China may contest WTO ruling on mineral exports

PUBLISHED : Thursday, 07 July, 2011, 12:00am
UPDATED : Thursday, 07 July, 2011, 12:00am


China is expected to appeal against a World Trade Organisation ruling that it broke global trade rules by imposing export duties on raw materials, mainly minerals.

The Ministry of Commerce said it regretted the decision, which came after an 18-month investigation following complaints by the United States, European Union and Mexico.

While the ministry said it was still deciding whether to appeal or not, industry observers expect China to defend its policies as a means of safeguarding both finite natural resources and the environment.

'It will appeal,' Johnson Chan, Hong Kong Energy and Minerals United Associations vice-chairman, said yesterday. 'The WTO outcome will have an impact on China's ambition to climb the value chain and technology ladder.'

China argued that in its 12th five-year plan, to 2015, it was pushing manufacturers in labour-intensive, energy-consuming and polluting industries to move higher up on the value chain.

Industry players now warn that the trade dispute could spread to rare earths, with Vice-Minister of Commerce Zhong Shan saying yesterday that China was about to promulgate new policies aimed at better managing reserves and exports of rare earths. China accounts for 30 per cent of the worlds' rare earths reserves and as much as 90 per cent of global trade, according to the ministry. The demand and supply of rare earths is a politically sensitive subject between the US, the EU and China because of the importance of the 17 chemical elements in producing a wide range of products including weapons.

The WTO dispute centres around export restraints, including duties and quotas, China has imposed on about 20 types of raw materials such as bauxite, coke, fluorspar, magnesium, manganese, silicon carbide, silicon metal, yellow phosphorus and zinc, which are widely used to produce aircraft, semiconductors, electronic products, detergents and steel.

The US, EU and Mexico complained that these controls would restrict world supply, jack up prices in global markets and provide an unfair advantage to Chinese industries.

Coking coal has since 2009 been subject to a 40 per cent export tax, while its export quota shrank to 8 million tonnes last year from 11.93 million tonnes in 2009. In the first six months of this year, it stood at 4.6 million tonnes. The WTO found that export duties and quotas on the raw materials in dispute were against WTO rules.

It said China, one of the largest producers of these materials, failed to demonstrate that export restrictions operated in conjunction with restrictions on domestic production or consumption to conserve the raw materials. Neither could China justify that the restrictions would lead to a reduction in pollution.