China broke rules on exports of rare earths, says WTO

Disputes panel says Beijing wrong to impose duties, quotas and controls on companies

PUBLISHED : Thursday, 27 March, 2014, 12:58am
UPDATED : Thursday, 27 March, 2014, 12:58am


China has broken the rules of global commerce by restricting exports of rare earths, tungsten and molybdenum, a move that benefited domestic industries, a World Trade Organisation panel said yesterday.

A WTO disputes settlement panel said Beijing's deployment of export duties and quotas, plus limits on who could trade in what are key raw materials for making electronic goods, skewed global commerce unfairly against fellow nations.

China accounts for 95 per cent of the global production of rare earths, which cover 18 metals that are vital for many industrial and high-technological processes such as the production of smartphones and low-energy light bulbs.

The panel, made up of independent trade and legal experts, largely backed a WTO complaint filed by the United States, the European Union and Japan.

Beijing insisted that its goal was to conserve its exhaustible natural resources and reduce pollution caused by mining, and argued that it was allowed to do so under WTO rules. But the panel ruled that permitted exceptions to rules banning trade-restraining measures were "not available to justify a breach of the obligation to eliminate export duties".

"Under the circumstances, China's imposition of the export duties in question was found to be inconsistent with China's WTO obligations," it said.

The panel rejected China's use of export quotas, saying they were "designed to achieve industrial policy goals rather than conservation".

"Conservation does not allow members to adopt measures to control the international market for a natural resource, which is what the challenged export quotas were, in the view of the panel, designed to do," it said.

"The overall effect of the foreign and domestic restrictions is to encourage domestic extraction and secure preferential use of those materials by Chinese manufacturers," it added, saying that such measures could "not be justified".

WTO polices respect for global trade accords in an effort to offer its 159 members a level playing field. Its disputes settlement body has the power to authorise retaliatory trade measures against a country found at fault and which fails to fall into line.