Defending permanent sovereignty over natural resources against the obligation to freely trade: the international legal dimension

Abstract

Permanent sovereignty over natural resources (PSNR) and the principle of free trade are two strongly established principles in international law. The main question addressed by the authors of this article is whether it is fair to force states of origin of natural resources to export said resources to other states instead of exploiting them in the interest of their national development?. On the one hand trade in natural resources is subject to the legal rules of international trade law, law of the World Trade Organization (WTO) in particular, which enshrines an obligation to freely trade across borders. On the other hand, states possess permanent sovereignty over their natural resources which encompass both the right to trade in natural resources and the right to limit such trade. It is the balance between the two principles that is hard to reach. Analysis presented in this article reveals that existing provisions of the law of the WTO and its jurisprudence lean away from a just balance between the two. The obligation to enable free trade prevails over the rights derived from the permanent sovereignty over natural resources. According to the WTO’s Trade Policy Reviews, more than one-third of all notified export restrictions are in the natural resource sector. Yet, WTO rules are not effective enough to secure states’ permanent sovereignty over their natural resources. Based on WTO jurisprudence and the outcomes of China — Measures Related to the Exportation of Various Raw Materials (China-Raw Materials), China — Measures Related to the Exportation of Rare Earths, Tungsten and Molybdenum (China– Rare Earth) and most recently in Indonesia– Measures Relating to Raw Materials (Indonesia– Raw Materials), it is argued that the WTO jurisprudence overly favours the principle of free trade over PSNR.