Recently, US President Barack Obama announced that the United States will join the EU and Japan in appealing to China's WTO restrictions on export restrictions on rare earths and other raw materials. This is the WTO Appellate Body's export restrictions on US and other WTO members against China's nine raw materials at the beginning of this year. After the report of the measures was published by the Appellate Body, there was another case against China’s export management measures. China is a world's largest exporter of rare earths, and rare earths are essential raw materials for the production of high-tech products. They have the nature of strategic materials, so the case has attracted widespread attention at home and abroad.
As the case has just happened, it is currently in the stage of consultation. The details of the reasons and basis for the appeals made by the WTO and other WTO members are still unknown. However, according to the ruling of the WTO’s nine raw material export restrictions at the beginning of this year, we can rationally Analyze the basic direction of the case and prepare for the legal response.
Background of the case
China is the world's largest producer and exporter of rare earths. At present, China's rare earth exports account for more than 90% of the international market. Although rare earths are vital to high-tech industries in various countries, rare earth resources are non-renewable mineral resources. In addition, the production and processing of rare earths have a great impact on the ecological environment.
In view of the severe decline in rare earth resource reserves and the severe situation of exhaustion, and at the same time, considering reducing the devastating impact on the ecological environment during the production of rare earths, since 1998, the Chinese government has implemented the export quota licensing system for rare earth products, and Rare earth raw materials are included in the catalogue of prohibited commodities in processing trade. At the beginning of September 2010, the State Council officially issued the "Opinions on Promoting Mergers and Acquisitions of Enterprises", and for the first time listed rare earths as a list of mergers and acquisitions in key industries. In 2011, China still implemented quota management for rare earth exports and the quotas were reduced. The Chinese government has repeatedly stated that the guiding ideology for strengthening rare earth mining, production and trade management is to protect the available natural resources and protect the ecological environment from serious damage. It is actually a strategic consideration for sustainable development.
However, the Chinese government, the European Union and Japan and other WTO members expressed dissatisfaction with the Chinese government's policy on the management of rare earth exports to protect the environment. They repeatedly made representations to the Chinese side and asked China to change this policy. In the case of unsuccessful negotiations with the Chinese government, they filed a complaint with the WTO, hoping that the WTO dispute settlement mechanism would make a ruling against China, thus forcing the Chinese government to change the above policy.
The impact of China's nine raw material export cases on the case
On January 30 this year, the WTO Appellate Body announced the final ruling on the "China's measures related to the export of various raw materials", and found that the Chinese government's export management measures for the nine raw materials involved were mostly in agreement with the WTO and China. The government’s commitment does not match. Since the case also involves export restrictions on Chinese raw materials, the appeal agency’s ruling has great significance for this case.
On the key issue concerning whether China has the right to invoke Article 20 “general exceptions†of GATT 1994 as the basis for defense, the Appellate Body held that the Marrakesh Agreement Establishing the WTO did not contain exceptions to the generality, GATT 1994 Article 20 “General Exceptions†clauses are only relevant to GATT 1994 and do not cover or cover other agreements and do not have general application significance. Article 11.3 of the Accession Protocol signed by China “concludes any content that explicitly invokes Article 20 of GATT 1994 or the general provisions of GATT 1994â€. Therefore, the Appellate Body considered that China has no right to invoke Article 20 of GATT 1994 as a basis for exempting Article 11.3 of the Protocol.
The core of Article 20 of GATT 1994 is to exempt members from adopting trade restrictions that violate WTO rules for the purpose of protecting human health and available resources. It is an important exception clause for WTO members to invoke environmental protection. According to the ruling of the Appellate Body, not only the nine raw materials involved in this case, but the Chinese government cannot use the “general exceptions†clause of Article 20 of GATT 1994 to adopt export tax measures for export products.
In addition, the Appellate Body also found that the Chinese government failed to effectively control its domestic production or sales when it restricted the export of the nine raw materials involved. This internal and external practice constituted discrimination against other importing members. The WTO rules.
Although the WTO Dispute Settlement Body has not implemented the principle of “following precedentsâ€, the rulings already made by the WTO in practice have great reference for the expert group and the Appellate Body to hear similar cases in the future. Therefore, the Appellate Body has issued 9 kinds of raw materials for China’s exports. The impact of the ruling on the case of restrictions was obvious. We should avoid the unfavorable factors in the nine raw materials cases according to the contents of the Appellate Body's report, and appropriately adjust the various management policies adopted by China on rare earths to comply with WTO rules. This is the key to determining the final result of the rare earth case.
Prepare the law to meet the challenge
It should be pointed out that strengthening the management of rare earth development, production and trade follows the principles and principles of sustainable development of the WTO and is the legitimate right of the Chinese government to exercise trade control. The Chinese government should be supported by the WTO in order to make the best use of available rare earth resources and strengthen the management of rare earth mining, production and trade for environmental protection purposes. However, in line with the principle of unity of purpose and effect, in order to better comply with WTO rules and China's commitments, and to respond to US, European and Japanese complaints and achieve good litigation results, we should take legal measures from the following aspects:
1. It is not appropriate to adopt export tax measures to limit rare earth exports.
As mentioned earlier, the Appellate Body has made a negative ruling on China's invocation of Article 20 of GATT 1994 to adopt export tax measures to restrict exports. Although Article 20 of GATT 1994 is an important environmental protection clause, the Appellate Body believes that China has no right to quote on the issue of export tax. We should strive to make the Appellate Body change its views as soon as possible. However, before it is completely changed, the Chinese government should not impose restrictions on rare earth exports by adopting an export tax, otherwise it will still face the risk of losing the lawsuit.
2. The environmental protection objectives should be further clarified in the export management policy.
The Chinese government should further collect and sort out the scientific evidence that the production and sales of rare earths have a bad impact on the environment, and further clarify the purpose of environmental protection in the formulation of relevant rare earth management policies and regulations, and truly implement and implement the purpose. From the perspective of WTO judicial practice itself, the WTO's purpose and goal of supporting member sustainable development is positive and determined. It only requires members to truly achieve this goal, rather than a disguised, discriminatory trade policy.
3. Clean up relevant domestic policies based on the principle of equal treatment at home and abroad
China should have the right to invoke Article 20 of GATT 1994 to take restrictive measures other than export taxes to strengthen export restrictions on rare earths, including restrictions on mining, production, sales, or quotas, but in the process Do the same at home and abroad. Article 20(g) of GATT 1994 sets out the right of members to adopt trade restrictions related to the protection of available resources, but there is also a very important legal requirement: “These measures are implemented together with restrictions on domestic production or consumption. ". It requires members to impose the same restrictions on the production or consumption of the available resources in their countries while adopting trade restrictions. If the request is not met, it may still face the risk of losing the WTO.
At this stage, we should carefully clean up the various management policies and regulations that have been adopted in accordance with the principle of non-discrimination, and truly limit the export of rare earths, and also limit the various aspects of rare earth mining, production and sales in China. It is in line with the original intention of environmental protection and the requirements of the WTO rules.
In short, our export restrictions on rare earths are justified, in line with the WTO's purpose and sustainable development principles, but at the same time, we should be fully prepared for the law to deal with members of the US, Europe and Japan. challenge.
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