IT is significant to note that WTO has ruled against China in a dispute over export restrictions on a group of nine raw materials which includes, inter alia, Bauxite, Coke, Manganese, Silicon metal and Zinc.
Export restraints relate to export licensing requirements, export duties and quota and fixation of minimum export price. It has been alleged by USA, EU and Mexico and upheld by WTO that China has also violated the protocol of accession to WTO and its action is inconsistent with Article XX (b)/(g), Article XI(1)/(2a) and Article X:I,X:3(A) of GATT 1994 which provide general exceptions to these measures under special circumstances.
China?s argument of preserving limited natural resources, particularly with respect to environment and health consideration of its citizens, was not found to be strong enough.
The petitioners claimed that Chinese restriction on free trade of raw materials provided undue advantages to the domestic user industries by making available more raw materials at competitive prices and also affected the health of the downstream industries using these inputs in USA, EU and Mexico.
The restriction by China on export of rare earth materials, a vital input to high end IT related industries in EU were particularly hurting the petitioners.
China has the right to appeal against this ruling to the appellate body.
Does this ruling hold any ramification for India particularly with regard to export tax and higher freight rate on export of Iron Ore?
The importer in this case is China and it is to be established that iron ore prices in China is greatly influenced by landed price of Indian iron ore considering that China imports much larger tonnages from Brazil and Australia.
The advantages accrued to the domestic steel industry in India in terms of higher availability and lower prices due to export tax and higher freight on export of iron ore would be difficult to prove as export parity is the primary consideration for fixing of domestic prices by NMDC.
But the WTO ruling provides adequate clues to what could be the broad framework for preservation of natural resources, denial of trading right to the intending users and artificial barriers to export of raw materials to the genuine user industries abroad.
The exemptions granted under specific Articles of GATT 1994 can be resorted to with adequate care and full justification.
We must recognise that globalisation has little scope for being aggressively sensitive to preservation of natural resources which needs to be argued with strong logic within the WTO compliant guidelines.
The author is DG, Institute of Steel Growth and Development. The views expressed are personal.