- The Washington Times - Tuesday, July 5, 2011

The United States and European Union won a major trade case against China that could have major implications for the global supply of so-called “rare earth” minerals critical to dozens of high-tech products and processes.

The Geneva-based World Trade Organization (WTO) found that China violated international trade law by artificially restricting exports of nine raw materials. A complaint was filed by the United States, European Union and Mexico.

The case involved export duties and quotas Beijing had imposed on the sale of such raw materials as coke, bauxite and zinc, but trade experts said it could also set a precedent for China’s stranglehold on the global market for such rare earth elements as cerium and yttrium, which are critical to the manufacture of products ranging from cellphone batteries and pollution-control devices to laser pointers.

China supplies at least 95 percent of the world market with rare earth minerals, but has been steadily dropping its export amounts over the past few years. In the past year, China’s export quota of these minerals fell 7,000 tons.

U.S. lawmakers in recent years have expressed concerns of China’s dominance of the rare earth mineral market. Concerns were heightened when Beijing temporarily halted exports to Japan in the midst of a territorial dispute last year.

The WTO ruling comes 18 months after the U.S., EU, and Mexico asked WTO investigators to look into China’s export quotas and tariffs.

China’s export laws “unfairly skew the playing field in favor of Chinese domestic industries, to the detriment of the U.S. and other trading partners,” said Nkenge Harmon, a spokeswoman for U.S. Trade Representative Ron Kirk. “The measures limit access to the raw material inputs by non-Chinese users. At the same time, Chinese producers appear to gain increased access to these raw material inputs at below-global prices.”

China had claimed the export limits were necessary in order to preserve its environment, but the WTO panel said China was unable to demonstrate how the export regulations helped to reduce domestic pollution.

The main beneficiaries from this ruling are steel, aluminum, and chemical industries, but it looks like Western high-tech interests might be the biggest beneficiaries in the longer term. The ruling will most likely serve as support for an additional complaint against China, in which the U.S. and EU also accuse Beijing of restricting exports on 17 rare earth minerals.

“It sends a strong signal to refrain from imposing unfair restrictions to trade and takes us one step closer to a level playing field for raw materials,” EU Trade Commissioner Karel De Gucht said in a statement.

“Furthermore, in the light of this result, China should ensure free and fair access to rare earth supplies,” he added.

Jack Lifton, a founder of Technology Metals Research LLC, said the minerals China is hoarding are essential to much of American technology.

“If we didn’t have [these minerals], we wouldn’t have BlackBerrys. We wouldn’t have DVD players. … Without them we simply wouldn’t have mass-produced miniature electronics,” Mr. Lifton said.

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