This won't be my last post on Rare Earths, but its the first.
In China-Publications the Appellate Body addressed the possibility that the Article XX general exceptions might apply with respect to obligations under agreements other than the GATT, in that case China's Protocol of Accession. Relying on text in the Protocol that appeared to subject the obligations at issue to the general right to regulate of WTO Members, the AB found that those particular obligations were subject to GATT Article XX. In China-Raw Materials, China made the argument that its Protocol obligations with respect to eliminating export taxes should also be subject to Article XX. The AB rejected the argument, not finding the textual basis that was present in the case of the obligations that were at issue in China-Publications. The AB left rather open the question of when there would be a sufficient basis in another agreement (let's say SCM for instance) for making the oblligations in that Agreement subject to Article XX exceptions. This is, obviously, an issue of systemic importance.
In China-Rare Earths, China essentially demanded that the panel not follow the AB's ruling in Raw Materials and decide that the Protocol obligations in question were indeed subject to Article XX exceptions. The panel split 2-1 on this issue. In this post, I am concerned with the majority opinion, which in its result followed the AB (the dissent raises important questions as to whether it is consistent with the understanding of the AB of stare decisis in the WTO system as articulatied in the Zeroing dispute, so I'll leave that for a separate post).
What is quite interesting in the majority opinion, is that the majority accepted China's argument that "an interpretation of the covered agreements that resulted in sovereign States being legally prevented from taking measures that are necessary to protect the environment or human, animal or plant life or health would likely be inconsistent with the object and purpose of the WTO Agreement. In the panel's view, such as result could even rise to the level of being "manifestly absurd or unreasonable.""(Paragraph 7.111)
The panel then went on however to find that China had not shown that the policy instrument specifically disallowed by the provisions of the Protocol at issue were the only means of achieving its objective. Thus the per se prohibition of this instrument was not as such in contradiction to the general principle of the right to regulate as agreed between the panel majority and China.
The idea of a canon of interpretation of the kind articulated by the panel at China's invitation is an important one, which deserves considerable discussion. Basically, it means that in the case of all the covered agreements, the operative provisions along with any limitations or exceptions, or balancing clauses, must be interpreted so as not to prevent Members to take measures that are indispensible for the protection of life, health and the environment. Where such an interpretation is impossible then one must find that to be consistent with the purposes of the WTO Agreement, Article XX itself applies to the obligations in question. How would such an approach affect TRIPs or SCM or SPS, to give examples of three agreements that definitely implicate the right to regulate? And how does this canon of interpretation relate to the acquis of WTO Appellate Body jurisprudence? (In a way, it is not dissimilar at least in spirit from the AB's approach in Cloves that one should read the TBT Agreement as maintaining the same kind of balance between the right to regulate and trade liberalization as the GATT-is there any reason not to extend tthis notion of a GATT-type balance to other covered Agreements, such as SCM or TRIPs?) I would be very interested in colleagues' views on these questions. More soon on the dissent.