Rare Earths

China loses appeal against WTO ruling on curbs on trade in rare earths

Trade body upholds its ruling that export restrictions on the minerals violate rules

PUBLISHED : Friday, 08 August, 2014, 9:38am
UPDATED : Saturday, 09 August, 2014, 3:00am

China says it "strongly regrets" a decision by the World Trade Organisation to uphold its ruling that the country violated global trade rules by restricting exports of rare earth elements, used in hi-tech goods like mobile phones and televisions.

The WTO's appeal body upheld its ruling of March this year, which found China's export restrictions - including duties, quotas and restrictions of trade rights on rare earth elements and the metals tungsten and molybdenum - were not justifiable and breached trade rules.

The decision is final and, in principle, WTO member states are obliged to follow the ruling.

"China will carefully assess the ruling [and] continue to improve its management of resource-consuming products in a WTO-consistent manner," the Ministry of Commerce said.

The ministry added that it would "take future steps consistent with the WTO dispute settlement system requirements".

China has argued that the export restrictions are related to the conservation of its natural resources, and are necessary for reducing the pollution caused by mining.

"Due to the need to protect exhaustible natural resources and the environment, the Chinese government has been enhancing its management of products that [pollute and consume resources on a large scale]," the ministry said.

But the complainants, including the United States, the European Union and Japan, said the restrictions were designed to provide Chinese industries with protected access to the materials. They lodged the complaint with the WTO in 2012.

China accounts for 95 per cent of global production of rare earths, a term covering 18 metals vital for the production of smartphones, hybrid car batteries, wind turbines, steel and low-energy light bulbs.

The country is home to 23 per cent of global reserves of such metals.

The WTO's appeal body said in a report on Thursday that China had "not demonstrated that the export quotas [it] applies to various forms of rare earths, tungsten and molybdenum are justified" and called on Beijing to fall in line with international trade rules.

EU Trade Commissioner Karel De Gucht said the ruling was "another milestone in the EU's efforts to ensure fair access to much-needed raw materials for its industries".

"This ruling sends a clear signal that export restrictions cannot be used to protect or promote domestic industries at the expense of foreign competitors.

"I now look forward to China swiftly bringing its export regime in line with international rules, as it did with other raw materials under the previous WTO ruling," he said.