China’s Environmental Export Restrictions: An Environmental Protection Measure or Trade Strategy?
by Emmeline Hateley, Staff Contributor
Last month, the World Trade Organization (WTO) affirmed that China’s export restrictions on rare earth elements used as raw materials in various energy-efficient products violated international trade law. Although China argues that the restrictions are an environmental protection measure, the United States and other countries think differently.
According to the New York Times, this past August, the WTO panel in Geneva issued a 177-page report upholding its initial ruling that China’s export restrictions on rare earth elements are a violation of international trade law principles.
“Prices for the materials and their end-products rose, affecting the global market.”
This matter began in 2009 when China, the world’s largest producer of rare earth metals used in the manufacture of a wide range of technological products around the world such as smart phones, light bulbs, and hybrid car batteries, lowered its export quotas for these materials. Tungsten and molybdenum, metals used in steel alloys, were also implicated by the quota reductions. As a result, prices for the materials and their end-products rose, affecting the global market. The United States, with support from the European Union (EU) and Japan, pursued a WTO analysis of the export quotas. The initial WTO panel found that the quotas violated international trade law, at which point China pursued the appeal.
This ruling embodies the ongoing conflict between trade and environmental issues that international legal bodies often must address. Although critics often accuse the WTO of failing to make environmental exceptions to international trade law, international trade law under the General Agreement on Trade and Tariffs (GATT) allows countries to limit trade for the purpose of preventing the exhaustion of natural resources and protecting the environment. China cited this principle in its appeal of the panel’s initial ruling, but the United States argued that the principle could not be reconciled with China’s lack of domestic regulation, which has encouraged many foreign manufacturers to relocate production from their home countries to China.
“The Chinese Ministry of Commerce has worked since 2009 to consolidate privately held producers of rare earth elements into state-owned enterprises, which now control global production.”
Whether the Chinese government will actually observe the ruling is uncertain. China has historically honored WTO rulings by officially making the requisite legislative changes.
However, the existence and creation of the state-owned enterprises prevalent in the country do not always reflect the principles of international trade law in practice. With respect to the present case, the Chinese Ministry of Commerce (MOFCOM) has worked since 2009 to consolidate privately held producers of rare earth elements into state-owned enterprises, which now control global production. As a result, Western and Japanese producers cannot compete as effectively, regardless of the WTO ruling.
Nonetheless, United States Trade Representative, Michael Forman, believes that the WTO report at least marks progress for countries competing with China’s trade restrictions. The environmental issues that arise from such international trade law disputes, however, will likely continue to require further analysis.
Cite as: Emmeline Hateley, China’s Environmental Export Restrictions: An Environmental Protection Measure or Trade Strategy?, 27 Geo. Int’l Entl. L. Rev. Online 13 (2014).