Natural resource sovereignty and economic development in the WTO in light of the recent case law involving raw materials and rare earths

• Published date: 01 November 2017
• Author: Alejandro Gonzalez Arreaza
• DOI: http://doi.org/10.1111/reel.12209
• Date: 01 November 2017

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  RECIEL. 2017;26:266–275.

wileyonlinelibrary.com/journal/reel

DOI: 10.1111/reel.12209

REGULAR ARTICLE

Natural resource sovereignty and economic development in

the WTO in light of the recent case law involving raw materials

and rare earths

Alejandro Gonzalez Arreaza

Correspondence

Email: alejandrojose.gonzalezarreaza@

kuleuven.be

The principle of permanent sovereignty over natural resources (PSNR) has been fun-

damental for developing nations to realize their political and economic independence.

Increasingly, the principle of PSNR has been subjected to pressures, which limit the

rights granted to States over their natural resources. Principles such as ‘common con-

cern of humankind’ and ‘sustainable development’ are adding new goals and limita-

tions to PSNR. The World Trade Organization (WTO) has brought the principle of

PSNR into the WTO system for the first time through recent case law. This article

explores the way in which the principle of PSNR has been adapted to the multilateral

trading system, arguing that this treatment imposes limitations on States’ actions re-

garding their economic development. The article also suggests how the WTO should

develop its treatment of PSNR, bearing in mind the historical calling for PSNR to fur-

ther economic development.

1 | INTRODUCTION

Natural resource management continues to be a fundamental chal-

lenge in international affairs. Environmental concerns regarding

natural resources, as well as social issues arising from the distribu-

tion and investment of the benefits they produce, are just a few of

the challenges that come from natural resource exploitation. At the

centre are the sovereign rights of States to exploit, use and man-

age their natural wealth to achieve sustainable development and

the well- being of their people, while also avoiding damaging other

States. This idea has been enshrined in the principle of permanent

sovereignty over natural resources (PSNR), which has had a long

and dynamic evolution, beginning with the end of hostilities of the

Second World War and continuing to evolve until the current con-

cerns presented by climate change and globalization. Increasingly,

more attention is being paid to the role natural resources have

within international trade and their environmental impacts. This

article analyses the current trends that are affecting the principle

of PSNR, paying particular attention to the current challenges

arising in international trade law, specifically in the World Trade

Organization (WTO).

The article analyses two recent decisions: China – Measures

Related to the Exportation of Various Raw Materials (China – Raw

Materials)1 and China – Measures Related to the Exportation of Rare

Earths, Tungsten, and Molybdenum (China – Rare Earths).2 These

cases mark the first instances of the principle of PSNR being in-

voked in the WTO dispute settlement system. Both cases involved

challenges brought against export- restricting measures applied by

China on certain raw materials and rare earths. For the complain-

ants, these measures not only violated the provisions of the General

Agreement on Tariffs and Trade of 1994 (GATT 1994), but also

China’s commitments in its Accession Protocol. These cases have

attracted much attention due to the strategic importance surround-

ing these scarce natural resources (particularly in light of their rele-

vance for civilian and military high- tech industries), as well as

because of the issue surrounding China’s commitments in its

Accession Protocol to eliminate all export duties and their

relationship with the exception regime established in Article XX of

1China – Measures Related to the Exportation of Various Raw Materials (5 July 2011), WT/

DS394/R.

2China – Measures Related to the Exportation of Rare Earths, Tungsten, and Molybdenum (26

March 2014), WT/DS431/R.

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