WTO Opens China to Rare Earth Challenge

Source:

"China has export restrictions on raw materials that are questionable."

Confidential World Trade Organization findings on China's on raw materials' export limits have boosted the case for an EU challenge to the country's rare earth element (REE) curbs, sources say.

"China has export restrictions on raw materials that are questionable, according to the WTO," a source familiar with the case said Tuesday. "So that will be taken seriously when the EU considers China's REE restrictions, too."

The EU's Executive Commission started screening the legality of China's plans to curtail REE exports last year.

China says export reductions aim to protect the environment and scarce resources—an argument that would comply with world trade rules enforced by the WTO.

But trade sources say a confidential, preliminary WTO report found flaws in similar reasoning China's used in an ongoing legal fight to defend its export restrictions.

The EU, U.S. and Mexico sued China at the WTO in 2009, complaining that limiting exports of these raw materials through quotas and red tape discriminated against foreign manufacturers and gave Chinese producers an unfair advantage.

The WTO, which rarely comments on current disputes, has publicly questioned whether China's curbs on exports of some raw materials to conserve resources meet the stated goals or merely favor Chinese manufacturers.

Its preliminary report, which has been handed to parties to the raw materials dispute, is confidential until publication in April, after which both sides can appeal. If China loses, it will have to make amendments to export controls to avoid penalties.

Last month, the U.S. said there was a possibility of a U.S. challenge on China's rare earth exports at the WTO.

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