

Company Halts Rare Earth Metals Production Amid Price Fall,

Caixin Online (19 October 2011) (http://english.caixin.com/2011-

10-19/100315580.html)

JE-169 Paper by Professor L Alan Winters: The Effect of China’s Rare

Earth Export Restrictions on Export Prices

JE-170

Skyrocketed Prices of Rare Earth Export Quotas Seriously

Jeopardize Development of Rare Earth Industry, Xinhua News

Service (4 May 2011)

JE-171 Rare earth fever drives skyrocketed export quota prices, Economic

Information Daily (29 April 2011)

JE-172 Showa Denko To Restart Chinese Rare-Earth Alloy Plants, Nikkei

English News (12 June 2013)

JE-173 Pricing of Rare Earth Exports from China, China Customs / World

Trade Atlas



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Mr. Chairman, distinguished Members of the Panel.

1. Thank you for this further opportunity to appear before you. Before I begin, on

behalf of the European Union's delegation, I would like to reiterate our deep

appreciation for all the work that the Panel is doing, and, of course, for the

tremendous efforts of the Secretariat, as well.

2. In this opening statement, the European Union will, in line with China's focus in

its second written submission, concentrate on its claim under Article XI:1 of the

GATT 1994 and in particular with respect to rare earths. In doing so, we will

address certain factual assertions made by China in its second written submission,

as well as specific legal arguments set out in China's second written submission

with respect to GATT Article XX. In this context we will also provide replies to

some of the questions addressed to us by the Panel. We stand ready to provide

answers to the other questions during the course of this afternoon and tomorrow.

3. The European Union wants to stress that our focus on rare earths in this statement

should not be seen as reflection of a judgment on our side that restrictions imposed

on molybdenum or tungsten are any less important or have been less trade

restrictive and distortive on international trade. On the contrary, as we have shown

through our submissions before this Panel, restrictions on all three materials

violate China's WTO obligations. However, since it is China that bears the burden

of proof to justify them under Article XX, it is neither necessary nor appropriate

for the Complainants to make arguments in rebuttal where a prima facie defence

has not been made.

1 INTRODUCTION

4. China would have you believe that finding against it in this dispute would be

fundamentally unjust. It does so by misconstruing the claims advanced against its

measures as an assault against conservation and environmental protection policies

and an attempt by the complainants to enforce an "absolute prohibition" against

export quotas as instruments within a conservation policy.

5. The European Union has been very clear about the fact that it is not challenging

China's policy objective to conserve exhaustible natural resources. Nor are we

challenging export quotas and their potential role in conservation in the abstract.



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6. We ask the Panel not to be distracted by China's rhetoric. This case is not about an

absolute prohibition or an absolute right to export quotas as conservation policy

tools. The Panel should instead objectively assess the facts before it concerning the

very concrete export restrictions at issue in this dispute.

7. The Complainants have established a prima facie case of violation by China of its

WTO-obligations both with respect to export duties and export quotas and the

manner in which export quotas are administered.

8. China concedes1 that the export quotas at issue were not in accordance with WTO

law prior to 2011, but alleges that it had made amends since and even asks you to

disregard how its system of restrictions operated before 2011. It also asks you to

ignore the fact that export restrictions existed well before it attempted to restrict

production and that those restrictions on exports at least for a period in time clearly

formed part of its industrial policy.2

9. As we see it, the proverbial wolf may have changed his coat, but not his

disposition. Aside from a few declaratory documents, nothing really changed.

China's export quotas on rare earths, tungsten and molybdenum remain designed to

and in any event operate so as to give advantages to domestic industry at the

expense of the rest of the world. The trade restrictive, trade distortive and trade

diverting effects of export quotas are accentuated through their WTO-inconsistent

administration and the imposition of export duties on the same products.

2 ARTICLE XX OF THE GATT 1994

10. In light of China's numerous allegations that the Complainants failed to make their

case that the export quotas result in trade restrictive, trade distortive and trade

diverting effects, the European Union wishes to recall again where the burden of

proof lies.

11. In US – Gasoline, the Appellate Body found that the burden of showing that a

measure comes within the scope of an exception and that the measure complies

with the chapeau of Article XX rests with the party invoking the exception. In

1 China's second written submission, para. 24.

2 See European Union's second written submission, paras 113-115.



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addition, the Appellate Body indicated that the latter is more difficult to prove than

the former. 3

12. In practice, what China needs to justify under Article XX is the measure that gives

rise to a WTO-inconsistency. In the context of an Art XI:1 claim, this is the

institution and maintenance of the export quota. Contrary to what China submits,4

it is not merely the quantitative restrictive effect of the quota in a given moment in

time that is relevant for the purpose of the Panel's analysis under Article XX. To

accept China's premise would effectively allow China to circumvent the Article

3.8 DSU presumption of nullification and impairment.

13. Past panels had regarded violations of Article XI:1 in a special light because of the

fundamentally trade-distorting nature of quantitative restrictions. The panel in

Japan - Agricultural Products found that "Article XI:1 protected expectations on

competitive conditions […] the presumption that a measure inconsistent with

Article XI causes nullification or impairment could therefore not be refuted with

arguments relating to export volumes".5 Moreover, the earlier panel in Japan –

Leather (GATT) stated that it "wished to stress that the existence of a quantitative

restriction should be presumed to cause nullification or impairment not only

because of any effect it had had on the volume of trade but also for other reasons

e.g., it would lead to increased transaction costs and would create uncertainties

which could affect investment plans".6 More recently, the panel in the Colombia -

Ports of Entry, after reviewing several GATT and WTO cases, concluded that

"restrictions" under Article XI:1 concerns measures that create uncertainties and

affect investment plans, restrict market access for imports or make importation

prohibitively costly.7

3 Appellate Body report, US-Gasoline, para. 149.

4 E.g China's second written submission, para. 21, China's first written submission, para. 233 et seq.

5 Panel report, Japan – Restrictions on Imports of Certain Agricultural Products, Op. Cit, para. 5.4.3,

citing also as support United States: - Taxes on Petroleum and Certain Imported Substances and

Japanese Measures on Imports of Leather.

6 Panel report, Japan - Leather, para. 55. (emphasis added)

7 Panel report, Colombia - Ports of Entry, para. 7.240 (emphasis added). See also Panel report,

Argentina – Hides and Leather, para. 11.20



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14. In the context of this dispute, China alleges that it is for the Complainants to

demonstrate beyond any doubt that its export quotas have been cause to any

restriction, distortion or diversion to international trade. In the absence of such

evidence, China implies, the Panel needs not consider anything else but the fact

that the quotas were not completely filled in the last two years. The European

Union submits that China's premise is clearly flawed and disproved by WTO

jurisprudence.

3 CHINA'S READING OF "CONSERVATION" UNDER ARTICLE XX(G) OF THE GATT IS

ERRONEOUS

15. Mr Chairman, China has chosen to defend its export quotas by resorting to the

GATT Article XX(g) exception and submits that its quotas are "relating to the

conservation of exhaustible natural resources". China placed these export quotas

within a broader framework or structure which it refers to as its "comprehensive

conservation policy" for rare earths, tungsten and molybdenum respectively.

16. China does not submit that the export quotas - on their own - constitute measures

related to conservation, but rather tries to convince this Panel that its export quotas

are relating to conservation because they form part of this broader conservation

policy mechanism.

17. China includes within its "comprehensive conservation policy" production quotas

which impose restrictions on the volume of natural resources which can be mined

or extracted from the earth. There is no disagreement between the Parties that

production quotas are measures which can be considered as related to

conservation. The Parties in this dispute do, however, disagree on whether China is

permitted to impose export quotas that additionally restrict the exports of these

natural resources and thereby allocate the consumption of the natural resources.

18. China alleges that the export quotas are measures to "manage the supply and use"

of natural resources and as such fall within the scope of "conservation" under

GATT Article XX(g)8, and that the Complainants are unduly narrowing the

meaning of the term "conservation".9

8 China's second written submission, paras. 17-18.

9 China's second written submission, paras 16-20.



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19. To support its claim, China has been relying on certain passages from the panel's

report in China – Raw Materials. The European Union re-asserts its view that

China is wrong when it interprets the panel's reasoning in China- Raw-Materials

in a manner which would read into conservation the management and use of

natural resources for the purposes of securing sufficient supplies of the resource

for its domestic industry.

3.1 CHINA'S PROPOSED INTERPRETATION READS PROTECTIONISM INTO CONSERVATION10

20. The European Union can accept conceptually that any conservation policy will

entail an element of management: the very act of restricting production or

consumption is an act of management of resources. The European Union does not,

however, agree with China that conservation within the meaning of Article XX(g)

could be read as entailing management or use to the advantage of the WTO

Member which instituted the conservation policy and the disadvantage of other

WTO Members. In other words, conservation is not about allocation of where the

product is consumed. To interpret conservation in such a manner would be

tantamount to reading economic goals into XX(g); a provision that provides for an

exception to China’s WTO obligation for legitimate non-economic goals. Where

economic interests can exceptionally be invoked as well, this has been stated

explicitly (cf. Article XX(i)) and adequate additional safeguards have been

provided. Ignoring this by reading economic goals into Article XX(g) would

fundamentally change the balance of rights and obligations that the GATT sought

to establish. A balance of rights which was not altered by the Preamble of the

WTO Agreement, which – as China stresses – recognises the objective of

sustainable development, but – what China prefers to ignore - also confirms that

this goal is to be achieved through the reduction of barriers to trade and the

elimination of discriminatory treatment.

21. The European Union also submits11

that the chapeau of Article XX, which is part

and parcel of the analysis under Article XX(g) and as such immediate and highly

relevant context in interpreting the scope of "conservation", should be taken into

10 The following section should also be considered as a preliminary response to Panel's Question 66.

11 European Union's second written submission, para 48 et seq.



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account. The function of the chapeau is preventing restrictions on trade based on

the grounds mentioned in the paragraphs of Article XX from being diverted from

their proper purpose and used in such a way as either to introduce unjustified or

arbitrary discrimination between other Members where the same conditions prevail

or indirectly to protect national industry. Furthermore, the chapeau also functions

as a safeguard against measures that constituted a disguised restriction on

international trade, including when such restrictions do not constitute

discriminatory treatment.

22. The European Union notes that China does not view “use and management” as a

neutral and non-discriminatory act of administration of measures needed for

conservation, but submits that Article XX(g), interpreted in light of the preamble

to the WTO Agreement and its sovereign right over natural resources, gives it the

right to conserve in a manner which favours its own economic development goals.

23. The ordinary meaning of the text of Article XX(g) provides no basis for such

interpretation. As we already noted and as Japan explained in great detail in its

second written submission12

, the preamble to the WTO agreement which China

invokes as relevant context also does not support such an expansive reading of

conservation.

24. Legitimising the protection and promotion of domestic industry by reading use and

management - as understood by China - into the concept of conservation would

indeed introduce an element of protectionism into the sub-paragraph of XX(g),

which could no longer be caught by the safeguards inserted in the chapeau. It

would be difficult to maintain that a measure which favours domestic industry by

extending protection to it (at the expense/disadvantage of foreign users), is

discriminatory in an unjustified or arbitrary manner if the very objective of

conservation were to be interpreted as encompassing such action by WTO

Members.

25. In the view of the EU, customary rules of treaty interpretation do not allow for

such a result. The Agreement is to be interpreted according to the ordinary

meaning of the words in the relevant provision, viewed in their context and in the

12 Japan's second written submission, paras. 43-48.



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light of the object and purpose of the agreement. Even if – quod non – one were to

accept the inference China draws from the Preamble to the WTO Agreement, it

would be untenable to interpret "conservation", a term which is prima facie clear

and does not require interpretation, in a manner which deprives of its purpose

another element of the provision (i.e. the chapeau).

26. The European Union recalls that the cornerstone of the GATT and the WTO is the

fundamental premise that free trade is mutually advantageous for WTO Members,

and that restrictions to international trade - particularly those that are

discriminatory or protectionist in nature - are to be eliminated. The importance that

WTO Members ascribed to non-discrimination has been reflected in the operative

text, as well as the preamble of the GATT and WTO Agreement. Any departure

from the principle of non-discrimination has been carefully circumscribed. There

is no language in paragraph (g) which supports China's argument that

"conservation" can include measures the intent or effect of which is promotion

and/or protection of domestic industry. Any interpretation along the lines of what

China submits would effectively amount to an amendment of the GATT 1994.

27. China's reliance on the principle of sovereignty also fails. China attempts to justify

its reliance on the principle of sovereignty by reference to other international

instruments. It seems clear that, unless mediated through the terms of WTO law

itself, relying on instruments from other areas of international law to permit

discriminatory trade preferences could seriously erode the WTO’s cornerstone

principles. Instruments of international law rightly call for special consideration of

many different economic and social interests, including: least-developed countries;

developing countries generally; landlocked developing countries; small island

developing countries; structurally weak, vulnerable and small economies; national

minorities; and indigenous peoples. A UN declaration is currently being negotiated

on peasants and other rural workers. Although important, these interests do not

automatically justify discriminatory trade restrictions under WTO law, without

express supporting language in the covered agreements.

28. In sum, the European Union submits that China's interpretation of the term

"conservation" is supported neither by the text nor by the context of the provision.

Its reading is as wide as to render the chapeau safeguards and by extension the



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substantive obligations under the GATT 1994 virtually meaningless. If this Panel

were to accept China's wide interpretation of the China-Raw Materials panel's

reasoning, this would open a Pandora's box. If the meaning of the term

"conservation" in the text of GATT Article XX(g) were to be expanded to include

within it the right of management and use of natural resources in order to promote

a WTO Member's economic development – then this might have serious systemic

implications as a myriad of other policies taken by WTO Members could

potentially be described as relating to "conservation".

3.2 RELEVANCE OF UNITED NATIONS GENERAL ASSEMBLY RESOLUTION 1831 (XXVI) 13

29. The Panel asked for comments on the United Nations General Assembly

Resolution 1831 (XXVI) of 18 December 1962 (Resolution 1831) and its relevance

in interpreting "conservation" under Article XX(g). As just explained, in the view

of the European Union the concept of "conservation" or "preservation" of natural

resources could in certain situations entail within it a degree of management, or

rational utilization. A case in point, as already noted, would be the introduction of

"production quotas" which effectively ensure the management and rational use of a

natural resource. However, the management and rational use of a natural resource

needs to relate directly to conservation and cannot include measures aiming at

ensuring sufficient supplies for the domestic market. These would not be

conservation measures.

30. Resolution 1831 does not support any different interpretation. The text of

Resolution 1831 juxtaposes the "conservation of nature" with "economic

development", and in one of its recitals, it considers the extent to which the

economic development of countries "may jeopardize their natural development

and their flora and fauna". The Resolution refers to "preserving, restoring,

enriching and making rational use of natural resources and increasing

productivity," and calls upon the United Nations Secretary-General and other UN

agencies to "continue to give the fullest co-operation and to provide technical

assistance to the developing countries at their request, in the conservation and

restoration of their natural resources and their flora and fauna". The resolution

13 The following section should also be considered as a preliminary response to Panel's Question 69.



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therefore spells out sustainable development aims, suggesting the rational

utilisation and management of natural resources aiming inter alia at the

conservation of natural resources. Nothing in the text, however, suggests that the

objective of conservation could include discriminatory measures that advantage

the resource-endowed country’s own industry at the expense of the rest of the

world. In sum, there is nothing in the text of this Resolution that would give any

credence or support to China's repeated view that the concept of "conservation" in

Article XX(g) of the GATT includes the right to manage and use their natural

resources with a view to shielding/protecting their domestic industry from

competition.

3.3 CHINA FAILED TO DEMONSTRATE THAT THE EXPORT QUOTAS AT ISSUE IN THIS DISPUTE ARE

RELATED TO CONSERVATION

31. China submits to this Panel that the export quotas it imposes facilitate the

enforcement of its conservation policy14

as the export quota system "enables the

Chinese authorities to trace the sources of the exported rare earth products and thus

to identify illegally produced rare earth products when they are exported".15

China

explains that this is due to the fact that the exporters of these rare earths "must

provide information on the mining enterprises that are the sources of supply, the

quantities purchased and VAT invoices."16

The European Union submits that this

is a fallacious argument, as what China is alluding to, essentially entails a system

of border or customs control, which can take place without quantitative

restrictions.

32. China again asserts that its export quotas "signal the need for exploring other

sources of supply".17

The European Union has already explained18

why it disagrees

with China's assertions. Firstly, such a signal could be sent through non-

discriminatory measures like an effectively enforced production quota and

secondly, the fact that China sends an almost contrary signal to its domestic


15 China's second written submission, para .46.

16 Ibid.


18 European Union's second written submission, paras 126-132.



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industry (ensuring sufficient domestic supplies by limiting exports to a maximum),

undermines this signal and may rather give an incentive to foreign consumers to

relocate to China, resulting in increased domestic consumption. China also alleges

that the export quotas it imposes "further enhance China's conservation policy

because they provide a safeguard against uncertainty in the market in respect of

sudden speculative and pre-emptive demand surges."19

China wants to prevent an

eventuality where export demand for rare earths would grow unexpectedly and

lead to its domestic industry facing a shortage. China alleges that it should be

permitted to prevent this eventuality based inter alia20

on the principle of

sovereignty over natural resources. The European Union disagrees. As discussed a

few moments ago, the objective of protecting one's industry cannot be subsumed

into the analysis of the objective of conservation. The two objectives are distinct

from each other.

33. In the context of this argument, China further refers to export quotas as a

"balancing tool"21

, and compares them to the requirements of GATT Article XIII:2

for import quotas, stating that the "export quotas seek to distribute trade of the rare

earths products in a manner that approached the expected domestic and foreign

demand."22

China asked the Panel to apply GATT Article XIII by analogy.23

The

European Union has already explained in its second written submission24

why this

would be both inappropriate and impractical.

34. Against this background, this Panel needs to assess whether the export quotas at

the heart of this dispute are primarily, closely and genuinely aimed at

conservation, and if so, in what way. This Panel should also look at the potential

impact of the meaning on this phrase on the meaning and relevance of other sub-

paragraphs of Article XX, like sub-paragraphs XX(i) and XX(j).

19 China's second written submission, para 53.

20 China's first written submission , para. 147; China's second written submission, para. 17.


22 Ibid.

23 China's second written submission, para 108; China's Opening Oral Statement at first meeting of

the Panel with the Parties, para 53.

24 European Union's second written submission, paras. 64-69.



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35. The European Union submits that China's claim that its export quotas are a part of

a bigger and broader "comprehensive conservation policy" is an inherently

fallacious one. China's export quotas are not related to conservation: they do not

add anything to China’s conservation objectives, but are aimed at protecting

China’s domestic industry from open market competition on access to the material

available.

4 CHINA'S EXPORT QUOTAS DO NOT SATISFY THE REQUIREMENTS OF THE SECOND

CLAUSE OF ARTICLE XX(G)

36. The European Union would now like to address the second condition that China

must comply with in order to provisionally justify its measure under Article

XX(g), namely the requirement that the measures at issue be "made effective in

conjunction with restrictions on domestic production or consumption".

37. As we just discussed, the European Union does not consider Chinese export quotas

on rare earths, tungsten and molybdenum as measures related to conservation.

Even if – quod non – the Panel were to conclude that they can fall within the scope

of measures related to conservation, the European Union submits that these

measures have not been made effective in conjunction with restrictions on

domestic production or consumption.

38. China alleges that it has put in place a comprehensive conservation policy within

which export quotas "work together with restrictions on domestic production or

consumption of rare earths to advance China's objective of conserving its

exhaustible light and medium/heavy rare earth resources".25

39. China submits that it is not required pursuant to Article XX(g) to impose identical

restrictions on domestic and foreign users. It contends that it has the right to

restrict international trade as long as any restrictions are not placed solely on

foreign trade.26

40. With those allegations as a background, the European Union would like to discuss

three core questions which are before this Panel in the context of the analysis

under the second clause of Article XX(g):

25 China's first written submission, para. 161.

26 China's first written submission, para. 69.



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1) First, what kind of restriction does China need to put in place;

2) Second, when can a restriction be considered as having been "made

effective in conjunction with" another restriction;

3) Third, why can we not speak of an even-handed system of restrictions in

this case.

4.1 WHAT CONSTITUTES A RESTRICTION WITHIN THE MEANING OF ARTICLE XX(G)27

41. The European Union notes that the panel in China - Raw Materials already looked

at the meaning of the term restriction and considered that "[…] the ordinary

meaning of "restriction" is that which has a limiting effect".28

42. In the context of measures for the conservation of natural resources the restrictions

generally take the form of quantitative limits on extraction. Other types of

measures can also be envisaged and have indeed been relied upon by WTO

Members for conservation purposes (e.g. production taxes, certification

requirements, licensing requirements etc.).

43. China submits that it is within its discretion to decide what is the most appropriate

and practical measure to pursue its conservation goals, depending on, inter alia, the

technical and market realities of the resource at issue29

44. The European Union does not disagree. Indeed, provided they comply with the

requirements of Article XX, WTO Members have a wide margin of discretion in

their choice of measures for conservation. Having said that, the choice to address

international trade with measures that are distinct from and additional to those

addressing all trade in exhaustible natural resources carries certain implications for

demonstrating compliance with Article XX(g) and the chapeau.

45. Article XX(g) does not necessarily require that domestic and foreign users of

Chinese raw materials be treated in an identical manner. It is uncontested,

however, that it requires that they be treated in an even-handed manner.30

27 This section should also be considered as a preliminary response to Panel's Question 73.

28 Panel report, China – Raw Materials, para. 7.394.




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46. To put it simply, if China wishes to avail itself of a right to restrict the quantities of

material available for export in the name of conservation, then Article XX(g)

obliges that any measure affecting exports would need to be made effective in

conjunction with a restriction that will have a similar/balancing effect on domestic

production or consumption.

47. Where the instrument used with respect to international trade is different and – as

is the case here - additional to the instrument that concerns domestic production or

consumption, establishing the mere existence of a restriction on domestic

production or consumption cannot be considered as sufficient to make a prima

facie case of even-handedness. Rather a qualitative assessment of the restrictions

imposed on foreign trade vis-à-vis the restrictions imposed on domestic production

or consumption is required to check whether a systemic balance exists between the

restrictions in place.

4.2 "RESTRICTIONS ON DOMESTIC PRODUCTION OR CONSUMPTION" MUST BE EFFECTIVE

48. Before explaining why such an analysis necessarily leads to the conclusion that

there is lack of even-handedness with respect to the measures at issue, the

European Union wants to address another critical flaw in China's proposed

interpretation of Article XX(g).

49. In its second written submission China seems to at least implicitly concede that its

"comprehensive conservation policy" measures may not have actually restricted

domestic consumption or production. It contends, nonetheless, that putting in place

a measure which "intends"31

to restrict domestic production or consumption is

sufficient to satisfy the requirements of Article XX(g).

50. The European Union asks the Panel to reject China's attempt to reduce the

obligation to "make effective" restrictions into a best-endeavours-type of


31 See e.g. China's second written submission, para. 87 ("The combination of the export and

production quotas for 2012 was thus intended to reduce domestic consumption of newly produced

rare earths in China and thus to balance the impact of the export quotas on foreign consumers."),

para. 95 ("[…] when setting the production and export quotas, and taking into account expected

domestic demand for 2012, China did intend to restrict domestic consumption of newly produced

rare earth products.)



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obligation.32 To apply Article XX(g) in such a lax manner would go against

established jurisprudence33

and deprive the test of any real meaning.

51. In US – Gasoline the Appellate Body held in the context of Article XX(g) of the

GATT 1994, that the ordinary meaning of "made effective when used in

connection with a measure - a governmental act or regulation may be seen to refer

to such measure being 'operative', as 'in force', or as having 'come into effect'". In

the context of Article XX(g), the ordinary meaning of "made effective" thus

indicates that a measure is "made effective" when it is "operative".

52. The Appellate Body's approach suggests that the meaning of "made effective" is

not confined to officially entered into force. In the view of the European Union an

interpretation whereby "made effective" would be limited to the act of "adopting"

or entering into force in accordance with municipal law, could open the possibility

for WTO Members to avoid the disciplines of Article XX(g), merely by adopting

legislation, but without ever enforcing it. As Japan notes in its second written

submission, such a reading would also not be supported by the context of the

provision and its negotiating history.34

53. Evidence on "effectiveness" of a measure is relevant – even critical - in

determining whether the system is related to conservation and even-handed. In this

respect, the facts on the record justify an even greater degree of scrutiny of China's

allegation that it has "made effective" domestic production or consumption

restrictions. Let us recall that production caps for rare earths did not exist until

2007 and have certainly not had any effect until 2011. Furthermore, the production

caps historically have been set at such high levels that they served as production

targets, not limitations, or have never been seriously enforced. Setting a target for

boosting production is not a “restriction on domestic production” – in fact, it

accelerates the rate of depletion.

54. Even with respect to 2011, the European Union submits that China failed to

establish a causal link between the existence of the restriction and the reduction in


33 See Appellate Body report, US – Gasoline, pp. 19-22; and recently panel report in China – Raw

Materials, paras. 7.455, 7.462.

34 See Japan's second written submission, para. 109.



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domestic production or consumption. The latter seems instead to be attributable to

the global slowdown and related decrease in demand of downstream products35

, as

well as to strategic reductions in production by Chinese producers, who reduced

supply in the hope that the prices which had decreased compared to prior periods

would pick up again.36

55. Restriction on production of tungsten since 2002 and molybdenum since 2010

exist only on paper.37

For both materials actual production has by far been

exceeding the extraction and production plans. China has not substantiated any

restrictive effect of these measures for those products nor claimed any enforcement

efforts.

56. China argues that domestic consumption is limited by the export quota because

“the share of the production quota available to domestic consumers is limited to

the volume obtained by deducting the export quota from the production quota”.

However - and independent of the European Union's repeated explanation that this

equation is fallacious as the products eligible for exports can also be sold

domestically – these restrictions cannot be considered as having been “made

effective”, since China’s alleged production controls do not appear to have any

“limiting effect” – direct or indirect – on domestic production or consumption,.

57. For the measure to be related to the conservation objective that China allegedly set

itself and effectively imposed vis-à-vis other WTO Members, restrictions on

domestic consumption or production need to have a restrictive effect. This is

clearly not the case with respect to the Chinese restrictions at issue.

58. This reading of Article XX(g) does not contradict what the Appellate Body found

concerning the relationship between domestic measures and measures which only

restrict export. In China – Raw Materials the panel interpreted Article XX(g) as

requiring that the challenged export restrictions ensure the effectiveness of

35 Paper by Professor L Alan Winters: The Effect of China’s Rare Earth Export Restrictions on Export

Prices, Exhibit JE-169, p.12.

36 Xinhua: Baotou Steel Rare-earth halts production to stabilize prices, 24 October 2012

(http://news.xinhuanet.com/english/china/2012-10/24/c_131927023.htm) (Exhibit JE-167);

Company Halts Rare Earth Metals Production Amid Price Fall, Caixin Online (19 October 2011)

(http://english.caixin.com/2011-10-19/100315580.html) (Exhibit JE-168).

37 As confirmed by CHN-138, CHN-139.

http://news.xinhuanet.com/english/china/2012-10/24/c_131927023.htm

http://english.caixin.com/2011-10-19/100315580.html



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domestic restrictions. In other words, the panel ruled that any export restriction

must be introduced with the purpose of making effective the domestic restriction.

The Appellate Body clarified that no such purpose is required under Article

XX(g).

59. Conversely, what the European Union submits here is that the lack of the

effectiveness of domestic restrictions as such should be taken into account by the

Panel in determining compatibility with Art XX(g). The European Union does not

argue that the export restrictions need to ensure (or be primarily aimed at ensuring)

the effectiveness of the domestic restrictions.

4.3 THE CHINESE MEASURES CREATE A SYSTEMIC IMBALANCE WHICH CANNOT BE RECONCILED

WITH THE EVEN-HANDEDNESS REQUIREMENT

60. This brings us to the question of whether looking at the effectiveness of the

measures China presents as restrictions on domestic production or consumption

entails a trade impact or trade effect test. The European Union notes38

that the

Appellate Body in US – Gasoline already clarified this issue and confirmed that

even-handedness does not involve an effects test. Thus, the "effectiveness" to

which the European Union just referred and the "impact" to which the panel

referred to in China – Raw Materials should not be understood as the actual trade

impact or quantitative "effects", but would instead be a regulatory or structural

impact.

61. In the context of rare earths, China submits that access conditions, measures

controlling the volume of production, taxes on production and environmental

requirements constitute the restrictions on domestic production or consumption.39

62. As the European Union showed in its second written submission40

, all these

restrictions – to the extent they exist in practice – equally affect domestic and

foreign users. However, foreign users face on top of this an additional restriction in

the form of export quotas (as well as quota administration and export duties).


39 China's first written submission, para. 164 et seq.

40 European Union's second written submission, paras 141 et seq.



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63. The system is therefore set up in a manner whereby the burden of conservation is

predominantly shouldered by foreign users. This systemic imbalance may not be

equally flagrant at all moments in time, but became obvious as of July 201041

and

continues to subject international trade to restrictive, distorting, or disruptive

effects. The complainants have submitted considerable argument and evidence

demonstrating the existence of these effects. Furthermore, in trying to justify its

decision not to impose export quotas on downstream products China even

explicitly acknowledges its full awareness about the trade distortive and trade

disruptive effects of export quotas.42

64. Despite all that, China – as if in complete oblivion of the jurisprudence concerning

the effects of (export) quotas and the very rationale for their prohibition –

continues to allege that only the quantitative effect is relevant in the context of the

Article XX analysis of its export quotas. China tries to shift the burden of proof

before having discharged its obligation to make a prima facie defence. Since,

according to China, export quotas have not been utilized in 2011 and 2012 and

while having been utilized, again according to China, had no actual restrictive

effect in 2010, the Panel should have no concerns about the even-handedness of its

system.43

65. The European Union will address the effects of the 2010 export quota reduction in

some more detail in a few minutes in the context of the chapeau, but notes already

at this point, that it contests China's submission about the absence of a causal link

between the reduction of the quota in mid-2010 and the increase in export prices.

China's theory on the matter is simply untenable in light of the facts.

66. By subjecting trade for exports to export quotas, China creates the very restrictive,

distorting, and disruptive effects on international trade that it contends to have the

prerogative to safeguard its own downstream industry from.44

Even in the absence

of an actual quantitative impact on trade flows in every given moment in time, the

41 This is confirmed by Professor L Alan Winters in his paper (Exhibit JE-169).



44 China's opening statement at the first meeting of the panel with the Parties, para. 25.



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trade distortive and disruptive effects of the export quota remain.45

At the same

time domestic users in China remain largely shielded from these effects and

continue to enjoy virtually uninhibited access to the materials.

67. Strikingly, China imposes on the rest of the world export quotas with trade

restrictive, distortive and disruptive effects to prevent and not to remedy a market

failure. Even if the Panel were to accept– quod non – that China has the right to

impose restrictions to safeguard its downstream industry from sudden and

unexpected surges in foreign demand which could lead to critical shortages of rare

earths, tungsten and molybdenum, the Panel should reject the permanent

imposition of export quotas as an instrument for the pursuit of such goal. China did

not put forward any evidence that would support the existence of the alleged risk

that non-Chinese users will cut Chinese users off limited resources. Indeed, the

evidence on consumption patterns on the record seems to confirm rather the

opposite trend.46

68. Another indicator of the lack of even-handedness is that China not only allows for

unutilised export quotas to be sold domestically, but has no real mechanism in

place to prevent the selling out to domestic users of quantities allocated for export

quotas.47

Except the desire to keep customers and possibly not reduce the future

export quota allocations, nothing under the Chinese system actually acts so as to

prevent expansion of Chinese domestic consumption at the expense of foreign

consumption. So while the export quotas demonstrably have the effect of

restricting access to rare earths for foreign consumers, the same cannot be said for

Chinese consumers.

69. It is almost ironic that China relies on market forces as the mechanism which will

ensure that quantities "earmarked" for exports will indeed be destined for exports48

and will not instead be used up by domestic downstream production. China

contends that in a context where Chinese consumption is growing exponentially

45 See China's second written submission, para 77, where China acknowledges the existence of those

effects.

46 See Exhibit JE-129, p. 10.

47 This and the subsequent paragraph should also be considered as a preliminary response to Panel's

Question 74.

48 See China's second written submission, para. 91 et seq.



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and export prices – according to China – largely correspond to domestic prices for

the materials at issue, its system should be viewed as advantageous to foreign

consumers. At the same time, however, China fundamentally distrusts market

forces when it comes to risks that may affect domestic production, which – to

recall – presently represents about 70% of the total global consumption.

70. Equally importantly, there is no systemic guarantee that radical cuts of export

quotas will not (just as suddenly and unexpectedly as it happened in July 2010)

occur again in the future. This is not a theoretical risk; China itself concedes that it

is not in a position to accurately estimate future consumption.49

71. For all these reasons, the European Union submits that the Chinese system is the

very opposite of the even-handed or balanced system that Article XX(g) requires.

There is nothing under the Chinese system that would act as a counterbalance to

restrictions imposed on international trade. To the contrary, the current system

structurally shifts any limiting effect resulting from China’s conservation policy

onto foreign consumers.

72. Since the Chinese export quota measures at issue cannot be considered as related

to conservation, nor have they been "made effective in conjunction with

restrictions on domestic production or consumption", the Panel should find that the

measures have not been provisionally justified. Should the Panel nonetheless find

it useful to complete the analysis under the chapeau, the European Union submits

that the measures at issue equally fail the chapeau test.

5 CHINA'S EXPORT QUOTAS ARE APPLIED IN A MANNER WHICH CONSTITUTES

ARBITRARY AND UNJUSTIFIABLE DISCRIMINATION, AS WELL AS REPRESENTING A

DISGUISED RESTRICTION ON INTERNATIONAL TRADE

73. To recall, the chapeau of Article XX provides that measures that are otherwise

inconsistent with the GATT 1994 may be justified pursuant to one of the sub-

paragraphs of Article XX, provided they are not applied in a manner constituting

arbitrary and unjustifiable discrimination or a disguised restriction on international

trade.




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74. The European Union wants to stress that the Panel is not bound to limit its analysis

under the chapeau to the "application" of the measure in the narrow sense

proposed by China50

75. The words “not applied in a manner” do not signify that the application of a

measure is relevant for purposes of the analysis under the chapeau of Article XX,

whereas the substantive content of a measure is not. Nor do these words indicate

that, under the subparagraph of Article XX, the substantive content is relevant,

whereas the manner of application is not. To the contrary, under any provision of

the GATT 1994, a panel may consider both the substantive content and the

application. Under any provision, it would be very difficult for a panel to divorce

its assessment of the inter-related concepts of content and application, because the

content has a considerable, if not decisive, bearing on the application, and the

application may also shed light on the content.

76. For example, under provisions involving a de facto analysis, the entire raison

d’être of the analysis is to ascertain whether, through a measure’s application, it

gives rise to a violation of a substantive treaty provision. However, even in cases

of de facto discrimination, panels do not artificially separate content and

application, but consider both. Substantive content and application cannot be

logically separated; hence, both are examined by panels.

77. Similarly, the obligation "not to apply a measure in a manner" which is

unjustifiably or arbitrarily discriminatory or constitutes a disguised restriction to

trade, also requires the Panel to consider any other relevant measures, which

inform or affect the manner in which the alleged conservation measure is applied.

While it is within China's prerogative not to invoke a particular Article XX

exception with respect to certain measures, this prerogative cannot be the basis for

artificially narrowing the scope of what can be considered as relevant in the

context of an Article XX defence.




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5.1 THE CHINESE MEASURES IN THEIR DESIGN, STRUCTURE AND APPLICATION DISCRIMINATE

BETWEEN CHINA AND THIRD COUNTRIES

78. Let us now turn to the issue of discrimination. The practical results of the systemic

imbalance of treatment between domestic and foreign users already discussed in

the context of even-handedness51

can be observed in the application of the Chinese

export restrictions. The European Union will not repeat facts and arguments

demonstrating this imbalance, but asks that they be considered mutatis mutandis

also as elements demonstrating the existence of discrimination in application under

the chapeau.

79. Furthermore, as the European Union explained in greater detail in its second

written submission52

, China has through its export quotas and export duties

increased costs for non-Chinese users disproportionately more than costs increased

for users of rare earths, tungsten and molybdenum who are located in China. The

trade restricting, distorting and diverting effects of the export quotas were only

exacerbated by the lack of transparency and due process which is inherent to the

Chinese system of quota setting for rare earths, tungsten and molybdenum.53

80. Nonetheless and despite having essentially conceded that its export restriction

were WTO-incompatible at least until 2011 (when it made some changes in light

of the guidance of the Appellate Body and panel in China – Raw Materials)54

China now asks the Panel to accept that restricting, distorting and diverting

international trade through the imposition of export quotas, while allowing

domestic consumption to grow without any effective restriction, should not be

regarded as discriminatory at all. According to China this is so because the

different treatment is warranted by the different conditions prevailing in the

countries concerned (i.e. different levels of consumption).

81. China's line of argument should be rejected by the Panel. Even if – quod non – one

were to accept that past levels of consumption could be accepted as a basis for

distinguishing between WTO Members, a WTO Member cannot be permitted to

51 See above Section 4.3, European Union's second written submission, paras 137 et seq.

52 European Union's second written submission, paras 192 et seq.

53 Ibid. paras 210-219, 276, 311-312.




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rely on different conditions to discriminate against other WTO Members, when the

different conditions were created by its own illegal measures. To allow that, would

be to reward a violation.

82. Furthermore, as will be discussed in more detail in the following section, the

rationale that China provided for the imposition of export quotas would still not

justify the discriminatory effect imposed on other WTO Members.

83. China submits, in essence, that there is no causal relationship between the

tightening of export quotas and the increase of export prices and that when the

effect of export quotas is isolated, no consistent price difference exists.55

In

support of this argument, China provides the so called "Antaike report"56

.

However, as both Professors Watson in a paper which we submit as JE-166 and

Winters in a paper which we submit as JE-169 explain, the methodology used in

the Antaike report is seriously flawed statistically. The conclusions China bases on

it, should thus not be accepted by the Panel.

84. Conversely, Professor Winters' analysis (JE-169) clearly establishes that Chinese

export quotas (and export duties) increase export prices above domestic prices. He

does so by means of two exercises, one looks at prices, while the other is based on

quantities of rare earths used outside China. The exercise on prices identifies what

has actually happened, that on quantities provides a basis on which to think about

the effects of the export quota on the rest of the world in the future when the short-

term disruptions have worked themselves out.

85. Professor Winters observes that export quotas had a dramatic effect on export

prices when they were suddenly tightened in July 2010 and that they, in

conjunction with export duties, have ever since kept the export prices of most rare

earths significantly above domestic prices. The analysis contained in the

Analytical Annex to his paper provides clear evidence to rebut what China

wrongly identified as a shortcoming of the Complainants arguments.57

The

patterns that Professor Winters’ analysis displays in the ratio of export to domestic


56 Exhibit CHN-154.




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prices are strongly consistent, especially when one recognizes the differences

between heavy and light rare earths and the demand-side connection of Europium

with the heavy rare earths. Moreover, it establishes the existence of a consistent

price difference over a broader set of commodities than China exhibited.

86. Professor Winter observes that:

[…] the patterns that it displays in the ratio of export to domestic

prices are strongly consistent, especially when one recognizes the

differences between heavy and light rare earths and the demand-

side connection of Europium with the former. Moreover, our

pattern is true over a broader set of commodities than China

exhibited. The inter-temporal pattern, based on China’s half-

yearly announcement of quota amounts, reflects one event - the

sudden extreme tightening of export quotas on rare earths in July

2010, and the panic buying and stock-cycle that it triggered. The

quota has not been relaxed since 2010 and it is clear that the stock

cycle has not yet been completed. Thus the market for rare earths

has not yet achieved equilibrium, especially the equilibrium that

will pertain when the world economy fully recovers from the

financial crisis. All the evidence suggests that when it does settle

down, maintaining export quotas at the 2010 level will result in

export prices exceeding domestic prices by a significant amount:

the initial shock hit all rare earths and hit far harder in export than

domestic markets, and even now towards the end of the de-

stocking process, rare earth prices are higher abroad than at home

and, for 16 out of 24 of them, to a degree that is statistically

significantly greater than the excess that was observed before the

export quota was so grievously tightened in July 2010. 58

87. In addition, Professor Winters also provides an estimate - based on the quantities

of rare earths used outside China – of what export prices might have been in 2012,

had it been a normal year not subject to macro-economic disequilibrium and

continuing effects of the stock cycle triggered by the Chinese export restrictions in

2010. He estimates that the demand for rare earth in the rest of the world has been

reduced by 48% as a result of China's export restrictions and observes that under a

conservative assumption of elasticity of demand at -0.5, the increase in export

prices induced by the quota would be around 95%, but if one were to assume an

elasticity of -0.3, the price increase would be 160%.

88. China further argues the increases in prices required to balance supply and demand

can be brought about by either export duties or export quotas. Given the existence

58 Exhibit JE-169, p. 29.



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of the export duties, China has sought to show that quotas have added no more

discrimination against non-Chinese users.

89. This is not supported by the facts on the record;59

discrimination exists even if one

were to make an adjustment for export duties. However, as confirmed by Professor

Winters60

, to do so would not be correct from an economic point of view. Nor

would it be correct from a legal point. The measures at issue in this dispute are

export duties and export quotas. As China itself argued, export duties and an

export quotas "have similar effect on the volume of export and, hence,

international and domestic supply [...].61

Based on that in China – Raw Materials,

China asked the Panel to consider both duties and quotas together in the context of

its Article XX(g) defence – an approach which the Panel accepted.62

China seems

to have adopted a different strategy here. But it is not China's litigation strategy

that should govern what the Panel can consider as evidence of existence of

discriminatory effect (or for that matter as evidence of lack of even-handedness

and lack of genuine aims and means relation between the restriction on exports and

the objective of conservation).

5.2 CHINESE EXPORT QUOTAS ARE APPLIED IN A MANNER WHICH CONSTITUTES ARBITRARY AND

UNJUSTIFIABLE DISCRIMINATION AND A DISGUISED RESTRICTION TO TRADE

90. The Complainants have demonstrated that China's export restrictions discriminate

against other WTO Members by creating an advantage for Chinese downstream

users of rare earths, tungsten and molybdenum by driving a wedge between

domestic and export prices, as well as by shielding them from business uncertainty

and the other costs associated with export restrictions. China continues to allege

that no discrimination or obstacles to trade exist. In line with that, China has to

date not provided any argument or evidence justify the discriminatory treatment or

imposition of obstacles to international trade.

91. This is not surprising, since none of the three alleged objectives of export quotas

that China refers to in the context of the "related to conservation" analysis could

59 European Union's second written submission, para 204, Winters paper, Exhibit JE-169.

60 Winters paper, Exhibit JE-169, p. 8; European Union's second written submission, para 200.

61 Panel report, China - Raw Materials, para. 7.231.

62 Ibid.



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serve as justification for the degree of trade restrictiveness, distortion and

diversion that China's export restrictions entail. To recall, China alleges that export

quotas:

1) help enforce China's restrictions on production by preventing smuggling63

;

2) signal the need for exploring other sources of supply64

; and

3) safeguard China's domestic industry from surges in foreign demand.65

92. The European Union submits that China could have achieved any of these goals

without restricting, diverting and distorting international trade with the measures at

issue.

93. First, export duties and export quotas are not the best way to monitor export

activity or control illegal exports. Stopping illegal trade is best done in a

plurilateral setting. When a mechanism is in place for peer reviewing compliance

with defined norms, this creates an incentive for both importers and exporters to

reduce or eliminate illegal trade since they are subject to double control at origin

and destination. Even when plurilateral action is not an (immediate) option,

screening of exports and automatic procedures by which to check shipments are

better ways in which to fight illegal trade.

94. Second, signalling too has possible alternatives that do not distort international

trade. For example, this could be achieved through a multilateral agreement on

developing new rare earths, molybdenum and tungsten supplies. Even where

concerted multilateral action is not (immediately) available, a credible public

announcement that China is taking serious measures to cut and control production

could also induce trade partners to develop new supplies. In addition, only

signalling this to foreign consumers may actually undermine the intended effects

of these signals as domestic consumers (who currently consume around 70% of the

rare earth produced) have no such incentive.

63 China's first written submission, paras 133 et seq.

64 Ibid. paras 139 et seq.

65 Ibid. paras. 146 et seq.



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95. Third, the European Union briefed at some length why the objective of

safeguarding Chinese industry from distortions to trade, by means which impose

exactly these effects on non-Chinese industries, cannot be accepted as legitimate in

the context of Article XX. Even if, arguendo, one were to accept that WTO

Members are allowed to act in such cases, a permanent obstacle to trade, as

imposed by China, would be disproportionate in its trade effects. China could limit

itself to monitoring trade flows (e.g. through customs statistics) and respond to

foreign demand or global price spikes on an ad hoc basis if the urgency and need

arises.

96. The European Union submits that in view of the declared objective, the impact of

the Chinese export quotas (on non-Chinese users of the materials specifically and

international trade generally) is disproportionately severe. These negative effects

on international trade are only accentuated by the lack of transparency and due

process in the setting and administration of export quotas and the additional

imposition of export duties. For all these reasons, the export quotas constitute

arbitrary and unjustifiable discrimination and a disguised obstacle to trade.

6 CONCLUDING REMARKS

97. Mr Chairman, members of the Panel, this concludes our opening oral statement.

We thank you for your attention and remain ready to answer any questions you

may have.

(ds432) european union's opening oral statement at the...

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