WTO's raw materials ruling reveals bias

On March 13, the United States, the European Union and Japan jointly challenged China's restrictions on exports of rare earth materials, a group of 17 key elements used in high-technology products, and requested consultations with China under the World Trade Organization framework. China responded on March 15, by saying it will consult with them following the dispute settlement procedure of the WTO.

China has time and again emphasized that the export restrictions are necessary in order to conserve its exhaustible natural resources and to protect people's health and are thus permitted by the General Exceptions clause in the WTO rules.

The WTO rules, a single set of comprehensive world-wide trade rules, require member countries commit to the fundamental obligations of non-discrimination, lowering trade barriers, non-quantitative restrictions and transparency in the administration of their trade related economic system. But the WTO rules also respect the sovereignty of member states in certain prescribed circumstances.

The WTO rules guarantee member countries a balance between their international obligations and national sovereignty by permitting the adoption or enforcement of measures in certain instances. In particular, Article XX of the General Agreement on Tariffs and Trade allows measures "necessary to protect human, animal or plant life or health" or "relating to the conservation of exhaustible natural resources".

However, the dispute settlement body of the WTO has denied China use of this clause.

On Jan 30th, the dispute settlement body delivered its decision on a complaint made at the end of 2009 by Mexico, the EU and the US of China's export restrictions on certain raw materials. After examining the case for two years, the dispute settlement body ruled that the restrictions were not consistent with WTO provisions and the commitments of China's WTO accession protocol.