. /.   WORLD TRADE  
ORGANIZATION  G/C/W/603 
24 October 2008 
 (08-5182) 
Council for Trade in Goods Original:   English 
 
 
 
TRANSITIONAL REVIEW MECHANISM PURSUANT TO PARAGRAPH 18  
OF THE PROTOCOL ON THE ACCESSION OF THE  
PEOPLE’S REPUBLIC OF CHINA (“CHINA”)  
 
Questions from the UNITED STATES to CHINA  
 
 
 The following communication, dated 20 Octobe r 2008, has been received from the delegation 
of the United States.  
_______________ 
 
 
 The United States wishes to pose the following  questions to China in  connection with the 
upcoming meeting of the Council for Trade in G oods for the purposes of the transitional review 
mandated by China’s Protocol of Accession.  These questions relate to matters that were raised by the 
United States during the transitional review held be fore one of the committees that reports to the 
Council for Trade in Goods, the Committee on Market Access, but China did not respond to them.  
The United States notes that it may submit additi onal questions, depending on the outcomes of other 
upcoming transitional reviews before committees th at report to the Council for Trade in Goods. 
   
Export Restrictions  
 
1. In past transitional reviews, the United States has expressed strong concerns about China’s 
use of export quotas and export duties, particularly on  raw materials.  In 2008, China continued these 
policies, and in many cases made them even more  restrictive.  The United States remains very 
concerned about all of these actions. 
 
2. In 2008, China also took new actions on certain  raw materials.  Fo r example, effective 
20 May 2008, China raised its export duties on natural phosphates, including natural calcium  phosphates, natural aluminium calcium phosphates and phosphatic chalk, and yellow phosphorus 
from 10-20 percent to 110-120 percent in 2008, even though it is the world’s leading producer of 
these inputs.  In addition, China has imposed mi nimum prices on export sal es of natural phosphates 
and yellow phosphorus.  It appears that these ac tions not only discourage exports of natural 
phosphates and yellow phosphorus from China, but al so create disadvantages for foreign downstream 
producers of industrial chemicals by artificially increasing China’s export prices for these inputs, which also drives up the world prices.  At the same time, China’s actions appear to artificially lower 
China’s domestic prices for natural phosphates and yellow phosphorus due to domestic oversupply, 
enabling China’s domestic downstream producers of  industrial chemicals to produce lower-priced 
products from these inputs and thereby creatin g significant advantages for China’s domestic 
downstream producers of industrial chemicals when competing against their foreign counterparts both 
in the China market and in export markets.  Inde ed, since China took these actions, the world price of 
yellow phosphorus, for example, reportedly has doub led and now totals $9,000  per metric ton (MT), 
while China’s domestic price ranges between $3,000 and $3,500 per MT. 
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  (a) Please explain the purposes underlying China’s imposition of (i) export duties and (ii) 
minimum export prices on natural phosphat es and yellow phosphorus.  It is the 
United States’ understanding that natural phosphates are primarily used to produce 
fertilizer in China, while yellow phosphorous  is primarily used in China to produce 
sodium phosphates, phosphorus trichlor ide and other phosphorus chemicals. 
 
(b) In Section 11.3 of Part I of its Protocol  of Accession, China committed not to impose 
export duties on any goods not appearing on th e list of goods subject to export duty in 
Annex 6 of its Protocol of Accession.  Natural phosphates do not appear on the 
Annex 6 list.  Where a good is listed in Annex 6, China committed not to exceed the 
listed percentage cap.  Yellow  phosphorus appears on the Annex 6 list, with a cap of 
20 percent.  Please explain how China justifies (i) the imposition of any export duties on natural phosphates and (ii) the imposition of export duties in excess of 20 percent 
on yellow phosphorus in light of the commitmen ts that China made in Section 11.3 of 
Part I of its Protocol of Accession. 
 
(c) Please explain how China justifies its use of minimum export prices under Article XI 
of the General Agreement on Tariffs and Trade 1994.   
 
(d) Does China have any plans to eliminate (i ) its export duties and (ii) its minimum 
export prices on natural phosphates a nd yellow phosphorus?  Please explain. 
 
3. In connection with last year’s transitional re view, the United States raised concerns about 
China’s export duties on refined metal lead.  The Un ited States explained that, after China decided to 
eliminate the 13 percent value-added tax (VAT) rebate  available upon export of refined metal lead in 
2006, it decided, in 2007, to impose a duty of 10 pe rcent on exports of refined metal lead, and this 
duty remains in place in 2008.  These actions have caused a steep decline in China’s exports of 
refined metal lead and contributed to a sharp rise in world prices.  Meanwhile, Chinese domestic prices reportedly have declined because of China’ s captive refined metal lead production, giving 
China’s downstream producers a significant competitive advantage over foreign downstream 
producers.  Last year, the United States asked Chin a the questions set forth below, but China did not 
respond to them.  The United States asks that Ch ina respond to them during this year’s transitional 
review before this Committee. 
 
(a) Please explain the purposes underlying China’s imposition of export duties on refined 
metal lead.  
(b) In Section 11.3 of Part I of its Protocol  of Accession, China committed not to impose 
export duties on any goods not appearing on th e list of goods subject to export duty in 
Annex 6 of its Protocol of Accession.  Refined metal lead does not appear on the 
Annex 6 list.  Please explain how China justifies its imposition of export duties on 
this product in light of the commitment that  China made in Section 11.3 of Part I of 
its Protocol of Accession. 
 
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