Analyzing the WTO Ruling on China's Rare Earth Export Restrictions · 2019. 2. 17. · Analyzing the WTO Ruling on China's Rare Earth Export Restrictions 1)Mubina Toirova*Insop Pak**

지역산업연구Ⅰ제40권 제3호Ⅰpp. 5～23

Analyzing the WTO Ruling on China's Rare Earth Export Restrictions

1)Mubina Toirova*․Insop Pak**

5

Abstract

Rare earths are indispensible elements of most high-tech devices. Rare earth

reserves are scattered all over the world, and nowadays China holding half of total

reserves is a dominant rare earth producer. Rare earth mining operations in the

country brought severe environmental damages. Moreover, owing to poor

management practices the China’s rare earth industry faced other issues, such as

smuggling and illegal mining activities at both production and export levels. In order

to solve above mentioned problems and to enlarge control over its rare earth

industry, the Chinese government has implemented a number of regulating policies.

The USA, Japan and the EU countries found China's export restrictions on different

rare earths (including export duties, export quotas and related administrative

requirements) discriminatory against foreign businesses and officially requested

dispute settlement consultations with China.

This article intends to shed light on key legal issues that emerged from the

recently released WTO Appellate Body’s adjudication over China — Rare Earths

dispute.

| Keywords | China, Rare Earth Industry, Export Restrictions, Environmental

Protection, WTO.

I. Introduction

Rare earth elements (REEs) have become increasingly important because of their relative scarcity and

worldwide increasing demand, as well as China’s quasi-monopoly of this market. REEs are virtually not

* (First Author), Ph.D. Candidate, Department of International Trade, Kyungpook National University,

[email protected]

** (Corresponding Author), Professor, School of Economics & Trade, Kyungpook National University,

[email protected]

6 지역산업연구｜제40권 제3호｜2017.8

substitutable, and they are essential for a variety of high-tech products and modern key technologies.

REEs due to their catalytic, magnetic, electrical, heat resistance and other characteristics are

indispensable part of most high-tech devices, including mobile phones. Without REEs, the majority of

high-tech devices would be huge and entirely different and additionally, most of them would not be

available. The use of rare earths makes smaller-sized technology, such as laptops and mobile phones,

practicable. Moreover, REEs are essential key to the expansion of eco-friendly innovations (Pak and

Toirova, 2015).

At the beginning of 1980s, China holding the majority of rare earth reserves, started production of

REEs in significant volumes, and in decade later became the leading rare earth producing country. This

has raised serious concerns that China will misuse its dominant position to set export quotas in order to

maximize its own profits at the expense of other rare earth user industries.

Japan, USA and EU countries were the main consumers of cheap and available in considerable

quantities Chinese rare earths. However, Chinese Government imposed several restrictions on rare earth

exports under environment protection in 2011, the major rare earth importing countries faced

considerable shortages. As a result, Japan enlarged rare earth imports from Malaysia, Kazakhstan,

Estonia and other countries. Whereas, USA and EU countries restarted mining operations in order to

make up a deficiency (Pak and Toirova, 2015).

In March 2012, the USA, Japan and the EU officially requested dispute settlement consultations

with China on its export restrictions on different rare earths. Since China entered the World Trade

Organization (WTO) in 2001, it has been continuously involved in different WTO disputes. In this case,

complainants reasoned that China’s rare earth policies, including export duties, export quotas and related

administrative requirements, constituted a distortion of free trade and discrimination against foreign

businesses. China defended its export controls on the grounds of environmental concerns and broad

national goals for sustainable development. Nevertheless, in March 2014 the WTO ruled that China was

acting in breach of WTO rules.

The tension between trade in raw materials and environmental policies concerning exhaustible

natural resources has been escalating in recent decades. At the extremes of this controversy, those

resource-hunger states, especially developed economies heavily relying on the imports of raw materials to

produce high-valued manufactured goods for exports, have been claiming that raw commodities — such

as rare earths, oil, iron ore — have gradually been characterized as “global public goods” because of their

essential inputs to the global value chains.

Analyzing the WTO Ruling on China's Rare Earth Export RestrictionsⅠ Mubina Toirova․Insop Pak 7

Furthermore, they insist that free flow of natural materials should be secured under the authority of

the WTO. The voice of the opponent, mostly from resource-endowed developing countries and

environmentalists, often blames the trade liberalization for inducing over-exploitation of natural

resources. As some environmental activists have warned, due to the flabby environmental regulation

commonly seen in developing economies, the extraction of natural resources and production process

afterwards make environment in those countries even more vulnerable.

The above tension has been made clear under the WTO system. The last decade have witnessed two

WTO disputes targeting China’s trade measures on natural resources, namely, China — Measures

Related to the Exportation of Various Raw Materials (hereinafter as “China — Raw Materials”) and

China — Measures Related to the Exportation of Rare Earths, Tungsten, and Molybdenum (hereinafter

as “China — Rare Earths”). In these two cases, a Member-specific package consisting of rules that China

agreed to undertake upon its accession, often referred to as “China’s Accession Protocol,” has complicated

the picture of this tension. China is subject to more stringent WTO-Plus commitments incorporated

therein, including the obligations to generally eliminate export duties that other WTO Members do not

undertake. As a result, China is facing more challenges in addressing environmental issues related to

trade in natural resources.

II. China – Rare Earths WTO Case and Rare Earth Industry Current Situation

The concentration of rare earth element productions in China and Chinese export restrictions have

raised concerns in industrialized countries about the critical nature of these materials. The growing

economy of China creating a worldwide risk to supply, because China’s growing consumption limits its

exports, making rare earths more critical.

Export restrictions on metals and mineral products have been broadly applied by many countries with

a view to securing domestic supply and to addressing the problem of resource depletion. Export

restrictions are designed to meet diverse policy objectives ranging from environmental protection and

increasing fiscal revenue to developing processing sectors. Restrictions to trade include taxes and other

legislation such as tariff and nontariff trade barriers such as quotas.

There is no single General Agreement on Tariffs and Trade (GATT)/ World Trade Organization

(WTO) article dealing exclusively with export restrictions. Still, Article XI of the GATT 1994 is the key

provision regarding export restrictions. It prohibits the use of quantitative restrictions on both imports


and exports. Export duties are in principle not subject to Article XI and thus are not prohibited under

this article, whereas quantitative restrictions are. Regarding quantitative restrictions that are generally

prohibited, the issue is whether these measures can be exceptionally allowed under Article XI:2(a)

(critical shortage of foodstuffs), Article XX (General Exceptions), and Article XXI (Security Exceptions).

Article XI:2(a) allows each member to apply export restrictions “temporarily” to prevent or relieve

“critical” shortage of foodstuffs or other products essential to the exporting country. Article XX allows

exceptional quantitative restrictions for policy objectives such as conservation of exhaustible natural

resources, and ensuring essential materials for domestic processing industry under “certain qualifications”

(OECD, 2010).

A number of articles and policy reports both from governmental and private organizations have been

published on these minerals, particularly after the 2010 incident of Chinese export restrictions to Japan

over a territorial dispute. These articles and reports have dealt with a wide range of aspects concerning

rare earths from assessing criticality of individual minerals to the possible effects of future scarcity

(Hedrick, 2010; Hurst, 2010; Wubbeke, 2013). Key factors considered are their economic importance,

their substitutability, the diversity of supply, the size of known resources and reserves, and the potential

for recycling (Kleijin, 2012). Also Peeling et al. (2010) provided an economic context of export

restrictions with particular focus on the metal and mineral sector. There could be various policy objectives

in imposing these restrictions, and many argue that Chinese export taxes on these minerals are imposed

to maintain mineral security in the domestic industries. Moreover, Kim (2010) examined the use of

export restrictions on raw materials and analyzed the policy objectives of export restrictions and their

effectiveness in achieving their stated goals. The study found that by affecting the price and quantity of

trade, export restrictions produce trade-distorting effects I the same way as import restrictions and may

result in efficiency losses. Also, China claimed that its export restrictions are imposed to protect the

environment and conserve its rapidly depleting resource base. However, a study by Korinek and Kim

(2010) found that the export restrictions put in place did not fulfill their objective of environmental

protection and the presence of export restrictions in one country put pressure on other exporters to apply

restrictions, which suggests the potential for competitive policy practices in restricting exports.

The global rare earth mining market currently stands at approximately U.S. $1 billion per year, and

it is expected to continue to experience rapid growth. At present, however, China is the main producer of

REEs, controlling about 97 percent of the market and about 75 percent of the economically important

end use components.


Today, only Chinese companies produce and sell rare earths in commercial quantities. Furthermore,

China is the only country that produces heavy REEs. They currently control about 50 percent of global

rare earth reserves, while the U.S. controls about 12–15 percent. <Figure 1> shows the growth in the

global rare earth production. There is no doubt that China has powered the global rare earth market in

the last two decades with the rest of the worlds’ supply picking up from 2010 after China cut its export

quotas.

<Figure 1> Rare Earth Production Growth, 1994-2015

Data: US Geological Survey

In 2010, China supplied almost the entire global market with production of 120,000 tonnes – almost

3x the amount in 1994. Given its near 100 percent ownership of the global market at 92 percent, there

was understandable widespread panic when China announced it would cut its export quotas. However, in

the last five years, as other mines came on line, China’s market share in global rare earth production has

fallen by around 7 percent – back to the 1999 level. Today it appears that the global rare earth industry

is finally shifting away from the monopoly of a “Chinese Era” to a somewhat more diversified

international market. That said, China remains the dominant player in the global market. In 2015, China

still supplied 85 percent of the global rare earth market with an annual production of 105,000 tonnes, as

can be seen from <Figure 2>.


<Figure 2> Rare Earth Production Growth, 1994-2015

Data: US Geological Survey

China’s rare earth export quotas have led to serious industry concerns and fears in the U.S. and other

foreign countries. As can be seen from <Figure 3>, REEs have also experienced alarmingly volatile price

shifts, with the prices of some elements increasing by a factor of more than 10. The figure shows the price

developments for selected REEs over time. Percentage difference illustrates the difference between FOB

and China prices.


<Figure 3> Prices on Selected REEs

Data: Asian Metals Database


The situation is not comparable for Chinese REE users, such as manufacturing companies, because

the Chinese government implemented a dual-pricing policy for the most important REEs, such as cerium

and neodymium. Within this system, prices of exported REEs are much higher than prices for the same

elements used by Chinese companies. This ultimately created a kind of crowding-out effect for foreign

companies, who can only purchase REEs at lower prices by forming joint ventures with Chinese

companies. They are then required to contribute the necessary technology, key equipment, and capital.

This technology transfer, in exchange for access to the Chinese market, was at the heart of China’s

ostensible open door policy, begun in the late 1970s–early 1980s under Deng Xiaoping. However, the

joint venture structure brings with it a tremendous risk of technology tunneling for foreign companies.

Several governments, including the U.S., Japan, and the EU, have complained that China was

strategically setting export quotas on REEs in order to foster their own domestic economic development.

As mentioned above, the United States initiated WTO dispute, in cooperation with the European

Union (EU) and Japan, after China significantly decreased its export quotas for REEs resulting a surge in

world prices and considerable disruption to the global rare earth market.

According to Baroncini (2012), “on 23 July 2012, the Dispute Settlement Body (DSB) of the World

Trade Organization (WTO) established a single Panel to examine the complaints”. The complainants

reasoned that China’s export restrictions on rare earths, tungsten and molybdenum, including export

duties, export quotas and related administrative requirements, constituted a distortion of free trade and

discrimination against foreign businesses.

China stated that export policies are applied towards the preservation of environment and natural

resources, and are essential in minimizing pollution induced by exploration activities. The USA, Japan

and the EU disagreed, reasoning that the export policies are planned to provide Chinese rare earth

consuming industries with protected access to the rare earths, tungsten and molybdenum.

According to WTO (2014), “on March 26 a WTO Panel issued its report founding that China

violated its obligations under the General Agreement on Tariffs and Trade 1994 (GATT) and the China’s

Accession Protocol by restricting exports of rare earths to manufacturers in other countries, while

favoring Chinese competitors”.

The Panel found that Beijing's imposition of export duties on rare earths, tungsten, and molybdenum

is inconsistent with China’s Accession Protocol. In its Accession Protocol, China guaranteed to eliminate

all export duties, except for those imposed on a number of products mentioned in Annex 6. The rare

earths, tungsten and molybdenum are not included in Annex 6, except of tungsten ores and concentrates.

Consequently, China is not allowed to impose export duties on rare earths, tungsten and molybdenum.


“The Panel also found that China's export quotas on rare earths, tungsten, and molybdenum were

inconsistent with GATT Article XI. Panel found that China’s export quotas were designed to achieve

industrial policy goals rather than conservation of an exhaustible natural resource”. The Panel stated that

“conservation” does not allow WTO Members to adopt measures to control the international market, as

it was in China’s rare earth export quota case. “Additionally, the Panel found that the challenged export

quotas do not work together with measures restricting domestic Chinese use of rare earths, tungsten, and

molybdenum, as required by the second part of Article XX(g)”.

The Panel recommended that “the DSB request China to bring the existing measures at issue into

conformity with its obligations under the GATT 1994, China’s Accession Protocol and China’s Working

Party Report”. In 2014, China announced that “implement the DSB’s recommendations and ruling in a

manner that respects its WTO obligations”. Additionally China stated that “it would need a reasonable

period of time to do so”.

As a result, China eliminated the export duties and quotas, pulling the price down a further 15-25

percent. Under the current pricing failure, neither companies in the supply chain nor individual

consumers pay for the associated costs of rare earths extraction and processing. Scarcity values are also

absent from price calculations. When China cut its export quota by 22.5 percent in 2010, the market

responded with a panic attack and prices temporarily doubled or tripled in the following year. This

pricing failure has made extraction and processing a losing business proposition. In 2015 the rare earths

industry in China suffered a $116 million deficit and the situation continued in 2016. Outside China, two

of the largest foreign rare earths companies filed for bankruptcy in 2015. One of these companies,

U.S.-based Molycorp Inc. was once the largest rare earths supplier in the world before China’s emergence

in the mid-1990s.

Proelss et al. (2016) investigated whether the announcement of a WTO dispute resolution case has

the power to fundamentally change market dynamics. They found empirical support, and REE prices

exhibited a structural break around the announcement of the WTO dispute, and showed lower variance

ratios for all tested REEs afterward. Similarly, they found that the stock price informativeness of

companies in the REE industry increases after the announcement, reflecting more firm-specific than

market-wide information and less governmental influence.

After decades of wild growth, now China’s rare earths industry is marching towards the type of

nationalization that its iron and steel industries experienced decades ago. Such a shift could help improve

compliance with environmental regulations and reduce rampant black market trading, illegal mining,

and pollution.


In 2016, the government introduced a series of guidelines and plans to do just that, including a

National Traceability System on Key Commodities (including rare earths), a National Purchase and

Storage Mechanism for Rare Earths, and the first-ever Five-Year Plan for the Rare Earth Industry.

According to the new plan, the country’s industrial capacity in rare earths extraction, smelting,

separating, and comprehensive utilization will be consolidated into six state-owned enterprises by 2020.

Consolidation and stricter regulation could help rein in mismanagement and pollution. The five-year

plan sets a goal to reduce major pollutants discharged from the sector by 20 percent and to encourage

innovation in rare earths recycling and green applications. The recently amended national Environmental

Protection Law, mandating harsher punishments for polluters and local governments that protect them,

could also catalyze stricter enforcement.

The “six groups,” as the consolidated state-owned rare earth companies are known, have met with

China’s National Development and Reform Commission to discuss details of national purchase and

storage, which would increase central government control over domestic supply. In a recent national

storage bid in January 2017, the State Reserve Bureau purchased over 2,000 tons of rare earth oxides

from five of the six groups.

The consolidation of state-owned companies and national control over storage are designed to address

environmental problems and industry viability, but they will also affect major companies like Apple and

Siemens that make profits from selling smart phones and wind turbines. After years of relying on China’s

cheap rare earths, these companies will be forced to find substitutes or raise consumer prices.

III. Environmental Aspects of the Dispute

WTO members are allowed to apply trade-related policies regarding the protection of the

environment, human health and life on condition that the policies follow the GATT rules. However,

particular policies applied concerning environmental protection could possibly restrict trade and therefore

affect the WTO rights of other members. Such policies can violate essential trade rules, particularly the

nondiscrimination obligation and the prohibition of quantitative restrictions. Therefore, the country

imposing restrictions under environment protection, should maintain the balance between international

trade and environmental concerns.

During the past few decades, the increase in rare earth metal production had severe health and

environmental consequences in the Inner Mongolia province, where the country's biggest mining


operation is located. Here, factories producing rare earth metals, were continuously discharging water

loaded with toxic chemicals. Consequently, polluted wastewater has contaminated drinking water

sources, farmland, and the surrounding ecosystems, elevating cancer rates, reducing agricultural

productivity and causing public concern. During last 10 years, the population of this area has dropped

significantly.

Moreover, owing to poor management practices the China’s rare earth industry faced other issues,

such as smuggling and illegal mining activities at both production and export levels. Between 2007 and

2009, approximately 118,000 tons of rare earth oxides were smuggled.

Assuming all the facts mentioned above, China’s defense in the Rare Earths WTO dispute is

primarily based on two arguments: Firstly, that export barriers are used to bring rare earths back on a

sustainable extraction path. Secondly, that they are used to prevent environmental damages from

exploration of rare earths.

During the dispute, China firmly declared that production of rare earth metals has brought severe

environmental problems affecting the health of people, animals and plants. China provided significant

evidence of environmental hazards related to rare earth metal production, emphasizing the problem of

the toxicity of mine tailings and water pollution.

The Report included China's statement that: “The risks to human, animal or plant life or health and

the costs of controlling such risks are key reasons why rare earth production was shut down outside

China. In this regard, China submits that companies outside of China that were producing, or had the

capability to produce, rare earths were not ready to bear the high costs of implementing technology that

would tackle environmental harm and meet national regulatory environmental requirements.”

The Panel included in the Report that “China has demonstrated that the mining and production of

rare earths, tungsten, and molybdenum have caused grave harm to the environment and to the life and

health of humans, animals, and plants in China.”

Nevertheless, the Panel mentioned that environmental problems caused by REEs exploration “do not

suffice to demonstrate that export duties are necessary to protect human, animal or plant life or health.”

Moreover, China could not prove that export duties have a material effect on environmental

protection. China claimed that export duties on rare earths, tungsten and molybdenum are “an integral

part of a comprehensive policy that has the goal to reduce pollution and protect the health of China's

population, its animals and plants”.

However, the Panel stated that there were not enough evidences presented by China, that imposition

of export taxes was part of “comprehensive policy for environmental protection.” Considering the Chinese


environment regulation measures, the Panel also noticed that there was no connection between export

taxes and “a pollution reduction objective.” Furthermore, there were no facts explaining that application

of export taxes “would have or had had any material effect on the stated goal of pollution control.” This

argument was also applied to a previous China- Raw Materials WTO Case.

China also could not prove objectivity of regulations related to resource management.

Considering the Chinese rare earth industry policies the Panel pointed out that export taxes had

influence on price rise of rare earth compounds and alloys exported from the country. China failed to

demonstrate that there were any relating policies that raised prices for rare earth compounds and alloys

that were supposed to utilize within the country.

China defended, claiming that imposition of export quotas was permitted by GATT Article XX(g)

concerning “the conservation of exhaustible natural resources.” Nevertheless, this article additionally

involves that “such measures are made effective in conjunction with restrictions on domestic production

or consumption.” The Panel mentioned that every WTO member state “has permanent sovereignty over

its natural resources, and that they can adopt conservation measures should they wish to do so, in the

light of their own objectives and policy goals, including economic and sustainable development.”

Furthermore, it was stated by the Panel that: “no WTO Member has, under WTO law, the right to

dictate or control the allocation or distribution of rare earth resources to achieve an economic objective.

WTO Members' right to adopt conservation programs is not a right to control the international markets

in which extracted products are bought and sold.”

Finally, the Panel stated that China could not proved the objectivity of policies according to which

domestic and foreign companies was treated differently regarding to access to rare earths. Subsequently,

the application of rare earth export quotas “was not made in conjunction with other measures that would

affect the domestic supply chain.” The Panel stated that the influence of Chinese export quotas was

discriminative against foreign companies.

IV. Comparison of China Rare Earth Case with Other WTO Cases

As mentioned above, the China Rare Earth WTO case related to export restrictions imposed by the

Chinese government on rare earths, tungsten and molybdenum. The similar case was brought by the

United States, European Union, and Mexico according China’s export restrictions with respect to nine

raw materials in 2009. These nine raw materials included several forms of bauxite, coke, fluorspar,


magnesium, manganese, silicon carbide, silicon metal, yellow phosphorous, and zinc.

According to findings of Appellate Body, China could impose export taxes only to 84 items outlined

in the Annex 6 of the China’s Accession Protocol. In 2013, regardless to the Appellate Body decision, the

Chinese government again imposed export taxes to 352 items, 253 items of which were not pointed in

the Annex 6. The Complaints expected that China would bring the export taxes applied on nine raw

materials in conformity with the WTO ruling, and consequently remove other export taxes applied on

items not outlined in the Annex 6. However, according to decision, China only removed export taxes

imposed on nine raw materials. The Chinese government did not reconsider the items that were similarly

to nine raw materials inconsistent with the Annex 6, but additionally put new items. As a result, export

taxes applied to 253 items in 2013, were in violation with WTO obligations.

China Rare Earth WTO Case included the export taxes applied on 81 items, which was again found

by Appellate Body inconsistent. The remaining 172 raw material items have been involved neither in

China Raw Materials Case nor in China Rare Earths Case. It is expected that WTO member countries

will raise additional dispute related to export taxes imposed on 172 remaining items, which similarly

violate WTO rules.

Taking the above mentioned points into account, and exploring different factors, the

recommendations have been made in order to avoid similar dispute in future. First of all, the Chinese

government should eliminate export taxes from remaining 172 raw material items which are not

mentioned in previous two cases and in Annex 6 of China’s Accession Protocol. Lastly, the

reconsideration of the list of products under export quotas released annually is recommended, and

whether foreign companies operating in China have discriminatory treatment. Moreover, the compliance

of such measures with WTO rules should be examined as well.

The imposition of export quotas on REEs by Chinese government violated the GATT Article XI:1.

While the quantitative restrictions are not permitted by WTO, the tariffs are accepted by GATT. The

GATT Article XI:1 includes that “no prohibitions or restrictions other than duties, taxes or other

charges, whether made effective through quotas... shall be instituted....”

There are several exceptions in GATT article, when WTO member country may impose quantitative

restrictions.

GATT prohibits the use of quantitative restrictions apart from certain exceptions. According to

GATT 1994 Article XI:2 (a), that includes that Article XI:1 shall not extend to examples when “export

prohibitions or restrictions temporarily applied to prevent or relieve critical shortages of foodstuffs or

other products essential to the exporting contracting party”. Therefore, for China to be included into this


exception, several evidences should have been presented. Particularly that export restrictions were

“temporarily applied”, and “to prevent or relieve critical shortages.” The Appellate Body has considered

these points in recent China Raw Materials WTO Case.

The Appellate Body stated that the meaning of the word “temporarily” is “lasting or meant to last

for a limited time only”, “not permanent”, and “made or arranged to supply a passing need”. Therefore,

“temporarily applied” and “applied” mean “measures that are applied in the interim.” The Chinese

government has imposed the export quotas on REEs since 2005, without any indication of end-date. The

Panel also pointed that export restrains had “been in place for at least a decade with no indication of

when it will be withdrawn and every indication that it will remain in place until the reserves have been

depleted.”

V. Conclusion

Nowadays, China is a dominant rare earth producer. However, this dominance brought severe

environmental damages caused by exploration activities in Inner Mongolia province, and other areas such

as Sichuan, Guangxi, Hunan. Wastewater with toxic substances has contaminated drinking water

sources, farmland, and the surrounding ecosystems, elevating cancer rates, reducing agricultural

productivity.

Moreover, owing to poor management practices the China’s rare earth industry faced other issues,

such as smuggling and illegal mining activities at both production and export levels.

In order to solve above mentioned problems and to enlarge control over its rare earth industry, the

Chinese government has implemented a number of regulating policies. In 2011, the Chinese government

imposed export restrictions, under environment protection concerns, and reduced rare earth supplies.

Major rare earth importing countries faced critical shortages. As a consequence, Japan enlarged rare earth

imports from Malaysia, Kazakhstan, Estonia and other countries. Whereas, USA and European countries

restarted rare earth mining operations in order to make up a deficiency.

In March 2012, the USA, Japan and the EU officially requested dispute settlement consultations

with China on its export restrictions on different rare earths. The complainants reasoned that China’s rare

earth policies, including export duties, export quotas and related administrative requirements,

constituted a distortion of free trade and discrimination against foreign businesses.


China’s defense in the Rare Earths WTO dispute is primarily based on two arguments: Firstly, that

export barriers are used to bring rare earths back on a sustainable extraction path. Secondly, that they are

used to prevent environmental damages from mining rare earths.

Nevertheless, in March 2014 the WTO ruled that China was acting in breach of WTO rules. In

April, 2015 the Ministry of Finance of China announced that “China will eliminate its export tariffs on

rare earths and other metals.”

After decades of wild growth, now China’s rare earths industry is marching towards the type of

nationalization that its iron and steel industries experienced decades ago. Such a shift could help improve

compliance with environmental regulations and reduce rampant black market trading, illegal mining,

and pollution.

In 2016, the government introduced a series of guidelines and plans to do just that, including a

National Traceability System on Key Commodities (including rare earths), a National Purchase and

Storage Mechanism for Rare Earths, and the first-ever Five-Year Plan for the Rare Earth Industry.

According to the new plan, the country’s industrial capacity in rare earths extraction, smelting,

separating, and comprehensive utilization will be consolidated into six state-owned enterprises by 2020.

Consolidation and stricter regulation could help rein in mismanagement and pollution. The five-year

plan sets a goal to reduce major pollutants discharged from the sector by 20 percent and to encourage

innovation in rare earths recycling and green applications. The recently amended national Environmental

Protection Law, mandating harsher punishments for polluters and local governments that protect them,

could also catalyze stricter enforcement.

The consolidation of state-owned companies and national control over storage are designed to address

environmental problems and industry viability, but they will also affect major companies like Apple and

Siemens that make profits from selling smart phones and wind turbines. After years of relying on China’s

cheap rare earths, these companies will be forced to find substitutes or raise consumer prices.

￭ 논문투고일 ￭ 논문 최종심사일 ￭ 논문게재확정일

2017. 07. 202017. 08. 152017. 08. 25


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국문요약

중국 희토류 수출 규제 관련 WTO 판정 분석

토이로바 무비나 (Mubina Toirova)*․박인섭 (Insop Pak)**

중국은 세계 최대의 희토류 생산국가임에도 불구 희토류의 생산 및 수출 단계에서 밀

수 및 불법 채굴이 만연해 중앙 정부 차원의 일관된 관리체계의 정비가 시급한 상황이다.

또한 중국 내 희토류 생산의 확대로 인한 희토류 생산지의 환경오염 방지 대책의 강구가

절실하게 되었다.

2010년 중국 정부는 자원보존과 환경보호를 이유로 희토류 생산 및 수출을 엄격하게

통제하기 시작했다. 이러한 중국 정부의 희토류 수출규제조치는 세계시장 공급물량 부족

으로 인한 공급난과 가격급등의 우려를 초래해 희토류 주 수입국인 미국, EU, 일본 등 주

요국의 비난을 받게 되었다.

2012년 미국과 일본, EU는 희토류, 텅스텐, 몰리브덴 등 관련제품에 대하여 중국 정부

가 단행한 쿼터, 관세부과 등의 수출 제한 조치가 WTO 협정에 부합하지 않는다고 하며

WTO 분쟁해결기구(DSB)에 제소하였다.

이에 본 논문은 중국 희토류 수출 규제 관련 분쟁에 관한 WTO 분쟁해결기구의 판정을

둘러싼 주요 쟁점을 살펴보고자 한다.

| 주제어 | 중국, 희토류 산업, 수출 규제, 환경보호, 세계무역기구

2)

* 경북대학교 대학원 무역학과 박사과정, [email protected]** 경북대학교 경제통상학부 교수, [email protected]

1. 주저자

토이로바무비나 (Mubina Toirova): [email protected]

경북대학교 대학원 무역학과 박사 과정생으로 주요 연구 관심분야는 중국 무역

정책, CIS 역내 경제통합, 국제통상 등이다. 지역산업연구, 사회과학연구, 인문

사회과학연구, 외국학연구 등에 다수의 논문을 게재하였다.

2. 교신저자

박인섭 (Insop Pak) : [email protected]

경북대학교 경제통상학부 교수로 주요 연구 관심분야는 국제통상, 국제금융, 국

제조세 등이다. 무역상무연구, 지역산업연구, 아태연구, 서울법학, 원광법학 등

에 다수의 논문을 게재하였다.

Analyzing the WTO Ruling on China's Rare Earth Export Restrictions · 2019. 2. 17. · Analyzing the WTO Ruling on China's Rare Earth Export Restrictions 1)Mubina Toirova*Insop Pak**

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