WTO Members Discuss Chinese Export Control Law

In recent years, China has been developing an export control law, which to some extent is similar to that of the United States and other countries. As China is still developing the implementing regulations, other governments have been weighing in and raising concerns.

At the July 8 and 9, 2021 meeting of the Council for Trade in Goods, several WTO members raised questions about China's Export Control Law, especially with regard to its definitions and scope of application. The agenda item at the meeting was titled China - Export Control Law - Request from the European Union and Japan. The meeting minutes were just recently circulated by the WTO.

At the meeting, Japan reiterated its concerns over the law that:

(i) there may be the possibility that the scope of the products has been set out excessively broadly; (ii) there may be cases that require unnecessary disclosure of technological information during classification and end-user or usage investigations; and (iii) the provisions on countermeasures for discriminatory export regulation by other countries are maintained in the law.

According to Japan, an "overly stringent export regulation" may "equate to export restrictions prohibited under Article XI of the GATT and, in consequence, be inconsistent with the WTO Agreements," according to Japan. Japan also renewed its concerns of "a possibility that China may introduce controls on exports of rare earth-related products, in accordance with the aforementioned Export Control Law."  

Japan also urged China to remove the countermeasure provisions.  

The EU expressed its concerns over "the law's extra-territorial application" because "the law contains a new provision with extraterritorial application determining consequences to foreign individuals and organizations outside of China violating the law and endangering the national security and interests of China (Article 44)." (Article 44 does not specify the legal responsibility of foreign individuals and organizations for violating the law.)

The EU also raised concerns over "the law's objectives and scope of controls" as "Article 1 ('national security and interests') as well as Article 3 ('national security and coordination' of 'security and development') contain vague language and are still reflecting objectives other than the stated international security obligations and commitments." The EU further called for clarifications and specification of related provisions, including "application of control parameters ('national security' and 'development', Articles 1, 3, and 13; 'terrorist purposes', Article 12); scope of controls ('temporary controls', Article 9) and related control lists; understanding of exporters' obligations in this regard ('is or should be aware', Article 12); scope of investigations by the authorities (in case of 'suspected violations', Article 28); and information restrictions (prohibited for reasons of national security, Article 32)."

Similar to Japan, the EU expressed concerns over the retaliation clause.

The United States highlighted concerns that "the law gives the Chinese government new rationales to impose terms on transactions among firms and within various partnerships in China, as well as on exports and offshore transactions. It also allows Chinese authorities to temporarily impose export controls on goods not on a control list. This law exists in the context of China's history of controlling the export of commodities, such as coke, fluorspar, and rare earth elements, and using ad hoc restrictions to create commercial and political pressures on its major trading partners."

The last government to raise questions and concerns at the meeting was Australia, which "welcomed efforts to codify the regulatory framework for defence export controls" during the meeting, but noted concerns over the "broad scope of the law." Australia also urged China to "provide greater clarity in relation to key elements of the law, including its jurisdiction, the scope of its administrator powers, and confirmation that the law is consistent with China's international commitments, including under WTO rules and the China–Australia Free Trade Agreement (ChAFTA)."

In response, China stated that it "is still drafting the supporting regulations on the Export Control Law" and "will keep the relevant Members updated on this issue in due course."

The EU and Japan raised similar issues at a WTO meeting earlier this year.

The countermeasures Japan and others mentioned relate to Article 48 of the law, which authorizes agencies to take reciprocal measures if “any country or region abuses export control measures to endanger the national security and interests” of China. This means that Beijing can use export controls as a weapon if it considers that it is being harmed by other countries’ export restrictions. Even though China has not invoked the provision so far, the EU and the US may be particularly concerned about the provision because both have issued new export control measures targeting China. The EU just implemented a new set of export control rules in September, which would have a significant impact on exports to China. The United States has also tightened its export controls toward China citing national security and other reasons.

Facing increasingly stringent export controls in recent years, China started drafting the Export Control Law in 2017. The law is heavily modeled after the U.S. export control regime and designed in part to counter export control measures from the United States and other nations.