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Distortion effects of Export quota policy: an analysis ofThe China - Raw materials dispute

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  • Christophe Charlier

    (Université Nice Sophia-Antipolis, Gredeg/Cnrs)

  • Sarah Guillou

    (Ofce sciences-po Paris, Gredeg/Cnrs)

Abstract

The China-Raw materials dispute recently arbitrated by the WTO opposed China as defendant to the US and the EU as claimants, on the somewhat unusual issue of export restrictions. For the claimants, Chinese export restrictions on various raw materials of which the country is a major producer create shortages in foreign markets. This scarcity does not prevail in the Chinese market and the price in the foreign markets increases, providing a cost advantage to the Chinese industries using these raw materials.China defends export limitations using Article XX of the GATT 1994 on possible exceptions to the prohibition of quantitative restrictions to conserve natural resources. This paper offers a theoretical analysis of the dispute with the help of a model of a monopoly extracting a non-renewable resource and selling it on both the domestic and foreign markets using Fischer and Laxminarayan (2004)'s framework. The theoretical results focus on the effects of imposing an export quota on quantities, prices and efficacy, and are used to comment on the claims of the parties and on the findings of the Panel and Appellate Body. Given the crucial importance of demand elasticities in this theoretical understanding of the conflict the empirical part of the paper provides estimates of import demand elasticity of the claimants as well as of China for each product concerned in the case, defined at the HS6 level. The empirical results show that among the products concerned in the dispute, two groups can be differentiated depending on China's export position. When China is a major or first exporter, there is no evident sign of the distortionary effect of an export quota. When China is a weak exporter, but a strong producer and consumer, there is evidence coherent with the model according to which China is imposing a quota export restriction that is inefficient. Key Words:Export restrictions, WTO, exhaustible natural resources, price discrimina- tion,Article XX of the GATT 1994.

Suggested Citation

  • Christophe Charlier & Sarah Guillou, 2013. "Distortion effects of Export quota policy: an analysis ofThe China - Raw materials dispute," Documents de Travail de l'OFCE 2013-07, Observatoire Francais des Conjonctures Economiques (OFCE).
    • Handle: RePEc:fce:doctra:1307
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    Cited by:

    1. Seiler, Volker, 2024. "The relationship between Chinese and FOB prices of rare earth elements – Evidence in the time and frequency domain," The Quarterly Review of Economics and Finance, Elsevier, vol. 95(C), pages 160-179.
    2. Proelss, Juliane & Schweizer, Denis & Seiler, Volker, 2020. "The economic importance of rare earth elements volatility forecasts," International Review of Financial Analysis, Elsevier, vol. 71(C).
    3. Seiler, Volker, 2021. "China-to-FOB price transmission in the rare earth elements market and the end of Chinese export restrictions," Energy Economics, Elsevier, vol. 102(C).
    4. Ronen, Eyal & Dawar, Kamala, 2016. "How Necessary? A Comparison of Legal and Economic Assessments GATT Dispute Settlements under: Article XX(b), TBT 2.2 and SPS 5.6," MPRA Paper 83834, University Library of Munich, Germany.

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    More about this item

    Keywords

    export restrictions; wto; exhaustible natural resources; price discrimina- tion; article xx of the gatt 1994.;
    All these keywords.

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F18 - International Economics - - Trade - - - Trade and Environment
    • F51 - International Economics - - International Relations, National Security, and International Political Economy - - - International Conflicts; Negotiations; Sanctions
    • K33 - Law and Economics - - Other Substantive Areas of Law - - - International Law
    • Q37 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Issues in International Trade

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