China blocked a request by the U.S., the European Union and Japan for World Trade Organization judges to probe its curbs on exports of rare earths. It won’t be able to thwart a second request, which may be made on July 23.
China says it imposed the limits in 2010 to conserve resources and protect the environment. China produces 97 percent of the world’s rare earths, 17 chemically similar metallic elements used in Boeing Co. (BA:US) helicopter blades, Nokia Oyj (NOK1V) mobile phones, Toyota Motor Corp. (7203) hybrid cars and wind turbines, according to EU data.
“China’s restrictions on rare earths and other products are violating its WTO commitments and continue to significantly distort global markets to the disadvantage of our companies,” EU Trade Commissioner Karel De Gucht said in a June 27 statement. “Despite the very clear WTO ruling earlier this year in the first raw-materials case, Beijing has not taken steps to remove these export restrictions.”
In a similar case, the WTO found in July 2011 that Chinese export duties and quotas on eight raw-materials used in the steel, aluminum, and chemicals industries broke global rules and gave domestic companies an unfair advantage. WTO appellate judges upheld the ruling, which supported a complaint by the U.S., the EU and Mexico.
Rare earths became a political issue after China moved to limit domestic output and reduce export quotas in July 2010 by 40 percent, souring ties with major users including the U.S. and Japan, where buyers cut usage after prices soared in the first half of 2011. China said on Dec. 28 it was leaving the 2012 overseas sales caps virtually unchanged.
The U.S. Energy Department said in January that limited supplies of five rare-earth minerals -- dysprosium, terbium, europium, neodymium and yttrium -- pose a threat to increasing use of clean-energy technologies such as wind turbines and solar panels. While prices of rare earths fell in the second half of 2011, they remain volatile, leading some companies to search for ways to consider reducing reliance on the minerals, the Energy Department said.
As in the raw materials case, the three complaining governments say the curbs violate paragraph 11.3 of China’s accession protocol requiring the country to scrap all taxes and charges on exports unless specifically provided for in Annex 6. While Annex 6 allows China to impose export duties on 84 tariff lines up to a specified limit, none of the rare earths or metals at issue are included on that list.
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