From a recent article in The Australian:
China yesterday raised the prospect of tariffs and new policies to stem growing uncertainty in its steel industry, which faces iron ore price hikes of up to 90 per cent this year.
China's Commerce Ministry said yesterday it was preparing a "new policy" to deal with the issues and would support its world-leading steel sector in its bid to keep the iron ore price -- which has recently hit record spot levels -- lower and less volatile.
Ministry of Commerce spokesman Yao Jian told media in Beijing that commerce and industry ministries would provide necessary support to steelmakers, which could include trade measures and policies.
He repeated China's mantra that its position as the world's largest buyer of iron ore meant it should get lower prices.
China wants to stick with annual price contracts, but the world's main iron ore producers want to move to a quarterly system more closely aligned with market spot prices.
Analysts predicted the government would introduce preferential tariffs for long-term contracts.
...
"There are not many or radical measures the Commerce Ministry can take, without possibly violating WTO regulations," one analyst close to the China Iron and Steel Association, who asked not to be named, told The Australian .
"My personal guess is that since the ministry stressed that it strongly supports long-term prices, it may issue preferential tariffs for long-term contracts," the analyst said.
So if I understand this correctly, China might grant lower tariffs on iron ore imports where long-term contracts with suppliers have been signed.
This proposal has me thinking about the scope of GATT Article I:1, which I just recently taught a class about. Article I:1 states:
With respect to customs duties and charges of any kind imposed on or in connection with importation or exportation or imposed on the international transfer of payments for imports or exports, and with respect to the method of levying such duties and charges, and with respect to all rules and formalities in connection with importation and exportation, and with respect to all matters referred to in paragraphs 2 and 4 of Article III, any advantage, favour, privilege or immunity granted by any WTO Member to any product originating in or destined for any other country shall be accorded immediately and unconditionally to the like product originating in or destined for the territories of all other WTO Members.
One of the issues we discussed was the meaning of "unconditionally" towards the end of the provision. We talked about cases such as Indonesia - Autos, Canada - Autos, EC - Tariff Preferences and Belgium - Family Allowances. In all of those cases, there were circumstances under which some entities paid a lower duty than others. These different circumstances could be thought of as "conditions" -- if certain conditions are fulfilled, a lower tariff rate applies. Without going into too much detail, there seems to be a split among the various panels as to how the differential application of tariffs should be considered in this context. In Canada - Autos, the panel seemed to think the issue was purely whether discrimination exists, and rejected an argument relating to "conditions." (See paras. 10.18-50) (The recent Colombia - Ports of Entry panel cited to Canada - Autos and took the same approach. See paras. 7.358-366) By contrast, the EC - Tariff Preferences panel appears to have taken the view that the existence of any "condition," in and of itself, violates Article I:1 (although it talked about non-discrimination as well). (See paras. 7.58-60) It's less clear what the Indonesia - Autos and Belgium - Family Allowances panels thought of this issue. Arguably, their statements could be taken either way. (See paras. 14.143-147 of Indonesia - Autos and para. 3 of Belgium - Family Allowances).
Getting back to the iron ore example, let's say that China grants lower tariffs for iron ore imports where there are long-term contracts. In a sense, long-term contracts could be deemed a "condition" for the lower tariffs. Thus, under one view, such a measure would violate Article I:1 for that reason alone.
In the alternative, taking the Canada - Autos / Colombia - Ports of Entry approach, you could look at whether establishing lower tariffs on this basis has a discriminatory effect on certain countries. I'm not sure where all of China's iron ore imports come from, and what the impact on specific countries would be, so the result under this approach is more uncertain.
