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ChinaMeasures Related to the Exportation of Rare Earths, Tungsten, and Molybdenum

Published online by Cambridge University Press:  20 January 2017

Elizabeth Trujillo
Elizabeth Trujillo*
Affiliation:
Suffolk University Law School
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Extract

In a proceeding brought against the People’s Republic of China by the United States (in which Japan and the European Union joined), the Appellate Body of the World Trade Organization (WTO) ruled that China violated its obligations under the General Agreement on Tariffs and Trade 1994 (GATT)1 by imposing export restrictions on “rare earths,” minerals used in mobile phones, hybrid cars, and other high-tech products. In upholding the earlier decision of a WTO dispute settlement panel, the Appellate Body rejected China’s argument that export duties, quotas, and other restrictions could be justified by health and environmental concerns.

Keywords

World Trade OrganizationChina’s accession protocolGeneral Agreement on Tariffs and Tradeexport dutiesquotasrestrictionsrare earthstungsten and molybdenum
Type
International Decisions
Information
American Journal of International Law , Volume 109 , Issue 3 , July 2015 , pp. 616 - 623
Copyright
Copyright © American Society of International Law 2015

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References

1 General Agreement on Tariffs and Trade 1994 [Gatt], Marrakesh Agreement Establishing the World Trade Organization, Apr. 15, 1994, 1867 UNTS 154 [hereinafter Marrakesh Agreement], Annex 1A, 1867 UNTS 190, reprinted in World Trade Organization, The Legal Texts: The Results of the Uruguay Round of Multilateral Trade Negotiations 3, 17 (1999) [hereinafter Legal Texts].

2 Appellate Body Report, China—Measures Related to the Exportation of Rare Earths, Tungsten, and Molyb denum, WT/DS431/AB/R, WT/DS432/AB/R, WT/DS433/AB/R (Aug. 7, 2014) (adopted Aug. 29, 2014) [hereinafter Ab Report]. Reports and other documents of the World Trade Organization cited herein are available at its website, http://www.wto.org.

3 Panel Report, China—Measures Related to the Exportation of Rare Earths, Tungsten, and Molybdenum, WT/DS431/R, WT/DS432/R, WT/DS433/R (Mar. 26, 2014) (adopted Aug. 29, 2014) [hereinafter Panel Report].

4 Appellate Body Report, China—Measures Related to the Exportation of Various Raw Materials, WT/DS394/AB/R, WT/DS395/AB/R, WT/DS398/AB/R (Jan. 30, 2012) (adopted Feb. 22, 2012) [hereinafter China—Raw Material s).

5 WTO Decision, Accession of the People’s Republic of China, para. 1.2, WT/L432 (Nov. 23, 2001) [here inafter Accession Protocol].

6 Panel Report, paras. 2.3–.7. The lanthanide group includes the following: lanthanum, cerium, praseodymium, neodymium, promethium, samarium, europium, gadolinium, terbium, dysprosium, holmium, erbium, thulium, ytterbium, and lutetium. Other rare earths included in the proceeding were scandium, yttrium, tungsten, and molybdenum.

7 Id., para. 2.2.

8 Article XX of the GATT, supra note 1, states in subparagraphs (b) and (g):

Subject to the requirement that such measures are not applied in a matter which would constitute a means of arbitrary and unjustifiable discrimination between countries where the same conditions prevail, or a disguised restriction on international trade, nothing in this Agreement shall be construed to prevent the adoption or enforcement by any contracting party of measures:

...

(b) necessary to protect human, animal or plant life or health;

...

(g) relating to the conservation of exhaustible natural resources if such measures are made effective in conjunction with restrictions on domestic production or consumption.

9 The “WTO-covered agreements” include the Marrakesh Agreement itself, the Multilateral Trade Agreements in its Annexes 1, 2, and 3, and some of the plurilateral trade agreements in its Annex 4. See Marrakesh Agreement, supra note 1, Art. II:2, 3; Understanding on Rules and Procedures Governing the Settlement of Disputes, App. 1, Apr. 15, 1994, Marrakesh Agreement, Annex 2, 1869 UNTS 401, reprinted in Legal Texts, supra note 1, at 354 [hereinafter Dsu].

10 In addition, the United States appealed certain issues of law and legal interpretations developed by the panel, but the Appellate Body did not rule on those issues because they were conditioned on the reversal or modification of the panel’s decision, which did not occur. See Ab Report, paras. 5.255–.258.

11 Panel Report, paras. 7.151–.152 (on Art. XX(b) defense); id., para. 7.236; see also Gatt Art. XX(g), supra note 8.

12 Accession Protocol, supra note 5, para. 1.2.

13 See China—Raw Materials, supra note 4, para. 307. Paragraph 11.3 of the Accession Protocol, supra note 5, states that China “shall eliminate all taxes and charges applied to exports unless specifically provided for in Annex 6 of this Protocol or applied in conformity with the provisions of Article Viii of the Gatt 1994.”

14 Because the panel’s decision on the applicability of Article XX(b) had not been appealed, that issue was not addressed by the Appellate Body. The panel concluded that China had failed to show that the measures challenged were “necessary to protect human, animal or plant life or health” and to provide persuasive evidence “of a connection between environmental protection standards and export restrictions.” Panel Report, para. 7.160 (quoting Panel Report, China—Raw Materials, para. 7.507, WT/DS394/R, WT/DS395/R, WT/DS398/R (July 5, 2011) (adopted Feb. 22, 2012)). That decision seems justified. The complainants had given convincing evidence that a tax on these exports would cause a rise in prices on the foreign market and a fall in the domestic market, creating incentives for more production of the minerals in question, and they had identified alternative measures to achieve the same objective. China did not adequately respond to these Wto-compliant alternatives, according to the panel. The panel therefore found that China had not met its burden of showing that alternative measures were not reasonably available to meet the environmental objective. Id., paras. 7.185–.187.

15 DSU, supra note 9, Art. 11.

16 The author of the separate opinion was not disclosed. The panel members included the chair, Nacer Benjel-loun-Touimi (Morocco); Hugo Cayrús (Uruguay); and Darlington Mwape (Zambia). For the separate opinion, see Panel Report, paras. 7.118–.138.

17 Id., paras. 7.124–.125, 7.136–.138.

18 See, e.g., Qin, Julia Ya, “WTO-Plus” Obligations and Their Implications for the World Trade Organization Legal System: An Appraisal of the China Accession Protocol, 37 J. World Trade 483, 487–89 (2003)Google Scholar.

19 Panel Report, para. 7.80.