The WTO Disputes on Chinese Natural Resources and the EU Litigation Strategy in the Light of the Lisbon Treaty

On 23 July 2012, the Dispute Settlement Body (DSB) of the World Trade Organization (WTO) established a single panel to examine the complaints brought by the United States, the European Union and Japan against the Chinese export restrictions on rare earth elements (REEs), tungsten and molybdenum. The controversy is very sensitive for at least three series of reasons: a) the economic and strategic relevance of the materials involved in the dispute (rare earths being essential, in particular, for high-tech information, military, and green industry); b) the difficult balance to find between mining and trading REEs while protecting the environment and thus respecting the principle of sustainable development enshrined in the Preamble of the Agreement establishing the WTO; c) the challenging task of defining the relation of the WTO-plus obligation to eliminate export duties, characterizing China’s accession to the Marrakech system, with the multilateral public policy exceptions clause enshrined in GATT Article XX. In this essay, we intend to offer a presentation of the above listed salient aspects of the China – Rare Earths controversy in the light of the recent China – Raw Materials case. In particular, we will concentrate on the necessity, for the Geneva jurisdictional pillar, to revisit the highly problematical conclusions reached last January by the Appellate Body (AB) in on the applicability of GATT Article XX to China’s WTO Accession Protocol (AP). We are, in fact, convinced that the new mineral trade dispute may be positively –and durably- settled only if the under regulated area of WTO law on export restrictions is adequately addressed also at political level: and such a target may, of course, be considerably fostered, inspired and supported by a well-balanced interpretative activity of the WTO judiciary. Consequently, we will try in this essay to propose a different perspective on the way in which GATT public policy exceptions and China’s Accession Protocol should be connected, grounding our suggested interpretative approach on each of the hermeneutic elements for treaty interpretation codified in Articles 31 and 32 of the 1969 Vienna Convention on the Law of Treaties. Finally, we will devote the last part of our essay to suggest that a litigation strategy entirely devoted to assess Chinese export restrictions on rare earths from the point of view of their alleged discriminatory and protectionist nature should be followed by the European Union in order to properly implement the principles of free and fair trade, sustainable development, and the commitment to the promotion of multilateral solutions to common problems, now codified in the Lisbon Treaty to guide the international action of Europe. Beyond fully respecting EU primary law principles for EU international action, such a different litigation strategy, entirely focused on substance instead of devoting considerable energy on the institutional topic of the availability of GATT Article XX to justify violations of the WTO-plus obligations, could also prove to be more fruitful with the strong Asian counterpart. In fact, recognizing the applicability of GATT Article XX to China’s Accession Protocol rules would allow the Chinese ruling class, who fought to persuade Beijing to be full Member of the WTO system also accepting WTO-plus obligations, to show at national level that Marrakesh multilateral trade law is sustainable and flexible enough also with reference to WTO-plus duties, thus smoothing the conditions for win-win political negotiations on access to natural resources at EU/China bilateral level as well as at multilateral WTO level. Furthermore, the concrete application of GATT Article XX to Chinese export duties would impose a deep, detailed and severe analysis of Beijing legislation on natural resources under the very demanding requirements of the GATT general exceptions clause, a joint analysis in bilateral consultations and within the WTO system which could considerably promote a balanced settlement of one of the current thorniest issues for the global governance for sustainable trade.