- Associated Press - Wednesday, June 20, 2012

BEIJING — China on Wednesday defended its export curbs on so-called “rare earths” minerals critical to many high-tech products as an environmental measure and rejected a World Trade Organization challenge by the United States, Europe and Japan.

A Cabinet official rejected complaints Beijing is using the environment as an excuse to support fledgling Chinese producers of lightweight magnets and other rare earths products by limiting supplies to foreign rivals in violation of its free-trade pledges.

“The protection of the environment is never a pretext for gaining advantage or increasing economic returns,” said Su Bo, a deputy industry minister, at a news conference.

China has about 30 percent of rare earths deposits but accounts for more than 90 percent of world production. Beijing alarmed global manufacturers by imposing export quotas in 2009. It is trying to build up domestic manufacturers to capture more of the profits that now go to U.S., Japanese and European companies that transform rare earths into mobile phone batteries, camera lenses, laser pointers and other products.

The U.S., EU and Japan filed WTO complaints in March accusing Beijing of violating its commitments on open trade. They say export limits push up rare earths prices abroad and give buyers in China an unfair advantage.

Officials held talks April 25 and 26 in the first step of the WTO dispute-resolution process, said another official, Gao Yun, deputy director-general of the industry ministry’s rare earths office.

If no resolution is reached after 60 days, the dispute can be sent to a WTO panel for a ruling. Depending on the outcome, sanctions against China are possible.

“All these measures fully conform to WTO rules,” Mr. Gao said. He said Beijing wants a quick resolution but said it will “actively use world trade rules” to protect its companies.

The dispute reflects the clash between Beijing’s free-trade pledges and its ambitions to transform China from a low-wage factory into a creator of profitable technology by building up fledgling high-tech companies.

Rare earths are 17 minerals used to make goods including hybrid cars, weapons, flat-screen TVs, mobile phones, mercury-vapor lights and camera lenses.

Beijing has announced an export quota of 10,546 tons of rare earths for the first half of this year. That is down 27 percent from the quota for the same period last year.

The United States, Canada, Australia and other countries also have rare earths deposits, but most mining stopped in the 1990s as lower-cost Chinese ores came on the market.