An epic mess: ‘Exhaustible natural resources’ and the future of export restraints after the china -rare earths decision

TLDR: In this paper, the authors reviewed the future of export restraints after the China-Rare Earths decision and highlighted the effect of this decision on the future structuring of export restraint regimes.

Abstract: CONTENTS I Introduction II Treatment of Export Restraints A GATT/WYO Framework B WTO Jurisprudence 1 Exception (b) 2 Exception (g) III The Chinese Complication A China--Raw Materials B China--Rare Earths IV Analysis V The Way Forward China's export restraints on rare earths were the subject of a trade dispute with the European Union, Japan and the United States in the World Trade Organization. The decision of the WTO Appellate Body in the China--Measures related to the Exportation of Rare Earths, Tungsten and Molybdenum ("China--Rare Earths',) case carries important consequences for developing countries that rely heavily on the resources and mining sector. Developing countries have often used export restraints to achieve varied objectives such as economic development and environmental protection. Export restraints are viewed as trade distortive and violative of the WTO norms. Therefore, developing countries face a complicated challenge on how to structure export restraint regimes that are WTO consistent and which allow domestic policy goals to be achieved. This article reviews the future of export restraints after the China--Rare Earths decision. I INTRODUCTION Rare earths are essential inputs for today's high tech digital age. These metals have wide-ranging applications in wind power generation equipment, defence industries, telecommunication equipment and permanent magnets. Rare earths are not rare in terms of availability but attract the moniker 'rare' due to a lack of concentrated occurrence in one locale, resulting in high mining costs. (1) Furthermore, mining operations in this sector cause considerable environmental harm. According to various 2014 estimates, China accounts for more than 90 per cent of global rare earths production (2) while being endowed with only 37 per cent of the total global deposits. (3) Mining of rare earths is highly damaging to the environment, leaving radiation in its wake and pollution of the surrounding soil, water and air. (4) Recently, China was the subject of a trade dispute on rare earths involving the European Union, Japan and the United States. This dispute was triggered after China imposed various regulatory measures on the rare earths mining industry. These measures included the closure of certain mines, reduction of the volume of exports and the setting of export quotas. (5) The measures were imposed as early as 2009 and their effects startled countries with industries that were dependent on imports of rare earths (namely the EU, Japan and the US). (6) The complaining parties objected to the measures employed by China and viewed these as a violation of China's General Agreement on Tariffs and Trade 1994 ('GATT or 'GATT 7994')/WTO obligations as well as specific undertakings made by China when it acceded to the WTO. (7) The trade dispute was escalated to the WTO Dispute Settlement Body ('WTO DSB') after the consultation process failed to produce an outcome. The dispute in question involved three parallel proceedings brought against China by the EU, Japan and the US. The Dispute Settlement Panel was constituted by the WTO DSB on 23 July 2012 which issued its report on 26 March 2014. (8) China appealed the case decision before the WTO Appellate Body. The WTO Appellate Body decision was announced in August 2014 which upheld the earlier decision by the panel. (9) The WTO decision in China--Measures related to the Exportation of Rare Earths, Tungsten and Molybdenum ('China--Rare Earths') carries important consequences for the mining and the resources sector. This decision also impacts future structuring of export restraints based on GATT art XX by resource-dependent countries. This article highlights the effect of the China--Rare Earths decision on the future of export restraint regimes. Part II briefly looks at the treatment of export restraints under the GATT!WTO framework and jurisprudence. …