Chinese rare earths clamp dispute escalates
29th Jun 2012
JUNE 29 – The European Union, US and Japan have requested a dispute settlement panel at the World Trade Organisation after failing to resolve a battle over China’s export restrictions on rare earth minerals.
The move follows a complaint the three trade powers took to the WTO in March, the first they have launched jointly amid a series of clashes with China over economic issues including the value of the Chinese currency.
"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 Guchi says. "We regret that we are left with no other choice but to solve this through litigation."
The case concerns the 17 rare earth metals, as well as tungsten and molybdenum, which are used in advanced technologies for the defence, electronics and renewable-energy industries.
The damage done to European manufacturing runs into billions of euros because it is nearly impossible to diversify away from the Chinese supply, according to EU officials.
China accounts for about 97% of world output of the 17 rare earths and the three powers accuse Beijing of trying to hold down prices for its domestic manufacturers and pressure international companies into moving operations to China. The EU and US say it hurts their producers and consumers, as foreign companies pay up to twice as much as Chinese companies for rare earth metals.
"These materials are key inputs in a multitude of US manufacturing sectors and American-made products, including hybrid car batteries, wind turbines, energy-efficient lighting, steel, advanced electronics, automobiles, petroleum and chemicals," US Trade Representative Ron Kirk says.
In March, China described the trade complaint as unfair, arguing that it only controlled 90% of global production because other countries, notably the US, had long ago closed their own rare earths refineries due to pollution concerns. Beijing says its export curbs aim to both control environmental problems and preserve supplies of an exhaustible natural resource.
Once appeals are lodged and heard, the WTO process could take as long as two years to complete.
US business groups are also urging Congress to pass the 30-year-old Law of the Sea Convention, which they argue will give US companies the legal certainty they need to make huge investments to mine rare earths in the ocean seabed.
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