WTO Trade and Environment Standard Rendering China-Rare Earths GATT Article XX Exemptions Impossible and Other International Laws Incompatible

By Gao, Fengping | Denver Journal of International Law and Policy, Fall 2016 | Go to article overview

WTO Trade and Environment Standard Rendering China-Rare Earths GATT Article XX Exemptions Impossible and Other International Laws Incompatible


Gao, Fengping, Denver Journal of International Law and Policy


I. INTRODUCTION

This article critically reviews China--Measures Related to the Exportation of Rare Earths, Tungsten and Molybdenum (the China-Rare Earths (1) case), from the perspective of the Article XX (b) and (g) of The General Agreement on Tariffs and Trade (GATT). (2) The purposes of this article include: 1) to reveal, regarding the World Trade Organization ("WTO") trade and environment, that the China-Rare Earths case could have been decided through an alternative legal basis, and 2) to evaluate the international scholars who thought that the Panel's isolated textual approach was wrong and the theoretical judgment of the case was not sound. An empirical study at both the macroeconomic level and the microeconomic level demonstrates the comprehensive policy in dispute actually has been working "as a whole" since the early 2000s. Also, this research shows that the China-Rare Earths case ruling has caused a devastating consequence on the whole rare earth industry.

Part I of this article provides background on the rare earth industry and its trade, while Part II briefly summarizes the principle substantive issues of the China-Rare Earths case. Part III reviews GATT Article XX (b) and (g). Part IV analyzes the rules of GATT Article XX (b) and (g) as applied to the China-Rare Earths case and finds that this case is extraordinary. First of all, it is arguable that China might deserve a different application of law. (3) In light of the fundamental importance of the flexibilities provided in GATT Article XX, China invoked both Article XX (b) and (g), respectively, for protection of human, animals and plants life and conservation of exhaustible natural resources. (4) The Panel decided the environmental issue under Article XX (g); however, Article XX (b) policy issues were not decided under Article XX (b) law, but on a different basis. (5) Scholars emphasize that the policy space governments enjoy to pursue legitimate objectives under GATT Article XX (g) is more likely to be considered "disguised trade restrictions" to pursue regulatory objectives and then tips the balance towards their obligations under the GATT, while issues under Article XX (b) regarding protection of human, animals and plants life require a lower standard of "burden of persuasion." (6) Secondly, the standard of the Article XX (g) has become next to impossible to qualify domestically legitimate environmental policy for the specified exemption, although there could be a theoretical chance. Part V reiterates that this extreme standard contradicts the Preamble of the WTO, the Marrakesh Agreement, and the purpose of the GATT Article XX. Moreover, as illustrated in the China-Rare Earths case, McRae's summarization of the WTO as a market access agency is apt. (7) The WTO's continuing reliance on the working principles of trade and environment in order to make its rulings is outdated and inconsistent with human rights and the international community environmental efforts for better living conditions. (8) Part VI follows the study in the transitional economy on both China's "continuing" reform policy and the case study on the China Northern Rare Earths, the world's number one rare earths producer. (9) The findings echo the scholar's view that the objectives of industry reorganization, resource conservation, and environmental protection are integrated. Part VII presents empirical follow-up research that has found the disastrous consequence is directly related to the application of the Panel's recommendations. Lastly, the article restates that the standard of the law in the China-Rare Earths case should be updated and the Panel's discretion on the approach shall be confined.

II. THE BACKGROUND OF THE RARE EARTHS INDUSTRY

Rare earths are a set of fifteen chemical elements in the periodic table. (10) Actually, they are not rare but relatively abundant in the Earth's crust. (11) However, it is rare to find them in quantities significant enough to support economic mineral development. …

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