China Blocks WTO Rare Earths Dispute Settlement Panel


"China says it is not in a position to accept establishment of a WTO dispute settlement panel regarding its restrictions related to rare earths, tungsten and molybdenum exports."

The WTO announced Tuesday that China has blocked the establishment of a panel requested by the United States, the European Union and Japan regarding China's restrictions on rare earths, tungsten and molybdenum exports.

However, China cannot object again to the creation of the panel when the WTO's Dispute Settlement Body (DSB) convenes again on July 23.

In the statement, WTO noted, "China said that its policies in question are aimed at protecting natural resources and achieving sustainable economic development."

"It [China] said it was puzzled by the complainants' initiation of the panel process as it has no intention of protecting its domestic industry through means that would distort trade," said the agency. "It added that at the present meeting, it was not in a position to accept the establishment of a panel."

During Tuesday's Dispute Settlement Body Meeting, the U.S. said due to China's position as a leading global producer of rare earths, tungsten and moly, "China's export restraint measures gave China the ability to significantly affect global supply and pricing.'

"It [the U.S.] said that the materials at issue are key inputs in the production of a wide range of important products, such as hybrid car batteries, wind turbines, automobiles and advanced electronics," said the WTO. "It added that the export restraints appeared to be inconsistent with the General Agreement on Tariffs and Trade (GATT) 1994 and China's Protocol of Accession."

The European Union told the DSB China's export restrictions significantly distort the market and create competitive advantages for the Chinese manufacturing industry to the detriment of foreign competitors. "It [the EU] said that these policies put pressure on foreign producers to move their operations and technologies to China," said the WTO. "It recognized environmental protection and resource management as legitimate aims but strongly believed that export restrictions are not the appropriate tools to promote these aims."

Japan told the DSB "the materials at issue are used by its industry in the production of various final products, such as catalysts and polishing media. China's export restrictions have caused a short supply of the materials in the international market and significant price differences between China's domestic market and export market."

"It [Japan] said that Japanese manufacturers have faced difficulty in purchasing the materials from China, putting them at a disadvantageous position with their Chinese counterparts," the WTO added.

China produces 97% of the world's rare earths. Rare earths became a controversial issue after China moved to limit domestic REE production, increased REE export duties, and reduced export quotas.

The WTO REE challenge follows a successful WTO challenge by the EU, the U.S. and Mexico regarding China's restrictions on raw materials exports.

Dorothy Kosich

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