Reconciling environmental protection with natural resources trade in international law: a perspective from China ? rare earths

• Author: SHI Jingxia and YANG Xingxing
• Pages: 537-566

FRONTIERS OF LAW IN CHINA

VOL. 10 SEPTEMBER 2015 NO. 3

DOI 10.3868/s050-004-015-0029-4

ARTICLE

RECONCILING ENVIRONMENTAL PROTECTION WITH NATURAL RESOURCES

TRADE IN INTERNATIONAL LAW : A PERSPECTIVE FROM CHINA —

RARE EARTHS

SHI Jingxia,∗ YANG Xingxing**

This article intends to shed light on key legal issues that emerged from the recently

released WTO Appellate Body’s adjudication over China

—

Rare Earths dispute,

exploring possible policy options for China to reach its environmental goals on natural

resources in a WTO-consistent manner. The article first spotlights positive variations in

the Appellate Body’s interpretative approach regarding the applicability of GATT

general exceptions to defend the violation of WTO-Plus commitments under China’s

Accession Protocol; second, given the fact that the Appellate Body, pursuant to the

elements inscribed in GATT Article XX(g), confirmed the Panel’s objective assessment

based on the design and structure of the challenged measures of GATT, this paper

provides reflections and recommendations on China’s domestic environmental

legislation. The third part probes into the interface between the principle of permanent

sovereignty over natural resources and the WTO legal regime, with an attempt to offer

thought-provoking ideas on how to reconcile potential conflicts between the two.

INTRODUCTION .................................................................................................................... 538

I. CHINA — RARE EARTHS: LITIGATION BACKGROUND............................................ 541

A. China

—

Raw Materials: A Rehearsal for Rare Earth Dispute ...................... 541

B. The Panel Report of China

—

Rare Earths: A Reiteration of China

—

Raw Materials ................................................................................................... 543

II. APPLICABILITY OF GATT-EXCEPTIONS TO EXPORT DUTIES COMMITMENTS.......... 545

A. China’s Arguments about the Applicability Issue.............................................. 545

B. The Appellate Body’s Reasoning: A Silver-Lining in the Dark.......................... 546

C. The Positive Momentum in Interpreting the Applicability Issue ....................... 549

III. THE ASSESSMENT OF CONFORMITY UNDER GATT ARTIC LE XX(G)..................... 550

A. China’s Arguments concerning GATT Article XX(g): Request for

∗ (󱓈󳐮󳏳) Dean and Professor of Law, at School of Law, University of International Business &

Economics (UIBE), Beijing 100029, China. Contact: shijingxia@uibe.edu.cn

∗∗ (󰐽) Doctoral Candidate, at School of Law, University of International Business & Economics

(UIBE), Beijing 100029, China. Contact: rsemma@sina.com. This article was supported by “Program for

Excellent Talents, UIBE” and “the Postgraduate Innovative Research Fund, UIBE.” The authors express

gratitude to the anonymous referees.

538 FRONTIERS OF LAW IN CHINA [Vol. 10: 537

Considering Actual Effects................................................................................ 551

1. China’s Arguments regarding the Requirement of “relating to”.................... 551

2. China’s Arguments regarding the Requirement of “Made Effective in

Conjunction with”.......................................................................................... 552

B. The Appellate Body’s Reasoning over GATT Article XX(g): Preference for

Objective Assessment......................................................................................... 552

1. The Appellate Body’s General Analytical Structure ...................................... 552

2. The Findings concerning Interpretation and Application of the Term

“relating to”.................................................................................................... 553

3. The Findings concerning the Phrase “Made Effective in Conjunction with”... 554

C. The Reflections on China’s Domestic Conservation Policy ..............................555

IV. THE INTERACTION BETWEEN THE PRINCIPLE OF PERMANENT SOVEREIGNTY

OVER NATURAL RESOURCES AND WTO LAW ....................................................... 556

A. The Principle of PSNR: Evolving Contours and Legal Nature ......................... 557

B. The Jurisprudence of WTO Rulings...................................................................560

1. China’s Argumentation on the Principle of PSNR ........................................... 560

2. Panel’s Reasoning and Findings...................................................................... 561

C. A Commentary: WTO Law Should Respect Member’s Sovereignty over Natural

Resources in Support of Development for Resources-Endowed Nations........... 563

CONCLUSION.........................................................................................................................565

INTRODUCTION

The advent of the WTO at the end of last century marked a tremendous leap in

international trade governance. Compared to its predecessor GATT, the multilateral trade

regime has taken greater account of environmental issues.1 Addressing the “sustainable

development” as one of its essential objectives, the WTO has declared to pursue “optimal

use of the world resources” and seek to “protect and preserve the environment” in a

manner consistent with the respective needs and levels of economic development of its

members.2 However, when it comes to substantial rules concerning environmental

protection and natural resources, only a small fraction of provisions are available under

the WTO regime.3 Among them, the subparagraph (b) of GATT Article XX serves to

justify trade restrictive measures necessary to protect the health and life of human,

animals, and plants. Such measures may be employed to prevent threats resulting from

1 Ehab S. Abu-Gosh & Rafael Leal-Arcas, The Conservation of Exhaustible Natural Resources in the

GATT and WTO: Implications for the Conservation of Oil Resources, 14 The Journal of World Investment

and Trade 480, 491 (2013).

2 See Preamble of the Marrakesh Agreement Establishing the World Trade Organization.

3 Pascal Lamy, former WTO Director-General stated: “the GATT/WTO rules were not written with

natural resource markets as the primary focus.” See Foreword of World Trade Report 2010, available at

http://www.wto.org/english/res_e/publications_e/wtr10_e.htm (last visited Dec. 4, 2014).