WTO action filed on China's rare earth controls

by Paul Handley
AFP Global Edition

Mar 13, 2012 10:52 EDT

The United States, European Union and Japan teamed up Tuesday to lay assault to China's controls on exports of rare earth minerals, which are crucial in high-tech manufacturing.

The three economic powers lodged a complaint with the World Trade Organization saying Beijing's restrictions on rare earths mined in China distort trade and unfairly benefit its own industries.

"China continues to make its export restraints more restrictive, resulting in massive distortions and harmful disruptions in supply chains for these materials throughout the global marketplace," said US Trade Representative Ron Kirk.

"Because China is a top global producer for these key inputs, its harmful policies artificially increase prices for the inputs outside of China while lowering prices in China."

The complaint argues that China places restrictions on the export of 17 elements as well as tungsten and molybdenum, critical to the making of high-tech products from iPods to missiles.

The restrictions are illegal under global trade rules, they said.

The complaint formally requests "dispute settlement consultations" under WTO rules, the first step in any bid to settle trade disputes, according to EU trade officials.

It is the newest complaint by industrial powers at the WTO over Chinese trade in raw materials. In response to an EU complaint, earlier this year the Geneva-based body found China to have illegally restricted exports of raw materials such as bauxite, zinc or magnesium.

"China's restrictions on rare earths and other products violate international trade rules and must be removed," EU Trade Commissioner Karel De Gucht said in a statement announcing the challenge.

"Despite the clear ruling of the WTO in our first dispute on raw materials, China has made no attempt to remove the other export restrictions," said De Gucht.

"This leaves us no choice but to challenge China's export regime again to ensure fair access for our businesses to these materials," he added.

Kirk's office said China's restrictions on rare earths trade come in several forms, including export duties, export quotas, export pricing requirements and other troublesome export procedures and requirements.

China's policy "creates significant advantages for China's producers when competing against US producers," the USTR said. It also as a consequence pressures manufacturers around the world which use rare earths to move their businesses to China.

Beijing has said the restrictions are necessary to conserve the highly sought-after natural resource, limit harm to the environment from excessive mining and meet domestic demand.

"Based on environmental protection and in order to achieve sustainable development, China carries out management policies over the export of rare earths," foreign ministry spokesman Liu Weimin said earlier Tuesday.

"We believe such measures comply with WTO rules."

The US side of the complaint comes as Washington steps up pressure in an election-year campaign aimed at the impact of China's allegedly unfair trade practices on the US economy.

The White House last month established a high-level interagency team under the USTR office to expedite trade complaints, with China the primary target.

"The launch of this case against China today... reflects the Obama administration's commitment to make all of our trading partners play by the rules," Kirk said.

Source: AFP Global Edition

 

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