China has lost a dispute at the WTO over limits on rare earth and metals exports, handing Europe and the US a victory over what they see as Beijing’s unfair trade practices.
“Today’s ruling by the WTO on rare earth shows that no one country can hoard its raw materials from the global market place at the expense of its other WTO partners,” EU Trade Commissioner Karel De Gucht said.
China produces more than 90 percent of the world’s rare earths, key elements in defense industry components and modern technology from smartphones and disk drives to wind turbines.
China imposed strict rare earth export quotas in 2010, saying it was trying to curtail pollution and preserve resources.
Prices of the prized commodities soared by hundreds of percent, and the US, EU and Japan complained that the export restrictions gave Chinese companies an unfair competitive edge. China said limits on exports of rare earths, as well as the metals tungsten and molybdenum, were needed to prevent overmining.
Any of the parties in the case can appeal within 60 days.
The US said that the export limits allowed China to artificially increase world prices for raw materials crucial to make products like hybrid car batteries, wind turbines and energy-efficient lighting, while artificially lowering prices for Chinese producers.
“China’s decision to promote its own industry and discriminate against US companies has caused US manufacturers to pay as much as three times more than what their Chinese competitors pay for the exact same rare earths,” US Trade Representative Michael Froman said in a statement.
China’s Ministry of Commerce said the head of its treaty and law department welcomed the WTO’s recognition of its efforts to conserve resources and protect the environment.
However, the ministry said it regretted that the panel found China’s export duties, quotas, and quota administration breached WTO rules.
The ministry added that China was currently assessing the WTO report.
The European Commission said no-one disputed China’s right to put in place environmental and conservation policies.
“However, as unequivocally confirmed by the WTO panel, the sovereign right of a country over its natural resources does not allow it to control international markets or the global distribution of raw materials,” the European Commission said.