WTO to Hear Complaints About China’s Rare-Earths Policy

The World Trade Organization establishes a panel to hear complaints from the U.S., European Union and Japan on China’s rare-earths export policy.

The three governments requested a single panel to hear their separate complaints after China two years ago cut domestic production and reduced export quotas 40% in a move that pushed prices dramatically higher.

China produces more than 90% of the world’s rare earths, comprising 17 chemically similar metallic elements that are used in a wide range of applications, including the auto industry.

The U.S. says the restraints at issue include export quotas, export duties, various restrictions on the right to export and administrative requirements that limit China’s overseas shipments of these materials by increasing the burden and costs of exporting.

The EU says the restrictions constitute a violation of China’s WTO commitments under the General Agreement on Tariffs and Trade as well as agreements in China’s Accession Protocol specifically aimed at such limitations.

The EU says the export restraints significantly distort the market and give China’s manufacturing industry competitive advantages to the detriment of foreign competition.

Japan also complains the export restrictions are inconsistent with China’s obligations under the WTO Agreement.

In defending its policies, China says they are aimed at protecting natural resources and achieving sustainable economic development. It claims it has no intention of protecting domestic industry through means that would distort trade.

Other WTO members wanting to exercise third-party rights in the case are Vietnam, Norway, Oman, Taiwan, South Korea, Saudi Arabia, Brazil, India, Canada and Colombia.

The panel’s final report usually is given to the parties in the dispute within six months.

The report becomes the ruling or recommendation by the WTO’s Dispute Settlement Body within 60 days unless either side appeals the decision, a process that can take another three months.

In a white paper published last month by the Information Office of the State Council, or China's cabinet, the government says it will regulate its rare-earth industry more strictly while supplying the global market in line with WTO rules.

The special report says the government will continue enforcing regulations on the mining, production and export of rare-earth metals, improve relevant laws and rules and crack down on all violations. But it also contends China’s curbs on production and exports comply with WTO rules and are necessary to protect further damage to the environment by reckless exploitation.