GATT Article XX and Domestic Production of Environmental Goods

International Economic Law and Policy Blog: GATT Article XX and Domestic Production of Environmental Goods

China could plead environmental necessity to win a dispute over its wind industry subsidies, a case now moving through the World Trade Organization, one legal expert suggests.

Provisions under Chinese law mandating that nearly all wind power equipment be purchased from China for projects to be eligible for state financial support are facing a WTO challenge by the United States.

The domestic content requirement that helped China build a wind industry at the expense of foreign firms does, on the face of it, seem to violate WTO rules against such protectionist measures, experts say. But the WTO panel and appellate body have explicitly shown in the past that they will allow exceptions for environmental protection.

And if Beijing could convince the trade body that the domestic content requirement is necessary to help curb global climate change, the WTO board may toss out the U.S. complaint, said Robert Howse, an international law professor at New York University and an expert on international trade law.

"I think in China's case in particular, there might be a plausible argument, which is that China's demand for clean energy is so enormous that it would be irresponsible for China not to take measures to ensure it has an adequate domestic industry in this area," Howse said.

The law professor admitted that his judgment is speculative at best -- China hasn't yet publicly stated what its defense of the foreign product block is. But given the rules in the various international treaties the WTO governs that allow for exceptional state support for efforts on environmental problems, China's trade negotiators may be looking for loopholes among those provisions, he said.

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