EU, U.S., Japan Step Up Rare Earths Battle With China

June 27, 2012
Nations request panel to address China's restrictions on rare earths.

The European Union, the United States and Japan asked the World Trade Organization on Wednesday to form a panel to resolve a dispute over China's export restrictions on rare earths.

The three economic powers tried to end the dispute through formal consultations with China at WTO headquarters in Geneva in April, but the negotiations failed to bring a resolution.

"China's restrictions on rare earths and other products are a violation of China's WTO commitments and continue to significantly distort global markets, creating a disadvantage for our companies," said EU Trade Commissioner Karel De Gucht.

"We regret that we are left with no other choice but to solve this through litigation," De Gucht said in a statement on the dispute, which also includes Chinese restrictions on exports of tungsten and molybdenum.

The United States, Japan and the EU lodged a complaint at the WTO earlier this year, complaining that China was unfairly benefiting its own industries by monopolizing the global supply of rare earths.

Despite the consultations, "there have been no signals from China that it would remove the restrictions," the EU statement said.

China produces 97% of the world's supply of rare earths like lutetium and scandium, which are used to make key components for products such as flat screen TVs, hard drives, hybrid car engines or camera lenses.

Critics say Beijing's strategy is aimed at driving up global prices of the metals and forcing foreign firms to relocate to the country to access them.

But Beijing says the restrictions are necessary to conserve the highly sought-after natural resource, limit harm to the environment from excessive mining and meet domestic demand.

"These materials are key inputs in a multitude of U.S. manufacturing sectors and American-made products, including hybrid car batteries, wind turbines, energy-efficient lighting, steel, advanced electronics, automobiles, petroleum and chemicals," said U.S. Trade Representative Ron Kirk "It is vital that U.S. workers and manufacturers obtain the fair and equal access to raw materials like rare earths that China specifically agreed to when it joined the WTO."

A request for a dispute settlement panel is the second step in the WTO proceedings after the failure of consultations.

China can reject the establishment of the panel following this first request, the European Commission said. The panel would then be established after a second request at the next meeting of the Dispute Settlement Body (DSB).

The next regular meeting of the DSB is July 23.

The EU says the restrictions imposed by China include an increase in export duties and drastic reduction in export quotas, as well as additional requirements and procedures for exporters.

It is the second dispute between the three industrial powers and China over raw materials at the WTO. Earlier this year the WTO found China to have illegally restricted exports of raw materials like bauxite, zinc and magnesium.

Copyright Agence France-Presse, 2012

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